Securities Act File No. 33-40682
Investment Company Act File No. 811-06312
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 18
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 18
(Check appropriate box or boxes)
THE LAZARD FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
30 Rockefeller Plaza, New York, New York 10112
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 632-6000
William G. Butterly III, Esq.
30 Rockefeller Plaza
New York, New York 10112
(Name and Address of Agent for Services)
copy to:
Stuart H. Coleman, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
It is proposed that this filing will become effective (check appropriate box)
- ---- immediately upon filing pursuant to paragraph (b)
X on May 1, 1999 pursuant to paragraph (b)
- ----
- ---- 60 days after filing pursuant to paragraph (a) (i)
- ---- on (date) pursuant to paragraph (a) (i)
- ---- 75 days after filing pursuant to paragraph (a) (ii)
- ---- on (date) pursuant to paragraph (a) (ii) of Rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
LAZARDFUNDS
PROSPECTUS
MAY 1, 1999
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES DESCRIBED IN THIS PROSPECTUS OR DETERMINED
WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE
IS COMMITTING A CRIME.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
===============================================================================================================
PAGE
<S> <C> <C>
--------------------------------------------
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH 6 RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
SUMMARIZES EACH PORTFOLIO'S INVESTMENTS, RISKS, ---------------------------------------------
PAST PERFORMANCE AND FEES. 6 Lazard Equity Portfolio
8 Lazard Mid Cap Portfolio
10 Lazard Small Cap Portfolio
12 Lazard Bantam Value Portfolio
14 Lazard Global Equity Portfolio
16 Lazard International Equity Portfolio
18 Lazard International Small Cap Portfolio
20 Lazard Emerging Markets Portfolio
22 Lazard Bond Portfolio
24 Lazard High Yield Portfolio
26 Lazard International Fixed-Income Portfolio
28 Lazard Strategic Yield Portfolio
---------------------------------------------
REVIEW THIS SECTION FOR INFORMATION ON INVESTMENT 30 INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
STRATEGIES AND THEIR RISKS. ---------------------------------------------
30 Lazard Equity Portfolio
30 Lazard Mid Cap Portfolio
31 Lazard Small Cap Portfolio
32 Lazard Bantam Value Portfolio
32 Lazard Global Equity Portfolio
33 Lazard International Equity Portfolio
34 Lazard International Small Cap Portfolio
35 Lazard Emerging Markets Portfolio
36 Lazard Bond Portfolio
36 Lazard High Yield Portfolio
37 Lazard International Fixed-Income Portfolio
39 Lazard Strategic Yield Portfolio
---------------------------------------------
REVIEW THIS SECTION FOR DETAILS ON THE PEOPLE AND 40 FUND MANAGEMENT
ORGANIZATIONS WHO OVERSEE THE PORTFOLIOS. ---------------------------------------------
40 Investment Manager
40 Principal Portfolio Managers
41 Administrator
41 Distributor
41 Custodian
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
REVIEW THIS SECTION FOR DETAILS ON HOW SHARES ARE --------------------------------------------
VALUED, HOW TO PURCHASE, SELL AND EXCHANGE 41 SHAREHOLDER INFORMATION
SHARES, RELATED CHARGES AND PAYMENTS OF DIVIDENDS --------------------------------------------
AND DISTRIBUTIONS. 41 General
42 How to Buy Shares
43 Distribution and Service (12b-1) Fees
43 How to Sell Shares
43 Investor Services
44 General Policies
45 Account Policies, Dividends and Taxes
---------------------------------------------
REVIEW THIS SECTION FOR RECENT FINANCIAL INFORMATION. 45 FINANCIAL HIGHLIGHTS
---------------------------------------------
---------------------------------------------
WHERE TO LEARN MORE ABOUT THE PORTFOLIOS BACK COVER
---------------------------------------------
</TABLE>
-------------------------------------------------------------------
LAZARD ASSET MANAGEMENT, A DIVISION OF LAZARD FRERES & CO. LLC
("LAZARD FRERES"), SERVES AS EACH PORTFOLIO'S INVESTMENT MANAGER.
-------------------------------------------------------------------
3
<PAGE>
The Portfolios The Lazard Funds, Inc. consists of twelve separate
Portfolios, each with its own investment objective,
strategies and risk/return profile. Each Portfolio invests
in different securities, depending on its investment
objective. Each Portfolio can be expected to have a
different degree of risk and yield or return. Because you
could lose money by investing in a Portfolio, be sure to
read all risk disclosures carefully before investing.
You should be aware that the Portfolios:
o Are not bank deposits
o Are not guaranteed, endorsed or insured by any bank,
financial institution or government entity, such as the
Federal Deposit Insurance Corporation
o Are not guaranteed to achieve their stated goals
Each Portfolio offers Institutional Shares and Open Shares.
Institutional Shares and Open Shares have different
investment minimums and different expense ratios.
Who May Want to Invest?
------------------------------
EQUITY PORTFOLIOS
------------------------------
Lazard Equity Portfolio
Lazard Mid Cap Portfolio
Lazard Small Cap Portfolio
Lazard Bantam Value Portfolio
Lazard Global Equity Portfolio
Lazard International Equity Portfolio
Lazard International Small Cap Portfolio
Lazard Emerging Markets Portfolio
These Portfolios will invest primarily in equity securities,
including common stocks, preferred stocks and convertible
securities of both U.S. and non-U.S. issuers. The Investment
Manager seeks to identify undervalued securities based on
earnings, cash flow or asset values. The Investment Manager
focuses on individual stock selection rather than on general
stock market trends.
The securities in which the Portfolios will invest generally
have one or more of the following characteristics:
o are undervalued relative to their earnings, cash flow or
asset values;
o have an attractive price/value relationship with
expectations that some catalyst will cause the perception
of value to change within two years;
o are out of favor due to circumstances which are unlikely
to harm the company's franchise or earnings power;
o have low projected P/E or price-to-cash flow multiples;
Because different types of stocks tend to shift in and out
of favor depending on market and economic conditions, the
Equity Portfolios' performance may sometimes be higher or
lower than that of other types of funds (such as those
emphasizing growth stocks).
4
<PAGE>
Consider investing in these Portfolios if you are:
o seeking a long-term goal such as retirement
o looking to add a growth component to your portfolio
o willing to accept higher risks of investing in the stock
market in exchange for potentially higher long-term
returns
These Portfolios may not be appropriate if you are:
o pursuing a short-term goal or investing emergency reserves
o uncomfortable with an investment that will go up and down
in value
---------------------------------
FIXED-INCOME PORTFOLIOS
---------------------------------
Lazard Bond Portfolio
Lazard High Yield Portfolio
Lazard International Fixed-Income Portfolio
Lazard Strategic Yield Portfolio
These Portfolios will invest in a variety of both U.S. and
non-U.S. fixed-income securities. The Investment Manager
focuses on individual security selection in fixed-income
markets. The risks associated with each Portfolio will vary.
Each investor should review carefully the risks associated
with each Portfolio. Consider investing in these Portfolios
if you are:
o looking to add a monthly income component to your
investments
o seeking higher potential returns than those offered by
money market funds
o willing to accept the risks of price and dividend
fluctuations
These Portfolios may not be appropriate if you are:
o investing emergency reserves
o uncomfortable with an investment that will go up and down
in value
5
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD EQUITY PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks long-term capital appreciation.
PRINCIPAL INVESTMENT The Portfolio invests primarily in equity securities,
STRATEGIES principally common stocks, of relatively large U.S.
companies with market capitalizations in the range of
the S&P 500(R) Index that the Investment Manager
believes are undervalued based on their earnings, cash
flow or asset values.
PRINCIPAL INVESTMENT While stocks have historically been a leading choice
RISKS of long-term investors, they do fluctuate in price.
The value of your investment in the Portfolio will go
up and down, which means that you could lose money.
Value stocks involve the risk that they may never
reach what the Investment Manager believes is their
full market value. They also may decline in price,
even though in theory they are already underpriced.
The accompanying bar chart and table provide some indication of the risks of
investing in Lazard Equity Portfolio by showing the Portfolio's annual returns
and its long-term performance. The bar chart shows how the performance of the
Portfolio's Institutional Shares has varied from year to year. The table
compares the performance of the Portfolio's Institutional Shares and Open Shares
over time to that of the S&P 500(R) Index, a widely recognized, unmanaged
index of common stocks. Both the bar chart and table assume reinvestment of
dividends and distributions. Past performance does not indicate how the
Portfolio will perform in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL SHARES
[FIGURES BELOW REPRESENTS BAR CHART IN THE PRINTED FORM]
1989 23.65%
1990 -4.73%
1991 27.55%
1992 5.26%
1993 18.62%
1994 4.23%
1995 37.69%
1996 19.91%
1997 25.13%
1998 17.31%
- --------------------------------------------------------------------------------
Best quarter: 12/31/98 21.97%
Worst quarter: 9/30/98 (15.02)%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
INCEPTION PAST PAST PAST SINCE
DATE YEAR 5 YEARS 10 YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES 6/1/87 17.31% 20.36% 16.83% 14.98%
- --------------------------------------------------------------------------------
OPEN SHARES 2/5/97 16.98% N/A N/A 18.95%
- --------------------------------------------------------------------------------
S&P 500(R) INDEX 28.57% 24.06% 19.21% 16.50%
(Institutional)
31.00%
(Open)
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .10% .12%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses .85% 1.12%
- --------------------------------------------------------------------------------
1 3 5 10
LAZARD EQUITY PORTFOLIO Year Years Years Years
INSTITUTIONAL SHARES $ 87 $271 $471 $1,049
- --------------------------------------------------------------------------------
OPEN SHARES $114 $356 $617 $1,363
- --------------------------------------------------------------------------------
7
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
===============================================================================
LAZARD MID CAP PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks long-term capital appreciation.
PRINCIPAL INVESTMENT The Portfolio invests primarily in equity securities,
STRATEGIES principally common stocks, of medium-size U.S.
companies in the range of the Russell Midcap Index
that the Investment Manager believes are undervalued
based on their earnings, cash flow or asset values.
PRINCIPAL INVESTMENT While stocks have historically been a leading choice
RISKS of long-term investors, they do fluctuate in price.
Midcap companies carry additional risks because their
earnings tend to be less predictable, their shares
prices more volatile and their securities less liquid
than larger, more established companies. The value of
your investment in the Portfolio will go up and down,
which means that you could lose money.
Value stocks involve the risk that they may never
reach what the Investment Manager believes is their
full market value. They also may decline in price,
even though in theory they are already underpriced.
The Portfolio is non-diversified and may invest a
greater precentage of its assets in a particular
company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to
changes in the market value of a single company or
industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard Mid Cap Portfolio by showing the Portfolio's annual
returns and its long-term performance. The bar chart shows the performance of
the Portfolio's Institutional Shares for its first full calendar year of
operations. The table compares the performance of the Portfolio's Institutional
Shares and Open Shares over time to that of the Russell Midcap Index, an
unmanaged index of mid-capitalization common stocks. Both the bar chart and
table assume reinvestment of dividends and distributions. Past performance does
not indicate how the Portfolio will perform in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL SHARES
[FIGURES BELOW REPRESENTS BAR CHART IN THE PRINTED FORM]
1998 3.65%
- --------------------------------------------------------------------------------
Best quarter: 12/31/98 17.09%
Worst quarter: 9/30/98 (16.68)%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
INCEPTION PAST SINCE
DATE YEAR INCEPTION
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES 11/4/97 3.65% 5.58%
- --------------------------------------------------------------------------------
OPEN SHARES 11/4/97 3.42% 5.34%
- --------------------------------------------------------------------------------
RUSSELL MIDCAP INDEX 10.10% 11.58%
- --------------------------------------------------------------------------------
8
<PAGE>
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 INITIAL INVESTMENT
o 5% annual return each year
o redemption at the end of each period
o no changes in operating
expenses, except for the first year
periods reflected in the table
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .48% .66%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.23% 1.66%
- --------------------------------------------------------------------------------
Fee Waiver and Expense
Reimbursement* .18% .31%
- --------------------------------------------------------------------------------
Net Expenses* 1.05% 1.35%
- --------------------------------------------------------------------------------
* Reflects a contractual obligation by the Investment Manager to waive its
fees and/or reimburse the Portfolio through December 31, 1999 to the extent
Total Annual Portfolio Operating Expenses exceed in any fiscal year 1.05% and
1.35% of the average daily net assets of the Portfolio's Institutional Shares
and Open Shares, respectively.
LAZARD MIDCAP 1 3 5 10
PORTFOLIO Year+ Years+ Years+ Years+
INSTITUTIONAL SHARES $107 $343 $597 $1,325
- --------------------------------------------------------------------------------
OPEN SHARES $137 $481 $847 $1,879
- --------------------------------------------------------------------------------
+ Year 1 fees and expenses are based on a contractual agreement.
9
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD SMALL CAP PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks long-term capital appreciation.
PRINCIPAL INVESTMENT The Portfolio invests primarily in equity securities,
STRATEGIES principally common stocks, of relatively small U.S.
companies in the range of the Russell 2000 Index that
the Investment Manager believes are undervalued based
on their earnings, cash flow or asset values.
PRINCIPAL INVESTMENT While stocks have historically been a leading choice
RISKS of long-term investors, they do fluctuate in price.
Small companies carry additional risks because their
earnings tend to be less predictable, their share
prices more volatile and their securities less liquid
than larger, more established companies. The value of
your investment in the Portfolio will go up and down,
which means that you could lose money.
Value stocks involve the risk that they may never
reach what the Investment Manager believes is their
full market value. They also may decline in price,
even though in theory they are already underpriced.
The Portfolio is non-diversified and may invest a
greater percentage of its assets in a particular
company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to
changes in the market value of a single company or
industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard Small Cap Portfolio by showing the Portfolio's annual
returns and its long-term performance. The bar chart shows how the performance
of the Portfolio's Institutional Shares has varied from year to year. The table
compares the performance of the Portfolio's Institutional Shares and Open Shares
over time to that of the Russell 2000 Index, an unmanaged index of smaller
capitalization common stocks. Both the bar chart and table assume reinvestment
of dividends and distributions. Past performance does not indicate how the
Portfolio will perform in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL SHARES
[FIGURES BELOW REPRESENTS BAR CHART IN THE PRINTED FORM]
1992 24.75%
1993 30.09%
1994 2.03%
1995 21.52%
1996 23.93%
1997 28.06%
1998 -12.62%
- --------------------------------------------------------------------------------
Best quarter: 12/31/98 18.39%
Worst quarter: 9/30/98 (25.53)%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
INCEPTION PAST PAST SINCE
DATE YEAR 5 YEARS INCEPTION
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES 10/30/91 (12.62)% 11.45% 16.11%
- -----------------------------------------------------------------------------------
OPEN SHARES 1/30/97 (12.86)% N/A 4.82%
- -----------------------------------------------------------------------------------
RUSSELL 2000 INDEX (2.55%) 11.86% 13.89%
(Institutional)
8.49%
(Open)
- -----------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .06% .09%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses .81% 1.09%
- --------------------------------------------------------------------------------
LAZARD SMALL CAP 1 3 5 10
PORTFOLIO Year Years Years Years
INSTITUTIONAL SHARES $ 83 $259 $450 $1,002
- --------------------------------------------------------------------------------
OPEN SHARES $111 $347 $601 $1,329
- --------------------------------------------------------------------------------
11
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD BANTAM VALUE PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks long-term capital appreciation.
PRINCIPAL INVESTMENT The Portfolio invests primarily in equity securities
STRATEGIES of small U.S. companies with market capitalizations
under $500 million that the Investment Manager
believes are undervalued based on their earnings,
cash flow or asset values.
PRINCIPAL INVESTMENT While stocks have historically been a leading choice
RISKS of long-term investors, they do fluctuate in price.
Small companies carry additional risks because their
earnings tend to be less predictable, their share
prices more volatile and their securities less liquid
than larger, more established companies. The value of
your investment in the Portfolio will go up and down,
which means that you could lose money.
Value stocks involve the risk that they may never
reach what the Investment Manager believes is their
full market value. They also may decline in price,
even though in theory they are already underpriced.
The Portfolio is non-diversified and may invest a
greater percentage of its assets in a particular
company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to
changes in the market value of a single company or
industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard Bantam Value Portfolio by showing the Portfolio's annual
returns and its long-term performance. The bar chart shows how the performance
of the Portfolio's Institutional Shares has varied from year to year. The table
compares the performance of the Portfolio's Institutional Shares and Open Shares
over time to that of the Russell 2000 Index, an unmanaged index of smaller
capitalization common stocks. Both the bar chart and table assume reinvestment
of dividends and distributions. Past performance does not indicate how the
Portfolio will perform in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL SHARES
[FIGURES BELOW REPRESENTS BAR CHART IN THE PRINTED FORM]
97 33.94%
98 -13.82%
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
INCEPTION PAST SINCE
DATE YEAR INCEPTION
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES 3/1/96 (13.82)% 16.39%
- --------------------------------------------------------------------------------
OPEN SHARES 1/23/97 (14.02)% 4.96%
- --------------------------------------------------------------------------------
RUSSELL 2000 INDEX 11.16%
(Institutional)
8.22%
(Open)
- --------------------------------------------------------------------------------
12
<PAGE>
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating
expenses, except for the first year
periods reflected in the table
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .34% .60%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.09% 1.60%
- --------------------------------------------------------------------------------
Fee Waiver and Expense
Reimbursement* .04% .25%
- --------------------------------------------------------------------------------
Net Expenses* 1.05% 1.35%
- --------------------------------------------------------------------------------
* Reflects a contractual obligation by the Investment Manager to waive its fees
and/or reimburse the Portfolio through December 31, 1999 to the extent Total
Annual Portfolio Operating Expenses exceed in any fiscal year 1.05% and 1.35%
of the average daily net assets of the Portfolio's Institutional Shares and
Open Shares, respectively.
LAZARD BANTAM VALUE 1 3 5 10
PORTFOLIO Year+ Years+ Years+ Years+
INSTITUTIONAL SHARES $107 $343 $597 $1,325
- --------------------------------------------------------------------------------
OPEN SHARES $137 $481 $847 $1,879
- --------------------------------------------------------------------------------
+ Year 1 fees and expenses are based on a contractual agreement.
13
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD GLOBAL EQUITY PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks long-term capital appreciation.
PRINCIPAL INVESTMENT The Portfolio invests primarily in equity securities,
principally common stocks, of relatively large
companies, with market capitalizations in the range of
the Morgan Stanley Capital International (MSCI) World
Index, both U.S. and non-U.S., that the Investment
Manager believes are undervalued based on their
earnings, cash flow or asset values.
In choosing stocks for the Portfolio, the Investment
Manager looks for established companies in
economically developed countries. The percentage of
the Portfolio's assets invested in particular
geographic sectors may shift from time to time based
on the Investment Manager's judgment. Ordinarily, the
Portfolio invests in at least three different foreign
countries.
PRINCIPAL INVESTMENT While stocks have historically been a leading choice
RISKS of long-term investors, they do fluctuate in price.
Foreign securities include special risks, such as
exposure to currency fluctuations, changing political
climate and potentially less liquidity. The value of
your investment in the Portfolio will go up and down,
which means that you could lose money.
Value stocks involve the risk that they may never
reach what the Investment Manager believes is their
full market value. They also may decline in price,
even though in theory they are already underpriced.
The Portfolio is non-diversified and may invest a
greater percentage of its assets in a particular
company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to
changes in the market value of a single company or
industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard Global Equity Portfolio by showing the Portfolio's
annual returns and its long-term performance. The bar chart shows how the
performance of the Portfolio's Institutional Shares has varied from year to
year. The table compares the performance of the Portfolio's Institutional Shares
and Open Shares over time to that of the MSCI World Index, an arithmetic, market
value-weighted average return which is derived from equities of Europe,
Australasia and Far East (EAFE) Index countries and equities from Canada and the
U.S. Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance does not indicate how the Portfolio will perform
in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL SHARES
[FIGURES BELOW REPRESENTS BAR CHART IN THE PRINTED FORM]
97 15.26%
98 17.10%
- --------------------------------------------------------------------------------
Best quarter: 12/31/98 18.45%
Worst quarter: 9/30/98 (16.39)%
- --------------------------------------------------------------------------------
14
<PAGE>
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating
expenses, except for the first year
periods reflected in the table.
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
INCEPTION PAST SINCE
DATE YEAR INCEPTION
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES 1/4/96 17.10% 16.09%
- --------------------------------------------------------------------------------
OPEN SHARES 1/30/97 16.82% 17.52%
- --------------------------------------------------------------------------------
MSCI WORLD INDEX 24.32% 17.57%
(Institutional)
20.19%
(Open)
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses 1.43% 1.85%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 2.18% 2.85%
- --------------------------------------------------------------------------------
Fee Waiver and Expense
Reimbursement* 1.13% 1.50%
- --------------------------------------------------------------------------------
Net Expenses* 1.05% 1.35%
- --------------------------------------------------------------------------------
* Reflects a contractual obligation by the Investment Manager to waive its fees
and/or reimburse the Portfolio through December 31, 1999 to the extent Total
Annual Portfolio Operating Expenses exceed in any fiscal year 1.05% and 1.35%
of the average daily net assets of the Portfolio's Institutional Shares and
Open Shares, respectively.
LAZARD GLOBAL EQUITY 1 3 5 10
PORTFOLIO Year+ Years+ Years+ Years+
INSTITUTIONAL SHARES $107 $573 $1,066 $2,425
- --------------------------------------------------------------------------------
OPEN SHARES $137 $741 $1,371 $3,068
- --------------------------------------------------------------------------------
+ Year 1 fees and expenses are based on a contractual agreement.
15
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks long-term capital appreciation.
PRINCIPAL INVESTMENT The Portfolio invests primarily in equity securities,
STRATEGIES principally common stocks, of relatively large
non-U.S. companies with market capitalizations in the
range of the Morgan Stanley Capital International
(MSCI) Europe, Australasia and Far East Index that the
Investment Manager believes are undervalued based on
their earnings, cash flow or asset values.
In choosing stocks for the Portfolio, the Investment
Manager looks for established companies in
economically developed countries. The percentage of
the Portfolio's assets invested in particular
geographic sectors may shift from time to time based
on the Investment Manager's judgment. Ordinarily, the
Portfolio invests in at least three different foreign
countries.
PRINCIPAL INVESTMENT While stocks have historically been a leading choice
RISKS of long-term investors, they do fluctuate in price.
The Portfolio's performance will be influenced by
political, social and economic factors. These risks
include changes in currency exchange rates, a lack of
adequate company information, political instability
and differing auditing and legal standards. The value
of your investment in the Portfolio will go up and
down, which means that you could lose money.
Value stocks involve the risk that they may never
reach what the Investment Manager believes is their
full market value. They also may decline in price,
even though in theory they are already underpriced.
The Portfolio is non-diversified and may invest a
greater percentage of its assets in a particular
company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to
changes in the market value of a single company or
industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard International Equity Portfolio by showing the
Portfolio's annual returns and its long-term performance. The bar chart shows
how the performance of the Portfolio's Institutional Shares has varied from year
to year. The table compares the performance of the Portfolio's Institutional
Shares and Open Shares over time to that of the Morgan Stanley Capital
International (MSCI) Europe, Australasia and Far East Index, an unmanaged index
comprised of international equities. Both the bar chart and table assume
reinvestment of dividends and distributions. Past performance does not indicate
how the Portfolio will perform in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
Year-by-Year Total Returns as of 12/31
for Institutional Shares
[FIGURES BELOW REPRESENTS BAR CHART IN THE PRINTED FORM]
1992 -6.62%
1993 31.05%
1994 0.24%
1995 13.14%
1996 15.64%
1997 11.84%
1998 16.04%
- --------------------------------------------------------------------------------
Best quarter: 12/31/98 17.96%
Worst quarter: 9/30/98 (17.11)%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
INCEPTION PAST PAST SINCE
DATE YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES 10/29/91 16.04% 11.22% 11.26%
- --------------------------------------------------------------------------------
OPEN SHARES 1/23/97 15.82% N/A 15.44%
- --------------------------------------------------------------------------------
MSCI EUROPE, 20.00% 9.19% 8.65%
AUSTRALASIA AND (Institutional)
FAR EAST INDEX 12.82%
(Open)
- ---------------------------------------------------------------------------
16
<PAGE>
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating expenses.
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .15% .24%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses .90% 1.24%
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL 1 3 5 10
EQUITY PORTFOLIO Year Years Years Years
INSTITUTIONAL SHARES $ 92 $287 $498 $1,108
- --------------------------------------------------------------------------------
OPEN SHARES $126 $393 $681 $1,500
- --------------------------------------------------------------------------------
17
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks long-term capital appreciation.
PRINCIPAL INVESTMENT The Portfolio invests primarily in equity securities,
principally common stocks, of relatively small,
non-U.S. companies in the range of the Morgan Stanley
Capital International Europe, Australasia and Far East
Small Cap Index that the Investment Manager believes
are undervalued based on their earnings, cash flow or
asset values.
In choosing stocks for the Portfolio, the Investment
Manager looks for smaller, well managed non-U.S.
companies that have the potential to grow. The
percentage of the Portfolio's assets invested in
particular geographic sectors may shift from time to
time based on the Investment Manager's judgment.
Ordinarily, the Portfolio invests in at least three
different foreign countries.
PRINCIPAL INVESTMENT While stocks have historically been a leading choice
RISKS of long-term investors, they do fluctuate in price.
The Portfolio's performance will be influenced by
political, social and economic factors affecting
non-U.S. companies. These risks include changes in
currency exchange rates, a lack of adequate company
information, political instability and differing
auditing and legal standards. Small companies carry
additional risks because their earnings tend to be
less predictable, their share prices more volatile and
their securities less liquid than larger, more
established companies. The value of your investment in
the Portfolio will go up and down, which means that
you could lose money.
Value stocks involve the risk that they may never
reach what the Investment Manager believes is their
full market value. They also may decline in price,
even though in theory they are already underpriced.
The Portfolio is non-diversified and may invest a
greater percentage of its assets in a particular
company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to
changes in the market value of a single company or
industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard International Small Cap Portfoio by showing the
Portfolio's annual returns and its long-term performance. The bar chart shows
how the performance of the Portfolio's Institutional Shares has varied from year
to year. The table compares the performance of the Portfolio's Institutional
Shares and Open Shares over time to that of the Morgan Stanley Capital
International (MSCI) Europe, Australasia and Far East Small Cap Index and the
Salomon Extended Market Index Ex-U.S., each of which is an unmanaged index of
securities listed on foreign stock exchanges. Both the bar chart and table
assume reinvestment of dividends and distributions. Past performance does not
indicate how the Portfolio will perform in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL SHARES
[FIGURES BELOW REPRESENTS BAR CHART IN THE PRINTED FORM]
1994 -4.51%
1995 1.90%
1996 15.65%
1997 0.27%
1998 7.55%
- --------------------------------------------------------------------------------
Best quarter: 3/31/98 20.62%
Worst quarter: 9/30/98 (19.58)%
- --------------------------------------------------------------------------------
18
<PAGE>
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating
expenses, except for the first year
periods reflected in the table
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
INCEPTION PAST PAST SINCE
DATE YEAR 5 YEARS INCEPTION
- ------------------------------------------------------------------------------
INSTITUTIONAL SHARES 12/1/93 7.55% 3.94% 5.58%
- ------------------------------------------------------------------------------
OPEN SHARES 2/13/97 7.21% N/A 1.97%
- ------------------------------------------------------------------------------
MSCI EUROPE, 5.44% (3.38)% (1.75)%
AUSTRALASIA AND FAR (Institutional)
EAST SMALL CAP INDEX (10.27)%
(Open)
- ------------------------------------------------------------------------------
SALOMON EMI 12.15% 4.47% 5.68%
INDEX EX-U.S. (Institutional)
2.04%
(Open)
- -------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .29% .93%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.04% 1.93%
- --------------------------------------------------------------------------------
Fee Waiver and Expense
Reimbursement* -- .50%
- --------------------------------------------------------------------------------
Net Expenses* 1.04% 1.43%
- --------------------------------------------------------------------------------
* Reflects a contractual obligation by the Investment Manager to waive its fee
and/or reimburse the Portfolio through December 31, 1999 to the extent Total
Annual Portfolio Operating Expenses exceed in any fiscal year 1.04% and 1.43%
of the average daily net assets of the Portfolio's Institutional Shares and
Open Shares, respectively.
LAZARD INTERNATIONAL 1 3 5 10
SMALL CAP PORTFOLIO Year+ Years+ Years+ Years+
INSTITUTIONAL SHARES $106 $331 $574 $1,271
- --------------------------------------------------------------------------------
OPEN SHARES $146 $558 $996 $2,213
- --------------------------------------------------------------------------------
+ Year 1 fees and expenses are based on a contractual agreement.
19
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD EMERGING MARKETS PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks long-term capital appreciation.
PRINCIPAL INVESTMENT The Portfolio invests primarily in equity securities,
STRATEGIES principally common stocks, of non-U.S. companies whose
principal activities are in emerging market countries
that the Investment Manager believes are undervalued
based on their earnings, cash flow or asset values.
Emerging market countries include all countries
represented by the Morgan Stanley Capital
International Emerging Markets (Free) Index, which
currently includes: Argentina, Brazil, Chile, China,
Colombia, the Czech Republic, Egypt, Greece, Hungary,
India, Indonesia, Israel, Jordan, Korea, Malaysia,
Mexico, Morocco, Pakistan, Peru, Philippines, Poland,
Russia, Sri Lanka, South Africa, Taiwan, Thailand,
Turkey and Venezuela.
PRINCIPAL INVESTMENT The securities markets of emerging market countries
RISKS can be extremely volatile. The Portfolio's performance
will be influenced by political, social and economic
factors affecting companies in emerging market
countries. These risks include changes in currency
exchange rates, a lack of adequate company
information, political instability, and differing
auditing and legal standards. In addition, emerging
market countries generally have economic structures
that are less diverse and mature, and political
systems that are less stable, than those of developed
countries. The value of your investment in the
Portfolio will go up and down, which means that you
could lose money.
Value stocks involve the risk that they may never
reach what the Investment Manager believes is their
full market value. They also may decline in price,
even though in theory they are already underpriced.
The Portfolio is non-diversified and may invest a
greater percentage of its assets in a particular
company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to
changes in the market value of a single company or
industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard Emerging Markets Portfolio by showing the Portfolio's
annual returns and its long-term performance. The bar chart shows how the
performance of the Portfolio's Institutional Shares has varied from year to
year. The table compares the performance of the Portfolio's Institutional Shares
and Open Shares over time to that of the Morgan Stanley Capital International
(MSCI) Emerging Markets (Free) Index and the International Finance Corp. (IFC)
Investable Total Return Index, an index of emerging markets securities that
represents 65% of market capital compiled by the International Finance
Corporation. Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance does not indicate how the Portfolio will perform
in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL SHARES
[FIGURES BELOW REPRESENTS BAR CHART IN THE PRINTED FORM]
1995 -5.88%
1996 23.63%
1997 -9.84%
1998 -23.49%
- --------------------------------------------------------------------------------
Best quarter: 6/30/97 12.07%
Worst quarter: 9/30/98 (23.59)%
- --------------------------------------------------------------------------------
20
<PAGE>
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating expenses,
except for the first year periods
reflected in the table
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
INCEPTION PAST SINCE
DATE YEAR INCEPTION
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES 7/15/94 (23.49)% (5.10)%
- --------------------------------------------------------------------------------
OPEN SHARES 1/8/97 (23.30)% (17.99)%
- --------------------------------------------------------------------------------
MSCI EMERGING (25.34)% (8.70)%
MARKETS (FREE) INDEX (Institutional)
(19.40)%
(Open)
- --------------------------------------------------------------------------------
IFC INVESTABLE TOTAL (22.02)% (8.85)%
RETURN INDEX (Institutional)
(19.53)%
(Open)
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management fees 1.00% 1.00%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .29% .51%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.29% 1.76%
- --------------------------------------------------------------------------------
Fee Waiver and Expense
Reimbursement* .01% .16%
- --------------------------------------------------------------------------------
Net Expenses* 1.28% 1.60%
- --------------------------------------------------------------------------------
* Reflects a contractual obligation by the Investment Manager to waive its
fees and/or reimburse the Portfolio through December 31, 1999 to the extent
Total Annual Portfolio Operating Expenses exceed in any fiscal year 1.28% and
1.60% of the average daily net assets of the Portfolio's Institutional Shares
and Open Shares, respectively.
LAZARD EMERGING MARKETS 1 3 5 10
PORTFOLIO Year+ Years+ Years+ Years+
INSTITUTIONAL SHARES $130 $408 $707 $1,556
- --------------------------------------------------------------------------------
OPEN SHARES $163 $539 $939 $2,060
- --------------------------------------------------------------------------------
+ Year 1 fees and expenses are based on a contractual agreement.
21
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD BOND PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks to build and preserve capital.
PRINCIPAL INVESTMENT The Portfolio invests in a range of bonds and other
STRATEGIES fixed-income securities, including mortgage-backed
securities, asset-backed securities, municipal
securities, corporate fixed-income securities and U.S.
Government securities. The Portfolio invests the major
portion of its assets in investment grade fixed-income
securities and may invest up to 10% of its total
assets in fixed-income securities rated below
investment grade ("junk" bonds). Under normal market
conditions, the Portfolio invests at least 80% of its
total assets in fixed-income securities with
maturities of greater than one year. Under normal
market conditions, the Portfolio's effective duration
(a measure of interest rate sensitivity) will range
between two and seven years.
PRINCIPAL INVESTMENT While bonds are designed to produce a stable stream of
RISKS income, their prices move inversely with changes in
interest rates. The Portfolio is subject to credit
risk, or the risk that an issuer of bonds held by the
Portfolio fails to make timely interest or principal
payments, potentially reducing the Portfolio's income
or share price.
The value of your investment in the Portfolio will go
up and down, which means that you could lose money.
The Portfolio is non-diversified and may invest a
greater percentage of its assets in a particular
company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to
changes in the market value of a single company or
industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard Bond Portfolio by showing the Portfolio's annual returns
and its long-term performance. The bar chart shows how the performance of the
Portfolio's Institutional Shares has varied from year to year. The table
compares the performance of the Portfolio's Institutional Shares and Open Shares
over time to that of the Lehman Intermediate Government/ Corporate Bond Index,
an index calculated by Lehman Brothers. Both the bar chart and table assume
reinvestment of dividends and distributions. Past performance does not indicate
how the Portfolio will perform in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL SHARES
[FIGURES BELOW REPRESENTS BAR CHART IN THE PRINTED FORM]
1992 5.69%
1993 8.59%
1994 -4.20%
1995 16.20%
1996 4.36%
1997 8.56%
1998 5.77%
- --------------------------------------------------------------------------------
Best quarter: 6/30/95 6.15%
Worst quarter: 3/31/94 (2.40)%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
INCEPTION PAST PAST SINCE
DATE YEAR 5 YEARS INCEPTION
INSTITUTIONAL SHARES 11/12/91 5.77% 5.93% 6.69%
- --------------------------------------------------------------------------------
OPEN SHARES 3/5/97 5.42% N/A 6.93%
- --------------------------------------------------------------------------------
LEHMAN INTERMEDIATE 8.43% 6.60% 7.35%
GOV'T/CORP. BOND INDEX (Institutional)
8.66%
(Open)
- --------------------------------------------------------------------------------
22
<PAGE>
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating
expenses, except for the first year
periods reflected in the table.
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
- --------------------------------------------------------------------------------
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management fees .50% .50%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .29% .46%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses .79% 1.21%
- --------------------------------------------------------------------------------
Fee Waiver and Expense
Reimbursement* .01% .11%
- --------------------------------------------------------------------------------
Net Expenses* .78% 1.10%
- --------------------------------------------------------------------------------
* Reflects a contractual obligation by the Investment Manager to waive its
fees and/or reimburse the Portfolio through December 31, 1999 to the extent
Total Annual Portfolio Operating Expenses exceed in any fiscal year 1.28% and
1.60% of the average daily net assets of the Portfolio's Institutional Shares
and Open Shares, respectively.
1 3 5 10
LAZARD BOND PORTFOLIO YEAR+ YEARS+ YEARS+ YEARS+
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES $ 80 $251 $438 $977
- --------------------------------------------------------------------------------
OPEN SHARES $112 $373 $654 $1,456
- --------------------------------------------------------------------------------
+ Year 1 fees and expenses are based on a contractual agreement.
23
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD HIGH YIELD PORTFOLIO
INVESTMENT OBJECTIVE
The Portfolio seeks maximum total return from a
combination of capital appreciation and current
income.
PRINCIPAL INVESTMENT The Portfolio invests primarily in high-yielding
STRATEGIES corporate fixed-income securities rated, at the time
of purchase, below investment grade ("junk bonds").
While the Portfolio's emphasis is currently on
high-yielding corporate bonds, it may also invest in
mortgage-related securities, asset-backed securities,
zero coupon securities, municipal securities,
preferred stock and convertible securities of U.S. and
non-U.S. issuers. The Portfolio may invest, to a
limited extent, in companies in, or governments of,
emerging market countries.
PRINCIPAL INVESTMENT High yield bonds involve greater credit risk than
RISKS investment grade bonds. They tend to be more volatile
in price, less liquid and are considered speculative.
The value of your investment in the Portfolio will go
up and down, which means that you could lose money.
Other risk factors could have an effect on the
Portfolio's performance, including:
o if there is a decline in the credit quality of a
bond, or a perception of a decline, the bond's value
could fall, potentially lowering the Portfolio's
share price
o if the Portfolio's mortgage-related securities are
paid off substantially earlier or later than
expected, the Portfolio's share price or yield could
be hurt
o the price and yield of non-U.S. debt securities
could be affected by factors ranging from political
and economic instability to changes in currency
exchange rates
The Portfolio is non-diversified and may invest a
greater percentage of its assets in a particular
company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to
changes in the market value of a single company or
industry.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
As of the date of this prospectus, the Portfolio had not completed
a year of operations.
Accordingly, no performance information is provided.
24
<PAGE>
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 INITIAL INVESTMENT
o 5% annual return each year
o redemption at the end of each period
o no changes in operating expenses,
except for the first year periods
reflected in the table
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .80% 8.77%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.55% 9.77%
- --------------------------------------------------------------------------------
Fee Waiver and Expense
Reimbursement* .50% 8.42%
- --------------------------------------------------------------------------------
Net Expenses* 1.05% 1.35%
- --------------------------------------------------------------------------------
* Reflects a contractual obligation by the Investment Manager to waive its fee
and/or reimburse the Portfolio through December 31, 1999 to the extent Total
Annual Portfolio Operating Expenses exceed in any fiscal year 1.05% and 1.35%
of the average daily net assets of the Portfolio's Institutional Shares and
Open Shares, respectively.
LAZARD HIGH YIELD 1 3 5 10
PORTFOLIO Year+ Years+ Years+ Years+
INSTITUTIONAL SHARES $107 $441 $797 $1,803
- --------------------------------------------------------------------------------
OPEN SHARES $137 $2,067 $3,817 $7,513
- --------------------------------------------------------------------------------
+ Year 1 fees and expenses are based on a contractual agreement.
25
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks maximum total return from a
combination of capital appreciation and current
income.
PRINCIPAL INVESTMENT The Portfolio generally invests at least 80% of its
STRATEGIES total assets in fixed-income securities of companies
within, or governments, their agencies or
instrumentalities of, at least three different
non-U.S. countries. The Investment Manager currently
intends to invest the Portfolio's assets primarily in
companies within, or governments of, Continental
Europe, the United Kingdom, Canada and the Pacific
Basin. The Portfolio invests primarily in non-U.S.
fixed-income securities of varying maturities. The
Portfolio typically invests more than half of its
total assets in corporate bonds, mortgage-related
securities and asset-backed securities. The Portfolio
typically invests less than half of its total assets
in foreign government obligations. The Portfolio
generally invests at least 85% of its total assets in
investment grade fixed-income securities and may
invest up to 15% of its total assets in fixed-income
securities rated below investment grade ("junk"
bonds). Under normal market conditions, the
Portfolio's effective duration (a measure of interest
rate sensitivity) will range between two and eight
years.
PRINCIPAL INVESTMENT While bonds are designed to produce a stable stream of
RISKS income, their prices move inversely with changes in
interest rates. The Portfolio is subject to credit
risk, or the risk that an issuer of bonds held by the
Portfolio fails to make timely interest or principal
payments, potentially reducing the Portfolio's income
or share price. The Portfolio's performance will be
influenced by political, social and economic factors
of non-U.S. countries. These risks include changes in
currency exchange rates, a lack of adequate company
information, political instability and differing
auditing and legal standards. The value of your
investment in the Portfolio will go up and down, which
means that you could lose money.
Mortgage-related securities can have a different
interest rate sensitivity than other bonds, because of
prepayments and other factors. For example, when
interest rates fall, mortgage-related securities may
be paid off earlier than expected, and the Portfolio
may reinvest those assets at lower rates. This lessens
these securities appreciation potential when interest
rates decline. When interest rates rise,
mortgage-related securities may decline less in price,
given their generally higher coupon.
The Portfolio is non-diversified and may invest a
greater percentage of its assets in a particular
company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to
changes in the market value of a single company or
industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard International Fixed-Income Portfolio by showing the
Portfolio's annual returns and its long-term performance. The bar chart shows
how the performance of the Portfolio's Institutional Shares has varied from year
to year. The table compares the performance of the Portfolio's Institutional
Shares and Open Shares over time to that of the Salomon World Government Bond
Index Ex-U.S., an index compiled by Salomon Smith Barney. Both the bar chart and
table assume reinvestment of dividends and distributions. Past performance does
not indicate how the Portfolio will perform in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL SHARES
[FIGURES BELOW REPRESENTS BAR CHART IN THE PRINTED FORM]
1992 2.03%
1993 15.67%
1994 4.17%
1995 19.38%
1996 5.52%
1997 -5.58%
1998 13.20%
- --------------------------------------------------------------------------------
Best quarter: 3/31/95 13.20%
Worst quarter: 3/31/97 (5.63)%
- --------------------------------------------------------------------------------
26
<PAGE>
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating expenses,
except for the first year periods
reflected in the table
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
INCEPTION PAST PAST SINCE
DATE YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES 11/8/91 13.20% 7.00% 7.86%
- --------------------------------------------------------------------------------
OPEN SHARES 1/8/97 12.92% N/A 3.72%
- --------------------------------------------------------------------------------
SALOMON WORLD 17.19% 8.26% 9.61%
GOVERNMENT BOND (Institutional)
INDEX EX-U.S. 6.81%
(Open)
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management Fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .35% .92%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.10% 1.92%
- --------------------------------------------------------------------------------
Fee Waiver and
Expense Reimbursement* .01% .57%
- --------------------------------------------------------------------------------
Net Expenses* 1.09% 1.35%
- --------------------------------------------------------------------------------
* Reflects a contractual obligation by the Investment Manager to waive its
fees and/or reimburse the Portfolio through December 31, 1999 to the extent
Total Annual Portfolio Operating Expenses exceed in any fiscal year 1.09% and
1.35% of the average daily net assets of the Portfolio's Institutional Shares
and Open Shares, respectively.
LAZARD INTERNATIONAL 1 3 5 10
FIXED-INCOME PORTFOLIO Year+ Years+ Years+ Years+
INSTITUTIONAL SHARES $111 $349 $605 $1,339
- --------------------------------------------------------------------------------
OPEN SHARES $137 $548 $984 $2,197
- --------------------------------------------------------------------------------
+ Year 1 fees and expenses are based on a contractual agreement.
27
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD STRATEGIC YIELD PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks total return from a combination of
capital appreciation and current income.
PRINCIPAL INVESTMENT The Portfolio invests in a wide variety of U.S. and
STRATEGIES non-U.S. fixed-income securities. The Portfolio
typically invests approximately half of its total
assets in investment grade corporate bonds,
mortgage-related securities and asset-backed
securities. The Portfolio typically invests
approximately half of its total assets in fixed-income
securities rated below investment grade ("junk"
bonds), emerging markets securities, structured notes
and local currency-denominated bonds. Structured notes
are securities that provide cash flows based on the
movements of underlying variables, such as exchange
rates or interest rates. At least 95% of these
fixed-income securities will be rated, at the time of
purchase, at least CCC by S&P or Caa by Moody's, or
the unrated equivalent as determined by the Investment
Manager. The remaining 5% may be rated as low as the
lowest rating assigned by S&P or Moody's.
Consequently, the Portfolio may invest all of its
assets in fixed-income securities rated below
investment grade. The Portfolio may invest up to 50%
of its total assets in non-U.S. dollar denominated
fixed-income securities of foreign issuers.
PRINCIPAL INVESTMENT While bonds are designed to produce a stable stream of
RISKS income, their prices move inversely with changes in
interest rates. High yield bonds involve greater
credit risk than investment grade bonds. They tend to
be more volatile in price, less liquid and are
considered speculative.
The Portfolio's performance will be influenced by
political, social and economic factors affecting
non-U.S. countries. These risks include changes in
currency exchange rates, a lack of adequate company
information, political instability and differing
auditing and legal standards. The value of your
investment in the Portfolio will go up and down, which
means that you could lose money.
Emerging market countries generally have economic
structures that are less diverse and mature, and
political systems that are less stable, than those of
developed countries. Emerging markets may be more
volatile than the markets of more mature economies,
and the securities of emerging market issuers often
are subject to rapid and large changes in price.
Mortgage-related securities can have a different
interest rate sensitivity than other bonds, because of
prepayments and other factors. For example, when
interest rates fall, mortgage-related securities may
be paid off earlier than expected, and the Portfolio
may reinvest those assets at lower rates. This lessens
these securities appreciation potential when interest
rates decline. When interest rates rise,
mortgage-related securities may decline less in price,
given their generally higher coupon.
The Portfolio is non-diversified and may invest a
greater percentage of its assets in a particular
company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to
changes in market value of a single company or
industry.
28
<PAGE>
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard Strategic Yield Portfolio by showing the Portfolio's
annual returns and its long-term performance. The bar chart shows how the
performance of the Portfolio's Institutional Shares has varied from year to
year. The table compares the performance of the Portfolio's Institutional Shares
and Open Shares over time to that of the One Month LIBOR U.S. Dollar Fixed
Index, an average derived from sixteen quotations provided by banks determined
by the British Bankers Association. Both the bar chart and table assume
reinvestment of dividends and distributions. Past performance does not indicate
how the Portfolio will perform in the future.
FEES AND EXPENSES
- -----------------
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
- ---------------
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 INITIAL INVESTMENT
o 5% annual return each year
o redemption at the end of each period
o no changes in operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL SHARES
[FIGURES BELOW REPRESENTS BAR CHART IN THE PRINTED FORM]
1992 5.96%
1993 15.60%
1994 -2.34%
1995 13.56%
1996 13.74%
1997 5.30%
1998 0.75%
- --------------------------------------------------------------------------------
Best quarter: 3/31/93 6.33
Worst quarter: 9/30/98 (3.78)%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
INCEPTION PAST PAST SINCE
DATE YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES 10/31/91 0.75% 6.00% 7.36%
- --------------------------------------------------------------------------------
OPEN SHARES 1/23/97 0.37% N/A 2.12%
- --------------------------------------------------------------------------------
ONE MONTH LIBOR 5.54% 5.44% 4.88%
USD FIXED INDEX (Institutional)
5.61%
(Open)
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
INSTITUTIONAL OPEN
SHARES SHARES
- --------------------------------------------------------------------------------
Management fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .15% .28%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses .90% 1.28%
- --------------------------------------------------------------------------------
LAZARD STRATEGIC 1 3 5 10
YIELD PORTFOLIO Year Years Years Years
INSTITUTIONAL SHARES $92 $287 $498 $1,108
- --------------------------------------------------------------------------------
OPEN SHARES $130 $406 $702 $1,545
- --------------------------------------------------------------------------------
29
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
================================================================================
LAZARD EQUITY PORTFOLIO
================================================================================
Ticker Symbol: LZEQX (Institutional)
LZEOX (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The Equity Portfolio seeks long-term capital appreciation. The Portfolio invests
primarily in equity securities, principally common stocks, of U.S. companies
with market capitalizations in the range of the S&P 500(R) Index that the
Investment Manager believes are undervalued based on their earnings, cash flow
or asset values.
The Portfolio generally invests at least 80% of its total assets in equity
securities. The Portfolio may invest up to 20% of its total assets in U.S.
Government securities and investment grade debt obligations of U.S.
corporations. The Portfolio also may invest up to 10% of its total assets in
non-U.S. equity or debt securities that trade in U.S. markets.
The Portfolio may engage, to a limited extent, in various investment techniques,
such as options transactions, leveraging and lending portfolio securities.
The Portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the Investment
Manager's expectations.
RISK FACTORS
- ------------
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the Portfolio will
go up and down, which means that you could lose money.
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the Portfolio's performance may sometimes be
lower or higher than that of other types of funds (such as those emphasizing
smaller companies). Under adverse market conditions, the Portfolio could invest
some or all of its assets in money market securities. The Portfolio would do
this only in seeking to avoid losses, but this could reduce the benefit from any
upswing in the market and may result in the Portfolio not achieving its
investment objective.
Value stocks involve the risk that they may never reach what the Investment
Manager believes is their full market value. They also may decline in price,
even though in theory they are already underpriced.
While the Portfolio may engage in options transactions primarily to hedge its
portfolio, it may use options to increase returns; however, there is the risk
that these transactions sometimes may reduce returns or increase volatility.
LAZARD MID CAP PORTFOLIO
================================================================================
Ticker Symbol: LZMIX (Institutional)
N/A (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The Mid Cap Portfolio seeks long-term capital appreciation. The Portfolio
invests primarily in equity securities, principally common stocks, of
medium-size U.S. companies in the range of the Russell Midcap Index that the
Investment Manager believes are undervalued based on their earnings, cash flow
or asset values. The Russell Midcap Index is composed of selected common stocks
of medium-size U.S. companies.
The Portfolio generally invests at least 80% of its total assets in the equity
securities of undervalued medium-size companies. The Portfolio may invest up to
20% of its total assets in the equity securities of larger capitalization
companies or investment grade debt securities. The Portfolio may also invest up
to 15% of its total assets in non-U.S. equity or debt securities.
The Portfolio may engage, to a limited extent, in various investment techniques,
such as options and futures transactions, foreign currency transactions,
leveraging, short-selling and lending portfolio securities.
The Portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the Investment
Manager's expectations.
RISK FACTORS
- ------------
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the Portfolio will
go up and down, which means that you could lose money.
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the Portfolio's performance may sometimes be
lower or higher than that of other types of funds (such as those emphasizing
larger companies). Mid cap companies carry additional risks because their
earnings tend to be less predictable, their share prices more volatile and their
securities less liquid than larger, more established companies. Some of
30
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS (CONTINUED)
================================================================================
the Portfolio's investments will rise and fall based on investor perception.
Investments in value stocks are subject to the risk that they may never reach
what the Investment Manager believes is their full value. They also may decline
in price, even though in theory they are already undervalued. And, while
investments in value stocks may limit downside risk over time, the Portfolio
may, as a trade-off, produce smaller gains than riskier stock funds.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the
market and may result in the Portfolio not achieving its investment objective.
While the Portfolio may engage in options and futures transactions and foreign
currency transactions primarily to hedge its portfolio, it may use these
transactions to increase returns; however, there is the risk that these
transactions sometimes may reduce returns or increase volatility. In addition,
derivatives, such as options and futures, can be illiquid and highly sensitive
to changes in their underlying security, interest rate or index, and as a result
can be highly volatile. A small investment in certain derivatives could have a
potentially large impact on the Portfolio's performance.
The Portfolio can buy securities with borrowed money (a form of leverage), which
could have the effect of magnifying the Portfolio's gains or losses.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
LAZARD SMALL CAP PORTFOLIO
================================================================================
Ticker Symbol: LZSCX (Institutional)
LZCOX (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The Small Cap Portfolio seeks long-term capital appreciation. The Portfolio
invests primarily in equity securities, principally common stocks, of relatively
small U.S. companies in the range of the Russell 2000 Index that the Investment
Manager believes are undervalued based on their earnings, cash flow or asset
values. The Russell 2000 Index is composed of selected common stocks of small,
generally unseasoned U.S. companies.
The Portfolio generally invests at least 80% of its total assets in equity
securities of small U.S. companies. These securities generally have one or more
of the following characteristics:
o have the potential to become a larger factor in the company's business;
o have significant debt but have high levels of free cash flow; and
o have a relatively short corporate history with the expectation that the
business may grow.
The Portfolio may invest up to 20% of its total assets in equity securities of
larger U.S. companies or investment grade debt securities. The Portfolio may
engage, to a limited extent, in various investment techniques, such as lending
portfolio securities.
The Portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the Investment
Manager's expectations.
RISK FACTORS
- ------------
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the Portfolio will
go up and down, which means that you could lose money.
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the Portfolio's performance may sometimes be
lower or higher than that of other types of funds (such as those emphasizing
larger companies). Small companies carry additional risks because their earnings
tend to be less predictable, their share prices more volatile and their
securities less liquid than larger, more established companies. Some of the
Portfolio's investments will rise and fall based on investor perception only.
Investments in value stocks are subject to the risk that they may never reach
what the Investment Manager believes is their full value. They also may decline
in price, even though in theory they are already undervalued. And, while
investments in value stocks may limit downside risk over time, the Portfolio
may, as a trade-off, produce smaller gains than riskier stock funds.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the
market and may result in the Portfolio not achieving its investment objective.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared
31
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS (CONTINUED)
================================================================================
with other funds. Accordingly, the Portfolio's securities may be more sensitive
to changes in the market value of a single company or industry.
LAZARD BANTAM VALUE PORTFOLIO
================================================================================
Ticker Symbol: LABVX (Institutional)
N/A (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The Bantam Value Portfolio seeks long-term capital appreciation. The Portfolio
invests primarily in equity securities, principally common stocks, of small U.S.
companies with market capitalizations under $500 million that the Investment
Manager believes are undervalued based on their earnings, cash flow or asset
values.
The Portfolio generally invests at least 80% of its total assets in equity
securities of small U.S. companies. The Portfolio may invest up to 20% of its
total assets in equity securities of large U.S. companies or investment grade
debt securities. The Portfolio also may invest up to 10% of its total assets in
non-U.S. equities or investment grade debt securities that trade in U.S.
markets.
The Portfolio may engage, to a limited extent, in various investment techniques,
such as options transactions and lending portfolio securities.
The Portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the investment
Manager's expectations.
RISK FACTORS
- ------------
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the Portfolio will
go up and down, which means that you could lose money.
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the Portfolio's performance may sometimes be
lower or higher than that of other types of funds (such as those emphasizing
larger companies). Small companies carry additional risks because their earnings
tend to be less predictable, their share prices more volatile and their
securities less liquid than larger, more established companies. Some of the
Portfolio's investments will rise and fall based on investor perception only.
Investments in value stocks are subject to the risk that they may never reach
what the Investment Manager believes is their full value. They also may decline
in price, even though in theory they are already undervalued. And, while
investments in value stocks may limit downside risk over time, the Portfolio
may, as a trade-off, produce smaller gains than riskier stock funds.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the
market and may result in the Portfolio not achieving its investment objective.
While the Portfolio may engage in options transactions primarily to hedge its
portfolio, it may use options to increase returns; however, there is the risk
that these transactions sometimes may reduce returns or increase volatility.
At times, the Portfolio may engage in short-term trading, which could produce
higher brokerage costs and taxable distributions.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
LAZARD GLOBAL EQUITY PORTFOLIO
================================================================================
Ticker Symbol: LZGEX(Institutional)
N/A (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The Global Equity Portfolio seeks long-term capital appreciation. The Portfolio
invests primarily in equity securities, principally common stocks, of relatively
large companies, (those whose market value is more than $1 billion) both U.S.
and non-U.S., that the Investment Manager believes are undervalued based on
their earnings, cash flow or asset values.
The Portfolio generally invests at least 80% of its total assets in equity
securities, including American and Global Depositary Receipts, of companies
located in at least four different countries, including the United States. The
allocation of the Portfolio's assets among geographic regions may shift from
time to time based on the Investment Manager's judgment and its analysis of
market conditions. However, the Investment Manager currently intends to invest
at least 25% of the Portfolio's total assets in securities of U.S. companies.
32
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS (CONTINUED)
================================================================================
The Portfolio may invest up to 20% of its total assets in investment grade
fixed-income securities. The Portfolio may engage, to a limited extent, in
various investment techniques, such as options and futures transactions, foreign
currency transactions and lending portfolio securities.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
RISK FACTORS
- ------------
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the Portfolio will
go up and down, which means that you could lose money.
The Portfolio's performance will be influenced by political, social and economic
factors affecting companies around the world. These risks include changes in
currency exchange rates, a lack of adequate company information, political
instability, and differing auditing and legal standards. To the extent the
Portfolio invests in companies in emerging market countries, these countries
generally have economic structures that are less diverse and mature and
political systems that are less stable, than those of developed countries.
Value stocks involve the risk that they may never reach what the Investment
Manager believes is their full market value. They also may decline in price,
even though in theory they are already underpriced.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the
market and may result in the Portfolio not achieving its investment objective.
While the Portfolio may engage in options and futures transactions and foreign
currency transactions primarily to hedge its portfolio, it may use these
transactions to increase returns; however, there is the risk that these
transactions sometimes may reduce returns or increase volatility. In addition,
derivatives, such as options and futures, can be illiquid and highly sensitive
to changes in their underlying security, interest rate or index, and as a result
can be highly volatile. A small investment in certain derivatives could have a
potentially large impact on the Portfolio's performance.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
LAZARD INTERNATIONAL
EQUITY PORTFOLIO
================================================================================
Ticker Symbol: LZIEX (Institutional)
LZIOX (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The International Equity Portfolio seeks long-term capital appreciation. The
Portfolio invests primarily in equity securities, principally common stocks, of
relatively large non-U.S. companies with market capitalizations in the range of
the MSCI Europe, Australasia and Far East Index that the Investment Manager
believes are undervalued based on their earnings, cash flow or asset values.
The Portfolio generally invests at least 80% of its total assets in equity
securities of companies located in at least three different foreign countries.
The allocation of the Portfolio's assets among geographic sectors may shift from
time to time based on the Investment Manager's judgment and its analysis of
market conditions. However, the Investment Manager currently intends to invest
the Portfolio's assets primarily in companies based in developed markets.
The Portfolio may invest up to 20% of its total assets in investment grade
fixed-income securities and short-term money market instruments. The Portfolio
may engage, to a limited extent, in various investment techniques, such as
foreign currency transactions and lending portfolio securities.
The Portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the Investment
Manager's expectations.
RISK FACTORS
- -----------
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the Portfolio will
go up and down, which means that you could lose money.
The Portfolio's performance will be influenced by political, social and economic
factors affecting companies around the world. These risks include changes in
currency exchange rates, a lack of adequate company information, political
instability, and differing auditing and legal standards.
33
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS (CONTINUED)
================================================================================
Value stocks involve the risk that they may never reach what the Investment
Manager believes is their full market value. They also may decline in price,
even though in theory they are already underpriced.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the
market and may result in the Portfolio not achieving its investment objective.
While the Portfolio may engage in foreign currency transactions primarily to
hedge its portfolio, it may use these transactions to increase returns; however,
there is the risk that these transactions sometimes may reduce returns or
increase volatility.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
LAZARD INTERNATIONAL
SMALL CAP PORTFOLIO
================================================================================
Ticker Symbol: LZISX (Institutional)
N/A (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The International Small Cap Portfolio seeks long-term capital appreciation. The
Portfolio invests primarily in equity securities, principally common stocks, of
relatively small non-U.S. companies in the range of the Morgan Stanley Capital
International Europe, Australasia and Far East Small Cap Index (the "MSCI EAFE
Small Cap Index") that the Investment Manager believes are undervalued based on
their earnings, cash flow or asset values. The MSCI EAFE Small Cap Index is an
unmanaged index of securities listed on foreign stock exchanges.
The Portfolio generally invests at least 80% of its total assets in equity
securities, including American and Global Depositary Receipts, of small non-U.S.
companies.
The Portfolio generally invests at least 65% of its total assets in equity
securities of small companies located in at least three foreign countries. The
allocation of the Portfolio's assets among geographic regions may shift from
time to time based on the Investment Manager's judgment and its analysis of
market conditions. However, the Investment Manager currently intends to invest
the Portfolio's assets primarily in companies based in Continental Europe, the
United Kingdom, the Pacific Basin, Latin America and Canada.
The Portfolio may invest up to 20% of its total assets in equity securities of
large companies or investment grade debt securities. The Portfolio may engage,
to a limited extent, in various investment techniques, such as options and
futures transactions, foreign currency transactions and lending portfolio
securities.
The Portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the Investment
Manager's expectations.
RISK FACTORS
- ------------
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the Portfolio will
go up and down, which means that you could lose money.
The Portfolio's performance will be influenced by political, social and economic
factors affecting companies around the world. These risks include changes in
currency exchange rates, a lack of adequate company information, political
instability, and differing auditing and legal standards.
Small companies carry additional risks because their earnings tend to be less
predictable, their share prices more volatile and their securities less liquid
than larger, more established companies. Some of the Portfolio's investments
will rise and fall based on investor perception only. Investments in value
stocks are subject to the risk that they may never reach what the Investment
Manager believes is their full value. They also may decline in price, even
though in theory they are already undervalued. And, while investments in value
stocks may limit downside risk over time, the Portfolio may, as a trade-off,
produce smaller gains than riskier stock funds.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the
market and may result in the Portfolio not achieving its investment objective.
While the portfolio may engage in options and futures transactions and foreign
currency transactions primarily to hedge its portfolio, it may use these
transactions to increase returns; however, there is the risk that these
transactions sometimes may reduce returns or increase volatility. In addition,
derivatives, such as options and futures, can be illiquid and highly sensitive
to changes in their
34
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS (CONTINUED)
================================================================================
underlying security, interest rate or index, and as a result can be highly
volatile. A small investment in certain derivatives could have a potentially
large impact on the portfolio's performance.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
LAZARD EMERGING MARKETS PORTFOLIO
================================================================================
Ticker Symbol: LZEMX (Institutional)
N/A (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The Emerging Markets Portfolio seeks long-term capital appreciation. The
Portfolio invests primarily in equity securities, principally common stocks, of
non-U.S. companies whose principal business activities are located in emerging
market countries that the Investment Manager believes are undervalued based on
their earnings, cash flow or asset values. Emerging market countries include all
countries represented by the Morgan Stanley Capital International Emerging
Markets (Free) Index, which currently includes: Argentina, Brazil, Chile, China,
Colombia, the Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Israel,
Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland,
Russia, Sri Lanka, South Africa, Taiwan, Thailand, Turkey and Venezuela.
The Portfolio generally invests at least 65% of its total assets in equity
securities, including American and Global Depositary Receipts, of companies
whose principal business activities are located in emerging market countries.
The Portfolio invests at least 65% of its total assets in equity securities of
companies in at least three different foreign countries. The allocation of the
Portfolio's assets among emerging market countries may shift from time to time
based on the Investment Manager's judgment and its analysis of market
conditions. However, the Portfolio is likely to focus on companies in Latin
America, the Pacific Basin and Europe.
The Portfolio may invest, to a limited extent, in closed-end investment
companies that invest in emerging market securities. When the Investment Manager
believes it is warranted, the Portfolio may invest, without limitation, in high
quality fixed-income securities or the equity securities of U.S. companies.
The Portfolio may engage, to a limited extent, in various investment techniques,
such as options and futures transactions, foreign currency transactions and
lending portfolio securities.
The Portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the Investment
Manager's expectations.
RISK FACTORS
- ------------
The securities markets of emerging market countries can be extremely volatile.
The value of your investment in the Portfolio will go up and down, which means
that you could lose money.
The Portfolio's performance will be influenced by political, social and economic
factors affecting companies in emerging market countries. These risks include
changes in currency exchange rates, a lack of adequate company information,
political instability, and differing auditing and legal standards. In addition,
emerging market countries generally have economic structures that are less
diverse and mature, and political systems that are less stable, than those of
developed countries. Emerging markets may be more volatile than the markets of
more mature economies; however, such markets may provide higher rates of return
to investors.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the
market and may result in the Portfolio not achieving its investment objective.
While the Portfolio may engage in options and futures transactions and foreign
currency transactions primarily to hedge its portfolio, it may use these
transactions to increase returns; however, there is the risk that these
transactions sometimes may reduce returns or increase volatility. In addition,
derivatives, such as options and futures, can be illiquid and highly sensitive
to changes in their underlying security, interest rate or index, and as a result
can be highly volatile. A small investment in certain derivatives could have a
potentially large impact on the Portfolio's performance.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
35
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS (CONTINUED)
================================================================================
LAZARD BOND PORTFOLIO
================================================================================
Ticker Symbol: LZBDX (Institutional)
N/A (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The Bond Portfolio seeks to build and preserve capital. The Portfolio invests in
a range of bonds and other fixed-income securities, including mortgage-backed
securities, asset-backed securities, municipal securities, corporate
fixed-income securities and U.S. Government securities. The allocation of the
Portfolio's assets among fixed-income sectors may shift from time to time based
on the Investment Manager's judgment.
The Portfolio invests the major portion of its assets in investment grade bonds
and other fixed-income securities or the unrated equivalent as determined by the
Investment Manager. The Portfolio may invest up to 10% of its total assets in
bonds and other fixed-income securities rated, at the time of purchase, below
investment grade and as low as the lowest rating assigned by Standard & Poor's
Ratings Group ("S&P") or Moody's Investors Service, Inc. ("Moody's"), or the
unrated equivalent ("junk bonds") as determined by the Investment Manager.
The Portfolio generally invests at least 80% of its total assets in bonds and
other fixed-income securities with maturities of greater than one year. The
Investment Manager anticipates that, under normal market conditions, the
Portfolio's effective duration will range between two and seven years. Duration
is a measure of how sensitive the securities held by the Portfolio may be to
changes in interest rates.
The Portfolio may engage, to a limited extent, in various investment techniques,
such as options and futures transactions and lending portfolio securities.
The Portfolio typically sells a fixed-income security when new information
changes the Investment Manager's fundamental view of the issuer, the current
price appreciation makes the future value of the security less attractive or the
market sector becomes overvalued relative to other sectors.
RISK FACTORS
- ------------
While bonds are designed to produce a stable stream of income, their prices move
inversely with changes in interest rates. The value of your investment in the
Portfolio will go up and down, which means that you could lose money.
The Portfolio is subject to credit risk, or the risk that an issuer of bonds
held by the Portfolio fails to make timely interest or principal payments,
potentially reducing the Portfolio's income or share price.
The Portfolio's investments in lower-rated, higher-yielding bonds are subject to
greater credit risk than its higher-rated investments. Lower-rated bonds tend to
be more volatile, less liquid and are considered speculative.
While the Portfolio may engage in options and futures transactions primarily to
hedge its portfolio, it may use these transactions to increase returns; however,
there is the risk that these transactions sometimes may reduce returns or
increase volatility. In addition, derivatives, such as options and futures, can
be illiquid and highly sensitive to changes in their underlying security,
interest rate or index, and as a result can be highly volatile. A small
investment in certain derivatives could have a potentially large impact on the
Portfolio's performance.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. Although the Portfolio would do this only in
seeking to avoid losses, it could have the effect of reducing the benefit from
any upswing in the bond market and may result in the Portfolio not achieving its
investment objective.
At times, the Portfolio may engage in short-term trading, which could produce
higher brokerage costs and taxable distributions.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
LAZARD HIGH YIELD PORTFOLIO
================================================================================
Ticker Symbol: LZHYX (Institutional)
N/A (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The High Yield Portfolio seeks maximum total return from a combination of
capital appreciation and current income. The Portfolio invests primarily in U.S.
high-yielding, fixed-income securities rated, at the time of purchase, below
investment grade ("junk" bonds).
The Portfolio generally invests at least 80% of its total assets in bonds and
other fixed-income securities rated, at the time of purchase, below investment
grade by S&P or Moody's and as low as the lowest rating assigned by S&P and
Moody's, or the unrated equivalent as determined by the Investment Manager.
While the Portfolio's investment
36
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS (CONTINUED)
================================================================================
emphasis is currently on high-yielding corporate bonds, it may also invest in
mortgage-related securities, asset-backed securities, zero coupon securities,
municipal securities, preferred stock and convertible securities of U.S. and
non-U.S. issuers. The Portfolio may invest, to a limited extent in companies in,
or governments of, emerging market countries. When the Investment Manager
believes it appropriate based on market conditions, the Portfolio may invest in
investment grade securities or the unrated equivalent as determined by the
Investment Manager.
The Portfolio may engage, to a limited extent, in various investment techniques,
such as options and futures transactions, foreign currency transactions,
leveraging, short-selling and lending portfolio securities.
The Portfolio typically sells a fixed-income security when new information
changes the Investment Manager's fundamental view of the issuer, the current
price appreciation makes the future value of the security less attractive or the
market sector becomes overvalued relative to other sectors.
RISK FACTORS
- ------------
While bonds are designed to produce a stable stream of income, their prices move
inversely with changes in interest rates. The value of your investment in the
Portfolio will go up and down, which means that you could lose money.
High yield bonds involve greater credit risk, including the risk of default,
than investment grade bonds. They tend to be more volatile in price, less liquid
and are considered speculative. As with stocks, the prices of junk bonds can
fall in response to bad news about the issuer, the issuer's industry or the
economy in general.
Other risk factors could have an effect on the Portfolio's performance:
o if an issuer fails to make timely interest or principal payments
o if there is a decline in the credit quality of a bond, or perception of
a decline, the bond's value could fall, potentially lowering the
Portfolio's share price
o if the Portfolio's mortgage-related securities are paid off substantially
earlier or later than expected, the Portfolio's share price or yield
could be hurt
o the price and yield of non-U.S. debt securities could be affected by
factors ranging from political and economic instability to changes
in currency exchange rates
o during unusual market conditions, the Portfolio may not be able to sell
certain securities at the time and price it would like
While the Portfolio may engage in options and futures transactions and foreign
currency transactions primarily to hedge its portfolio, it may use these
transactions to increase returns; however, there is the risk that these
transactions sometimes may reduce returns or increase volatility. In addition,
derivatives, such as options and futures, can be illiquid and highly sensitive
to changes in their underlying security, interest rate or index, and as a result
can be highly volatile. A small investment in certain derivatives could have a
potentially large impact on the Portfolio's performance.
The Portfolio can buy securities with borrowed money (a form of leverage), which
could have the effect of magnifying the Portfolio's gains or losses.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the high
yield bond market and may result in the Portfolio not achieving its investment
objective.
At times, the Portfolio may engage in short-term trading, which could produce
higher brokerage costs and taxable distributions.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO
================================================================================
Ticker Symbol: LZIFX (Institutional)
N/A (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The International Fixed-Income Portfolio seeks high total return from a
combination of current income and capital appreciation. The Portfolio invests
primarily in non-U.S. fixed-income securities of varying maturities.
The Portfolio typically invests more than half of its total assets in corporate
bonds, mortgage-related securities and asset-backed securities. The Portfolio
typically invests less than half of its total assets in foreign government
obligations.
37
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS (CONTINUED)
================================================================================
The Portfolio generally invests at least 80% of its total assets in fixed-income
securities of companies within, or governments, their agencies or
instrumentalities of, at least three different non-U.S. countries. The Portfolio
may invest in any region of the world, including emerging market countries.
However, the Investment Manager currently intends to invest the Portfolio's
assets primarily in companies within, or governments of, Continental Europe, the
United Kingdom, Canada and the Pacific Basin. The Portfolio also may invest in
American or Global Depositary Receipts issued in relation to a pool of
fixed-income securities in which the Portfolio could invest directly.
The Portfolio generally invests at least 85% of its total assets in investment
grade fixed-income securities or the unrated equivalent as determined by the
Investment Manager. The Portfolio may invest up to 15% of its total assets in
fixed-income securities rated, at the time of purchase, below investment grade
and as low as the lowest rating assigned by S&P and Moody's or the unrated
equivalent as determined by the Investment Manager.
The Investment Manager anticipates that, under normal market conditions, the
Portfolio's effective duration will range between two and eight years. Duration
is a measure of how sensitive the securities held by the Portfolio may be to
changes in interest rates.
The Portfolio may engage, to a limited extent, in various investment techniques,
such as options and futures transactions, foreign currency transactions and
lending portfolio securities.
The Portfolio typically sells a fixed-income security when new information
changes the Investment Manager's fundamental view of the issuer, the current
price appreciation makes the future value of the security less attractive or the
market sector becomes overvalued relative to other sectors.
RISK FACTORS
- ------------
While bonds are designed to produce a stable stream of income, their prices move
inversely with changes in interest rates. The value of your investment in the
Portfolio will go up and down, which means that you could lose money.
The Portfolio is subject to credit risk, or the risk that an issuer of bonds
held by the Portfolio fails to make timely interest or principal payments,
potentially reducing the Portfolio's income or share price.
The Portfolio's performance will be influenced by political, social and economic
factors affecting companies around the world. These risks include changes in
currency exchange rates, a lack of adequate company information, political
instability, and differing auditing and legal standards.
The Portfolio's investments in lower-rated, higher-yielding bonds are subject to
greater credit risk than its higher-rated investments. Lower-rated bonds tend to
be more volatile, less liquid and are considered speculative.
Mortgage-related securities can have a different interest rate sensitivity than
other bonds, because of prepayments and other factors. For example, when
interest rates fall, mortgage-related securities may be paid off earlier than
expected, and the Portfolio may reinvest those assets at lower rates. This
lessens these securities' appreciation potential when interest rates decline.
When interest rates rise, mortgage-related securities may decline less in price,
given their generally higher coupon.
While the Portfolio may engage in options and futures transactions and foreign
currency transactions primarily to hedge its portfolio, it may use these
transactions to increase returns; however, there is the risk that these
transactions sometimes may reduce returns or increase volatility. In addition,
derivatives, such as options and futures, can be illiquid and highly sensitive
to changes in their underlying security, interest rate or index, and as a result
can be highly volatile. A small investment in certain derivatives could have a
potentially large impact on the Portfolio's performance.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the bond
market and may result in the Portfolio not achieving its investment objective.
At times, the Portfolio may engage in short-term trading, which could produce
higher brokerage costs and taxable distributions.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
38
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS (CONTINUED)
================================================================================
LAZARD STRATEGIC YIELD PORTFOLIO
================================================================================
Ticker Symbol: LZSYX (Institutional)
N/A (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
- -----------------------------------
The Strategic Yield Portfolio seeks total return from a combination of capital
appreciation and current income. The Portfolio invests primarily in a wide
variety of U.S. and non-U.S. fixed-income securities. The Portfolio typically
invests approximately half of its total assets in investment grade corporate
bonds, mortgage-related securities and asset-backed securities. The Portfolio
typically invests approximately half of its total assets in fixed-income
securities rated below investment grade ("junk" bonds), emerging markets
securities, structured notes and local currency-denominated bonds. Structured
notes are securities that provide cash flows based on the movements of
underlying variables, such as exchange rates or interest rates.
At least 95% of these fixed-income securities will be rated, at the time of
purchase, at least CCC by S&P or Caa by Moody's, or the unrated equivalent as
determined by the Investment Manager. The remaining 5% may be rated, at the time
of purchase, as low as the lowest rating assigned by S&P and Moody's.
Consequently, the Portfolio may invest all of its assets in fixed-income
securities rated below investment grade.
The Portfolio may invest up to 50% of its total assets in non-U.S. dollar
denominated fixed-income securities of foreign issuers. The Portfolio may invest
without limitation in U.S. dollar denominated fixed-income securities of foreign
issuers. The Portfolio also may invest in American or Global Depositary Receipts
issued in relation to a pool of fixed-income securities in which the Portfolio
could invest directly.
When, in the Investment Managers judgment, business or financial conditions
warrant, the Portfolio may assume a temporary defensive position and invest
without limit in investment grade fixed-income securities or short-term money
market instruments.
The Portfolio may engage, to a limited extent, in various investment techniques,
such as options transactions, foreign currency transactions and lending
portfolio securities.
The Portfolio typically sells a fixed-income security when new information
changes the Investment Manager's fundamental view of the issuer, the current
price appreciation makes the future value of the security less attractive or the
market sector becomes overvalued relative to other sectors.
RISK FACTORS
- ------------
While bonds are designed to produce a stable stream of income, their prices move
inversely with changes in interest rates. The value of your investment in the
Portfolio will go up and down, which means that you could lose money.
The Portfolio is subject to credit risk, or the risk that an issuer of bonds
held by the Portfolio fails to make timely interest or principal payments,
potentially reducing the Portfolio's income or share price.
The Portfolio's investments in lower-rated, higher-yielding bonds are subject to
greater credit risk than its higher-rated investments. Lower-rated bonds tend to
be more volatile, less liquid and are considered speculative.
The Portfolio's performance will be influenced by political, social and economic
factors affecting companies around the world. These risks include changes in
currency exchange rates, a lack of adequate company information, political
instability, and differing auditing and legal standards.
Emerging market countries generally have economic structures that are less
diverse and mature, and political systems that are less stable, than those of
developed countries. Emerging markets may be more volatile than the markets of
more mature economies, and the securities of emerging market issuers often are
subject to rapid and large changes in price.
Mortgage-related securities can have a different interest rate sensitivity than
other bonds, because of prepayments and other factors. For example, when
interest rates fall, mortgage-related securities may be paid off earlier than
expected, and the Portfolio may reinvest those assets at lower rates. This
lessens these securities' appreciation potential when interest rates decline.
When interest rates rise, mortgage-related securities may decline less in price,
given their generally higher coupon.
While the Portfolio may engage in options and futures transactions and foreign
currency transactions primarily to hedge its portfolio, it may use these
transactions to increase returns; however, there is the risk that these
transactions sometimes may reduce returns or increase volatility. In addition,
derivatives, such as options and futures, can be illiquid and highly sensitive
to changes in their underlying security, interest rate or index, and as a result
can be highly volatile. A small investment in certain derivatives could have a
potentially large impact on the Portfolio's performance.
39
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES
AND RISKS (CONTINUED)
================================================================================
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the bond
market and may result in the Portfolio not achieving its investment objective.
At times, the Portfolio may engage in short-term trading, which could produce
higher brokerage costs and taxable distributions.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
FUND MANAGEMENT
================================================================================
INVESTMENT MANAGER
- ------------------
Lazard Asset Management, 30 Rockefeller Plaza, New York, New York 10112, serves
as the Investment Manager of the Portfolios. The Investment Manager provides
day-to-day management of the Portfolios' investments and assists in the overall
management of the Portfolios' affairs. The Investment Manager is a division of
Lazard Freres, a New York limited liability company, which is registered as an
investment adviser with the Securities and Exchange Commission (the
"Commission") and is a member of the New York, American and Midwest Stock
Exchanges. Lazard Freres provides its clients with a wide variety of investment
banking, brokerage and related services. The Investment Manager provides
investment management services to client discretionary accounts with assets
totaling approximately $64 billion as of March 31, 1999. Its clients are both
individuals and institutions, some of whose accounts have investment policies
similar to those of several of the Portfolios.
The Fund has agreed to pay the Investment Manager an investment management fee
at the annual rate set forth below as a percentage of the relevant Portfolio's
average daily net asset value. The investment management fees are accrued daily
and paid monthly. For the fiscal year ended December 31, 1998, the Investment
Manager waived a portion of its management fees with respect to each Portfolio,
which resulted in the Portfolios paying the Investment Manager a management fee
at the effective annual rate set forth below as a percentage of the relevant
Portfolio's average daily net asset value.
Effective Annual Rate
Investment of Investment
Management Management
Name of Portfolio Fee Payable Fee Paid After Waiver
- ----------------- ----------- ---------------------
Institutional Open
Shares Shares
Equity Portfolio .75% .75% .75%
Mid Cap Portfolio .75% .57% .45%
Small Cap Portfolio .75% .75% .75%
Bantam Value Portfolio .75% .72% .50%
Global Equity Portfolio .75% 0.00% 0.00%
International Equity
Portfolio .75% .75% .75%
International Small Cap
Portfolio .75% .75% .25%
Emerging Markets
Portfolio 1.00% 1.00% .85%
Bond Portfolio .50% .50% .40%
High Yield Portfolio .75% .39% 0.00%
International Fixed-
Income Portfolio .75% .75% .19%
Strategic Yield Portfolio .75% .75% .75%
PRINCIPAL PORTFOLIO MANAGERS
All of the Portfolios are managed on a team basis. The names of the principal
persons who are primarily responsible for the day-to-day management of the
assets of each of the Portfolios are as follows:
EQUITY PORTFOLIO--Herbert W. Gullquist (since inception) and Michael S. Rome
(since 1991)
MID CAP PORTFOLIO--Herbert W. Gullquist and Eileen Alexanderson (each since
inception)
SMALL CAP PORTFOLIO--Herbert W. Gullquist and Eileen Alexanderson (each since
inception)
BANTAM VALUE PORTFOLIO--Herbert W. Gullquist and Eileen Alexanderson (each since
inception)
GLOBAL EQUITY PORTFOLIO--Herbert W. Gullquist, John R. Reinsberg and Michael S.
Rome (each since inception)
INTERNATIONAL EQUITY PORTFOLIO--Herbert W. Gullquist (since inception) and John
R. Reinsberg (since January 1992)
INTERNATIONAL SMALL CAP PORTFOLIO--Herbert W. Gullquist and John R. Reinsberg
(each since inception)
EMERGING MARKETS PORTFOLIO--Herbert W. Gullquist and John R. Reinsberg (each
since inception)
BOND PORTFOLIO--Thomas F. Dunn (since January 1995) and Ira O. Handler (since
August 1997)
40
<PAGE>
HIGH YIELD PORTFOLIO--Thomas F. Dunn and Peter R.S. Bakker (each since
inception)
INTERNATIONAL FIXED-INCOME PORTFOLIO--Thomas F. Dunn (since January 1995) and
Ira O. Handler (since June 1992)
STRATEGIC YIELD PORTFOLIO--Thomas F. Dunn (since January 1995) and Ira O.
Handler (since 1993)
BIOGRAPHICAL INFORMATION OF PRINCIPAL PORTFOLIO MANAGERS
EILEEN ALEXANDERSON. Ms. Alexanderson has been a Managing Director of the
Investment Manager since January 1997. Prior thereto, Ms. Alexanderson was a
Senior Vice President of the Investment Manager. She joined the Investment
Manager in 1979.
PETER R.S. BAKKER. Mr. Bakker has been a Senior Vice President of the Investment
Manager since January 1998 (a Vice President from January 1996 to January 1998).
He joined the Investment Manager in May 1995. Prior thereto, he was a Senior
Vice President of NatWest Markets.
THOMAS F. DUNN. Mr. Dunn is a Managing Director of the Investment Manager. He
joined the Investment Manager in January 1995. Prior thereto, he was a Senior
Vice President of Goldman Sachs Asset Management.
HERBERT W. GULLQUIST. Mr. Gullquist has been Vice Chairman of the Investment
Manager since 1997 and a Managing Director and Chief Investment Officer of the
Investment Manager since 1982. He joined the Investment Manager in November
1982.
IRA O. HANDLER. MR. HANDLER HAS BEEN A MANAGING DIRECTOR OF THE INVESTMENT
MANAGER SINCE JANUARY 1998 (A SENIOR VICE PRESIDENT FROM JANUARY 1994 TO JANUARY
1998). HE JOINED THE INVESTMENT MANAGER IN 1992.
JOHN R. REINSBERG. Mr. Reinsberg is a Managing Director of the Investment
Manager. He joined the Investment Manager in January 1992.
MICHAEL S. ROME. Mr. Rome is a Managing Director of the Investment Manager. He
joined the Investment Manager in March 1991.
ADMINISTRATOR
State Street Bank and Trust Company ("State Street"), located at 225 Franklin
Street, Boston, Massachusetts 02110, serves as each Portfolio's administrator.
DISTRIBUTOR
Lazard Freres acts as distributor for the Portfolios.
CUSTODIAN
State Street acts as custodian of the Portfolio's investments. State Street may
enter into subcustodial arrangements on behalf of the Portfolios for the holding
of foreign securities.
YEAR 2000 ISSUES
Each Portfolio could be adversely affected if the computer systems used by the
Investment Manager and the Fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
While year 2000-related computer problems could have a negative effect on the
Portfolios, the Investment Manager is working to avoid such problems and to
obtain assurances from service providers that they are taking similar steps.
While the Portfolios cannot, at this time, predict the degree of impact, it is
possible that foreign markets will be less prepared than U.S. markets.
SHAREHOLDER INFORMATION
================================================================================
GENERAL
================================================================================
Portfolio shares are sold, without a sales charge, on a continuous basis at the
net asset value per share ("NAV") next determined after an order in proper form
is received by the Fund's Transfer Agent, Boston Financial Data Services, Inc.,
or another agent of the Fund. The NAV is determined as of the close of trading
on the floor of the New York Stock Exchange (normally 4:00 p.m., Eastern time),
on each day the New York Stock Exchange is open for business. Equity securities
typically are valued based on market value, or where market quotations are not
readily available, based on fair value as determined in good faith by the Board.
Debt securities having remaining maturities of 60 days or less are valued on an
amortized cost basis unless the Board determines that such method does not
represent fair value. Other debt securities are valued using available market
quotations or at fair value which may be determined by one or more pricing
services.
Foreign securities held by a Portfolio may trade on days when the Portfolio does
not calculate its NAVand thus affect the Portfolio's NAVon days when
shareholders will not be able to buy or sell the Portfolio's shares.
41
<PAGE>
SHAREHOLDER INFORMATION (CONTINUED)
================================================================================
MINIMUM INVESTMENTS
All purchases made by check should be in U.S. dollars and made payable to "The
Lazard Funds, Inc." Third party checks will not be accepted. When purchases are
made by check or periodic account investment, redemption proceeds will be
transmitted to you promptly upon bank clearance of your purchase check, which
may take up to 15 calendar days.
- --------------------------------------------------------------------------------
INITIAL SUBSEQUENT
INVESTMENT INVESTMENTS
- --------------------------------------------------------------------------------
Institutional Shares $1,000,000 $5,000
- -------------------------------------------------------------------------------
Open Shares 10,000 1,000
- -------------------------------------------------------------------------------
IRA Rollover/Transfer-
Open Shares 10,000 1,000
- -------------------------------------------------------------------------------
HOW TO BUY SHARES
================================================================================
INITIAL PURCHASE
BY MAIL
-------
1. Complete a Purchase Application. Indicate the services to be used.
2. Mail the Purchase Application and a check for $10,000 or more for Open
Shares, or $1,000,000 or more for Institutional Shares, payable to
"The Lazard Funds, Inc." to:
The Lazard Funds, Inc.
P.O. Box 9363
Boston, Massachusetts
02205-9363
Attention: (Name of
Portfolio and
Class of Shares)
BY WIRE
-------
1. Call (800) 986-3455 toll free from any state and provide the following:
o the Portfolio(s) and Class of shares to be invested in
o name(s) in which shares are to be registered
o address
o social security or tax identification number
o dividend payment election
o amount to be wired
o name of the wiring bank, and
o name and telephone number of the person to be contacted in connection with
the order.
An account number will then be assigned.
2. Instruct the wiring bank to transmit the specified amount in federal funds,
giving the wiring bank the account name(s) and assigned account number, to
the Custodian:
ABA #: 011000028
State Street Bank and Trust Company
Boston, Massachusetts
Custody and Shareholder Services Division
DDA 9905-2375
Attention: (Name of Portfolio and Class of Shares)
The Lazard Funds, Inc.
Shareholder's Name and Account Number
3. Complete a Purchase Application. Indicate the services to be used. Mail the
Purchase Application to the address set forth in Item 2 under "Initial
Purchase--By Mail."
ADDITIONAL PURCHASES
- --------------------
BY MAIL
-------
1. Make a check payable to "The Lazard Funds, Inc." Write the shareholder's
account number on the check.
2. Mail the check and the detachable stub from the Statement of Account (or a
letter providing the account number) to the address set forth in Item 2 under
"Initial Purchase--By Mail."
BY WIRE
-------
Instruct the wiring bank to transmit the specified amount in federal funds to
State Street Bank and Trust Company, as instructed in Item 2 under "Initial
Purchase -- By Wire."
PURCHASES THROUGH THE AUTOMATIC INVESTMENT PLAN
(OPEN SHARES ONLY)
Investors may participate in the Automatic Investment Plan by purchasing Open
Shares of any Portfolio at regular intervals selected by the investor. The
Automatic Investment Plan enables an investor to make regularly scheduled
rinvestments and may provide investors with a convenient way to invest for
long-term financial goals. An account must be opened with a minimum investment
of $10,000. Thereafter, the minimum periodic investment is $250. To obtain an
Automatic Investment Plan application, call the Fund at (800) 823-6300.
42
<PAGE>
SHAREHOLDER INFORMATION (CONTINUED)
================================================================================
INDIVIDUAL RETIREMENT ACCOUNTS (OPEN SHARES ONLY)
The Fund may be used as an instrument for existing IRAs. Completion of a Lazard
Funds IRA application is required. The minimum initial investment for an IRA
rollover account is $10,000. For a Direct IRA Account, a $5 establishment fee
and a $12 annual maintenance and custody fee is payable to State Street for each
IRA Fund account; in addition, a $10 termination fee will be charged and paid to
State Street when the account is closed. For more information on IRAs, call the
Fund at (800) 823-6300.
DISTRIBUTION AND SERVICE (12B-1) FEES
(OPEN SHARES ONLY)
The Fund has adopted a plan under rule 12b-1 that allows each Portfolio to pay
Lazard Freres a fee at the annual rate of .25% of the value of the average daily
net assets of a Portfolio's Open Shares for the sale of a Portfolio's Open
Shares and for services provided to holders of Open Shares. Because these fees
are deducted from the Portfolio's assets on an on-going basis, over time these
fees will increase the cost of a shareholder's investment and may cost
shareholders more than paying other types of sales charges.
HOW TO SELL SHARES
================================================================================
GENERAL
The Fund imposes no charges when shares are sold. Securities dealers and other
institutions may charge their clients a fee for effecting sales of Portfolio
shares. Upon receipt by the Transfer Agent, Lazard Freres or another agent of a
sale request in proper form, Portfolio shares will be sold at their next
determined NAV. Payment of sale proceeds may be made in securities.
Checks for sale proceeds ordinarily will be mailed within seven days. Where the
shares to be sold had been purchased by check, the sale proceeds will be
transmitted to you promptly upon bank clearance of your purchase check, which
may take up to 15 calendar days.
SELLING SHARES
THROUGH THE TRANSFER AGENT:
Shareholders who do not have a brokerage account with Lazard Freres should
submit their sale requests to the Transfer Agent by mail (see Items 1-4 below).
1. Write a letter of instruction to the Fund. Indicate the dollar amount, or
number and Portfolio and Class, of shares to be sold, the shareholder's account
number, and social security or taxpayer identification number.
2. Sign the letter in exactly the same way the account is registered. If there
is more than one owner of the shares, all must sign.
3. If shares to be sold have a value of $50,000 or more, the signature(s) must
be guaranteed by a domestic bank, savings and loan institution, domestic credit
union, member bank of the Federal Reserve System, broker-dealer, registered
securities association or clearing agency, or other participant in a signature
guarantee program. Signature guarantees by a notary public are not acceptable.
Further documentation may be requested to evidence the authority of the person
or entity making the sale request.
4. Mail the letter to the Transfer Agent at the following address:
The Lazard Funds, Inc.
P.O. Box 9363
Boston, Massachusetts 02205-9363
Attention: (Name of Portfolio and Class of Shares)
TELEPHONE REDEMPTIONS:
A shareholder may redeem shares by calling the Transfer Agent. To redeem shares
by telephone, the shareholder must have properly completed and submitted to the
Transfer Agent either a Purchase Application authorizing such redemption or a
Telephone Redemption Authorization Form. The Transfer Agent's toll-free number
for redemptions is (800) 986-3455. In order to confirm that telephone
instructions for redemptions are genuine, the Fund has established reasonable
procedures to be employed by the Fund and the Transfer Agent, including the
requirement that a form of personal identification be provided.
THROUGH A LAZARD FRERES BROKERAGE ACCOUNT:
Shareholders who have a brokerage account with Lazard Freres should contact
their Lazard Freres account representative for specific instructions on how to
sell Portfolio shares.
INVESTOR SERVICES
================================================================================
AUTOMATIC REINVESTMENT PLAN allows your dividends and capital gain distributions
to be reinvested in additional shares of your Portfolio or another Portfolio.
AUTOMATIC INVESTMENTS allows you to purchase Open Shares through automatic
deductions from a designated bank account.
43
<PAGE>
SHAREHOLDER INFORMATION (CONTINUED)
================================================================================
INDIVIDUAL RETIREMENT ACCOUNTS. Call us at (800) 823-6300 for more information
and an IRA kit.
EXCHANGE PRIVILEGE allows you to exchange shares of one Portfolio that have been
held for seven days or more for shares of the same Class of another Portfolio in
an identically registered account. Shares will be exchanged at the next
determined NAV. There is no cost associated with this service. All exchanges are
subject to the minimum initial investment requirements.
A shareholder may exchange shares by writing or calling the Transfer Agent. To
exchange shares by telephone, the shareholder must have properly completed and
submitted to the Transfer Agent either a Purchase Application authorizing such
exchanges or a signed letter requesting that the exchange privilege be added to
the account. The Transfer Agent's toll-free number for exchanges is (800)
986-3455. In order to confirm that telephone instructions for exchanges are
genuine, the Fund has established reasonable procedures to be employed by the
Fund and the Transfer Agent, including the requirement that a form of personal
identification be provided.
The Fund reserves the right to limit the number of times shares may be exchanged
between Portfolios, to reject any telephone exchange order, or to otherwise
modify or discontinue exchange privileges at any time.
TELEPHONE REDEMPTION allows you to redeem shares at the net asset value next
determined after you call the Transfer Agent with your request.
GENERAL POLICIES
================================================================================
The Fund reserves the right to:
o Redeem an account, with notice, if the value of the account
falls below $1,000 due to redemptions
o Convert Institutional Shares held by a shareholder whose
account is less than $1,000,000 to Open Shares, upon written
notice to the shareholder
o Suspend redemptions or postpone payments when the NYSE is
closed for any reason other than its usual weekend or holiday
closings or when trading is restricted by the SEC
o Change the required minimum investment amounts
o Delay sending out redemption proceeds for up to seven days
(this usually applies to very large redemptions received
without notice, excessive trading, or during unusual market
conditions)
o Make a redemption-in-kind (a payment in portfolio securities
instead of in cash) if it is determined that a redemption is
too large and/or may cause harm to the Portfolio and its
shareholders
o Refuse any purchase or exchange request if such request could
adversely affect the Portfolio's NAV, including if such person
or group has engaged in excessive trading (to be determined in
the Fund's discretion)
o Close an account due to excessive trading after prior warning
and notification
44
<PAGE>
SHAREHOLDER INFORMATION (CONTINUED)
================================================================================
ACCOUNT POLICIES, DIVIDENDS AND TAXES
-------------------------------------
ACCOUNT STATEMENTS
You will receive quarterly statements detailing your account activity. All
investors will also receive a yearly statement detailing the tax characteristics
of any dividends and distributions that you have received in your account. You
will also receive confirmations after each trade executed in your account.
DIVIDENDS AND DISTRIBUTIONS
Income dividends are normally declared and paid annually but may be declared and
paid twice annually for each of the Equity Portfolios. Income dividends are
normally declared each business day and paid monthly for each of the
Fixed-Income Portfolios. Net capital gains, if any, are normally distributed
annually but may be distributed twice annually.
Dividends and distributions of a Portfolio will be invested in additional shares
of the same Class of the Portfolio at net asset value and credited to the
shareholder's account on the payment date or, at the shareholder's election,
paid in cash. Dividend checks and Statements of Account will be mailed
approximately two business days after the payment date.
TAX INFORMATION
Please be aware that the following tax information is general and refers to the
provisions of the Internal Revenue Code of 1986, as amended, which are in effect
as of the date of this Prospectus. You should consult a tax adviser about the
status of your distributions from your Portfolio.
All dividends and short-term capital gains distributions are generally taxable
to you as ordinary income, whether you receive the distribution in cash or
reinvest it in additional shares. An exchange of one Portfolio's shares for
shares of another Portfolio will be treated as a sale of the Portfolio's shares
and any gain on the transaction may be subject to federal income tax.
Keep in mind that distributions may be taxable to you at different rates
depending on the length of time the Portfolio held the applicable investment,
not the length of time that you held your Portfolio shares. When you do sell
your Portfolio shares, a capital gain may be realized, except for IRA accounts.
Federal law requires a Portfolio to withhold taxes on distributions paid to
shareholders who:
o fail to provide a social security number or taxpayer identification number
o fail to certify that their social security number or taxpayer identification
number is correct
o fail to certify that they are exempt from withholding
FINANCIAL HIGHLIGHTS
--------------------
The tables on the following pages describe each Portfolio's performance for the
fiscal periods indicated. Certain information reflects financial results for a
single Portfolio share. "Total return" shows how much your investment in a
Portfolio would have increased (or decreased) during each period, assuming you
had reinvested all dividends and distributions. The information in the tables
has been independently audited by Anchin, Block & Anchin LLP, whose report,
along with the Portfolios' financial statements, is included in the Fund's
annual report, which is available upon request.
45
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
LAZARD EQUITY PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------------------
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C>
-------- -------- -------- -------- --------
Net asset value, beginning of period .................. $ 19.98 $ 19.24 $ 17.41 $ 13.75 $ 13.89
-------- -------- -------- -------- -------
Income (loss) from investment operations:
Net investment income ............................... 0.28 0.22 0.33 0.23 0.14
Net realized and unrealized gain (loss) ............. 3.10 4.54 3.06 4.93 0.44
-------- -------- -------- -------- -------
Total from investment operations .................... 3.38 4.76 3.39 5.16 0.58
-------- -------- -------- -------- -------
Less distributions from and in excess of:
Net investment income ............................... (0.26) (0.22) (0.33) (0.18) (0.15)
Net realized gain ................................... (1.35) (3.80) (1.23) (1.32) (0.57)
-------- -------- -------- -------- -------
Total distributions ................................. (1.61) (4.02) (1.56) (1.50) (0.72)
-------- -------- -------- -------- -------
Net asset value, end of period ........................ $ 21.75 $ 19.98 $ 19.24 $ 17.41 $ 13.75
======== ======== ======== ======== =======
TOTAL RETURN (A) ...................................... 17.3% 25.1% 19.9% 37.7% 4.2%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .............. $361,126 $333,575 $278,605 $163,787 $89,105
Ratios to average net assets:
Net expenses (b) .................................... 0.85% 0.86% 0.89% 0.92% 1.05%
Gross expenses (b) .................................. 0.85% 0.87% 0.89% 0.92% 1.05%
Net investment income (b) ........................... 1.28% 1.00% 1.87% 1.45% 1.15%
Portfolio turnover rate ............................... 76% 78% 66% 81% 67%
</TABLE>
<TABLE>
<CAPTION>
YEAR FOR THE PERIOD
ENDED 2/5/97* TO
OPEN SHARES 12/31/98 12/31/97
--------- ---------
<S> <C> <C>
Net asset value, beginning of period .................. $ 19.99 $ 20.19
-------- -------
Income (loss) from investment operations:
Net investment income ............................... 0.20 0.13
Net realized and unrealized gain (loss) ............. 3.12 3.62
-------- -------
Total from investment operations .................... 3.32 3.75
-------- -------
Less distributions from and in excess of:
Net investment income ............................... (0.20) (0.15)
Net realized gains .................................. (1.35) (3.80)
-------- -------
Total distributions ................................. (1.55) (3.95)
-------- -------
Net asset value, end of period ........................ $ 21.76 $ 19.99
======== =======
TOTAL RETURN (A) ...................................... 17.0% 18.9%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .............. $117,624 $22,811
Ratios to average net assets:
Net expenses (b) .................................... 1.12% 1.22%
Gross expenses (b) .................................. 1.12% 1.35%
Net investment income (b) ........................... 0.96% 0.60%
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
46
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
LAZARD MID-CAP PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR FOR THE PERIOD
ENDED 11/4/97* TO
INSTITUTIONAL SHARES 12/31/98 12/31/97
--------- ---------
<S> <C> <C>
Net asset value, beginning of period .................. $ 10.26 $ 10.00
------- -------
Income (loss) from investment operations:
Net investment income ............................... 0.05 0.02
Net realized and unrealized gain (loss) ............. 0.31 0.26
------- -------
Total from investment operations .................... 0.36 0.28
------- -------
LESS DISTRIBUTIONS FROM AND IN EXCESS OF:
Net investment income ............................... (0.05) (0.02)
Net realized gain ................................... (0.11) --
------- -------
Total distributions ................................. (0.16) (0.02)
------- -------
Net asset value, end of period ........................ $ 10.46 $ 10.26
======= =======
TOTAL RETURN (A) ...................................... 3.7% 2.8%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .............. $55,731 $49,779
Ratios to average net assets:
Net expenses (b) .................................... 1.05% 1.05%
Gross expenses (b) .................................. 1.23% 1.44%
Net investment income (b) ........................... 0.48% 1.02%
Portfolio turnover rate ............................... 86% 1%
</TABLE>
<TABLE>
<CAPTION>
YEAR FOR THE PERIOD
ENDED 11/4/97* TO
OPEN SHARES 12/31/98 12/31/97
--------- ---------
<S> <C> <C>
Net asset value, beginning of period .................. $ 10.26 $ 10.00
------- -------
Income (loss) from investment operations:
Net investment income ............................... 0.02 0.01
Net realized and unrealized gain (loss) ............. 0.32 0.26
------- -------
Total from investment operations .................... 0.34 0.27
------- -------
Less distributions from and in excess of:
Net investment income ............................... (0.04) (0.01)
NET REALIZED GAIN ................................... (0.11) --
------- -------
Total distributions ................................. (0.15) (0.01)
------- -------
Net asset value, end of period ........................ $ 10.45 $ 10.26
======= =======
TOTAL RETURN (A) ...................................... 3.4% 2.7%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .............. $16,345 $1,806
Ratios to average net assets:
Net expenses (b) .................................... 1.35% 1.35%
Gross expenses (b) .................................. 1.66% 4.97%
Net investment income (b) ........................... 0.29% 0.72%
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
47
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
LAZARD SMALLCAP PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------------------
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $ 20.02 $ 18.44 $ 15.95 $ 14.35 $ 15.26
---------- ---------- -------- -------- --------
Income (loss) from investment operations:
Net investment income ............................... 0.08 0.07 0.11 0.13 0.07
Net realized and unrealized gain (loss) ............. (2.60) 4.92 3.68 2.95 0.22
---------- ---------- -------- -------- --------
Total from investment operations .................... (2.52) 4.99 3.79 3.08 0.29
---------- ---------- -------- -------- --------
Less distributions from and in excess of:
Net investment income ............................... (0.01) (0.06) (0.11) (0.16) (0.04)
Net realized gain ................................... (0.10) (3.35) (1.19) (1.32) (1.16)
---------- ---------- -------- -------- --------
Total distributions ................................. (0.11) (3.41) (1.30) (1.48) (1.20)
---------- ---------- -------- -------- --------
Net asset value, end of period ........................ $ 17.39 $ 20.02 $ 18.44 $ 15.95 $ 14.35
========== ========== ======== ======== ========
TOTAL RETURN (A) ...................................... (12.6)% 28.1% 23.9% 21.5% 2.0%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .............. $1,411,503 $1,445,075 $981,405 $646,371 $429,673
Ratios to average net assets:
Net expenses (b) .................................... 0.81% 0.82% 0.84% 0.84% 0.85%
Gross expenses (b) .................................. 0.81% 0.82% 0.84% 0.84% 0.85%
Net investment income (b) ........................... 0.50% 0.35% 0.60% 0.90% 0.51%
Portfolio turnover rate ............................... 46% 56% 51% 70% 70%
</TABLE>
<TABLE>
<CAPTION>
YEAR FOR THE PERIOD
ENDED 1/30/97* TO
OPEN SHARES 12/31/98 12/31/97
--------- ---------
<S> <C> <C>
Net asset value, beginning of period .................... $ 20.02 $ 18.75
------- -------
Income (loss) from investment operations:
Net investment income ................................. 0.03 0.01
Net realized and unrealized gain (loss) ............... (2.60) 4.61
------- -------
Total from investment operations ...................... (2.57) 4.62
------- -------
Less distributions from and in excess of:
Net investment income ................................. -- --
Net realized gain ..................................... (0.10) (3.35)
------- -------
Total distributions ................................... (0.10) (3.35)
------- -------
Net asset value, end of period .......................... $ 17.35 $ 20.02
======= =======
TOTAL RETURN (A) ........................................ (12.9)% 25.6%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................ $93,547 $46,097
Ratios to average net assets:
Net expenses (b) ...................................... 1.09% 1.14%
Gross expenses (b) .................................... 1.09% 1.23%
Net investment income (b) ............................. 0.21% 0.12%
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
48
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
LAZARD BANTAMVALUE PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
------------------------- 3/1/96* TO
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96
---------- ---------- --------
<S> <C> <C> <C>
Net asset value, beginning of period .................... $ 14.32 $ 12.58 $ 10.00
------- ------- -------
Income (loss) from investment operations:
Net investment income ................................. -- -- 0.22
Net realized and unrealized gain (loss) ............... (1.98) 4.12 3.11
------- ------- -------
Total from investment operations ...................... (1.98) 4.12 3.33
------- ------- -------
Less distributions from and in excess of:
Net investment income ................................. -- -- (0.22)
Net realized gain ..................................... (0.15) (2.38) (0.53)
------- ------- -------
Total distributions ................................... (0.15) (2.38) (0.75)
------- ------- -------
Net asset value, end of period .......................... $ 12.19 $ 14.32 $ 12.58
======= ======= =======
TOTAL RETURN (A) ........................................ (13.8)% 33.9% 33.3%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................ $59,737 $69,972 $34,549
Ratios to Average Net Assets:
Net expenses (b) ...................................... 1.05% 1.05% 1.05%
Gross expenses (b) .................................... 1.09% 1.14% 1.91%
Net investment income (b) ............................. (0.40)% (0.42)% 2.80%
Portfolio turnover rate ................................. 95% 110% 262%
</TABLE>
<TABLE>
<CAPTION>
YEAR FOR THE PERIOD
ENDED 1/23/97* TO
OPEN SHARES 12/31/98 12/31/97
--------- ---------
<S> <C> <C>
Net asset value, beginning of period .................... $14.26 $13.13
------ ------
Income (loss) from investment operations:
Net investment income (loss) .......................... (0.04) --
Net realized and unrealized gain (loss) ............... (1.96) 3.51
------ ------
Total from investment operations ...................... (2.00) 3.51
------ ------
Less distributions from and in excess of:
Net investment income ................................. -- --
Net realized capital gains ............................ (0.15) (2.38)
------ ------
Total distributions ................................... (0.15) (2.38)
------ ------
Net asset value, end of period .......................... $12.11 $14.26
====== ======
TOTAL RETURN (A) ........................................ (14.0)% 27.8%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................ $7,057 $8,348
Ratios to average net assets:
Net expenses (b) ...................................... 1.35% 1.35%
Gross expenses (b) .................................... 1.60% 1.88%
Net investment income (b) ............................. (0.70)% (0.69)%
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
49
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
LAZARD GLOBAL EQUITY PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
------------------------- 1/4/96* TO
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96
---------- ---------- --------
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $ 11.91 $ 11.48 $10.00
------- ------- ------
Income (loss) from investment operations:
Net investment income .................................. 0.10 0.14 0.09
Net realized and unrealized gain (loss) ................ 1.90 1.58 1.49
------- ------- ------
Total from investment operations ....................... 2.00 1.72 1.58
------- ------- ------
Less distributions from and in excess of:
Net investment income .................................. (0.08) (0.15) (0.10)
Net realized gain ...................................... (0.69) (1.14) --
------- ------- ------
Total distributions .................................... (0.77) (1.29) (0.10)
------- ------- ------
Net asset value, end of period ........................... $ 13.14 $ 11.91 $11.48
======= ======= ======
TOTAL RETURN (A) ......................................... 17.1% 15.3% 15.8%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................. $17,710 $10,359 $9,784
Ratios to average net assets:
Net expenses (b) ....................................... 1.05% 1.05% 1.05%
Gross expenses (b) ..................................... 2.18% 2.55% 5.06%
Net investment income (b) .............................. 1.07% 1.02% 1.70%
Portfolio turnover rate .................................. 48% 64% 74%
</TABLE>
<TABLE>
<CAPTION>
Year For the period
Ended 1/30/97* to
Open Shares 12/31/98 12/31/97
--------- ---------
<S> <C> <C>
Net asset value, beginning of period ..................... $ 11.92 $ 11.31
------- -------
Income (loss) from investment operations:
Net investment income (loss) ........................... 0.09 0.08
Net realized and unrealized gain (loss) ................ 1.88 1.78
------- -------
Total from investment operations ....................... 1.97 1.86
------- -------
Less distributions from and in excess of:
Net investment income .................................. (0.04) (0.11)
Net realized gain ...................................... (0.69) (1.14)
------- -------
Total distributions .................................... (0.73) (1.25)
------- -------
Net asset value, end of period ........................... $ 13.16 $ 11.92
======= =======
TOTAL RETURN (A) ......................................... 16.8% 16.7%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................. $ 4,824 $ 2,290
Ratios to average net assets:
Net expenses (b) ....................................... 1.35% 1.35%
Gross expenses (b) ..................................... 2.85% 4.23%
Net investment income (b) .............................. 0.77% 0.67%
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
50
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL EQUITY PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------------------
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $ 13.97 $ 13.62 $ 12.50 $ 11.23 $ 12.32
---------- ---------- ---------- ---------- --------
Income (loss) from investment operations:
Net investment income ................................ 0.18 0.22 0.17 0.19 0.08
Net realized and unrealized gain (loss) .............. 2.03 1.40 1.76 1.29 (0.05)
---------- ---------- ---------- ---------- --------
Total from investment operations ..................... 2.21 1.62 1.93 1.48 0.03
---------- ---------- ---------- ---------- --------
Less distributions from and in excess of:
Net investment income ................................ (0.14) (0.34) (0.19) (0.09) --
Net realized gain .................................... (0.81) (0.93) (0.62) (0.12) (1.12)
---------- ---------- ---------- ---------- --------
Total distributions .................................. (0.95) (1.27) (0.81) (0.21) (1.12)
---------- ---------- ---------- ---------- --------
Net asset value, end of period ......................... $ 15.23 $ 13.97 $ 13.62 $ 12.50 $ 11.23
========== ========== ========== ========== ========
TOTAL RETURN (A) ....................................... 16.0% 11.8% 15.6% 13.1% 0.2%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............... $2,879,289 $2,099,724 $1,816,173 $1,299,549 $831,877
Ratios to average net assets:
Net expenses (b) ..................................... 0.90% 0.89% 0.91% 0.95% 0.94%
Gross expenses (b) ................................... 0.90% 0.89% 0.91% 0.95% 0.94%
Net investment income (b) ............................ 1.37% 1.18% 1.93% 1.82% 0.75%
Portfolio turnover rate ................................ 41% 37% 39% 63% 106%
</TABLE>
<TABLE>
<CAPTION>
YEAR FOR THE PERIOD
ENDED 1/23/97* TO
OPEN SHARES 12/31/98 12/31/97
--------- ---------
<S> <C> <C>
Net asset value, beginning of period ................... $ 13.95 $ 13.29
---------- ----------
Income (loss) from investment operations:
Net investment income ................................ 0.18 0.16
Net realized and unrealized gain (loss) .............. 2.00 1.71
---------- ----------
Total from investment operations ..................... 2.18 1.87
---------- ----------
Less distributions from and in excess of:
Net investment income ................................ (0.09) (0.28)
Net realized gain .................................... (0.81) (0.93)
---------- ----------
Total distributions .................................. (0.90) (1.21)
---------- ----------
Net asset value, end of period ......................... $ 15.23 $ 13.95
========== ==========
TOTAL RETURN (A) ....................................... 15.8% 14.1%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............... $ 47,303 $ 10,794
Ratios to average net assets:
Net expenses (b) ..................................... 1.24% 1.25%
Gross expenses (b) ................................... 1.24% 1.61%
Net investment income (b) ............................ 1.02% 0.37%
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
51
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL SMALLCAP PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------------------
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $ 11.69 $ 11.93 $ 10.52 $ 10.38 $ 10.86
-------- -------- -------- -------- -------
Income (loss) from investment operations:
Net investment income ................................ 0.05 0.07 0.08 0.14 0.07
Net realized and unrealized gain (loss) .............. 0.83 (0.03) 1.55 0.06 (0.55)
-------- -------- -------- -------- -------
Total from investment operations ..................... 0.88 0.04 1.63 0.20 (0.48)
-------- -------- -------- -------- -------
Less distributions from and in excess of:
Net investment income ................................ (0.05) (0.07) (0.08) -- --
Net realized gain .................................... (1.12) (0.21) (0.14) (0.06) --
-------- -------- -------- -------- -------
Total distributions .................................. (1.17) (0.28) (0.22) (0.06) --
-------- -------- -------- -------- -------
Net asset value, end of period ....................... $ 11.40 $ 11.69 $ 11.93 $ 10.52 $ 10.38
======== ======== ======== ======== =======
TOTAL RETURN (A) ....................................... 7.6% 0.3% 15.6% 1.9% (4.5)%
Net assets, end of period (in thousands) ............... $177,779 $141,695 $126,973 $115,534 $83,432
Ratios to average net assets:
Net expenses (b) ..................................... 1.04% 1.09% 1.12% 1.13% 1.05%
Gross expenses (b) ................................... 1.04% 1.09% 1.12% 1.13% 1.26%
Net investment income (b) ............................ 0.81% 0.73% 1.67% 1.56% 0.95%
Portfolio turnover rate ................................ 56% 63% 101% 118% 113%
</TABLE>
<TABLE>
<CAPTION>
YEAR FOR THE PERIOD
ENDED 1/23/97* TO
OPEN SHARES 12/31/98 12/31/97
--------- ---------
<S> <C> <C>
Net asset value, beginning of period ................... $ 11.69 $ 12.32
-------- --------
Income (loss) from investment operations:
Net investment income (loss) ......................... 0.01 0.02
Net realized and unrealized gain (loss) .............. 0.83 (0.42)
-------- --------
Total from investment operations ..................... 0.84 (0.40)
-------- --------
Less distributions from and in excess of:
Net investment income ................................ (0.03) (0.02)
Net realized capital gains ........................... (1.12) (0.21)
-------- --------
Total distributions .................................. (1.15) (0.23)
-------- --------
Net asset value, end of period ......................... $11.38 $ 11.69
======== ========
TOTAL RETURN (A) ....................................... 7.2% (3.2)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............... $ 2,646 $ 1,873
Ratios to average net assets:
Net expenses (b) ..................................... 1.43% 1.43%
Gross expenses (b) ................................... 1.93% 3.39%
Net investment income (b) ............................ 0.43% 0.34%
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
52
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
LAZARD EMERGING MARKETS PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
------------------------------------------------------ 7/15/94* TO
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $ 9.20 $ 11.21 $ 9.24 $ 9.86 $ 10.00
-------- -------- -------- ------- -------
Income (loss) from investment operations:
Net investment income .................................. 0.10 0.10 0.07 0.08 0.01
Net realized and unrealized gain (loss) ................ (2.26) (1.18) 2.11 (0.66) (0.15)
-------- -------- -------- ------- -------
Total from investment operations ....................... (2.16) (1.08) 2.18 (0.58) (0.14)
-------- -------- -------- ------- -------
Less distributions from and in excess of:
Net investment income .................................. (0.10) (0.09) (0.08) (0.04) --
Net realized gain ...................................... -- (0.84) (0.13) -- --
-------- -------- -------- ------- -------
Total distributions .................................... (0.10) (0.93) (0.21) (0.04) --
-------- -------- -------- ------- -------
Net asset value, end of period ........................... $ 6.94 $ 9.20 $ 11.21 $ 9.24 $ 9.86
======== ======== ======== ======= =======
TOTAL RETURN (A) ......................................... (23.5)% (9.8)% 23.6% (5.9)% (1.4)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................. $298,033 $236,340 $145,328 $35,216 $17,025
Ratios to average net assets:
Net expenses (b) ....................................... 1.28% 1.32% 1.38% 1.30% 1.30%
Gross expenses (b) ..................................... 1.29% 1.33% 1.48% 2.00% 2.31%
Net investment income (b) .............................. 1.84% 1.26% 1.40% 1.22% 0.31%
Portfolio turnover rate .................................. 36% 40% 51% 102% 31%
</TABLE>
<TABLE>
<CAPTION>
YEAR FOR THE PERIOD
ENDED 1/8/97* TO
OPEN SHARES 12/31/98 12/31/97
--------- ---------
<S> <C> <C>
Net asset value, beginning of period ..................... $ 9.20 $ 11.45
-------- --------
Income (loss) from investment operations:
Net investment income .................................. 0.11 0.07
Net realized and unrealized gain (loss) ................ (2.26) (1.42)
-------- --------
Total from investment operations ....................... (2.15) (1.35)
-------- --------
Less distributions from and in excess of:
Net investment income .................................. (0.08) (0.07)
Net realized gain ...................................... -- (0.83)
-------- --------
Total distributions .................................... (0.08) (0.90)
-------- --------
Net asset value, end of period ........................... $ 6.97 $ 9.20
======== ========
TOTAL RETURN (A) ......................................... (23.3)% (12.0)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................. $8,191 $7,769
Ratios to average net assets:
Net expenses (b) ....................................... 1.60% 1.60%
Gross expenses (b) ..................................... 1.76% 1.93%
Net investment income (b) .............................. 1.54% 1.01%
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
53
<PAGE>
Financial Highlights (CONTINUED)
- --------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------------------
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $ 10.03 $ 9.88 $ 10.10 $ 9.24 $ 10.28
-------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income ................................. 0.55 0.59 0.56 0.60 0.58
Net realized and unrealized gain (loss) ............... 0.01 0.23 (0.14) 0.86 (1.01)
-------- ------- ------- ------- -------
Total from investment operations ...................... 0.56 0.82 0.42 1.46 (0.43)
-------- ------- ------- ------- -------
Less distributions from and in excess of:
Net investment income ................................. (0.55) (0.60) (0.57) (0.60) (0.58)
Net realized gain ..................................... (0.15) (0.07) (0.07) -- (0.03)
-------- ------- ------- ------- -------
Total distributions ................................... (0.70) (0.67) (0.64) (0.60) (0.61)
-------- ------- ------- ------- -------
Net asset value, end of period .......................... $ 9.89 $ 10.03 $ 9.88 $ 10.10 $ 9.24
======== ======= ======= ======= =======
TOTAL RETURN (A) ........................................ 5.8% 8.6% 4.4% 16.2% (4.2)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................ $100,397 $92,428 $69,906 $46,083 $24,494
Ratios to average net assets:
Net expenses (b) ...................................... 0.78% 0.80% 0.80% 0.80% 0.80%
Gross expenses (b) .................................... 0.79% 0.81% 0.88% 0.97% 1.23%
Net investment income (b) ............................. 5.45% 5.81% 5.77% 6.07% 6.11%
Portfolio turnover rate ................................. 335% 447% 460% 244% 121%
</TABLE>
<TABLE>
<CAPTION>
YEAR FOR THE PERIOD
ENDED 3/5/97* TO
OPEN SHARES 12/31/98 12/31/97
--------- --------
<S> <C> <C>
Net asset value, beginning of period .................... $ 10.02 $ 9.86
------- ------
Income (loss) from investment operations:
Net investment income ................................. 0.52 0.46
Net realized and unrealized gain (loss) ............... 0.01 0.24
------- ------
Total from investment operations ...................... 0.53 0.70
------- ------
Less distributions from and in excess of:
Net investment income ................................. (0.52) (0.47)
Net realized gain ..................................... (0.15) (0.07)
------- ------
Total distributions ................................... (0.67) (0.54)
------- ------
Net asset value, end of period .......................... $ 9.88 $10.02
======= ======
TOTAL RETURN (A) ........................................ 5.4% 7.2%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................ $15,226 $7,283
Ratios to average net assets:
Net expenses (b) ...................................... 1.10% 1.10%
Gross expenses (b) .................................... 1.21% 1.49%
Net investment income (b) ............................. 5.11% 5.46%
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
54
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
LAZARD HIGH YIELD PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
For the period
1/2/98* to
INSTITUTIONAL SHARES 12/31/98
---------
Net asset value, beginning of period ................... $ 10.00
-------
Income (loss) from investment operations:
Net investment income (loss) ......................... 0.88
Net realized and unrealized gain (loss) .............. (0.57)
-------
Total from investment operations ..................... 0.31
-------
Less distributions from and in excess of:
Net investment income ................................ (0.89)
Net realized gain .................................... --
-------
Total distributions .................................. (0.89)
-------
Net asset value, end of period ......................... $ 9.42
=======
TOTAL RETURN (A) ....................................... 2.9%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............... $41,935
Ratios to average net assets:
Net expenses (b) ..................................... 1.05%
Gross expenses (b) ................................... 1.55%
Net investment income (b) ............................ 8.87%
Portfolio turnover rate ................................ 418%
FOR THE PERIOD
2/24/98* TO
Open Shares 12/31/98
---------
Net asset value, beginning of period ................... $10.37
------
Income (loss) from investment operations:
Net investment income ................................ 0.72
Net realized and unrealized gain (loss) .............. (0.94)
------
Total from investment operations ..................... (0.22)
------
Less distributions from and in excess of:
Net investment income ................................ (0.73)
Net realized gain .................................... --
------
Total distributions .................................. (0.73)
------
Net asset value, end of period ......................... $ 9.42
======
TOTAL RETURN (A) ....................................... (2.2)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............... $ 949
Ratios to average net assets:
Net expenses (b) ..................................... 1.35%
Gross expenses (b) ................................... 9.77%
Net investment income (b) ............................ 8.59%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
55
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------------------
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $ 9.63 $ 10.78 $ 10.85 $ 10.23 $ 10.51
-------- -------- ------- ------- --------
Income (loss) from investment operations:
Net investment income ................................ 0.32 0.40 0.54 0.70 0.59
Net realized and unrealized gain (loss) .............. 0.98 (1.05) 0.03 1.25 (0.16)
-------- -------- ------- ------- --------
Total from investment operations ..................... 1.30 (0.65) 0.57 1.95 0.43
-------- -------- ------- ------- --------
Less distributions from and in excess of:
Net investment income ................................ (0.22) (0.13) (0.59) (1.13) (0.59)
Net realized gain .................................... -- (0.12) (0.05) (0.20) (0.12)
Capital .............................................. -- (0.25) -- -- --
-------- -------- ------- ------- --------
Total distributions .................................. (0.22) (0.50) (0.64) (1.33) (0.71)
-------- -------- ------- ------- --------
Net asset value, end of period ......................... $ 10.71 $ 9.63 $ 10.78 $ 10.85 $ 10.23
======== ======== ======= ======= ========
TOTAL RETURN (A) ....................................... 13.2% (5.6)% 5.5% 19.4% 4.2%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............... $115,500 $110,185 $88,430 $45,624 $35,803
Ratios to average net assets:
Net expenses (b) ..................................... 1.09% 1.06% 1.05% 1.05% 1.05%
Gross expenses (b) ................................... 1.10% 1.10% 1.21% 1.25% 1.51%
Net investment income (b) ............................ 4.27% 5.13% 5.54% 5.99% 5.68%
Portfolio turnover rate ................................ 187% 166% 242% 190% 66%
</TABLE>
<TABLE>
<CAPTION>
YEAR PERIOD FROM
ENDED 1/2/97* TO
OPEN SHARES 12/31/98 12/31/97
--------- ---------
<S> <C> <C>
Net asset value, beginning of period ................... $ 9.63 $ 10.64
-------- --------
Income (loss) from investment operations:
Net investment income (loss) ......................... 0.31 0.43
Net realized and unrealized gain (loss) .............. 0.96 (0.98)
-------- --------
Total from investment operations ..................... 1.27 (0.55)
-------- --------
Less distributions from and in excess of:
Net investment income ................................ (0.21) (0.08)
Net realized capital gains ........................... -- (0.12)
Capital .............................................. -- (0.26)
-------- --------
Total distributions .................................. (0.21) (0.46)
-------- --------
Net asset value, end of period ......................... $ 10.69 $ 9.63
======== ========
TOTAL RETURN (A) ....................................... 12.9% (4.8)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............... $ 4,751 $ 2,772
Ratios to average net assets:
Net expenses (b) ..................................... 1.35% 1.35%
Gross expenses (b) ................................... 1.92% 2.71%
Net investment income (b) ............................ 4.01% 4.68%
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
56
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------------------
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $ 9.66 $ 10.01 $ 9.52 $ 9.10 $ 10.13
-------- -------- -------- ------- -------
Income (loss) from investment operations:
Net investment income ............................... 0.76 0.81 0.76 0.75 0.76
Net realized and unrealized gain (loss) ............. (0.69) (0.28) 0.50 0.43 (0.99)
-------- -------- -------- ------- -------
Total from investment operations .................... 0.07 0.53 1.26 1.18 (0.23)
-------- -------- -------- ------- -------
Less distributions from and in excess of:
Net investment income ............................... (0.44) (0.82) (0.77) (0.76) (0.76)
Net realized gain ................................... -- (0.06) -- -- (0.04)
Capital ............................................. (0.28) -- -- -- --
-------- -------- -------- ------- -------
Total distributions ................................. (0.72) (0.88) (0.77) (0.76) (0.80)
-------- -------- -------- ------- -------
Net asset value, end of period ........................ $ 9.01 $ 9.66 $ 10.01 $ 9.52 $ 9.10
======== ======== ======== ======= =======
TOTAL RETURN (A) ...................................... 0.8% 5.3% 13.7% 13.6% (2.3)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .............. $397,599 $399,452 $199,083 $78,474 $62,328
Ratios to average net assets:
Net expenses (b) .................................... 0.90% 0.94% 1.08% 1.09% 1.05%
Gross expenses (b) .................................. 0.90% 0.95% 1.08% 1.09% 1.15%
Net investment income (b) ........................... 6.94% 7.42% 7.88% 8.02% 8.03%
Portfolio turnover rate ............................... 276% 161% 189% 205% 195%
</TABLE>
<TABLE>
<CAPTION>
YEAR FOR THE PERIOD
ENDED 1/23/97* TO
OPEN SHARES 12/31/98 12/31/97
--------- ---------
<S> <C> <C>
Net asset value, beginning of period .................. $ 9.66 $ 10.08
-------- --------
Income (loss) from investment operations:
Net investment income (loss) ........................ 0.73 0.72
Net realized and unrealized gain (loss) ............. (0.69) (0.35)
-------- --------
Total from investment operations .................... 0.04 0.37
-------- --------
Less distributions from and in excess of:
Net investment income ............................... (0.40) (0.73)
Net realized gain ................................... -- (0.06)
Capital ............................................. (0.28) --
-------- --------
Total distributions ................................. (0.68) (0.79)
-------- --------
Net asset value, end of period ........................ $ 9.02 $ 9.66
======== ========
TOTAL RETURN (A) ...................................... 0.4% 3.8%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .............. $ 22,460 $ 15,300
Ratios to average net assets:
Net expenses (b) .................................... 1.28% 1.39%
Gross expenses (b) .................................. 1.28% 1.44%
Net investment income (b) ........................... 6.60% 6.92%
</TABLE>
NOTES TO FINANCIAL HIGHLIGHTS:
*Commencement of operations.
(a) Total Returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower. Periods of less than one year are not annualized.
(b) Annualized for periods of less than one year.
57
<PAGE>
For more information about the Portfolios, the following documents are available
free upon request:
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
- ------------------------------------
The Fund's annual and semi-annual reports to shareholders contain additional
information on each Portfolio's investments. In the annual report, you will find
a broad discussion of the market conditions and investment strategies that
significantly affected each Portfolio's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
- ------------------------------------------
The SAI provides more detailed information about the Portfolios, including their
operations and investment policies. It is incorporated by reference and is
legally considered a part of this prospectus.
You can review the Fund's Reports and the SAI at the Public Reference Room of
the Securities and Exchange Commission. You can get text-only copies:
o For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-6312
58
<PAGE>
- --------------------------------------------------------------------------------
You can get free copies of Reports and the SAI, or request other information and
discuss your questions about the Portfolios by contacting the Fund at:
The Lazard Funds, Inc.
30 Rockefeller Plaza
New York, New York 10112
Telephone: 1-800-823-6300
http://www.lazardfunds.com
- --------------------------------------------------------------------------------
================================================================================
THE LAZARD FUNDS, INC. TRANSFER AGENT AND
30 Rockefeller Plaza DIVIDEND DISBURSING AGENT
New York, New York 10112 Boston Financial Data Services, Inc.
Telephone: (800) 823-6300 P.O. Box 9363
http://www.lazardfunds.com Boston, Massachusetts 02205-9363
INVESTMENT MANAGER INDEPENDENT PUBLIC ACCOUNTANTS
Lazard Asset Management Anchin, Block & Anchin LLP
30 Rockefeller Plaza 1375 Broadway
New York, New York 10112 New York, New York 10018
DISTRIBUTOR LEGAL COUNSEL
Lazard Freres & Co. LLC Stroock & Stroock & Lavan LLP
30 Rockefeller Plaza 180 Maiden Lane
New York, New York 10112 New York, New York 10038-4982
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
59
<PAGE>
LAZARDFUNDS
30 Rockefeller Plaza
New York, NY 10112
Telephone 800.823.6300
http://www.lazardfunds.com
NO SALES OR REDEMPTION CHARGES
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, and information or
representations not contained herein must not be relied upon as having been
authorized by the Fund or the Distributor. This Prospectus does not constitute
an offer of any security other than the registered securities to which it
relates or an offer to any person in any jurisdiction where such offer would be
unlawful.
[Graphic Omitted]
<PAGE>
LazardFunds
30 Rockefeller
Plaza New York, NY 10112
Telephone 800.823.6300
http://www.lazardfunds.com
No Sales or Redemption Charges
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, and information or
representations not contained herein must not be relied upon as having been
authorized by the Fund or the Distributor. This Prospectus does not constitute
an offer of any security other than the registered securities to which it
relates or an offer to any person in any jurisdiction where such offer would be
unlawful.
LazardFunds
Lazard Small Cap Portfolio
Lazard International Equity Portfolio
Lazard Emerging Markets Portfolio
Prospectus
May 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the shares described in this prospectus or determined
whether this prospectus is truthful or complete. Anyone who tells you otherwise
is committing a crime.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH SUMMARIZES EACH PORTFOLIO'S
INVESTMENTS, RISKS, PAST PERFORMANCE AND FEES.
REVIEW THIS SECTION FOR INFORMATION ON INVESTMENT STRATEGIES AND THEIR RISKS.
REVIEW THIS SECTION FOR DETAILS ON THE PEOPLE AND ORGANIZATIONS WHO OVERSEE THE
PORTFOLIOS.
REVIEW THIS SECTION FOR DETAILS ON HOW SHARES ARE
VALUED, HOW TO PURCHASE, SELL AND EXCHANGE
SHARES, RELATED CHARGES AND PAYMENTS OF DIVIDENDS
AND DISTRIBUTIONS.
PAGE
4 RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
4 Lazard Small Cap Portfolio
6 Lazard International Equity Portfolio
<PAGE>
8 Lazard Emerging Markets Portfolio
10 INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
10 Lazard Small Cap Portfolio
10 Lazard International Equity Portfolio
11 Lazard Emerging Markets Portfolio
12 FUND MANAGEMENT
12 Investment Manager
12 Principal Portfolio Managers
13 Administrator
13 Distributor
13 Custodian
14 SHAREHOLDER INFORMATION
14 GENERAL
14 How to Buy Shares
15 Distribution and Service (12b-1) Fees
15 How to Sell Shares
16 Investor Services
16 General Policies
17 Account Policies, Dividends and Taxes
REVIEW THIS SECTION FOR 17 FINANCIAL HIGHLIGHTS
RECENT FINANCIAL INFORMATION.
WHERE TO LEARN MORE ABOUT BACK COVER
THE PORTFOLIOS
LAZARD ASSET MANAGEMENT, A DIVISION OF LAZARD FRERES & CO. LLC ("LAZARD
FRERES"), SERVES AS EACH PORTFOLIO'S INVESTMENT MANAGER.
<PAGE>
The Portfolios:
The Portfolios The Lazard Funds, Inc. (the "Fund") consists of twelve separate
Portfolios, only three of which, Lazard Small Cap Portfolio, Lazard
International Equity Portfolio and Lazard Emerging Markets Portfolio, are being
offered through this Prospectus. Each Portfolio has its own investment
objective, strategies and risk/return profile and invests in different
securities, depending on its investment objective. Each Portfolio can be
expected to have a different degree of risk and yield or return. Because you
could lose money by investing in a Portfolio, be sure to read all risk
disclosures carefully before investing.
You should be aware that the Portfolios:
o Are not bank deposits
o Are not guaranteed, endorsed or insured by any
bank, financial institution or government entity,
such as the Federal Deposit Insurance Corporation
o Are not guaranteed to achieve their stated goals
Each Portfolio offers Institutional Shares and Open
Shares. Institutional Shares and Open Shares have
different investment minimums and different expense
ratios.
Who May Want to Invest? EQUITY PORTFOLIOS
Lazard Small Cap Portfolio
Lazard International Equity Portfolio
Lazard Emerging Markets Portfolio
These Portfolios will invest primarily in equity
securities, including common stocks, preferred
stocks and convertible securities of both U.S. and
non-U.S. issuers. The Investment Manager seeks to
identify undervalued securities based on earnings,
cash flow or asset values. The Investment Manager
focuses on individual stock selection rather than on
general stock market trends.
The securities in which the Portfolios will invest
generally have one or more of the following
characteristics:
o are undervalued relative to their earnings, cash
flow or asset values;
o have an attractive price/value relationship with
expectations that some catalyst will cause the
per- ception of value to change within two years;
o are out of favor due to circumstances which are
unlikely to harm the company's franchise or
earnings power;
o have low projected P/E or
price-to-cash flow multiples;
2
<PAGE>
Because different types of stocks tend to shift in
and out of favor depending on market and economic
conditions, the Equity Portfolios' performance may
sometimes be higher or lower than that of other
types of funds (such as those emphasizing growth
stocks).
Consider investing in these Portfolios if you are:
o seeking a long-term goal such as retirement
o looking to add a growth component to your
portfolio
o willing to accept higher risks of investing in the
stock market in exchange for potentially higher
long-term returns
These Portfolios may not be appropriate if you are:
o pursuing a short-term goal or investing emergency
reserves
o uncomfortable with an investment that will go up
and down in value
3
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD SMALL CAP PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio invests primarily in equity
securities, principally common stocks, of
relatively small U.S. companies in the range
of the Russell 2000 Index that the Investment
Manager believes are undervalued based on
their earnings, cash flow or asset values.
PRINCIPAL INVESTMENT RISKS While stocks have historically been a leading
choice of long-term investors, they do
fluctuate in price. Small companies carry
additional risks because their earnings tend
to be less predictable, their share prices
more volatile and their securities less
liquid than larger, more established
companies. The value of your investment in
the Portfolio will go up and down, which
means that you could lose money.
Value stocks involve the risk that they may
never reach what the Investment Manager
believes is their full market value. They
also may decline in price, even though in
theory they are already underpriced.
The Portfolio is non-diversified and may
invest a greater percentage of its assets in
a particular company compared with other
funds. Accordingly, the Portfolio's
securities may be more sensitive to changes
in the market value of a single company or
industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard Small Cap Portfolio by showing the Portfolio's annual
returns and its long-term performance. The bar chart shows how the performance
of the Portfolio's Institutional Shares has varied from year to year. The table
compares the performance of the Portfolio's Institutional Shares and Open Shares
over time to that of the Russell 2000 Index, an unmanaged index of smaller
capitalization common stocks. Both the bar chart and table assume reinvestment
of dividends and distributions. Past performance does not indicate how the
Portfolio will perform in the future.
Performance Bar Chart and Table
-------------------------------
Year-by-year Total Returns as of 12/31
for Institutional Shares
24.75 24.75% 1992
30.09 30.09% 1993
2.03 2.03% 1994
21.52 21.52% 1995
23.93 23.93% 1996
28.06 28.06% 1997
- -12.62 -12.62% 1998
- --------------------------------------------------------------------------------
Best quarter: 12/31/98 18.39%
Worst quarter: 9/30/98 (25.53)%
- --------------------------------------------------------------------------------
Average Annual Total Returns
(For the Periods Ended December 31, 1998)
Inception Past Past Since
Date Year 5 Years Inception
- --------------------------------------------------------------------------------
Institutional Shares 10/30/91 (12.62)% 11.45% 16.11%
- --------------------------------------------------------------------------------
Open Shares 1/30/97 (12.86)% N/A 4.82%
- --------------------------------------------------------------------------------
Russell 2000 Index (2.55%) 11.86% 13.89%
(Institutional)
8.49%
(Open)
- --------------------------------------------------------------------------------
4
<PAGE>
FEES AND EXPENSES
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(expenses that are deducted from Portfolio assets)
Institutional Open
Shares Shares
- --------------------------------------------------------------------------------
Management fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .06% .09%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses .81% 1.09%
- --------------------------------------------------------------------------------
LAZARD SMALL CAP 1 3 5 10
PORTFOLIO Year Years Years Years
INSTITUTIONAL SHARES $ 83 $259 $450 $1,002
- --------------------------------------------------------------------------------
OPEN SHARES $111 $347 $601 $1,329
- --------------------------------------------------------------------------------
5
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio invests primarily in
equity securities, principally common
stocks, of relatively large non-U.S.
companies with market capitalizations in
the range of the Morgan Stanley Capital
International (MSCI) Europe, Australasia
and Far East Index that the Investment
Manager believes are undervalued based
on their earnings, cash flow or asset
values. In choosing stocks for the
Portfolio, the Investment Manager looks
for established companies in
economically developed countries. The
percentage of the Portfolio's assets
invested in particular geographic
sectors may shift from time to time
based on the Investment Manager's
judgment. Ordinarily, the Portfolio
invests in at least three different
foreign countries.
PRINCIPAL INVESTMENT RISKS While stocks have historically been a
leading choice of long-term investors,
they do fluctuate in price. The
Portfolio's performance will be
influenced by political, social and
economic factors. These risks include
changes in currency exchange rates, a
lack of adequate company information,
political instability and differing
auditing and legal standards. The value
of your investment in the Portfolio will
go up and down, which means that you
could lose money.
Value stocks involve the risk that they
may never reach what the Investment
Manager believes is their full market
value. They also may decline in price,
even though in theory they are already
underpriced.
The Portfolio is non-diversified and may
invest a greater percentage of its
assets in a particular company compared
with other funds. Accordingly, the
Portfolio's securities may be more
sensitive to changes in the market value
of a single company or industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard International Equity Portfolio by showing the
Portfolio's annual returns and its long-term performance. The bar chart shows
how the performance of the Portfolio's Institutional Shares has varied from year
to year. The table compares the performance of the Portfolio's Institutional
Shares and Open Shares over time to that of the Morgan Stanley Capital
International (MSCI) Europe, Australasia and Far East Index, an unmanaged index
comprised of international equities. Both the bar chart and table assume
reinvestment of dividends and distributions. Past performance does not indicate
how the Portfolio will perform in the future.
Performance Bar Chart and Table
-------------------------------
Year-by-year Total Returns as of 12/31
for Institutional Shares
- -6.62 -6.62% 1992
31.05 31.05% 1993
0.24 0.24% 1994
13.14 13.14% 1995
15.64 15.64% 1996
11.84 11.84% 1997
16.04 16.04% 1998
- --------------------------------------------------------------------------------
Best quarter: 12/31/98 17.96%
Worst quarter: 9/30/98 (17.11)%
- --------------------------------------------------------------------------------
Average Annual Total Returns
(For the Periods Ended December 31, 1998)
Inception Past Past Since
Date Year 5 Years Inception
- --------------------------------------------------------------------------------
Institutional Shares 10/29/91 16.04% 11.22% 11.26%
- --------------------------------------------------------------------------------
Open Shares 1/23/97 15.82% N/A 15.44%
- --------------------------------------------------------------------------------
MSCI Europe, 20.00% 9.19% 8.65%
Australasia and (Institutional)
Far East Index 12.82%
(Open)
- --------------------------------------------------------------------------------
6
<PAGE>
FEES AND EXPENSES
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(expenses that are deducted from Portfolio assets)
Institutional Open
Shares Shares
- --------------------------------------------------------------------------------
Management fees .75% .75%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .15% .24%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses .90% 1.24%
- --------------------------------------------------------------------------------
LAZARD SMALL CAP 1 3 5 10
PORTFOLIO Year Years Years Years
INSTITUTIONAL SHARES $ 92 $287 $498 $1,108
- --------------------------------------------------------------------------------
OPEN SHARES $126 $393 $681 $1,500
- --------------------------------------------------------------------------------
7
<PAGE>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
================================================================================
LAZARD EMERGING MARKETS PORTFOLIO
INVESTMENT OBJECTIVE The Portfolio seeks long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio invests primarily in
equity securities, principally common
stocks, of non-U.S. companies whose
principal activities are in emerging
market countries that the Investment
Manager believes are undervalued based
on their earnings, cash flow or asset
values.
Emerging market countries include all
countries represented by the Morgan
Stanley Capital International Emerging
Markets (Free) Index, which currently
includes: Argentina, Brazil, Chile,
China, Colombia, the Czech Republic,
Egypt, Greece, Hungary, India,
Indonesia, Israel, Jordan, Korea,
Malaysia, Mexico, Morocco, Pakistan,
Peru, Philippines, Poland, Russia, Sri
Lanka, South Africa, Taiwan, Thailand,
Turkey and Venezuela.
PRINCIPAL INVESTMENT RISKS The securities markets of emerging
market countries can be extremely
volatile. The Portfolio's performance
will be influenced by political, social
and economic factors affecting companies
in emerging market countries. These
risks include changes in currency
exchange rates, a lack of adequate
company information, political
instability, and differing auditing and
legal standards. In addition, emerging
market countries generally have economic
structures that are less diverse and
mature, and political systems that are
less stable, than those of developed
countries. The value of your investment
in the Portfolio will go up and down,
which means that you could lose money.
Value stocks involve the risk that they
may never reach what the Investment
Manager believes is their full market
value. They also may decline in price,
even though in theory they are already
underpriced.
The Portfolio is non-diversified and may
invest a greater percentage of its
assets in a particular company compared
with other funds. Accordingly, the
Portfolio's securities may be more
sensitive to changes in the market value
of a single company or industry.
The accompanying bar chart and table provide some indication of the risks of
investing in the Lazard Emerging Markets Portfolio by showing the Portfolio's
annual returns and its long-term performance. The bar chart shows how the
performance of the Portfolio's Institutional Shares has varied from year to
year. The table compares the performance of the Portfolio's Institutional Shares
and Open Shares over time to that of the Morgan Stanley Capital International
(MSCI) Emerging Markets (Free) Index and the International Finance Corp. (IFC)
Investable Total Return Index, an index of emerging markets securities that
represents 65% of market capital compiled by the International Finance
Corporation. Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance does not indicate how the Portfolio will perform
in the future.
Performance Bar Chart and Table
-------------------------------
Year-by-year Total Returns as of 12/31
for Institutional Shares
-5.88 -5.88% 1995
23.63 23.63% 1996
-9.84 -9.84% 1997
- -23.49 -23.49% 1998
- --------------------------------------------------------------------------------
Best quarter: 6/30/97 12.07%
Worst quarter: 9/30/98 (23.59)%
- --------------------------------------------------------------------------------
8
<PAGE>
FEES AND EXPENSES
As an investor, you pay certain fees and expenses in connection with buying and
holding Portfolio shares. The following table illustrates those fees and
expenses. Keep in mind that the Portfolio has no sales charge (load). Annual
Portfolio Operating Expenses are paid out of Portfolio assets, and are reflected
in the share price.
EXPENSE EXAMPLE
Use the table at the right to compare the Portfolio's fees and expenses with
those of other funds. It illustrates the amount of fees and expenses you would
pay, assuming the following:
o $10,000 initial investment
o 5% annual return each year
o redemption at the end of each period
o no changes in operating expenses, except for the first year periods reflected
in the table
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
Average Annual Total Returns
(For the Periods Ended December 31, 1998)
Inception Past Since
Date Year Inception
- --------------------------------------------------------------------------------
Institutional Shares 7/15/94 (23.49)% (5.10)%
- --------------------------------------------------------------------------------
Open Shares 1/8/97 (23.30)% (17.99)%
- --------------------------------------------------------------------------------
MSCI Emerging (25.34)% (8.70)%
Markets (Free) Index (Institutional)
(19.40)%
(Open)
- --------------------------------------------------------------------------------
IFC Investable Total (22.02)% (8.85)%
Return Index (Institutional)
(19.53)%
(Open)
- --------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(expenses that are deducted from portfolio assets)
Institutional Open
Shares Shares
- --------------------------------------------------------------------------------
Management fees 1.00% 1.00%
- --------------------------------------------------------------------------------
Distribution and
Service (12b-1) fees None .25%
- --------------------------------------------------------------------------------
Other expenses .29% .51%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.29% 1.76%
- --------------------------------------------------------------------------------
Fee Waiver and Expense
Reimbursement* .01% .16%
- --------------------------------------------------------------------------------
Net Expenses* 1.28% 1.60%
- --------------------------------------------------------------------------------
* Reflects a contractual obligation by the Investment Manager to waive its
fees and/or reimburse the Portfolio through December 31, 1999 to the extent
Total Annual Portfolio Operating Expenses exceed in any fiscal year 1.28%
and 1.60% of the average daily net assets of the Portfolio's Institutional
Shares and Open Shares, respectively.
Lazard Emerging Markets 1 3 5 10
Portfolio Year+ Years+ Years+ Years+
Institutional Shares $130 $408 $707 $1,556
- --------------------------------------------------------------------------------
Open Shares $163 $539 $939 $2,060
- --------------------------------------------------------------------------------
+ Year 1 fees and expenses are based on a contractual agreement.
9
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
================================================================================
LAZARD SMALL CAP PORTFOLIO
Ticker Symbol: LZSCX (Institutional)
LZCOX (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
The Small Cap Portfolio seeks long-term capital appreciation. The Portfolio
invests primarily in equity securities, principally common stocks, of relatively
small U.S. companies in the range of the Russell 2000 Index that the Investment
Manager believes are undervalued based on their earnings, cash flow or asset
values. The Russell 2000 Index is composed of selected common stocks of small,
generally unseasoned U.S. companies.
The Portfolio generally invests at least 80% of its total assets in equity
securities of small U.S. companies. These securities generally have one or more
of the characteristics shown on page2, and/or:
o have the potential to become a larger factor in the company's business;
o have significant debt but have high levels of free cash flow; and
o have a relatively short corporate history with the expectation that the
business may grow.
The Portfolio may invest up to 20% of its total assets in equity securities of
larger U.S. companies or investment grade debt securities. The Portfolio may
engage, to a limited extent, in various investment techniques, such as lending
portfolio securities.
The Portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the Investment
Manager's expectations.
RISK FACTORS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the Portfolio will
go up and down, which means that you could lose money.
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the Portfolio's performance may sometimes be
lower or higher than that of other types of funds (such as those emphasizing
larger companies). Small companies carry additional risks because their earnings
tend to be less predictable, their share prices more volatile and their
securities less liquid than larger, more established companies. Some of the
Portfolio's investments will rise and fall based on investor perception only.
Investments in value stocks are subject to the risk that they may never reach
what the Investment Manager believes is their full value. They also may decline
in price, even though in theory they are already undervalued. And, while
investments in value stocks may limit downside risk over time, the Portfolio
may, as a trade-off, produce smaller gains than riskier stock funds.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the
market and may result in the Portfolio not achieving its investment objective.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
LAZARD INTERNATIONAL
EQUITY PORTFOLIO
================================================================================
Ticker Symbol: LZIEX (Institutional)
LZIOX (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
The International Equity Portfolio seeks long-term capital appreciation. The
Portfolio invests primarily in equity securities, principally common stocks, of
relatively large foreign companies with market capitalizations in the range of
the MSCI Europe, Australasia and Far East Index that the Investment Manager
believes are undervalued based on their earnings, cash flow or asset values. The
Portfolio generally invests at least 80% of its total assets in equity
securities of companies located in at least three different foreign countries.
The allocation of the Portfolio's assets among geographic sectors may shift from
time to time based on the Investment Manager's judgment and its analysis of
market conditions. However, the Investment Manager currently intends to invest
the Portfolio's assets primarily in companies based in developed markets.
The Portfolio may invest up to 20% of its total assets in investment grade
fixed-income securities and short-term money market instruments. The Portfolio
may engage, to a limited extent, in various investment techniques, such as
foreign currency transactions and lending portfolio securities.
The Portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the Investment
Manager's expectations.
10
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS (CONTINUED)
================================================================================
RISK FACTORS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the Portfolio will
go up and down, which means that you could lose money.
The Portfolio's performance will be influenced by political, social and economic
factors affecting companies around the world. These risks include changes in
currency exchange rates, a lack of adequate company information, political
instability, and differing auditing and legal standards.
Value stocks involve the risk that they may never reach what the Investment
Manager believes is their full market value. They also may decline in price,
even though in theory they are already underpriced.
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The Portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the
market and may result in the Portfolio not achieving its investment objective.
While the Portfolio may engage in foreign currency transactions primarily to
hedge its portfolio, it may use these transactions to increase returns; however,
there is the risk that these transactions sometimes may reduce returns or
increase volatility.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
LAZARD EMERGING MARKETS PORTFOLIO
================================================================================
Ticker Symbol: LZEMX (Institutional)
N/A (Open)
INVESTMENT OBJECTIVE AND STRATEGIES
The Emerging Markets Portfolio seeks long-term capital appreciation. The
Portfolio invests primarily in equity securities, principally common stocks, of
non-U.S. companies whose principal business activities are located in emerging
market countries that the Investment Manager believes are undervalued based on
their earnings, cash flow or asset values. Emerging market countries include all
countries represented by the Morgan Stanley Capital International Emerging
Markets (Free) Index, which currently includes: Argentina, Brazil, Chile, China,
Colombia, the Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Israel,
Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland,
Russia, Sri Lanka, South Africa, Taiwan, Thailand, Turkey and Venezuela.
The Portfolio generally invests at least 65% of its total assets in equity
securities, including American and Global Depositary Receipts, of companies
whose principal business activities are located in emerging market countries.
The Portfolio invests at least 65% of its total assets in equity securities of
companies in at least three different foreign countries. The allocation of the
Portfolio's assets among emerging market countries may shift from time to time
based on the Investment Manager's judgment and its analysis of market
conditions. However, the Portfolio is likely to focus on companies in Latin
America, the Pacific Basin and Europe.
The Portfolio may invest, to a limited extent, in closed-end investment
companies that invest in emerging market securities.
The Portfolio may engage, to a limited extent, in various investment techniques,
such as options and futures transactions, foreign currency transactions and
lending portfolio securities.
The Portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the Investment
Management Manager's expectations.
RISK FACTORS
The securities markets of emerging market countries can be extremely volatile.
The value of your investment in the Portfolio will go up and down, which means
that you could lose money.
The Portfolio's performance will be influenced by political, social and economic
factors affecting companies in emerging market countries. These risks include
changes in currency exchange rates, a lack of adequate company information,
political instability, and differing auditing and legal standards. In addition,
emerging market countries generally have economic structures that are less
diverse and mature, and political systems that are less stable, than those of
developed countries. Emerging markets may be more volatile than the markets of
more mature economies; however, such markets may provide higher rates of return
to investors.
11
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS (CONTINUED)
================================================================================
Under adverse market conditions, the Portfolio could invest some or all of its
assets in money market securities. The portfolio would do this only in seeking
to avoid losses, but this could reduce the benefit from any upswing in the
market and may result in the portfolio not achieving its investment objective.
While the Portfolio may engage in options and futures transactions and foreign
currency transactions primarily to hedge its portfolio, it may use these
transactions to increase returns; however, there is the risk that these
transactions sometimes may reduce returns or increase volatility. In addition,
derivatives, such as options and futures, can be illiquid and highly sensitive
to changes in their underlying security, interest rate or index, and as a result
can be highly volatile. A small investment in certain derivatives could have a
potentially large impact on the Portfolio's performance.
The Portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
Portfolio's securities may be more sensitive to changes in the market value of a
single company or industry.
FUND MANAGEMENT
================================================================================
INVESTMENT MANAGER
Lazard Asset Management, 30 Rockefeller Plaza, New York, New York 10112, serves
as the Investment Manager of the Portfolios. The Investment Manager provides
day-to-day management of the Portfolios' investments and assists in the overall
management of the Portfolios'affairs. The Investment Manager is a division of
Lazard Freres, a New York limited liability company, which is registered as an
investment adviser with the Securities and Exchange Commission (the
"Commission") and is a member of the New York, American and Midwest Stock
Exchanges. Lazard Freres provides its clients with a wide variety of investment
banking, brokerage and related services. The Investment Manager provides
investment management services to client discretionary accounts with assets
totaling approximately $64 billion as of March 31, 1999. Its clients are both
individuals and institutions, some of whose accounts have investment policies
similar to those of several of the Portfolios.
The Fund has agreed to pay the Investment Manager an investment management fee
at the annual rate set forth below as a percentage of the relevant Portfolio's
average daily net asset value. The investment management fees are accrued daily
and paid monthly. For the fiscal year ended December 31, 1998, the Investment
Manager waived a portion of its management fees with respect to each Portfolio,
which resulted in the Portfolios paying the Investment Manager a management fee
at the effective annual rate set forth below as a percentage of the relevant
Portfolio's average daily net asset value.
Effective Annual Rate
Investment of Investment
Management Management
Name of Portfolio Fee Payable Fee Paid After Waiver
- ----------------- ----------- ---------------------
Institutional Open
Shares Shares
Small Cap Portfolio .75% .75% .75%
International Equity
Portfolio .75% .75% .75%
Emerging Markets
Portfolio 1.00% 1.00% .85%
PRINCIPAL PORTFOLIO MANAGERS
All of the Portfolios are managed on a team basis. The names of the principal
persons who are primarily responsible for the day-to-day management of the
assets of each of the Portfolios are as follows:
SMALL CAP PORTFOLIO--Herbert W. Gullquist and Eileen Alexanderson (each since
inception)
INTERNATIONAL EQUITY PORTFOLIO--Herbert W. Gullquist (since inception) and John
R. Reinsberg (since January 1992)
EMERGING MARKETS PORTFOLIO--Herbert W. Gullquist and John R. Reinsberg (each
since inception)
12
<PAGE>
BIOGRAPHICAL INFORMATION OF PRINCIPAL PORTFOLIO MANAGERS
EILEEN ALEXANDERSON. Ms. Alexanderson has been a Managing Director of the
Investment Manager since January 1997. Prior thereto, Ms. Alexanderson was a
Senior Vice President of the Investment Manager. She joined the Investment
Manager in 1979.
HERBERT W. GULLQUIST. Mr. Gullquist has been Vice Chairman of the Investment
Manager since 1997 and a Managing Director and Chief Investment Officer of the
Investment Manager since 1982. He joined the Investment Manager in November
1982.
JOHN R. REINSBERG. Mr. Reinsberg is a Managing Director of the Investment
Manager. He joined the Investment Manager in January 1992.
ADMINISTRATOR
State Street Bank and Trust Company ("State Street"), located at 225 Franklin
Street, Boston, Massachusetts 02110, serves as each Portfolio's administrator.
DISTRIBUTOR
Lazard Freres acts as distributor for the Portfolios.
CUSTODIAN
State Street acts as custodian of the Portfolio's investments. State Street may
enter into subcustodial arrangements on behalf of the Portfolios for the holding
of foreign securities. YEAR 2000 ISSUES Each Portfolio could be adversely
affected if the computer systems used by the Investment Manager and the Fund's
other service providers do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related computer
problems could have a negative effect on the Portfolios, the Investment Manager
is working to avoid such problems and to obtain assurances from service
providers that they are taking similar steps. While the Portfolios cannot, at
this time, predict the degree of impact, it is possible that foreign markets
will be less prepared than U.S. markets.
13
<PAGE>
SHAREHOLDER INFORMATION
================================================================================
GENERAL
- --------------------------------------------------------------------------------
Portfolio shares are sold, without a sales charge, on a continuous basis at the
net asset value per share ("NAV") next determined after an order in proper form
is received by the Fund's Transfer Agent, Boston Financial Data Services, Inc.,
Or another agent of the Fund. The NAV is determined as of the close of trading
on the floor of the New York Stock Exchange (normally 4:00 p.m., Eastern time),
on each day the New York Stock Exchange is open for business. Equity securities
typically are valued based on market value, or where market quotations are not
readily available, based on fair value as determined in good faith by the Board.
Debt securities having remaining maturities of 60 days or less are valued on an
amortized cost basis unless the Board determines that such method does not
represent fair value. Other debt securities are valued using available market
quotations or at fair value which may be determined by one or more pricing
services.
Foreign securities held by a Portfolio may trade on days when the Portfolio does
not calculate its NAVand thus affect the Portfolio's NAVon days when
shareholders will not be able to buy or sell the Portfolio's shares.
MINIMUM INVESTMENTS
All purchases made by check should be in U.S. dollars and made payable to "The
Lazard Funds, Inc." Third party checks will not be accepted. When purchases are
made by check or periodic account investment, redemption proceeds will be
transmitted to you promptly upon bank clearance of your purchase check, which
may take up to 15 calendar days.
- ---------------------------------------------------------------
INITIAL SUBSEQUENT INVESTMENT INVESTMENTS
- ---------------------------------------------------------------
Institutional Shares $1,000,000 $5,000
- ---------------------------------------------------------------
Open Shares 10,000 1,000
- ---------------------------------------------------------------
IRA Rollover/Transfer-
Open Shares 10,000 1,000
- ---------------------------------------------------------------
================================================================================
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
INITIAL PURCHASE
BY MAIL
1. Complete a Purchase Application. Indicate the services to be used.
2. Mail the Purchase Application and a check for $10,000 or more for Open
Shares, or $1,000,000 or more for Institutional Shares, payable to "The
Lazard Funds, Inc." to:
The Lazard Funds, Inc.
P.O. Box 9363
Boston, Massachusetts
02205-9363
Attention: (Name of Portfolio and Class of Shares)
BY WIRE
1. Call (800) 986-3455 toll free from any state and provide the following:
o the Portfolio(s) and Class of shares to be invested in
o name(s) in which shares are to be registered
o address
o social security or tax identification number
o dividend payment election
o amount to be wired
o name of the wiring bank, and
o name and telephone number of the person to be contacted in connection with the
order.
An account number will then be assigned.
2. Instruct the wiring bank to transmit the specified amount in federal funds,
giving the wiring bank the account name(s) and assigned account number, to
the Custodian:
ABA #: 011000028
State Street Bank and Trust Company
Boston, Massachusetts
Custody and Shareholder Services Division
DDA 9905-2375
Attention: (Name of Portfolio and Class of Shares)
The Lazard Funds, Inc.
Shareholder's Name and Account Number
3. Complete a Purchase Application. Indicate the services to be used. Mail the
Purchase Application to the address set forth in Item 2 under "Initial
Purchase--By Mail."
14
<PAGE>
SHAREHOLDER INFORMATION (CONTINUED)
================================================================================
ADDITIONAL PURCHASES
BY MAIL
1. Make a check payable to "The Lazard Funds, Inc." Write the shareholder's
account number on the check.
2. Mail the check and the detachable stub from the Statement of Account (or a
letter providing the account number) to the address set forth in Item 2
under "Initial Purchase -- By Mail."
BY WIRE
Instruct the wiring bank to transmit the specified amount in federal funds to
State Street Bank and Trust Company, as instructed in Item 2 under "Initial
Purchase -- By Wire."
PURCHASES THROUGH THE AUTOMATIC INVESTMENT PLAN (OPEN SHARES ONLY)
Investors may participate in the Automatic Investment Plan by purchasing Open
Shares of any Portfolio at regular intervals selected by the investor. The
Automatic Investment Plan enables an investor to make regularly scheduled
investments and may provide investors with a convenient way to invest for
long-term financial goals. An account must be opened with a minimum investment
of $10,000. Thereafter, the minimum periodic investment is $250. To obtain an
Automatic Investment Plan application, call the Fund at (800) 823-6300.
INDIVIDUAL RETIREMENT ACCOUNTS (OPEN SHARES ONLY)
The Fund may be used as an instrument for existing IRAs. Completion of a Lazard
Funds IRA application is required. The minimum initial investment for an IRA
rollover account is $10,000. For a Direct IRA Account, a $5 establishment fee
and a $12 annual maintenance and custody fee is payable to State Street for each
IRA Fund account; in addition, a $10 termination fee will be charged and paid to
State Street when the account is closed. For more information on IRAs, call the
Fund at (800) 823-6300.
DISTRIBUTION AND SERVICE (12B-1) FEES (OPEN SHARES ONLY)
The Fund has adopted a plan under rule 12b-1 that allows each Portfolio to pay
Lazard Freres a fee at the annual rate of .25% of the value of the average daily
net assets of a Portfolio's Open Shares for the sale of a Portfolio's Open
Shares and for services provided to holders of Open Shares. Because these fees
are deducted from the Portfolio's assets on an on-going basis, over time these
fees will increase the cost of a shareholder's investment and may cost
shareholders more than paying other types of sales charges.
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
GENERAL
The Fund imposes no charges when shares are sold. Securities dealers and other
institutions may charge their clients a fee for effecting sales of Portfolio
shares. Upon receipt by the Transfer Agent, Lazard Freres or another agent of a
sale request in proper form, Portfolio shares will be sold at their next
determined NAV. Payment of sale proceeds may be made in securities.
Checks for sale proceeds ordinarily will be mailed within seven days. Where the
shares to be sold had been purchased by check, the sale proceeds will be
transmitted to you promptly upon bank clearance of your purchase check, which
may take up to 15 calendar days.
SELLING SHARES
THROUGH THE TRANSFER AGENT:
Shareholders who do not have a brokerage account with Lazard Freres should
submit their sale requests to the Transfer Agent by mail (see Items 1-4 below).
1. Write a letter of instruction to the Fund. Indicate the dollar amount, or
number and Portfolio and Class, of shares to be sold, the shareholder's account
number, and social security or taxpayer identification number.
2. Sign the letter in exactly the same way the account is registered. If there
is more than one owner of the shares, all must sign.
3. If shares to be sold have a value of $50,000 or more, the signature(s) must
be guaranteed by a domestic bank, savings and loan institution, domestic credit
union, member bank of the Federal Reserve System, broker-dealer, registered
securities association or clearing agency, or other participant in a signature
guarantee program. Signature guarantees by a notary public are not acceptable.
Further documentation may be requested to evidence the authority of the person
or entity making the sale request.
15
<PAGE>
SHAREHOLDER INFORMATION (CONTINUED)
================================================================================
4. Mail the letter to the Transfer Agent at the following address:
The Lazard Funds, Inc.
P.O. Box 9363
Boston, Massachusetts 02205-9363
Attention: (Name of Portfolio and Class of Shares)
TELEPHONE REDEMPTIONS:
A shareholder may redeem shares by calling the Transfer Agent. To redeem shares
by telephone, the shareholder must have properly completed and submitted to the
Transfer Agent either a Purchase Application authorizing such redemption or a
Telephone Redemption Authorization Form. The Transfer Agent's toll-free number
for redemptions is (800) 986-3455. In order to confirm that telephone
instructions for redemptions are genuine, the Fund has established reasonable
procedures to be employed by the Fund and the Transfer Agent, including the
requirement that a form of personal identification be provided.
THROUGH A LAZARD FRERES BROKERAGE ACCOUNT:
Shareholders who have a brokerage account with Lazard Freres should contact
their Lazard Freres account representative for specific instructions on how to
sell Portfolio shares.
INVESTOR SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC REINVESTMENT PLAN allows your dividends and capital gain distributions
to be reinvested in additional shares of your Portfolio or another Portfolio.
AUTOMATIC INVESTMENTS allows you to purchase Open Shares through automatic
deductions from a designated bank account.
INDIVIDUAL RETIREMENT ACCOUNTS. Call us at (800) 823-6300 for more information
and an IRA kit.
EXCHANGE PRIVILEGE allows you to exchange shares of one Portfolio that have been
held for seven days or more for shares of the same Class of another Portfolio in
an identically registered account. Shares will be exchanged at the next
determined NAV. There is no cost associated with this service. All exchanges are
subject to the minimum initial investment requirements.
A shareholder may exchange shares by writing or calling the Transfer Agent. To
exchange shares by telephone, the shareholder must have properly completed and
submitted to the Transfer Agent either a Purchase Application authorizing such
exchanges or a signed letter requesting that the exchange privilege be added to
the account. The Transfer Agent's toll-free number for exchanges is (800)
986-3455. In order to confirm that telephone instructions for exchanges are
genuine, the Fund has established reasonable procedures to be employed by the
Fund and the Transfer Agent, including the requirement that a form of personal
identification be provided.
The Fund reserves the right to limit the number of times shares may be exchanged
between Portfolios, to reject any telephone exchange order, or to otherwise
modify or discontinue exchange privileges at any time.
TELEPHONE REDEMPTION allows you to redeem shares at the net asset value next
determined after you call the Transfer Agent with your request.
GENERAL POLICIES
- --------------------------------------------------------------------------------
The Fund reserves the right to:
o Redeem an account, with notice, if the value of the account falls
below $1,000 due to redemptions
o Convert Institutional Shares held by a shareholder whose account is
less than $1,000,000 to Open Shares, upon written notice to the
shareholder
o Suspend redemptions or postpone payments when the NYSE is closed
for any reason other than its usual weekend or holiday closings or
when trading is restricted by the SEC
o Change the required minimum investment amounts
o Delay sending out redemption proceeds for up to seven days (this
usually applies to very large redemptions received without notice,
excessive trading, or during unusual market conditions)
o Make a redemption-in-kind (a payment in portfolio securities
instead of in cash) if it is determined that a redemption is too
large and/or may cause harm to the Portfolio and its shareholders
o Refuse any purchase or exchange request if such request could
adversely affect the Portfolio's NAV, including if such person or
group has engaged in excessive trading (to be determined in the
Fund's discretion)
o Close an account due to excessive trading after prior warning and
notification
16
<PAGE>
SHAREHOLDER INFORMATION (CONTINUED)
================================================================================
ACCOUNT POLICIES, DIVIDENDS AND TAXES
ACCOUNT STATEMENTS
You will receive quarterly statements detailing your account activity. All
investors will also receive a yearly statement detailing the tax characteristics
of any dividends and distributions that you have received in your account. You
will also receive confirmations after each trade executed in your account.
DIVIDENDS AND DISTRIBUTIONS
Income dividends are normally declared and paid annually but may be declared and
paid twice annually for each of the Portfolios. Net capital gains, if any, are
normally distributed annually but may be distributed twice annually.
Dividends and distributions of a Portfolio will be invested in additional shares
of the same Class of the Portfolio at net asset value and credited to the
shareholder's account on the payment date or, at the shareholder's election,
paid in cash. Dividend checks and Statements of Account will be mailed
approximately two business days after the payment date.
TAX INFORMATION
Please be aware that the following tax information is general and refers to the
provisions of the Internal Revenue Code of 1986, as amended, which are in effect
as of the date of this Prospectus. You should consult a tax adviser about the
status of your distributions from your Portfolio.
All dividends and short-term capital gains distributions are generally taxable
to you as ordinary income, whether you receive the distribution in cash or
reinvest it in additional shares. An exchange of one Portfolio's shares for
shares of another Portfolio will be treated as a sale of the Portfolio's shares
and any gain on the transaction may be subject to federal income tax.
Keep in mind that distributions may be taxable to you at different rates
depending on the length of time the Portfolio held the applicable investment,
not the length of time that you held your Portfolio shares. When you do sell
your Portfolio shares, a capital gain may be realized, except for IRA accounts.
Federal law requires a Portfolio to withhold taxes on distributions paid to
shareholders who:
o fail to provide a social security number or taxpayer identification number
o fail to certify that their social security number or taxpayer identification
number is correct
o fail to certify that they are exempt from withholding
FINANCIAL HIGHLIGHTS
The tables on the following pages describe each Portfolio's performance for the
fiscal periods indicated. Certain information reflects financial results for a
single Portfolio share. "Total return" shows how much your investment in a
Portfolio would have increased (or decreased) during each period, assuming you
had reinvested all dividends and distributions. The information in the tables
has been independently audited by Anchin, Block & Anchin LLP, whose report,
along with the Portfolios' financial statements, is included in the Fund's
annual report, which is available upon request.
17
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
LAZARD SMALLCAP PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------------------
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 20.02 $ 18.44 $ 15.95 $ 14.35 $ 15.26
---------- ---------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income ................. 0.08 0.07 0.11 0.13 0.07
Net realized and unrealized gain (loss) (2.60) 4.92 3.68 2.95 0.22
---------- ---------- --------- --------- ---------
Total from investment operations ...... (2.52) 4.99 3.79 3.08 0.29
---------- ---------- --------- --------- ---------
Less distributions from and in excess of:
Net investment income ................. (0.01) (0.06) (0.11) (0.16) (0.04)
Net realized gain ..................... (0.10) (3.35) (1.19) (1.32) (1.16)
---------- ---------- --------- --------- ---------
Total distributions ................... (0.11) (3.41) (1.30) (1.48) (1.20)
---------- ---------- --------- --------- ---------
Net asset value, end of period .......... $ 17.39 $ 20.02 $ 18.44 $ 15.95 $ 14.35
========== ========== ========= ========= =========
TOTAL RETURN (A) ........................ (12.6)% 28.1% 23.9% 21.5% 2.0%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $1,411,503 $1,445,075 $ 981,405 $ 646,371 $ 429,673
Ratios to average net assets:
Net expenses (b) ...................... 0.81% 0.82% 0.84% 0.84% 0.85%
Gross expenses (b) .................... 0.81% 0.82% 0.84% 0.84% 0.85%
Net investment income (b) ............. 0.50% 0.35% 0.60% 0.90% 0.51%
Portfolio turnover rate ................. 46% 56% 51% 70% 70%
</TABLE>
YEAR FOR THE PERIOD
ENDED 1/30/97* TO
OPEN SHARES 12/31/98 12/31/97
---------- ----------
Net asset value, beginning of period .... $ 20.02 $ 18.75
---------- ----------
Income (loss) from investment operations:
Net investment income ................. 0.03 0.01
Net realized and unrealized gain (loss) (2.60) 4.61
---------- ----------
Total from investment operations ...... (2.57) 4.62
---------- ----------
Less distributions from and in excess of:
Net investment income ................. -- --
Net realized gain ..................... (0.10) (3.35)
---------- ----------
Total distributions ................... (0.10) (3.35)
---------- ----------
Net asset value, end of period .......... $ 17.35 $ 20.02
========== ==========
TOTAL RETURN (A) ........................ (12.9)% 25.6%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 93,547 $ 46,097
Ratios to average net assets:
Net expenses (b) ...................... 1.09% 1.14%
Gross expenses (b) .................... 1.09% 1.23%
Net investment income (b) ............. 0.21% 0.12%
SEE NOTES TO FINANCIAL HIGHLIGHTS
18
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL EQUITY PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------------------
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
---------- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 13.97 $ 13.62 $ 12.50 $ 11.23 $ 12.32
---------- ---------- ----------- ------------ ---------
Income (loss) from investment operations:
Net investment income ................. 0.18 0.22 0.17 0.19 0.08
NET REALIZED AND UNREALIZED GAIN (LOSS) 2.03 1.40 1.76 1.29 (0.05)
---------- ---------- ----------- ------------ ---------
Total from investment operations ...... 2.21 1.62 1.93 1.48 0.03
---------- ---------- ----------- ------------ ---------
Less distributions from and in excess of:
Net investment income ................. (0.14) (0.34) (0.19) (0.09) --
Net realized gain ..................... (0.81) (0.93) (0.62) (0.12) (1.12)
---------- ---------- ----------- ------------ ---------
Total distributions ................... (0.95) (1.27) (0.81) (0.21) (1.12)
---------- ---------- ----------- ------------ ---------
Net asset value, end of period .......... $ 15.23 $ 13.97 $ 13.62 $ 12.50 $ 11.23
========== ========== =========== ============ =========
TOTAL RETURN (A) ........................ 16.0% 11.8% 15.6% 13.1% 0.2%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $2,879,289 $2,099,724 $ 1,816,173 $ 1,299,549 $ 831,877
Ratios to average net assets:
Net expenses (b) ...................... 0.90% 0.89% 0.91% 0.95% 0.94%
Gross expenses (b) .................... 0.90% 0.89% 0.91% 0.95% 0.94%
Net investment income (b) ............. 1.37% 1.18% 1.93% 1.82% 0.75%
Portfolio turnover rate ................. 41% 37% 39% 63% 106%
</TABLE>
YEAR FOR THE PERIOD
ENDED 1/23/97* TO
OPEN SHARES 12/31/98 12/31/97
---------- ----------
Net asset value, beginning of period .... $ 13.95 $ 13.29
---------- ----------
Income (loss) from investment operations:
Net investment income ................. 0.18 0.16
Net realized and unrealized gain (loss) 2.00 1.71
---------- ----------
Total from investment operations ...... 2.18 1.87
---------- ----------
Less distributions from and in excess of:
Net investment income ................. (0.09) (0.28)
Net realized gain ..................... (0.81) (0.93)
---------- ----------
Total distributions ................... (0.90) (1.21)
---------- ----------
Net asset value, end of period .......... $ 15.23 $ 13.95
========== ==========
TOTAL RETURN (A) ........................ 15.8% 14.1%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 47,303 $ 10,794
Ratios to average net assets:
Net expenses (b) ...................... 1.24% 1.25%
Gross expenses (b) .................... 1.24% 1.61%
Net investment income (b) ............. 1.02% 0.37%
SEE NOTES TO FINANCIAL HIGHLIGHTS
19
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
LAZARD EMERGING MARKETS PORTFOLIO
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
---------------------------------------------------------------- 7/15/94* TO
INSTITUTIONAL SHARES 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 9.20 $ 11.21 $ 9.24 $ 9.86 $ 10.00
----------- ----------- ----------- ---------- ----------
Income (loss) from investment operations:
Net investment income ................. 0.10 0.10 0.07 0.08 0.01
Net realized and unrealized gain (loss) (2.26) (1.18) 2.11 (0.66) (0.15)
----------- ----------- ----------- ---------- ----------
Total from investment operations ...... (2.16) (1.08) 2.18 (0.58) (0.14)
----------- ----------- ----------- ---------- ----------
Less distributions from and in excess of:
Net investment income ................. (0.10) (0.09) (0.08) (0.04) --
Net realized gain ..................... -- (0.84) (0.13) -- --
----------- ----------- ----------- ---------- ----------
TOTAL DISTRIBUTIONS ................... (0.10) (0.93) (0.21) (0.04) --
----------- ----------- ----------- ---------- ----------
Net asset value, end of period .......... $ 6.94 $ 9.20 $ 11.21 $ 9.24 $ 9.86
=========== =========== =========== ========== ==========
TOTAL RETURN (A) ........................ (23.5)% (9.8)% 23.6% (5.9)% (1.4)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 298,033 $ 236,340 $ 145,328 $ 35,216 $ 17,025
Ratios to average net assets:
Net expenses (b) ...................... 1.28% 1.32% 1.38% 1.30% 1.30%
Gross expenses (b) .................... 1.29% 1.33% 1.48% 2.00% 2.31%
Net investment income (b) ............. 1.84% 1.26% 1.40% 1.22% 0.31%
Portfolio turnover rate ................. 36% 40% 51% 102% 31%
</TABLE>
YEAR FOR THE PERIOD
ENDED 1/8/97* TO
OPEN SHARES 12/31/98 12/31/97
----------- -----------
Net asset value, beginning of period .... $ 9.20 $ 11.45
----------- -----------
Income (loss) from investment operations:
Net investment income ................. 0.11 0.07
Net realized and unrealized gain (loss) (2.26) (1.42)
----------- -----------
Total from investment operations ...... (2.15) (1.35)
----------- -----------
Less distributions from and in excess of:
Net investment income ................. (0.08) (0.07)
Net realized gain ..................... -- (0.83)
----------- -----------
Total distributions ................... (0.08) (0.90)
----------- -----------
Net asset value, end of period .......... $ 6.97 $ 9.20
=========== ===========
TOTAL RETURN (A) ........................ (23.3)% (12.0)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 8,191 $ 7,769
Ratios to average net assets:
Net expenses (b) ...................... 1.60% 1.60%
Gross expenses (b) .................... 1.76% 1.93%
Net investment income (b) ............. 1.54% 1.01%
NOTES TO FINANCIAL HIGHLIGHTS:
*Commencement of operations.
(a) Total Returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower. Periods of less than one year are not annualized.
(b) Annualized for periods less than one year.
20
<PAGE>
For more information about the Portfolios, the following documents are available
free upon request:
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
The Fund's annual and semi-annual reports to shareholders contain additional
information on each Portfolio's investments. In the annual report, you will find
a broad discussion of the market conditions and investment strategies that
significantly affected each Portfolio's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Portfolios, including their
operations and investment policies. It is incorporated by reference and is
legally considered a part of this prospectus.
You can review the Fund's Reports and the SAI at the Public Reference Room of
the Securities and Exchange Commission. You can get text-only copies:
o For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-6312
You can get free copies of Reports and the SAI, or request other information
and discuss your questions about the Portfolios by contacting the Fund at:
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
30 Rockefeller Plaza
New York, New York 10112
Telephone: 1-800-823-6300
http://www.lazardfunds.com
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
30 Rockefeller Plaza
New York, New York 10112
Telephone: (800) 823-6300
http://www.lazardfunds.com
INVESTMENT MANAGER
Lazard Asset Management
30 Rockefeller Plaza
New York, New York 10112
DISTRIBUTOR
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, New York 10112
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Boston Financial Data Services, Inc.
P.O. Box 9363
Boston, Massachusetts 02205-9363
INDEPENDENT PUBLIC ACCOUNTANTS
Anchin, Block & Anchin LLP
1375 Broadway
New York, New York 10018
LEGAL COUNSEL
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
21
<PAGE>
<PAGE>
THE LAZARD FUNDS, INC.
30 Rockefeller Plaza
New York, New York 10112
(800) 823-6300
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
The Lazard Funds, Inc. (the "Fund") is a no-load, open-end
management investment company known as a mutual fund. This Statement of
Additional Information, which is not a prospectus, supplements and should be
read in conjunction with the current Prospectus of the Fund, dated May 1, 1999,
as it may be revised from time to time, relating to the following twelve
portfolios (individually, a "Portfolio" and collectively, the "Portfolios"):
Lazard Equity Portfolio Lazard Emerging Markets Portfolio
Lazard Mid Cap Portfolio Lazard Bond Portfolio
Lazard Small Cap Portfolio Lazard High Yield Portfolio
Lazard Bantam Value Portfolio Lazard International Fixed-Income
Lazard Global Equity Portfolio Portfolio
Lazard International Equity Portfolio Lazard Strategic Yield Portfolio
Lazard International Small Cap Portfolio
Each Portfolio currently offers two classes of shares--Institutional
Shares and Open Shares. Institutional Shares and open shares are identical,
except as to minimum investment requirements and the services offered to and
expenses borne by each Class.
To obtain a copy of the Fund's Prospectus, please write or call the
Fund at the address and telephone number given above.
The most recent Annual Report and Semi-Annual Report to Shareholders
for each Portfolio are separate documents supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing in the Annual Report are incorporated
by reference into this Statement of Additional Information.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
- --------------------------------------------------------------------------------
Description of the Fund and Portfolios ........................................3
Investment Restrictions ......................................................27
Management ...................................................................31
Determination of Net Asset Value .............................................38
Portfolio Transactions .......................................................39
How to Buy and How to Sell Shares ............................................41
Distribution and Servicing Plan ..............................................43
Dividends and Distributions ..................................................45
Taxation .....................................................................46
Performance Information ......................................................49
Information About the Fund and Portfolios ....................................53
Counsel and Independent Auditors .............................................66
Additional Information .......................................................66
Appendix .....................................................................67
2
<PAGE>
DESCRIPTION OF THE FUND AND PORTFOLIOS
The Fund is a Maryland corporation organized on May 17, 1991. Each
Portfolio is a separate portfolio of the Fund, an open-end management investment
company, known as a mutual fund. The Equity Portfolio is a diversified
investment company, which means that, with respect to 75% of its total assets,
the Equity Portfolio will not invest more than 5% of its assets in the
securities of any single issuer. Each of the other Portfolios is a
non-diversified investment company, which means that the proportion of the
Portfolio's assets that may be invested in the securities of a single issuer is
not limited by the Investment Company Act of 1940, as amended (the "1940 Act").
Lazard Asset Management, a division of Lazard Freres & Co. LLC
("Lazard Freres"), serves as the investment manager (the "Investment Manager")
to each of the Portfolios.
Lazard Freres is the distributor of each Portfolio's shares.
Certain Portfolio Securities
The following information supplements and should be read in
conjunction with the Fund's Prospectus.
Depository Receipts. (All Portfolios, except the Small Cap
Portfolio) Each of these Portfolios may invest in the securities of foreign
issuers in the form of American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs"). These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. GDRs are receipts issued outside the United States, typically by
non-United States banks and trust companies that evidence ownership of either
foreign or domestic securities. Generally, ADRs in registered form are designed
for use in the United States securities markets and GDRs in bearer form are
designed for use outside the United States.
These securities may be purchased through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the underlying security and a depositary, whereas a depositary may
establish an unsponsored facility without participation by the issuer of the
deposited security. Holders of unsponsored depositary receipts generally bear
all the costs of such facilities and the depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Foreign Government Obligations; Securities of Supranational
Entities. (All Portfolios, except the Equity Portfolio and Small Cap Portfolio)
Each of these Portfolios may invest in obligations issued or guaranteed by one
or more foreign governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Investment
3
<PAGE>
Manager to be of comparable quality to the other obligations in which the
Portfolio may invest. Supranational entities include international organizations
designated or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and related
government agencies. Examples include the International Bank for Reconstruction
and Development (the World Bank), the European Coal and Steel Community, the
Asian Development Bank and the InterAmerican Development Bank.
Convertible Securities. (All Portfolios) Convertible securities may
be converted at either a stated price or stated rate into underlying shares of
common stock. Convertible securities have characteristics similar to both
fixed-income and equity securities. Convertible securities generally are
subordinated to other similar but non-convertible securities of the same issuer,
although convertible bonds, as corporate debt obligations, enjoy seniority in
right of payment to all equity securities, and convertible preferred stock is
senior to common stock, of the same issuer. Because of the subordination
feature, however, convertible securities typically have lower ratings than
similar non-convertible securities.
Although to a lesser extent than with fixed-income securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the underlying
common stock. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
Convertible securities are investments that provide for a stable
stream of income with generally higher yields than common stocks. There can be
no assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
Warrants. (All Portfolios, except the International Equity
Portfolio, Bond Portfolio and International Fixed-Income Portfolio) A warrant is
an instrument issued by a corporation which gives the holder the right to
subscribe to a specified amount of the corporation's capital stock at a set
price for a specified period of time. A Portfolio may invest up to 5% of its
total assets in warrants, except that this limitation does not apply to warrants
purchased by the Portfolio that are sold in units with, or attached to, other
securities.
4
<PAGE>
Participation Interests. (All Portfolios) Each Portfolio may
purchase from financial institutions participation interests in securities in
which the Portfolio may invest. A participation interest gives the Portfolio an
undivided interest in the security in the proportion that the Portfolio's
participation interest bears to the total principal amount of the security.
These instruments may have fixed, floating or variable rates of interest with
remaining maturities of 13 months or less. If the participation interest is
unrated, or has been given a rating below that which is permissible for purchase
by the Portfolio, the participation interest will be collateralized by U.S.
Government securities, or, in the case of unrated participation interests, the
Investment Manager must have determined that the instrument is of comparable
quality to those instruments in which the Portfolio may invest.
Each Portfolio may invest in corporate obligations denominated in
U.S. or (except with respect to the Equity Portfolio and Small Cap Portfolio)
foreign currencies that are originated, negotiated and structured by a syndicate
of lenders ("Co-Lenders") consisting of commercial banks, thrift institutions,
insurance companies, financial companies or other financial institutions one or
more of which administers the security on behalf of the syndicate (the "Agent
Bank"). Co-Lenders may sell such securities to third parties called
"Participants." Each Portfolio may invest in such securities either by
participating as a Co-Lender at origination or by acquiring an interest in the
security from a Co-Lender or a Participant (collectively, "participation
interests"). Co-Lenders and Participants interposed between the Portfolio and
the corporate borrower (the "Borrower"), together with Agent Banks, are referred
to herein as "Intermediate Participants." Each Portfolio also may purchase a
participation interest in a portion of the rights of an Intermediate
Participant, which would not establish any direct relationship between the Fund,
on behalf of the Portfolio, and the Borrower. In such cases, the Portfolio would
be required to rely on the Intermediate Participant that sold the participation
interest not only for the enforcement of the Portfolio's rights against the
Borrower, but also for the receipt and processing of payments due to the
Portfolio under the security. Because it may be necessary to assert through an
Intermediate Participant such rights as may exist against the Borrower, if the
Borrower fails to pay principal and interest when due, the Portfolio may be
subject to delays, expenses and risks that are greater than those that would be
involved if the Portfolio were to enforce its rights directly against the
Borrower. Moreover, under the terms of a participation interest, the Portfolio
may be regarded as a creditor of the Intermediate Participant (rather than of
the Borrower), so that the Portfolio also may be subject to the risk that the
Intermediate Participant may become insolvent. Similar risks may arise with
respect to the Agent Bank if, for example, assets held by the Agent Bank for the
benefit of the Portfolio were determined by the appropriate regulatory authority
or court to be subject to the claims of the Agent Bank's creditors. In such
case, the Portfolio might incur certain costs and delays in realizing payment in
connection with the participation interest or suffer a loss of principal and/or
interest. Further, in the event of the bankruptcy or insolvency of the Borrower,
the obligation of the Borrower to repay the loan may be subject to certain
defenses that can be asserted by such Borrower as a result of improper conduct
by the Agent Bank or Intermediate Participant.
5
<PAGE>
Variable and Floating Rate Securities. (All Portfolios) Variable and
floating rate securities provide for a periodic adjustment in the interest rate
paid on the obligations. The terms of such obligations must provide that
interest rates are adjusted periodically based upon an interest rate adjustment
index as provided in the respective obligations. The adjustment intervals may be
regular, and range from daily up to annually, or may be event based, such as
based on a change in the prime rate.
Each Portfolio may invest in floating rate debt instruments
("floaters"). The interest rate on a floater is a variable rate which is tied to
another interest rate, such as a money-market index or Treasury bill rate. The
interest rate on a floater resets periodically, typically every six months.
Because of the interest rate reset feature, floaters provide the Portfolio with
a certain degree of protection against rises in interest rates, although the
Portfolio will participate in any declines in interest rates as well.
Each Portfolio also may invest in inverse floating rate debt
instruments ("inverse floaters"). The interest rate on an inverse floater resets
in the opposite direction from the market rate of interest to which the inverse
floater is indexed. An inverse floating rate security may exhibit greater price
volatility than a fixed rate obligation of similar credit quality.
Municipal Obligations. (Bond Portfolio, High Yield Portfolio and
Strategic Yield Portfolio) In circumstances where the Investment Manager
determines that investment in municipal obligations would facilitate the
Portfolio's ability to accomplish its investment objective, each of these
Portfolios may invest its assets in such obligations, including municipal
obligations issued at a discount. Dividends on shares attributable to interest
on municipal obligations held by the Portfolio will not be exempt from federal
income taxes. Municipal obligations are susceptible to risks arising from the
financial condition of the states, public bodies or municipalities issuing the
securities. To the extent that state or local governmental entities are unable
to meet their financial obligations, the income derived by the Portfolio from
municipal obligations could be impaired.
Municipal obligations are debt obligations issued by states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, or multistate
agencies or authorities. Municipal obligations bear fixed, floating or variable
rates of interest. Certain municipal obligations are subject to redemption at a
date earlier than their stated maturity pursuant to call options, which may be
separated from the related municipal obligations and purchased and sold
separately. Each of these Portfolios also may acquire call options on specific
municipal obligations. The Portfolio generally would purchase these call options
to protect the Portfolio from the issuer of the related municipal obligation
redeeming, or other holder of the call option from calling away, the municipal
obligation before maturity.
Municipal obligations generally include debt obligations issued to
obtain funds for various public purposes as well as certain industrial
development bonds issued by or on behalf of public authorities. Municipal
obligations are classified as general obligation bonds, revenue bonds and notes.
General obligation bonds are secured by the issuer's pledge of its
6
<PAGE>
faith, credit and taxing power for the payment of principal and interest.
Revenue bonds are payable from the revenue derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source, but not from the general taxing power. Industrial
development bonds, in most cases, are revenue bonds and generally do not carry
the pledge of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are issued. Notes are
short-term instruments which are obligations of the issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. Municipal obligations include municipal
lease/purchase agreements which are similar to installment purchase contracts
for property or equipment issued by municipalities.
While, in general, municipal obligations are tax exempt securities
having relatively low yields as compared to taxable, non-municipal obligations
of similar quality, certain municipal obligations are taxable obligations,
offering yields comparable to, and in some cases greater than, the yields
available on other permissible Portfolio investments. Dividends received by
shareholders on Portfolio shares which are attributable to interest income
received by the Portfolio from municipal obligations generally will be subject
to federal income tax. Each of these Portfolios will invest in municipal
obligations, the ratings of which correspond with the ratings of other
permissible Portfolio investments. Each of these Portfolios currently intends to
invest no more than 25% of its assets in municipal obligations. However, this
percentage may be varied from time to time without shareholder approval.
Zero Coupon and Stripped U.S. Treasury Securities. (Bond Portfolio,
High Yield Portfolio and Strategic Yield Portfolio) Each of these Portfolios may
invest in zero coupon U.S. Treasury securities, which are Treasury notes and
Bonds that have been stripped of their unmatured interest coupons, the coupons
themselves and receipts or certificates representing interests in such stripped
debt obligations and coupons. Zero coupon securities also are issued by
corporations and financial institutions which constitute a proportionate
ownership of the issuer's pool of underlying U.S. Treasury securities. A zero
coupon security pays no interest to its holder during its life and is sold at a
discount to its face value at maturity. The market prices of zero coupon
securities generally are more volatile than the market prices of securities that
pay interest periodically and are likely to respond to a greater degree to
changes in interest rates than non-zero coupon securities having similar
maturities and credit qualities.
Mortgage-Related Securities. (Bond Portfolio, High Yield Portfolio,
International Fixed-Income Portfolio and Strategic Yield Portfolio and, to a
limited extent, the Equity Portfolio, Mid Cap Portfolio, Small Cap Portfolio,
Bantam Value Portfolio and Global Equity Portfolio) Mortgage-related securities
are secured, directly or indirectly, by pools of mortgages, and may include
complex instruments such as collateralized mortgage obligations and stripped
mortgage-backed securities. These securities also may include mortgage
pass-through securities, interests in REMICs or other kinds of mortgage-backed
securities. The mortgage-related securities which may be purchased include those
with fixed, floating and variable interest rates, those with interest rates that
change based on multiples of changes in interest rates and those with interest
rates that change inversely to changes in interest rates.
7
<PAGE>
Residential Mortgage-Related Securities--Each of these Portfolios may invest in
mortgage-related securities representing participation interests in pools of
one- to four-family residential mortgage loans issued by governmental agencies
or instrumentalities, such as the GNMA, FNMA and FHLMC, or by private entities.
Residential mortgage-related securities issued by private entities are
structured to provide protection to the senior class investors against potential
losses on the underlying mortgage loans. This protection is generally provided
by having the holders of the subordinated class of securities ("Subordinated
Securities") take the first loss if there are defaults on the underlying
commercial mortgage loans. Other protection, which may benefit all of the
classes or particular classes, may include issuer guarantees, reserve funds,
additional Subordinated Securities, cross-collateralization and
over-collateralization.
Commercial Mortgage-Related Securities--Each of these Portfolios may invest in
commercial mortgage-related securities, which generally are multi-class debt or
pass-through certificates secured by mortgage loans on commercial properties.
Similar to residential mortgage-related securities, commercial mortgage-related
securities have been issued using a variety of structures, including multi-class
structures featuring senior and subordinated classes.
Subordinated Securities--Each of these Portfolios may invest in Subordinated
Securities issued or sponsored by commercial banks, savings and loan
institutions, mortgage bankers, private mortgage insurance companies and other
non-governmental issuers. Subordinated Securities have no governmental
guarantee, and are subordinated in some manner as to the payment of principal
and/or interest to the holders of more senior mortgage-related securities
arising out of the same pool of mortgages. The holders of Subordinated
Securities typically are compensated with a higher stated yield than are the
holders of more senior mortgage-related securities. On the other hand,
Subordinated Securities typically subject the holder to greater risk than senior
mortgage-related securities and tend to be rated in a lower rating category, and
frequently a substantially lower rating category, than the senior
mortgage-related securities issued in respect of the same pool of mortgage.
Subordinated Securities generally are likely to be more sensitive to changes in
prepayment and interest rates and the market for such securities may be less
liquid than is the case for traditional fixed-income securities and senior
mortgage-related securities.
Collateralized Mortgage Obligations and Multi-Class Pass-Through
Securities--Collateralized mortgage obligations or "CMOs" are multiclass bonds
backed by pools of mortgage pass-through certificates or mortgage loans. CMOs
may be collateralized by (a) pass-through certificates issued or guaranteed by
GNMA, FNMA or FHLMC, (b) unsecuritized mortgage loans insured by the Federal
Housing Administration or guaranteed by the Department of Veterans' Affairs,
(c) unsecuritized conventional mortgages, (d) other mortgage-related securities
or (e) any combination thereof. CMOs may be issued by agencies or
instrumentalities of the U.S. Government, or by private originators of, or
investors in, mortgage loans, including depository institutions, mortgage banks,
investment banks and special purpose subsidiaries of the foregoing. The issuer
of CMOs or multi-class pass-through securities may elect to be treated as a
REMIC. The Bond Portfolio, High Yield Portfolio and International Fixed-Income
Portfolio may invest, to a limited extent, in residual interests in REMICs. See
"Taxation."
8
<PAGE>
Each class of CMOs, often referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final distribution date; these
characteristics will vary from one tranche to another. Principal prepayments on
collateral underlying a CMO may cause it to be retired substantially earlier
than the stated maturities or final distribution dates. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in many ways. One or more tranches of a CMO may have coupon
rates which reset periodically at a specified increment over an index, such as
the London Interbank Offered Rate ("LIBOR") (or sometimes more than one index).
These floating rate CMOs typically are issued with lifetime caps on the coupon
rate thereon. Each of these Portfolios also may invest in inverse floating rate
CMOs. Inverse floating rate CMOs constitute a tranche of a CMO with a coupon
rate that moves in the reverse direction to an applicable index such as the
LIBOR. Accordingly, the coupon rate thereon will increase as interest rates
decrease. Inverse floating rate CMOs are typically more volatile than fixed or
floating rate tranches of CMOs.
Many inverse floating rate CMOs have coupons that move inversely to
a multiple of the applicable indexes. The coupon varying inversely to a multiple
of an applicable index creates a leverage factor. The markets for inverse
floating rate CMOs with highly leveraged characteristics may at times be very
thin. The Portfolio's ability to dispose of its positions in such securities
will depend on the degree of liquidity in the markets for such securities. It is
impossible to predict the amount of trading interest that may exist in such
securities, and therefore the future degree of liquidity. It should be noted
that inverse floaters based on multiples of a stated index are designed to be
highly sensitive to changes in interest rates and can subject the holders
thereof to extreme reductions of yield and loss of principal.
Stripped Mortgage-Backed Securities--Each of these Portfolios also may invest in
stripped mortgage-backed securities. Stripped mortgage-backed securities are
created by segregating the cash flows from underlying mortgage loans or mortgage
securities to create two or more new securities, each with a specified
percentage of the underlying security's principal or interest payments. Mortgage
securities may be partially stripped so that each investor class received some
interest and some principal. When securities are completely stripped, however,
all of the interest is distributed to holders of one type of security, known as
an interest-only security, or IO, and all of the principal is distributed to
holders of another type of security known as a principal-only security, or PO.
Strips can be created in a pass-through structure or as tranches of a CMO. The
yields to maturity on IOs and POs are very sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets. If
the underlying mortgage assets experience greater than anticipated prepayments
of principal, the Portfolio may not fully recoup its initial investment in IOs.
Conversely, if the underlying mortgage assets experience less than anticipated
prepayments of principal, the yield on POs could be materially and adversely
affected.
Real Estate Investment Trusts--Each of these Portfolios may invest in Real
Estate Investment Trusts ("REITs"), although each of the Mid Cap Portfolio,
Bantam Value Portfolio, Equity Portfolio, Global Equity Portfolio and Small Cap
Portfolio currently intends to limit its investments in REITs to no more than 5%
of its assets. A REIT is a corporation, or a business trust that would otherwise
be taxed as a corporation, which meets the definitional requirements
9
<PAGE>
of the Code. The Code permits a qualifying REIT to deduct dividends paid,
thereby effectively eliminating corporate level Federal income tax and making
the REIT a pass-through vehicle for Federal income tax purposes. To meet the
definitional requirements of the Code, a REIT must, among other things, invest
substantially all of its assets in interests in real estate (including mortgages
and other REITs) or cash and government securities, derive most of its income
from rents from real property or interest on loans secured by mortgages on real
property, and distribute to shareholders annually a substantial portion of its
otherwise taxable income.
REITs are characterized as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs, which may include operating or finance companies, own real
estate directly and the value of, and income earned by, the REITs depends upon
the income of the underlying properties and the rental income they earn. Equity
REITs also can realize capital gains (or losses) by selling properties that have
appreciated (or depreciated) in value. Mortgage REITs can make construction,
development or long-term mortgage loans and are sensitive to the credit quality
of the borrower. Mortgage REITs derive their income from interest payments on
such loans. Hybrid REITs combine the characteristics of both equity and mortgage
REITs, generally by holding both ownership interests and mortgage interests in
real estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management skill. They also are
subject to heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation and the possibility of failing to qualify for tax-free status
under the Code or to maintain exemption from the 1940 Act.
Government-Agency Securities--Mortgage-related securities issued by the
Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development.
Government-Related Securities--Mortgage-related securities issued by the Federal
National Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of FNMA and are not backed by or entitled to the full faith and
credit of the United States Government. FNMA is a government-sponsored
organization owned entirely by private stockholders.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as "Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the
United States Government created pursuant to an Act of Congress, which is owned
entirely by Federal Home Loan Banks.
Private Entity Securities--These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Timely payment
of principal and interest on mortgage-related securities backed by pools created
by non-governmental issuers often is supported partially by
10
<PAGE>
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance. The insurance and guarantees are issued by government
entities, private insurers and the mortgage poolers. There can be no assurance
that the private insurers or mortgage poolers can meet their obligations under
the policies, so that if the issuers default on their obligations the holders of
the security could sustain a loss. No insurance or guarantee covers the
Portfolio or the price of the Portfolio's shares. Mortgage-related securities
issued by non-governmental issuers generally offer a higher rate of interest
than government-agency and government-related securities because there are no
direct or indirect government guarantees of payment.
CMO Residuals--CMO Residuals are derivative mortgage securities issued by
agencies or instrumentalities of the U.S. Government or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose
subsidiaries of the foregoing.
The cash flow generated by the Mortgage Assets underlying series of
CMOs is applied first to make required payments of principal of and interest on
the CMOs and second to pay the related administrative expenses of the issuer.
The residual in a CMO structure generally represents the interest in any excess
cash flow remaining after making the foregoing payments. Each payment of such
excess cash flow to a holder of the related CMO Residual represents dividend or
interest income and/or a return of capital. The amount of residual cash flow
resulting from a CMO will depend on, among other things, the characteristics of
the Mortgage Assets, the coupon rate of each class of CMOs, prevailing interest
rates, the amount of administrative expenses and the prepayment experience on
the Mortgage Assets. In particular, the yield to maturity on CMO Residuals is
extremely sensitive to prepayments on the related underlying Mortgage Assets in
the same manner as an IO class of SMBS. See "Stripped Mortgage-Backed
Securities," above. In addition, if a series of a CMO includes a class that
bears interest at an adjustable rate, the yield to maturity on the related CMO
residual will also be extremely sensitive to the level of the index upon which
interest rate adjustments are based. As described above with respect to SMBS, in
certain circumstances, the Portfolio may fail to fully recoup its initial
investment in a CMO Residual.
CMO Residuals are generally purchased and sold by institutional
investors through several investment banking firms acting as brokers or dealers.
CMO Residuals may not have the liquidity of other more established securities
trading in other markets. Transactions in CMO Residuals are generally completed
only after careful review of the characteristics of the securities in question.
In addition, CMO Residuals may or, pursuant to an exemption therefrom, may not
have been registered under the Securities Act. CMO Residuals, whether or not
registered under the Securities Act, may be subject to certain restrictions of
transferability. Ownership of certain CMO Residuals imposes liability for
certain of the expenses of the related CMO issuer on the purchaser. The
Investment Manager will not purchase any CMO Residual that imposes such
liability on the Portfolio.
Other Mortgage-Related Securities--Other mortgage-related securities include
securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property. Other mortgage-related securities may
11
<PAGE>
be equity or debt securities issued by agencies or instrumentalities of the U.S.
Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, homebuilders, mortgage banks,
commercial banks, investment banks, partnerships, trusts and special purpose
entities of the foregoing.
Asset-Backed Securities. (Bond Portfolio, High Yield Portfolio,
International Fixed-Income Portfolio and Strategic Yield Portfolio) Each of
these Portfolios may invest in asset-backed securities, including interests in
pools of receivables, such as motor vehicle installment purchase obligations,
credit card receivables, home equity loans, home improvement loans and
manufactured housing loans. These securities may be in the form of pass-through
instruments or asset-backed bonds. The securities, all of which are issued by
non-governmental entities and carry no direct or indirect government guarantee,
are structurally similar to the collateralized mortgage obligations and mortgage
pass-through securities described above. As with mortgage-backed securities,
asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties and use similar credit enhancement
techniques.
Asset-backed securities present certain risks that are not presented
by mortgage-related securities. Primarily, these securities may provide the
Portfolio with a less effective security interest in the related collateral than
do mortgage-related securities. Therefore, there is the possibility that
recoveries on the underlying collateral may not, in some cases, be available to
support payments on these securities. Credit card receivables are generally
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, many of which give such debtors the right to
set off certain amounts owed on the credit cards, thereby reducing the balance
due. Most organizations that issue asset-backed securities relating to motor
vehicle installment purchase obligations perfect their interests in their
respective obligations only by filing a financing statement and by having the
servicer of the obligations, which is usually the originator, take custody
thereof. In such circumstances, if the servicer were to sell the same
obligations to another party, in violation of its duty not to so do, there is a
risk that such party could acquire an interest in the obligations superior to
that of the holders of the securities. Also, although most such obligations
grant a security interest in the motor vehicle being financed, in most states
the security interest in a motor vehicle must be noted on the certificate of
title to perfect such security interest against competing claims of other
parties. Due to the large number of vehicles involved, however, the certificate
of title to each vehicle financed, pursuant to the obligations underlying the
securities, usually is not amended to reflect the assignment of the seller's
security interest for the benefit of the holders of the securities. Therefore,
there is the possibility that recoveries on repossessed collateral may not, in
some cases, be available to support payments on those securities. In addition,
various state and federal laws give the motor vehicle owner the right to assert
against the holder of the owner's obligation certain defenses such owner would
have against the seller of the motor vehicle. The assertion of such defenses
could reduce payments on the related securities.
Investment Companies. (All Portfolios) Each Portfolio may invest, to
the extent permitted under the 1940 Act, in securities issued by investment
companies which principally invest in securities of the type in which the
Portfolio invests. Investments in the securities of investment companies may
involve duplication of advisory fees and certain other expenses.
12
<PAGE>
Illiquid Securities. (All Portfolios) Each Portfolio may invest up
to 10% (15% in the case of the Mid Cap Portfolio and High Yield Portfolio) of
the value of its net assets in securities as to which a liquid trading market
does not exist, provided such investments are consistent with the Portfolio's
investment objective. Such securities may include securities that are not
readily marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, certain mortgage-related
securities, and certain privately negotiated, non-exchange traded options and
securities used to cover such options. As to these securities, the Portfolio is
subject to a risk that should the Portfolio desire to sell them when a ready
buyer is not available at a price the Portfolio deems representative of their
value, the value of the Portfolio's net assets could be adversely affected.
Money Market Instruments. (All Portfolios) When the Investment
Manager determines that adverse market conditions exist, a Portfolio may adopt a
temporary defensive position and invest some or all of its assets in money
market instruments, including U.S. Government securities, repurchase agreements,
bank obligations and commercial paper. Each Portfolio also may purchase money
market instruments when it has cash reserves or in anticipation of taking a
market position.
Investment Techniques
The following information supplements and should be read in
conjunction with the Fund's Prospectus.
Borrowing Money. (All Portfolios) Each Portfolio, except as noted,
is permitted to borrow money from banks for temporary or emergency (not
leveraging) purposes, including to meet redemption requests which might require
the untimely disposition of securities, in an amount up to 15% (5% for purposes
other than meeting redemption requests) of the value of its total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (including the amount borrowed) at the time the borrowing is made.
The Equity Portfolio, however, may borrow for temporary purposes only to meet
redemption requests in an amount up to 10% of the value of its total assets.
While borrowings exceed 5% of a Portfolio's total assets, the Portfolio will not
make any additional investments. In addition, the Mid Cap Portfolio, Bantam
Value Portfolio, Global Equity and, although currently it has no intention of
doing so, Equity Portfolio may borrow for investment purposes to the extent
permitted under the 1940 Act, which permits an investment company to borrow in
an amount up to 33-1/3% of the value of it total assets. See "Leverage" below.
Leverage. (Equity Portfolio, Mid Cap Portfolio, Bantam Value
Portfolio, Global Equity Portfolio, International Small Cap Portfolio, Emerging
Markets Portfolio and High Yield Portfolio) Leveraging (that is, buying
securities using borrowed money) exaggerates the effect on net asset value of
any increase or decrease in the market value of the Portfolio's investment.
Money borrowed for leveraging is limited to 33-1/3% of the value of the
Portfolio's total assets. These borrowings would be subject to interest costs
which may or may not be recovered by appreciation of the securities purchased;
in certain cases, interest costs may exceed the return received on the
securities purchased. For borrowings for investment purposes, the 1940 Act
13
<PAGE>
requires the Portfolio to maintain continuous asset coverage (that is, total
assets including borrowings, less liabilities exclusive of borrowings) of 300%
of the amount borrowed. If the required coverage should decline as a result of
market fluctuations or other reasons, the Portfolio may be required to sell some
of its portfolio securities within three days to reduce the amount of its
borrowings and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time.
The Portfolio also may be required to maintain minimum average balances in
connection with such borrowing or pay a commitment or other fee to maintain a
line of credit; either of these requirements would increase the cost of
borrowing over the stated interest rate.
Each of these Portfolios may enter into reverse repurchase
agreements with banks, brokers or dealers. This form of borrowing involves the
transfer by the Portfolio of an underlying debt instrument in return for cash
proceeds based on a percentage of the value of the security. The Portfolio
retains the right to receive interest and principal payments on the security. At
an agreed upon future date, the Portfolio repurchases the security at principal
plus accrued interest. To the extent a Portfolio enters into a reverse
repurchase agreement, the Portfolio will maintain in a segregated custodial
account permissible liquid assets at least equal to the aggregate amount of its
reverse repurchase obligations, plus accrued interest, in certain cases, in
accordance with releases promulgated by the Securities and Exchange Commission.
Except for these transactions, each of these Portfolio's borrowings generally
will be unsecured.
Lending Portfolio Securities. (All Portfolios) Each Portfolio may
lend securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions. The
Portfolio continues to be entitled to payments in amounts equal to the interest,
dividends or other distributions payable on the loaned securities which affords
the Portfolio an opportunity to earn interest on the amount of the loan and on
the loaned securities' collateral. Loans of portfolio securities may not exceed
33-1/3% (10% with respect to the Equity Portfolio, Small Cap Portfolio,
International equity Portfolio, Bond Portfolio, International Fixed-Income
Portfolio and Strategic Yield Portfolio) of the value of the Portfolio's total
assets, and the Portfolio will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be maintained
at all times in an amount equal to al least 100% of the current market value of
the loaned securities. Such loans are terminable by the Portfolio at any time
upon specified notice. The Portfolio might experience risk of loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the Portfolio. In connection with its securities lending
transactions, a Portfolio may return to the borrower or a third party which is
unaffiliated with the Portfolio, and which is acting as a "placing broker," a
part of the interest earned from the investment of collateral received for
securities loaned.
Derivatives. (All Portfolios) Each Portfolio may invest in, or enter
into, derivatives to the extent described in the Prospectus, for a variety of
reasons, including to hedge certain market risks, to provide a substitute for
purchasing or selling particular securities or to increase potential income
gain. Derivatives may provide a cheaper, quicker or more specifically focused
way for the Portfolio to invest than "traditional" securities would.
14
<PAGE>
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit a Portfolio to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Portfolio can increase or decrease the level
of risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in derivatives could
have a large potential impact on a Portfolio's performance.
If a Portfolio invests in derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Portfolio's return
or result in a loss. A Portfolio also could experience losses if its derivatives
were poorly correlated with its other investments, or if the Portfolio were
unable to liquidate its position because of an illiquid secondary market. The
market for many derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for derivatives.
Although neither the Fund nor any Portfolio will be a commodity
pool, certain derivatives subject the Portfolios to the rules of the Commodity
Futures Trading Commission which limit the extent to which a Portfolio can
invest in such derivatives. A Portfolio may invest in futures contracts and
options with respect thereto for hedging purposes without limit. However, no
Portfolio may invest in such contracts and options for other purposes if the sum
of the amount of initial margin deposits and premiums paid for unexpired options
with respect to such contracts, other than for bona fide hedging purposes,
exceeds 5% of the liquidation value of the Portfolio's assets, after taking into
account unrealized profits and unrealized losses on such contracts and options;
provided, however, that in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
When required by the Commission, a Portfolio will segregate
permissible liquid assets to cover its obligations relating to its transactions
in derivatives. To maintain this required cover, the Portfolio may have to sell
portfolio securities at disadvantageous prices or times since it may not be
possible to liquidate a derivative position at a reasonable price.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily payment system (i.e., variation margin requirements)
operated by the clearing agency in order to reduce overall credit risk. As a
result, unless the clearing agency defaults, there is relatively little
counterparty credit risk associated with derivatives purchased on an exchange.
By contrast, no clearing agency guarantees over-the-counter derivatives.
Therefore, each party to an over-the-counter derivative bears the risk that the
counterparty will default. Accordingly, the Investment Manager will consider the
creditworthiness of counterparties to over-the-counter derivatives in the same
15
<PAGE>
manner as it would review the credit quality of a security to be purchased by
the Portfolio. Over-the-counter derivatives are less liquid than exchange-traded
derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the derivative to be interested in bidding for
it.
Futures Transactions--In General. (All Portfolios, except the Equity Portfolio,
Small Cap Portfolio, Bantam Value Portfolio, International Equity Portfolio and
Strategic Yield Portfolio) Each of these Portfolios may enter into futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange, or on
exchanges located outside the United States, such as the London International
Financial Futures Exchange, the Deutsche Termine Borse and the Sydney Futures
Exchange Limited. Foreign markets may offer advantages such as trading
opportunities or arbitrage possibilities not available in the United States.
Foreign markets, however, may have greater risk potential than domestic markets.
For example, some foreign exchanges are principal markets so that no common
clearing facility exists and an investor may look only to the broker for
performance of the contract. In addition, any profits a Portfolio might realize
in trading could be eliminated by adverse changes in the exchange rate, or the
Portfolio could incur losses as a result of those changes. Transactions on
foreign exchanges may include both commodities which are traded on domestic
exchanges and those which are not. Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not regulated by the
Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to the
Portfolio which could adversely affect the value of the Portfolio's net assets.
Although each of these Portfolios intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contract prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting the Portfolio
to substantial losses.
Successful use of futures by a Portfolio also is subject to the
Investment Manager's ability to predict correctly movements in the direction of
the relevant market, and, to the extent the transaction is entered into for
hedging purposes, to ascertain the appropriate correlation between the
transaction being hedged and the price movements of the futures contract. For
example, if a Portfolio uses futures to hedge against the possibility of a
decline in the market value of securities held in its portfolio and the prices
of such securities instead increase, the Portfolio will lose part or all of the
benefit of the increased value of securities which it has hedged because it will
have offsetting losses in its futures positions. Furthermore, if in such
circumstances the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. The Portfolio may have
to sell such securities at a time when it may be disadvantageous to do so.
16
<PAGE>
Pursuant to regulations and/or published positions of the
Commission, a Portfolio may be required to segregate permissible liquid assets
in connection with its commodities transactions in an amount generally equal to
the value of the underlying commodity. The segregation of such assets will have
the effect of limiting the Portfolio's ability otherwise to invest those assets.
The Board of Directors has adopted the requirement that futures
contracts and options on futures contracts be used by the Bond Portfolio or the
International Fixed-Income Portfolio solely as a hedge and not for speculation.
In addition to this requirement, the Board of Directors has also adopted two
percentage restrictions on the use of futures contracts. The first restriction
is that the Bond Portfolio and the International Fixed-Income Portfolio will not
enter into any futures contracts or options on futures contracts if immediately
thereafter the amount of margin deposits on all the futures contracts of the
Portfolio and premiums paid on options on futures contracts would exceed 5% of
the market value of the total assets of the Portfolio. The second restriction is
that the aggregate market value of the outstanding futures contracts purchased
by either the Bond Portfolio or International Fixed-Income Portfolio not exceed
50% of the market value of the total assets of such Portfolio. Neither of these
restrictions will be changed by the Fund's Board of Directors without
considering the policies and concerns of the various applicable federal and
state regulatory agencies.
Specific Futures Transactions. Each of these Portfolios, except the Bond
Portfolio, High Yield Portfolio and International Fixed-Income Portfolio, may
purchase and sell stock index futures contracts. A stock index future obligates
the Portfolio to pay or receive an amount of cash equal to a fixed dollar amount
specified in the futures contract multiplied by the difference between the
settlement price of the contract on the contract's last trading day and the
value of the index based on the stock prices of the securities that comprise it
at the opening of trading in such securities on the next business day.
The Bond Portfolio, High Yield Portfolio, International Fixed-Income
Portfolio, Emerging Markets Portfolio, Global Equity Portfolio and International
Small Cap Portfolio may purchase and sell interest rate futures contracts. An
interest rate future obligates the Portfolio to purchase or sell an amount of a
specific debt security at a future date at a specific price.
Each of these Portfolios, except the Bond Portfolio, may purchase
and sell currency futures. A currency future obligates the Portfolio to purchase
or sell an amount of a specific currency at a future date at a specific price.
Options--In General. (All Portfolios, except the Small Cap Portfolio and
International Equity Portfolio) Each of these Portfolios may invest up to 5% of
its assets, represented by the premium paid, in the purchase of call and put
options. A Portfolio may write (i.e., sell) covered call and put option
contracts to the extent of 20% of the value of its net assets at the time such
option contracts are written. A call option gives the purchaser of the option
the right to buy, and obligates the writer to sell, the underlying security or
securities at the exercise price at any time during the option period, or at a
specific date. Conversely, a put option gives the purchaser of the option the
right to sell, and obligates the writer to buy, the underlying security or
securities
17
<PAGE>
at the exercise price at any time during the option period, or at a specified
date.
A covered call option written by a Portfolio is a call option with
respect to which the Portfolio owns the underlying security or otherwise covers
the transaction by segregating cash or other securities. A put option written by
a Portfolio is covered when, among other things, cash or liquid securities
having a value equal to or greater than the exercise price of the option are
placed in a segregated account with the Fund's custodian to fulfill the
obligation undertaken. The principal reason for writing covered call and put
options is to realize, through the receipt of premiums, a greater return than
would be realized on the underlying securities alone. A Portfolio receives a
premium from writing covered call or put options which it retains whether or not
the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow, or other unforeseen events, at times have rendered
certain of the clearing facilities inadequate and resulted in the institution of
special procedures, such as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, a Portfolio is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
Specific Options Transactions. Each of these Portfolios may purchase and sell
call and put options in respect of specific securities (or groups or "baskets"
of specific securities) or indices listed on national securities exchanges or
traded in the over-the-counter market. An option on an index is similar to an
option in respect of specific securities, except that settlement does not occur
by delivery of the securities comprising the index. Instead, the option holder
receives an amount of cash if the closing level of the index upon which the
option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. Thus, the effectiveness of
purchasing or writing index options will depend upon price movements in the
level of the index rather than the price of a particular security.
Except as described below, each of the Equity Portfolio,
International Small Cap Portfolio, Emerging Markets Portfolio, Global Equity
Portfolio and Bantam Value Portfolio will write call options on indices only if
on such date the Portfolio holds a portfolio of stocks at least equal to the
value of the index times the multiplier times the number of contracts. When one
of the Portfolios writes a call option on a broadly based stock market index, it
will segregate or put into escrow with the Fund's custodian, or pledge to a
broker as collateral for the option, at least ten "qualified securities" with a
market value at the time the option is written of not less than 100% of the
current index value times the multiplier times the number of contracts. If one
of the Portfolios has written an option on an industry or market segment index,
it will so segregate,
18
<PAGE>
escrow, or pledge at least five "qualified securities," all of which are stocks
of issuers in such industry or market segment, with a market value at the time
the option is written of not less than 100% of the current index value times the
multiplier times the number of contracts. Such stocks will include stocks which
represent at least 50% of the weighting of the industry or market segment index
and will represent at least 50% of the Portfolio's holdings in that industry or
market segment. No individual security will represent more than 15% of the
amount so segregated, escrowed or pledged, in the case of broadly based stock
market index options, or 25% of such amount, in the case of industry or market
segment index options. If at the close of business on any day the market value
of such qualified securities so segregated, escrowed or pledged falls below 100%
of the current index value times the multiplier times the number of contracts,
the Portfolio will so segregate, escrow or pledge an amount in cash, Treasury
bills or other high grade short-term obligations equal in value to the
difference. In addition, when one of the Portfolios writes a call on an index
which is in-the-money at the time the call is written, the Portfolio will
segregate with the Fund's custodian or pledge to the broker as collateral cash,
Treasury bills or other high grade short-term obligations equal in value to the
amount by which the call is in-the-money times the multiplier times the number
of contracts. Any amount segregated pursuant to the foregoing sentence may be
applied to the Portfolio's obligation to segregate additional amounts in the
event that the market value of the qualified securities falls below 100% of the
current index value times the multiplier times the number of contracts. A
"qualified security" is an equity security which is listed on a national
domestic or foreign securities exchange or quoted on the Nasdaq National Market
System against which the Portfolio has not written a stock call option; however,
if the Portfolio owns a call on the same index as the call written where the
exercise price of the call owned is equal to or less than the exercise price of
the call written, or greater than the call written if the difference is
maintained by the Portfolio in permissible liquid assets in a segregated account
with the Fund's custodian, it will not be subject to the requirements described
in this paragraph.
Each of these Portfolios, except the Equity Portfolio, Small Cap
Portfolio, Bantam Value Portfolio and Bond Portfolio, may purchase and sell call
and put options on foreign currency. These options convey the right to buy or
sell the underlying currency at a price which is expected to be lower or higher
than the spot price of the currency at the time the option is exercised or
expires.
Each of these Portfolios may purchase cash-settled options on
interest rate swaps, interest rate swaps denominated in foreign currency (except
in the case of the Equity Portfolio), and (except in the case of the Bond
Portfolio and International Fixed-Income Portfolio) equity index swaps in
pursuit of its investment objective. Interest rate swaps involve the exchange by
a Portfolio with another party of their respective commitments to pay or receive
interest (for example, an exchange of floating-rate payments for fixed-rate
payments) denominated in U.S. dollars or foreign currency. Equity index swaps
involve the exchange by the Portfolio with another party of cash flows based
upon the performance of an index or a portion of an index of securities which
usually includes dividends. A cash-settled option on a swap gives the purchaser
the right, but not the obligation, in return for the premium paid, to receive an
amount of cash equal to the value of the underlying swap as of the exercise
date. These options typically are purchased in privately negotiated transactions
from financial institutions, including
19
<PAGE>
securities brokerage firms.
Successful use by a Portfolio of options will be subject to the
Investment Manager's ability to predict correctly movements in the prices of
individual stocks, the stock market generally, foreign currencies or interest
rates. To the extent the Investment Manager's predictions are incorrect, the
Portfolio may incur losses.
Future Developments. The relevant Portfolios may take advantage of
opportunities in the area of options and futures contracts and options on
futures contracts and any other Derivatives which are not presently contemplated
for use by the Portfolio or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the
Portfolio's investment objective and legally permissible for the Portfolio.
Before entering into such transactions or making any such investment, the
Portfolio will provide appropriate disclosure in the Prospectus or Statement of
Additional Information.
Short-Selling. (Mid Cap Portfolio and High Yield Portfolio) Each of
these Portfolios may engage in short sales of securities. In these transactions,
the Portfolio sells a security it does not own in anticipation of a decline in
the market value of the security. To complete the transaction, the Portfolio
must borrow the security to make delivery to the buyer. The Portfolio is
obligated to replace the security borrowed by purchasing it subsequently at the
market price at the time of replacement. The price at such time may be more or
less than the price at which the security was sold by the Portfolio, which would
result in a loss or gain, respectively. The Portfolio also may make short sales
"against the box," in which the Portfolio enters into a short sale of a security
it owns. Securities will not be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of the Portfolio's net assets.
Until the Portfolio closes its short position or replaces the
borrowed security, it will: (a) maintain a segregated account, containing
permissible liquid assets, at such a level that the amount deposited in the
account plus the amount deposited with the broker as collateral always equals
the current value of the security sold short; or (b) otherwise cover its short
position.
Forward Commitments. (All Portfolios) A Portfolio may purchase or
sell securities on a forward commitment, when-issued or delayed delivery basis,
which means delivery and payment take place a number of days after the date of
the commitment to purchase or sell the securities at a predetermined price
and/or yield. Typically, no interest accrues to the purchaser until the security
is delivered. When purchasing a security on a forward commitment basis, the
Portfolio assumes the rights and risks of ownership of the security, including
the risk or price and yield fluctuations, and takes such fluctuations into
account when determining its net asset value. Because the Portfolio is not
required to pay for these securities until the delivery date, these risks are in
addition to the risks associated with the Portfolio's other investments. If the
Portfolio is fully or almost fully invested when forward commitment purchases
are outstanding, such purchases may result in a form of leverage. The Portfolio
intends to engage in forward commitments to increase its portfolio's financial
exposure to the types of securities in
20
<PAGE>
which it invests. Leveraging the portfolio in this manner will increase the
Portfolio's exposure to changes in interest rates and will increase the
volatility of its returns. The Portfolio will set aside in a segregated account
permissible liquid assets at least equal at all times to the amount of the
Portfolio's purchase commitments. At no time will the Portfolio have more than
33-1/3% of its assets committed to purchase securities on a forward commitment
basis.
Securities purchased on a forward commitment or when-issued basis
are subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest rates
rise) based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates. Securities
purchased on a forward commitment or when-issued basis may expose a Portfolio to
risks because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a forward commitment or when-issued basis can
involve the additional risk that the yield available in the market when the
delivery takes place actually may be higher than that obtained in the
transaction itself. Purchasing securities on a forward commitment or when-issued
basis when the Portfolio is fully or almost fully invested may result in greater
potential fluctuation in the value of the Portfolio's net assets and its net
asset value per share.
Swap Agreements. (All Portfolios) To the extent consistent with the
Portfolio's investment objective and management policies as set forth herein,
each Portfolio may enter into equity, interest rate, index, total return and
currency rate swap agreements. These transactions are entered into in an attempt
to obtain a particular return when it is considered desirable to do so, possibly
at a lower cost to the Portfolio than if the Portfolio had invested directly in
the asset that yielded the desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods ranging
from a few weeks to more than a year. In a standard swap transaction, two
parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular predetermined investments or instruments, which
may be adjusted for an interest factor. The gross returns to be exchanged or
"swapped" between the parties are generally calculated with respect to a
"notional amount," i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate, in a particular foreign
currency, or in a "basket" of securities representing a particular index. Forms
of swap agreements include interest rate caps, under which, in return for a
premium, one party agrees to make payments to the other to the extent interest
rates exceed a specified rate or "cap"; interest rate floors, under which, in
return for a premium, one party agrees to make payments to the other to the
extent interest rates fall below a specified level or "floor"; and interest rate
collars, under which a party sells a cap and purchases a floor or vice versa in
an attempt to protect itself against interest rate movements exceeding given
minimum or maximum levels.
Most swap agreements entered into by a Portfolio would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, the
Portfolio's current obligations (or rights) under a swap agreement generally
will be equal only to the net amount to be paid or received under the agreement
based on the relative values of the positions held by each party to the
agreement (the "net amount"). The risk of loss with respect to swaps is limited
to the net amount of payments that the Portfolio is contractually obligated to
make. If the other party to a swap defaults, the Portfolio's risk of loss
consists of the net amount of payments that
21
<PAGE>
the Portfolio contractually is entitled to receive.
Foreign Currency Transactions. (All Portfolios, except the Equity
Portfolio, Small Cap Portfolio, Bantam Value Portfolio and Bond Portfolio)
Foreign currency transactions may be entered into for a variety of purposes,
including: to fix in U.S. dollars, between trade and settlement date, the value
of a security the Portfolio has agreed to buy or sell; to hedge the U.S. dollar
value of securities the Portfolio already owns, particularly if it expects a
decrease in the value of the currency in which the foreign security is
denominated; or to gain exposure to the foreign currency in an attempt to
realize gains.
Foreign currency transactions may involve, for example, the
Portfolio's purchase of foreign currencies for U.S. dollars or the maintenance
of short positions in foreign currencies, which would involve the Portfolio
agreeing to exchange an amount of a currency it did not currently own for
another currency at a future date in anticipation of a decline in the value of
the currency sold relative to the currency the Portfolio contracted to receive
in the exchange. The Portfolio's success in these transactions will depend
principally on the Investment Manager's ability to predict accurately the future
exchange rates between foreign currencies and the U.S. dollar.
Investment Considerations and Risks
Equity Securities. (All Portfolios, except the Bond Portfolio, High
Yield Portfolio, International Fixed-Income Portfolio and Strategic Yield
Portfolio) Equity securities fluctuate in value, often based on factors
unrelated to the value of the issuer of the securities, and such fluctuations
can be pronounced. Changes in the value of a Portfolio's investments will result
in changes in the value of its shares and thus the Portfolio's total return to
investors.
The securities of the smaller companies in which the Small Cap,
International Small Cap, Emerging Markets and Bantam Value Portfolios may invest
may be subject to more abrupt or erratic market movements than larger, more
established companies, because securities of smaller companies typically are
traded in lower volume and the issuers typically are more subject to changes in
earnings and prospects. Smaller capitalization companies often have limited
product lines, markets or financial resources. They may be dependent on
management for one or a few key persons, and can be more susceptible to losses
and the risk of bankruptcy. In addition, securities of the small capitalization
sector may be thinly traded (and therefore have to be sold at a discount from
current market prices or sold in small lots over an extended period of time),
may be followed by fewer investment research analysts and may be subject to
wider price swings, and thus may create a greater chance of loss than by
investing in securities of larger capitalization companies.
Fixed-Income Securities. (All Portfolios) Even though
interest-bearing securities are investments which promise a stable stream of
income, the prices of such securities generally are inversely affected by
changes in interest rates and, therefore, are subject to the risk of market
price fluctuations. Certain portfolio securities, such as those with interest
rates that fluctuate directly or indirectly based on multiples of a stated
index, are designed to be highly
22
<PAGE>
sensitive to changes in interest rates and can subject the holders thereof to
extreme reductions of yield and possibly loss of principal.
The values of fixed-income securities also may be affected by
changes in the credit rating or financial condition of the issuer. Certain
portfolio securities, such as those rated below investment grade by Standard &
Poor's Ratings Group ("S&P") and Moody's Investors Service, Inc. ("Moody's" and
together with S&P, the "Rating Agencies"), may be subject to such risk with
respect to the issuing entity and to greater market fluctuations than certain
lower yielding, higher rated fixed-income securities. Once the rating of a
portfolio security has been changed, the Portfolio will consider all
circumstances deemed relevant in determining whether to continue to hold the
security.
Federal income tax law requires the holder of a zero coupon security
or of certain pay-in-kind bonds to accrue income with respect to these
securities prior to the receipt of cash payments. A Portfolio investing in such
securities may be required to distribute such income accrued with respect to
these securities and may have to dispose of portfolio securities under
disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements.
Mortgage-Related Securities. (Bond Portfolio, High Yield Portfolio,
International Fixed-Income Portfolio and Strategic Yield Portfolio) As with
other interest-bearing securities, the prices of certain mortgage-related
securities are inversely affected by changes in interest rates. However,
although the value of a mortgage-related security may decline when interest
rates rise, the converse is not necessarily true, since during periods of
declining interest rates the mortgages underlying the security are more likely
to be prepaid. For this and other reasons, a mortgage-related security's stated
maturity may be shortened by unscheduled prepayments on the underlying
mortgages, and, therefore, it is possible that the realized return of the
security may differ materially from the return originally expected by the
Investment Manager. Moreover, with respect to certain stripped mortgage-backed
securities, if the underlying mortgage securities experience greater than
anticipated prepayments of principal, the Portfolio may fail to fully recoup its
initial investment even if the securities are rated in the highest rating
category by a nationally recognized statistical rating organization. During
periods of rapidly rising interest rates, prepayments of mortgage-related
securities may occur at slower than expected rates. Slower prepayments
effectively may lengthen a mortgage-related security's expected maturity (but
not past its stated maturity), which generally would cause the value of such
security to fluctuate more widely in response to changes in interest rates. Were
the prepayments on the Portfolio's mortgage-related securities to decrease
broadly, the Portfolio's effective duration, and thus sensitivity to interest
rate fluctuations, would increase. Commercial real property loans, however,
often contain provisions that substantially reduce the likelihood that such
securities will be prepaid. The provisions generally impose significant
prepayment penalties on loans and in some cases there may be prohibitions on
principal prepayments for several years following origination.
Certain mortgage-related securities are subject to credit risks
associated with the performance of the underlying mortgage properties. Adverse
changes in economic conditions
23
<PAGE>
and circumstances are more likely to have an adverse impact on mortgage-related
securities secured by loans on commercial properties than on those secured by
loans on residential properties. In addition, as described above, these
securities are subject to prepayment risk, although commercial mortgages
typically have shorter maturities than residential mortgages and prepayment
protection features. Some mortgage-related securities have structures that make
their reactions to interest rate changes and other factors difficult to predict,
making their values highly volatile.
In certain instances, the credit risk associated with
mortgage-related securities can be reduced by third party guarantees or other
forms of credit support. Improved credit risk does not reduce prepayment risk
which is unrelated to the rating assigned to the mortgage-related security.
Prepayment risk can lead to fluctuations in value of the mortgage-related
security which may be pronounced. If a mortgage-related security is purchased at
a premium, all or part of the premium may be lost if the market value of the
security declines whether resulting from changes in interest rates or
prepayments on the underlying mortgage collateral. Certain mortgage-related
securities that may be purchased by these Portfolios, such as inverse floating
rate collateralized mortgage obligations, have coupons that move inversely to a
multiple of a specific index which may result in increased price volatility.
Foreign Securities. (All Portfolios, except the Small Cap Portfolio)
Foreign securities markets generally are not as developed or efficient as those
in the United States. Securities of some foreign issuers are less liquid and
more volatile than securities of comparable U.S. issuers. Similarly, volume and
liquidity in most foreign securities markets are less than in the United States
and, at times, volatility of price can be greater than in the United States.
Because evidences of ownership of such securities usually are held
outside the United States, the Portfolios will be subject to additional risks
which include possible adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions,
which might adversely affect or restrict the payment of principal and interest
on the foreign securities to investors located outside the country of the
issuer, whether from currency blockage or otherwise.
With respect to the Emerging Markets, International Fixed-Income,
Strategic Yield and High Yield Portfolios, emerging market countries have
economic structures that generally are less diverse and mature, and political
systems that are less stable, than those of developed countries. Emerging
markets may be more volatile than the markets of more mature economies; however,
such markets may provide higher rates of return to investors. Many emerging
market countries providing investment opportunities for these Portfolios have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and
may continue to have adverse effects on the economies and securities markets of
certain of these countries.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations.
24
<PAGE>
Foreign Currency Transaction. (All Portfolios, except the Equity
Portfolio, Small Cap Portfolio, Bantam Value Portfolio and Bond Portfolio)
Currency exchange rates may fluctuate significantly over short periods of time.
They generally are determined by the forces of supply and demand in the foreign
exchange markets and the relative merits of investments in different countries,
actual or perceived changes in interest rates and other complex factors, as seen
from an international perspective. Currency exchange rates also can be affected
unpredictably by intervention of U.S. or foreign governments or central banks,
or the failure to intervene, or by currency controls or political developments
in the United States or abroad.
Simultaneous Investments by Other Portfolios or Funds. (All
Portfolios) Investment decisions for each Portfolio are made independently from
those of the other portfolios and accounts managed by the Investment Manager.
If, however, such other portfolios or accounts desire to invest in, or dispose
of, the same securities as the Portfolio, available investments or opportunities
for sales will be allocated equitably to each. In some cases, this procedure may
adversely affect the size of the position obtained for or disposed of by a
Portfolio or the price paid or received by a Portfolio.
Lower Rated Securities. (Bond Portfolio, High Yield Portfolio,
International Fixed-Income Portfolio and Strategic Yield Portfolio). Each of
these Portfolios may invest in securities rated below investment grade such as
those rated Ba by Moody's or BB by S&P, and as low as the lowest rating assigned
by the Rating Agencies (commonly known as junk bonds). They may be subject to
certain risks and to greater market fluctuations than lower yielding investment
grade securities. See "Appendix" for a general description of the Rating
Agencies' ratings. Although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value risk of
these securities. The Portfolio will rely on the Investment Manager's judgment,
analysis and experience in evaluating the creditworthiness of an issuer.
You should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities and will fluctuate over time. These securities generally are
considered by the Rating Agencies to be, on balance, predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation and generally will involve more credit risk than
securities in the higher rating categories.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with the higher rated securities.
For example, during an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of these securities may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be affected adversely by
specific corporate developments, forecasts, or the unavailability of additional
financing. The risk of loss because of default by the issuer is significantly
greater for the holders of these securities because such securities generally
are unsecured and often are subordinated to other creditors of the issuer.
25
<PAGE>
Because there is no established retail secondary market for many of
these securities, the Portfolio anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the extent a
secondary trading market for these securities does exist, it generally is not as
liquid as the secondary market for higher rated securities. The lack of a liquid
secondary market may have an adverse impact on market price and yield and the
Portfolio's ability to dispose of particular issues when necessary to meet the
Portfolio's liquidity needs or in response to a specific economic event such as
a deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Portfolio to obtain accurate market quotations for purposes of valuing its
portfolio and calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable, objective data may be
available.
These securities may be particularly susceptible to economic
downturns. It is likely that an economic recession could disrupt severely the
market for such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn could
adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.
The Portfolio may acquire these securities during an initial
offering. Such securities may involve special risks because they are new issues.
The Portfolio has no arrangement with any persons concerning the acquisition of
such securities, and the Investment Manager will review carefully the credit and
other characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also
apply to lower rated zero coupon securities and pay-in-kind bonds, in which each
of these Portfolios may invest. Pay-in-kind bonds pay interest through the
issuance of additional securities. Zero coupon securities and pay-in-kind bonds
carry an additional risk in that, unlike bonds which pay interest throughout the
period to maturity, the Portfolio will realize no cash until the cash payment
date unless a portion of such securities are sold and, if the issuer defaults,
the Portfolio may obtain no return at all on its investment.
Strategic Yield Portfolio--During the year ended December 31, 1998, the
percentages of the Strategic Yield Portfolio's assets invested in securities
rated in particular rating categories by S&P were, on a weighted average basis,
as follows:
26
<PAGE>
Percentage of
S&P Ratings Total Investments
-----------------
TSY 4.17%
AGY 21.17%
AAA 10.83%
AA- 1.33%
A+ 0.56%
A 3.19%
A- 0.53%
A1+ 2.10%
A1 3.94%
A3 0.17%
BBB+ 0.29%
BBB 0.39%
BBB- 1.46%
BB+ 0.43%
BB 2.96%
BB- 1.27%
B+ 3.51%
B 9.05%
B- 8.76%
CCC+ 0.16%
CCC 0.49%
No Rating* 23.24%
------
100.0%
- ----------------------
* The Investment Manager estimates these securities to have an average rating
of BBB.
The actual distribution of the Portfolio's investments by ratings on
any given date will vary. In addition, the distribution of the Portfolio's
investments by ratings as set forth above should not be considered as
representative of the Portfolio's future investment portfolio composition.
INVESTMENT RESTRICTIONS
Each Portfolio's investment objective is a fundamental policy, which
cannot be changed without approval by the holders of a majority (as defined in
the 1940 Act) of the Portfolio's outstanding voting shares. In addition, the
following investment restrictions, except as otherwise noted, are fundamental
policies. However, the amendment of these restrictions to add an additional
Portfolio, which amendment does not substantively affect the restrictions with
respect to an existing Portfolio, will not require approval as described in the
preceding sentence. None of the Portfolios may:
27
<PAGE>
(i) issue senior securities, borrow money or pledge or mortgage its
assets, except that (A) each Portfolio may borrow from banks for
temporary purposes, including the meeting of redemption requests
which might require the untimely disposition of securities, as
described in the Prospectus, (B) each of the Mid Cap Portfolio,
International Small Cap Portfolio, High Yield Portfolio, Emerging
Markets Portfolio, Global Equity Portfolio and Bantam Value
Portfolio also may borrow money to the extent permitted under the
1940 Act and, as a non-fundamental policy, may pledge, hypothecate,
mortgage or otherwise encumber its assets to secure permitted
borrowings; provided, however, that the Portfolio will not make new
investments to the extent borrowings exceed 5% of its total assets,
except for borrowings covered within the interpretations of Section
18(f) of the 1940 Act, and (C) the Equity Portfolio may additionally
utilize leverage as described in the Prospectus. For purposes of
this investment restriction, a Portfolio's entry into options,
forward contracts, futures contracts, including those related to
indexes, shall not constitute borrowing;
(ii) make loans, except loans of portfolio securities not having a
value in excess of 33-1/3% (10% in the case of the Equity Portfolio,
Small Cap Portfolio, International Equity Portfolio, Bond Portfolio,
International Fixed-Income Portfolio and Strategic Yield Portfolio)
of a Portfolio's total assets and except that each Portfolio may
purchase debt obligations in accordance with its investment
objectives and policies;
(iii) invest in illiquid securities as defined in "Investment
Objectives and Management Policies--Illiquid Securities" if
immediately after such investment more than 10% (15% in the case of
the Mid Cap Portfolio and High Yield Portfolio) of the value of the
Portfolio's net assets, or, in the case of the Equity Portfolio,
more than 10% of the value of that Portfolio's total assets, taken
at market value, would be invested in such securities (this
restriction is not a fundamental policy of the Mid Cap Portfolio,
High Yield Portfolio, Global Equity Portfolio and Bantam Value
Portfolio);
(iv) purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or
reorganization; provided, however, that this restriction is not a
fundamental policy of the Mid Cap Portfolio, International Small Cap
Portfolio, Emerging Markets Portfolio, Global Equity Portfolio,
Bantam Value Portfolio and High Yield Portfolio, and provided
further, that (A) the Mid Cap Portfolio, International Small Cap
Portfolio, Emerging Markets Portfolio, Global Equity Portfolio,
Bantam Value Portfolio and High Yield Portfolio may purchase
securities of other investment companies to the extent permitted
under the 1940 Act (this restriction is not a fundamental policy of
these Portfolios) and (B) the Equity Portfolio, International Equity
Portfolio and Small Cap Portfolio may purchase securities in an
amount up to 5% of the value of the Portfolio's total assets in any
one closed-end fund and may purchase in the aggregate securities of
closed-end funds in an amount of up to 10% of the value
28
<PAGE>
of the Portfolio's total assets;
(v) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the
purchase and as a result thereof, the value of the Portfolio's
investments in that industry would exceed 25% of the current value
of such Portfolio's total assets, provided that there is no
limitation with respect to investments in obligations of the U.S.
Government, its agencies or instrumentalities;
(vi) (A) purchase or sell real estate or real estate limited
partnerships, except that a Portfolio may purchase and sell
securities of companies which deal in real estate or interests
therein and the Mid Cap Portfolio, International Small Cap
Portfolio, Emerging Markets Portfolio, Global Equity Portfolio,
Bantam Value Portfolio and High Yield Portfolio also may purchase
and sell securities that are secured by real estate; (B) purchase or
sell commodities or commodity contracts (except that the Mid Cap
Portfolio, International Small Cap Portfolio, Emerging Markets
Portfolio, Global Equity Portfolio, Bantam Value Portfolio and High
Yield Portfolio may purchase and sell swaps, options, forward
contracts, futures contracts, including those relating to indices,
and options on futures contracts or indices, the Mid Cap Portfolio,
International Equity Portfolio, International Fixed-Income
Portfolio, Strategic Yield Portfolio and High Yield Portfolio may
purchase or sell foreign currency forward exchange contracts, the
International Fixed-Income Portfolio and Bond Portfolio may enter
into futures contracts and options on futures contracts, the
International Fixed-Income Portfolio may enter into futures
contracts on foreign currencies and the International Fixed-Income
Portfolio and Strategic Yield Portfolio may purchase and write put
and call options on foreign currencies); and (C) invest in interests
in or leases relating to oil, gas, or other mineral exploration or
development programs; provided, however, that this clause (C) is not
a fundamental policy of the Equity Portfolio, Mid Cap Portfolio,
Global Equity Portfolio, Bantam Value Portfolio and High Yield
Portfolio;
(vii)-purchase securities on margin (except for short-term credits
necessary for the clearance of transactions) or, except for the Mid
Cap Portfolio and High Yield Portfolio, make short sales of
securities, provided, however, that this prohibition on short sales
is not a fundamental policy of the Global Equity Portfolio and
Bantam Value Portfolio;
(viii)-underwrite securities of other issuers, except to the extent
that the purchase of municipal obligations or other permitted
investments directly from the issuer thereof or from an underwriter
for an issuer and the later disposition of such securities in
accordance with the Portfolio's investment program may be deemed to
be an underwriting; or
29
<PAGE>
(ix)-make investments for the purpose of exercising control or
management; provided, however, that this restriction is not a
fundamental policy of the International Small Cap Portfolio,
Emerging Markets Portfolio, Global Equity Portfolio and Bantam Value
Portfolio. This restriction has not been adopted by the Mid Cap
Portfolio or High Yield Portfolio.
In addition to the restrictions noted above, the Equity Portfolio
has adopted the following restrictions as fundamental policies. The Equity
Portfolio may not:
(i) purchase restricted securities, which are securities that must
be registered under the Securities Act of 1933, as amended, before
they may be offered or sold to the public, except that the Equity
Portfolio may invest up to 5% of the value of its total assets,
taken at cost, in such securities;
(ii) invest more than 5% of the current value of its total assets in
the securities of any one issuer, other than obligations of the
United States Government, its agencies or instrumentalities or
securities which are backed by the full faith and credit of the
United States; or
(iii) purchase securities of an issuer if, as a result, as to 75% of
the Portfolio's total assets, the Portfolio would own more than 10%
of the voting securities of such issuer.
* * *
If a percentage restriction is adhered to at the time of investment,
a later change in percentage resulting from a change in values or assets will
not constitute a violation of such restriction.
30
<PAGE>
MANAGEMENT
The Fund's Board is responsible for the management and supervision
of each Portfolio. The Board approves all significant agreements with those
companies that furnish services to the Portfolios. These companies are as
follows:
Lazard Asset Management ................. Investment Manager
Lazard Freres & Co. LLC ................. Distributor
Boston Financial Data Services, Inc. .... Transfer Agent and
Dividend Disbursing Agent
State Street Bank and Trust Company ..... Custodian
The Directors and officers of the Fund and their principal
occupations during the past five years are set forth below. Unless otherwise
specified, the address of each of the following persons is 30 Rockefeller Plaza,
New York, New York 10112.
Principal Occupation
Name, Address and Age Position with Fund During Past 5 Years
- --------------------------- --------------------- -------------------------
Norman Eig* (58) Chairman of the Board Vice Chairman and
Managing Director
(formerly General
Partner), Lazard Freres.
Herbert W. Gullquist* (61) President, Director Vice Chairman and
Managing Director
(formerly General
Partner), Lazard Freres;
Chief Investment Officer
of the Investment
Manager.
John J. Burke (70) Director Retired; Former Vice
50 Burning Tree Lane Chairman, Director,
Butte, MT 59701 Montana Power Company.
Kenneth S. Davidson (54) Director Managing Partner,
Davidson Capital Management Davidson Capital
Corporation Management Corporation;
635 Madison Avenue, Director, Blackthorn Fund
16th Floor N.V. and Ottertail Valley
New York, NY 10022 Railroad.
Carl Frischling* (62) Director Senior Partner, Kramer,
Kramer, Levin, Naftalis & Levin, Naftalis &
Frankel Frankel; from 1992 to
919 Third Avenue 1994, Senior Partner,
New York, NY 10022 Reid & Priest.
Lester Z. Lieberman (68) Director Private Investor;
1500 Mt. Kemble Avenue Director of Dowel
Morristown, NJ 07960 Associates; Chairman of
the Board of Trustees of
Newark Beth Israel
Medical Center and
Irvington General
Hospital; Member of the
New Jersey State
Investment Council; prior
to 1994, Director of
United Jersey Bank, N.A.
and Clarkson University.
Richard Reiss, Jr. (55) Director Managing Partner, Georgica
Georgica Advisers LLC Advisers LLC, an
1114 Avenue of the Americas investment manager.
New York, NY 10036
31
<PAGE>
Principal Occupation
Name, Address and Age Position with Fund During Past 5 Years
- --------------------------- --------------------- -------------------------
John Rutledge (50) Director President, Rutledge &
Rutledge & Company Company, an economics and
Office Park investment advisory firm;
51 Weaver Street Chairman, Claremont
Greenwich, CT 06831 Economics Institute.
William Katz (45) Director President and Chief
BBDO Worldwide Network Operating Officer of
1285 Avenue of the Americas BBDO, an advertising
New York, NY 10019 agency; from May 1994 to
February 1996, General
Manager of BBDO; prior
thereto, Executive Vice
President and Senior
Account Director of BBDO.
William G. Butterly, Vice President, Senior Vice President,
III (38) Secretary Legal Affairs of the
Investment Manager.
James Giallanza (33) Treasurer Certified Public
Accountant; Vice President
of the Investment
Manager; from August 1990
to July 1998, Manager,
Price Waterhouse LLP.
- -----------
* An "interested person" of the Fund as defined in the 1940 Act.
The Fund has adopted a Distribution and Servicing Plan with respect
to shares of the Portfolios. So long as the Plan remains in effect, the
Directors who are not "interested persons" of the Fund, as defined in the 1940
Act, will be selected and nominated by the Directors who are not "interested
persons" of the Fund.
The Fund pays its Directors its allocable share of the aggregate of
a fixed fee of $20,000 per annum and a per meeting fee of $1,000 for the Fund
and Lazard Retirement Series, Inc., and reimburses them for their expenses. The
aggregate amount of compensation paid to each Director by the Fund for the year
ended December 31, 1998, was as follows:
Total Compensation from
Aggregate Compensation the Fund and
Name of Director from the Fund Lazard Retirement Series, Inc.
- ---------------- ------------- ----------------------
John J. Burke $18,600 $24,000
Kenneth S. Davidson $18,600 $24,000
Norman Eig N/A N/A
Carl Frischling $18,600 $24,000
Herbert W. Gullquist N/A N/A
William Katz $18,600 $24,000
Lester Z. Lieberman $18,600 $24,000
Richard Reiss, Jr. $18,600 $24,000
John Rutledge $18,600 $24,000
The Fund does not compensate officers or Directors who are employees
or affiliated persons of the Investment Manager. As of April 6, 1999, the Fund's
officers and Directors, as a group, owned less than 1% of the shares of each
Portfolio.
32
<PAGE>
Investment Manager and Investment Management Agreement
Lazard Asset Management, 30 Rockefeller Plaza, New York, New York
10112, has entered into an investment management agreement with the Fund on
behalf of each Portfolio (the "Management Agreement"). Pursuant to the
Management Agreement, Lazard Asset Management regularly provides each Portfolio
with investment research, advice and supervision and furnishes continuously an
investment program for each Portfolio consistent with its investment objectives
and policies, including the purchase, retention and disposition of securities.
Lazard Asset Management is a division of Lazard Freres, a New York
limited liability company, which is registered as an investment adviser with the
Commission and is a member of the New York, American and Midwest Stock
Exchanges. Lazard Freres provides its clients with a wide variety of investment
banking and related services, including investment management. It is a major
underwriter of corporate securities, conducts a broad range of trading and
brokerage activities in corporate and governmental bonds and stocks and acts as
a financial adviser to utilities. Lazard Asset Management provides investment
management services to client discretionary accounts with assets as of March 31,
1999 totaling approximately $64 billion. Its clients are both individuals and
institutions, some of whose accounts have investment policies similar to those
of several of the Portfolios. As of April 6, 1999, Lazard Asset Management held
voting and dispositive power with respect to a sufficient number of shares of
each Portfolio held by client accounts as to be considered a controlling person
of such Portfolio.
Under the terms of the Management Agreement, the Investment Manager
will pay the compensation of all personnel of the Fund, except the fees of
Directors of the Fund who are not employees or affiliated persons of the
Investment Manager. The Investment Manager will make available to the Portfolios
such of the Investment Manager's members, directors, officers and employees as
are reasonably necessary for the operations of each Portfolio, or as may be duly
elected officers or directors of the Fund. Under the Management Agreement, the
Investment Manager also pays each Portfolio's office rent and provides
investment advisory research and statistical facilities and all clerical
services relating to research, statistical and investment work. The Investment
Manager, including its employees who serve the Portfolios, may render investment
advice, management and other services to others.
As compensation for its services, each of the Portfolios has agreed
to pay the Investment Manager an investment management fee, accrued daily and
payable monthly, at the annual rates set forth below as a percentage of the
average daily value of the net assets of the relevant Portfolio:
33
<PAGE>
Investment Management
Name of Portfolio Fee Payable
------------------ ---------------------
Equity Portfolio .75%
Mid Cap Portfolio .75%
Small Cap Portfolio .75%
Bantam Value Portfolio .75%
Global Equity Portfolio .75%
International Equity Portfolio .75%
International Small Cap Portfolio .75%
Emerging Markets Portfolio 1.00%
Bond Portfolio .50%
High Yield Portfolio .75%
International Fixed-Income Portfolio .75%
Strategic Yield Portfolio .75%
For the fiscal year ending December 31, 1999, the Investment Manager
has agreed to waive its management fees or otherwise bear the expenses of the
following Portfolios to the extent the aggregate expenses of the Portfolios
exceed the percentage of the value of the Portfolio's average daily net assets
set forth opposite the Portfolio's name:
Maximum Total Portfolio Operating Expenses
------------------------------------------
Name of Portfolio Institutional Shares Open Shares
- ----------------- -------------------- -----------
Mid Cap Portfolio 1.05% 1.35%
Bantam Value Portfolio 1.05% 1.35%
Global Equity Portfolio 1.05% 1.35%
International Small Cap Portfolio 1.04% 1.43%
Emerging Markets Portfolio 1.28% 1.60%
Bond Portfolio .78% 1.10%
High Yield Portfolio 1.05% 1.35%
International Fixed-Income Portfolio 1.09% 1.35%
For the fiscal years ended December 31, 1996, 1997 and 1998, the
management fees payable by each Portfolio, the amounts waived by the Investment
Manager and the net fees paid to the Investment Manager were as follows:
34
<PAGE>
<TABLE>
<CAPTION>
Fee Payable For Fee Payable For Fee Payable For
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
Name of Portfolio December 31, 1996 December 31, 1997 December 31, 1998
- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Equity Portfolio $ 1,829,111 $ 2,475,417 $ 3,316,469
Mid Cap Portfolio N/A $ 56,562 $ 459,760
Small Cap Portfolio $ 6,243,613 $ 8,868,261 $11,726,934
Bantam Value Portfolio $ 134,134 $ 418,572 $ 575,206
Global Equity Portfolio $ 39,032 $ 87,691 $ 119,985
International Equity Portfolio $11,746,379 $15,062,772 $19,452,067
International Small Cap
Portfolio $ 870,310 $ 1,061,698 $ 1,354,903
Emerging Markets Portfolio $ 983,215 $ 2,418,181 $ 2,794,119
Bond Portfolio $ 306,035 $ 429,720 $ 523,656
High Yield Portfolio N/A N/A $ 225,562
International Fixed-Income
Portfolio $ 462,235 $ 772,515 $ 857,644
Strategic Yield Portfolio $ 908,760 $ 2,447,618 $ 3,422,135
</TABLE>
<TABLE>
<CAPTION>
Reduction in Reduction in Reduction in
Fee For Fiscal Fee For Fiscal Fee For Fiscal
Year Ended Year Ended Year Ended
Name of Portfolio December 31, 1996 December 31, 1997 December 31, 1998
- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Equity Portfolio -0- $ 11,054 -0-
Mid Cap Portfolio N/A $ 24,010 $ 119,681
Small Cap Portfolio -0- $ 11,502 -0-
Bantam Value Portfolio $ 126,612 $ 56,620 $ 40,732
Global Equity Portfolio $ 39,032 $ 87,691 $ 119,985
International Equity Portfolio -0- $ 16,852 -0-
International Small Cap
Portfolio -0- $ 21,116 $ 16,356
Emerging Markets Portfolio $ 87,108 $ 19,725 $ 17,870
Bond Portfolio $ 37,009 $ 21,802 $ 11,309
High Yield Portfolio N/A N/A $ 107,939
International Fixed-Income
Portfolio $ 100,766 $ 58,602 $ 21,538
Strategic Yield Portfolio -0- $ 3,456 -0-
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Net Fee Paid For Net Fee Paid For Net Fee Paid For
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
Name of Portfolio December 31, 1996 December 31, 1997 December 31, 1998
- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Equity Portfolio $ 1,829,111 $ 2,464,363 $ 3,316,469
Mid Cap Portfolio N/A $ 32,552 $ 340,079
Small Cap Portfolio $ 6,243,613 $ 8,856,759 $11,726,934
Bantam Value Portfolio $ 7,522 $ 361,952 $ 534,474
Global Equity Portfolio -0- -0- -0-
International Equity Portfolio $11,746,379 $15,045,920 $19,452,067
International Small Cap
Portfolio $ 870,310 $ 1,040,582 $ 1,338,547
Emerging Markets Portfolio $ 896,107 $ 2,398,456 $ 2,776,249
Bond Portfolio $ 269,026 $ 407,918 $ 512,347
High Yield Portfolio N/A N/A $ 117,623
International Fixed-Income
Portfolio $ 361,469 $ 713,913 $ 836,106
Strategic Yield Portfolio $ 908,760 $ 2,444,162 $ 3,422,135
</TABLE>
Each Management Agreement provides that the relevant Portfolio pays
all of its expenses that are not specifically assumed by the Investment Manager.
Expenses attributable to each Portfolio will be charged against the assets of
that Portfolio. Other expenses of the Fund will be allocated among the
Portfolios in a manner which may, but need not, be proportionate in relation to
the net assets of each Portfolio. Expenses payable by each of the Portfolios
include, but are not limited to, clerical salaries, brokerage and other expenses
of executing portfolio transactions; legal, auditing or accounting expenses;
trade association dues; taxes or governmental fees; the fees and expenses of any
person providing administrative services to the Fund; the fees and expenses of
the custodian and transfer agent of the Fund; clerical expenses of issue,
redemption or repurchase of shares of the Portfolio; the expenses and fees for
registering and qualifying securities for sale; the fees of Directors of the
Fund who are not employees or affiliated persons of the Investment Manager or
its affiliates; travel expenses of all Directors, officers and employees;
insurance premiums; and the cost of preparing and distributing reports and
notices to shareholders. In addition, the Open Shares of each Portfolio are
subject to an annual distribution and servicing fee. See "Distribution and
Servicing Plan." The organizational expenses of the Fund are being amortized and
allocated among the International Equity Portfolio, International Fixed-Income
Portfolio, Bond Portfolio, Strategic Yield Portfolio and Small Cap Portfolio.
Each Management Agreement is subject to annual approval by (i) the
Fund's Board or (ii) vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the relevant Portfolio, provided that in either
event the continuance also is approved by a majority of the Directors who are
not "interested persons" (as defined in the 1940 Act) of the Fund or the
Investment Manager, by vote cast in person at a meeting called for the purpose
of voting on such approval. The Management Agreement was approved by
shareholders of the Equity Portfolio, Small Cap Portfolio, International Equity
Portfolio, International Fixed-Income
36
<PAGE>
Portfolio, Bond Portfolio and Strategic Yield Portfolio on December 16, 1992 and
initially by the Board on September 11, 1991 (and amended and restated on
October 19, 1993); by the sole shareholder for the International Small Cap
Portfolio and Emerging Markets Portfolio on August 25, 1993 and initially by the
Board on July 20, 1993; by the sole shareholder for the Bantam Value Portfolio
and Global Equity Portfolio and initially by the Board on October 16, 1995; and
by the sole shareholder for the Mid Cap Portfolio and High Yield Portfolio and
by the Board on July 29, 1997. The Management Agreement for each Portfolio was
last approved by the Fund's Board, including a majority of the Directors who are
not "interested persons" of any party to the Management Agreement, at a meeting
held on October 27, 1998. Each Management Agreement is terminable without
penalty, on 60 days' notice, by the Fund's Board or by vote of the holders of a
majority of the shares of such Portfolio, or, upon not less than 60 days'
notice, by the Investment Manager. Each Management Agreement provides for
automatic termination in the event of its assignment (as defined in the 1940
Act). Each Management Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Investment
Manager, or of reckless disregard of its obligations thereunder, the Investment
Manager shall not be liable for any action or failure to act in accordance with
its duties thereunder.
Administrator and Custodian
The Fund has engaged State Street Bank and Trust Company ("State
Street"), 225 Franklin Street, Boston, Massachusetts 02110, to provide certain
administrative services to the Portfolios. Each Portfolio will bear the cost of
such administrative expenses at the annual rate of $45,000 plus .02% of the
value of the average daily net assets of each Class of the Portfolio up to $1
billion and .01% of the value of such assets over $1 billion.
State Street also acts as the Fund's custodian. As the Fund's
custodian, State Street, among other things, maintains a custody account or
accounts in the name of each Portfolio; receives and delivers all assets for
each Portfolio upon purchase and upon sale or maturity; collects and receives
all income and other payments and distributions on account of the assets of each
Portfolio and disburses the Portfolio's assets in payment of its expenses. The
custodian does not determine the investment policies of any Portfolio or decide
which securities any Portfolio will buy or sell.
Distributor
Lazard Freres serves as the distributor of each Portfolio's shares
and conducts a continuous offering pursuant to a "best efforts" arrangement. As
the distributor, it accepts purchase and redemption orders for Portfolio shares.
In addition, the distribution agreement obligates Lazard Freres to pay certain
expenses in connection with the offering of Portfolio shares. After the
prospectus and periodic reports have been prepared, set in type and mailed to
shareholders, Lazard Freres also will pay for the printing and distribution of
copies thereof used in connection with the offering to prospective investors.
37
<PAGE>
DETERMINATION OF NET ASSET VALUE
Net asset value per share for each Class of each Portfolio is
determined by State Street for the Fund on each day the New York Stock Exchange
is open for trading. The New York Stock Exchange is ordinarily closed on the
following national holidays: New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Net asset value per share is determined by
dividing the value of the total assets of the Portfolio represented by such
Class, less all liabilities, by the total number of Portfolio shares of such
Class outstanding.
The value of securities, other than options listed on national
securities exchanges and debt securities maturing in 60 days or less, is
determined as of the close of regular trading on the New York Stock Exchange.
Options on stock and stock indices traded on national securities exchanges are
valued as of the close of options trading on such exchanges (which is currently
4:10 p.m., New York time). Debt securities maturing in 60 days or less are
valued at amortized cost, except where to do so would not reflect accurately
their fair value, in which case such securities would be valued at their fair
value as determined under the supervision of the Board of Directors. Each
security for which the primary market is on a national securities exchange is
valued at the last sale price on the principal exchange on which it is traded,
or, if no sales are reported on such exchange on that day, at the closing bid
price.
Any security held by a Portfolio for which the primary market is the
Nasdaq National Market System is valued at the last sale price as quoted by such
system or, in the absence of any sale on the valuation date, at the closing bid
price. Any other unlisted security for which current over-the-counter market
quotations or bids are readily available is valued at its last quoted bid price
or, if available, the mean of two such prices.
All other securities and other assets for which current market
quotations are not readily available are valued at fair value as determined in
good faith by the Fund's Board of Directors and in accordance with procedures
adopted by the Board of Directors. The portfolio securities of any of the
Portfolios also may be valued on the basis of prices provided by a pricing
service when such prices are believed by the Investment Manager to reflect the
fair market value of such securities.
The Bantam Value Portfolio, International Small Cap Portfolio and
Small Cap Portfolio invest primarily in equity securities of companies with
relatively small market capitalizations. Because of the difference between the
bid and asked prices of over-the-counter securities, there may be an immediate
reduction in the net asset value of the shares of the Bantam Value Portfolio,
International Small Cap Portfolio or Small Cap Portfolio after such Portfolio
has completed a purchase of securities that will be valued by the relevant
Portfolio at their bid price, since those securities usually will have been
purchased at or near the asked price.
Trading in securities on European and Far Eastern securities
exchanges and over-the-counter markets ordinarily is completed well before the
close of business on each business day in New York (i.e., a day on which the New
York Stock Exchange is open). In addition, European or Far Eastern securities
trading generally or in a particular country or countries may
38
<PAGE>
not take place on all business days in New York. Furthermore, trading takes
place in Japanese markets on certain Saturdays and in various foreign markets on
days which are not business days in New York and on which the net asset value of
a Portfolio is not calculated. Each Portfolio calculates net asset value per
share, and therefore effects sales, redemptions and repurchases of its shares,
as of the close of regular trading on the New York Stock Exchange once on each
day on which the New York Stock Exchange is open. Such calculation may not take
place contemporaneously with the determination of the prices of the majority of
the portfolio securities used in such calculation. If events materially
affecting the value of such securities occur between the time when their price
is determined and the time when the Portfolio's net asset value is calculated,
such securities will be valued at fair value as determined in good faith by the
Board of Directors.
PORTFOLIO TRANSACTIONS
General
Subject to the supervision of the Board of Directors, the Investment
Manager is primarily responsible for the investment decisions and the placing of
portfolio transactions for each Portfolio. In selecting brokers or dealers to
execute portfolio transactions on behalf of a Portfolio, the Investment Manager
seeks the best overall terms available, taking into account such factors as
price, size of order, difficulty of execution and skill required of the
executing broker. While the Investment Manager will generally seek reasonably
competitive spreads or commissions, the Portfolios will not necessarily be
paying the lowest spread or commission available.
Purchases and sales of portfolio securities on a securities exchange
are effected by the Investment Manager through brokers who charge a negotiated
commission for their services based on the quality and quantity of execution
services provided by the broker in the light of generally prevailing rates.
Orders may be directed to any broker including, to the extent and in the manner
permitted by applicable law, Lazard Freres. In the over-the-counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.
To the extent consistent with applicable provisions of the 1940 Act
and the rules adopted by the Commission thereunder, the Fund's Board has
determined that securities transactions for a Portfolio may be executed through
Lazard Freres if, in the judgment of the Investment Manager, the use of Lazard
Freres is likely to result in price and execution at least as favorable as those
of other qualified brokers or dealers, and if, in the transaction, Lazard Freres
charges the Portfolio a rate consistent with that charged to comparable
unaffiliated customers in similar transactions.
39
<PAGE>
Purchase and sale orders for securities held by a Portfolio may be
combined with those for other Portfolios in the interest of the most favorable
net results for all. When the Investment Manager determines that a particular
security should be bought for or sold by more than one Portfolio, the Investment
Manager undertakes to allocate those transactions between the participants
equitably.
Research and Statistical Information
When it can be done consistently with the policy of obtaining the
best overall terms available, the Investment Manager may select brokers or
dealers who supply market quotations to the Fund's custodian for valuation
purposes, or who supply research, market and statistical information to the
Investment Manager. Although such research, market and statistical information
may be useful to the Investment Manager, it is only supplementary to the
Investment Manager's own research efforts, since the information must still be
analyzed, weighed and reviewed by the Investment Manager's staff. Information so
received will be in addition to, and not in lieu of, the services required to be
performed by the Investment Manager under the Management Agreement with the Fund
on behalf of the Portfolios. Such information may be useful to the Investment
Manager in providing services to both the Portfolios and clients other than the
Portfolios, and, conversely, supplemental information obtained by the placement
of business of other clients may be useful to the Investment Manager in carrying
out its obligations to the Portfolios. The total dollar amount of transactions
pursuant to which brokerage was directed in consideration of research services
provided during the year ended December 31, 1998, was $1,894,819,000, and the
related commissions were $4,385,000. In addition, when it can be done
consistently with the above stated policy, the Investment Manager may place
orders with brokers and dealers (i) who refer persons to the Investment Manager
for the purpose of purchasing shares of the Portfolios or (ii) who provide
services to the Fund at no fee or for a reduced fee.
Brokerage Commissions
In connection with its portfolio securities transactions for the
fiscal years ended December 31, 1996, 1997 and 1998, each Portfolio indicated
below paid brokerage commissions as follows:
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Percentage of
Amount of Percentage of Total Brokerage
Brokerage Total Brokerage Transactions
Brokerage Commissions Paid Commissions Paid Effected Through
Name of Portfolio Commissions Paid to Lazard Freres to Lazard Freres Lazard Freres
- ----------------- ---------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
Equity Portfolio $ 483,954 -0- -0- -0-
Small Cap Portfolio $1,522,251 $ 4,465 0.29% 0.31%
Bantam Value Portfolio $ 206,307 $12,195 5.91% 3.49%
Global Equity Portfolio $ 29,963 $ 1,104 3.69% 9.28%
International Equity Portfolio $2,707,977 -0- -0- -0-
International Small Cap Portfolio $ 580,942 -0- -0- -0-
Emerging Markets Portfolio $ 621,547 -0- -0- -0-
</TABLE>
40
<PAGE>
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Percentage of
Amount of Percentage of Total Brokerage
Brokerage Total Brokerage Transactions
Brokerage Commissions Paid Commissions Paid Effected Through
Name of Portfolio Commissions Paid to Lazard Freres to Lazard Freres Lazard Freres
- ----------------- ---------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
Equity Portfolio $ 592,299 -0- -0- -0-
Mid Cap Portfolio $ 59,461 -0- -0- -0-
Small Cap Portfolio $2,003,525 -0- -0- -0-
Bantam Value Portfolio $ 231,614 -0- -0- -0-
Global Equity Portfolio $ 26,640 $45 0.17% 0.19%
International Equity Portfolio $3,041,586 -0- -0- -0-
International Small Cap Portfolio $ 429,111 -0- -0- -0-
Emerging Markets Portfolio $1,098,476 -0- -0- -0-
</TABLE>
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Percentage of
Amount of Percentage of Total Brokerage
Brokerage Total Brokerage Transactions
Brokerage Commissions Paid Commissions Paid Effected Through
Name of Portfolio Commissions Paid to Lazard Freres to Lazard Freres Lazard Freres
- ----------------- ---------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
Equity Portfolio $ 802,204 $51,625 6.44% 7.24%
Mid Cap Portfolio $ 183,975 $ 5,270 2.86% 2.73%
Small Cap Portfolio $2,544,527 $61,090 2.40% 0.95%
Bantam Value Portfolio $ 273,070 $ 3,635 1.33% 1.50%
Global Equity Portfolio $ 33,371 $ 2,734 8.87% 14.52%
International Equity Portfolio $4,724,137 -0- -0- -0-
International Small Cap Portfolio $ 439,572 -0- -0- -0-
Emerging Markets Portfolio $1,016,826 $ 812 0.23% 0.39%
</TABLE>
HOW TO BUY AND HOW TO SELL SHARES
General. The minimum initial investment for each Portfolio is
$10,000 for Open Shares, unless the investor is a client of a securities dealer
or other institution which has made an aggregate minimum initial purchase for
its clients of at least $10,000, and $1,000,000 for Institutional Shares.
Subsequent investments for each Portfolio must be at least $1,000 for Open
Shares and $5,000 for Institutional Shares. For directors, members and employees
of Lazard Freres and its affiliates, and the trustees of benefit plans covering
any of the foregoing individuals, the minimum initial investment for each
Portfolio is $5,000 for Institutional Shares. The minimum investment
requirements may be waived or lowered for investments effected through banks and
other institutions that have entered into special arrangements with the Fund
41
<PAGE>
or Lazard Freres and for investments effected on a group basis by certain other
entities and their employees, such as pursuant to a payroll deduction plan. The
Fund reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
Securities dealers and other institutions effecting transactions in
Portfolio shares for the accounts of their clients may charge their clients
direct fees in connection with such transactions. The Fund and Lazard Freres
reserve the right to reject any purchase order. All funds will be invested in
full and fractional shares. Stock certificates will not be issued.
Shares of each Portfolio may be purchased in exchange for securities
which are permissible investments of that Portfolio, subject to the Investment
Manager's determination that the securities are acceptable. Securities accepted
in exchange for Portfolio shares will be valued at the mean between their bid
and asked quotations. In addition, securities accepted in exchange for Portfolio
shares are required to be liquid securities that are not restricted as to
transfer and have a value that is readily ascertainable (and not established
only by valuation procedures) as evidenced by a listing on the American Stock
Exchange, the New York Stock Exchange, The Nasdaq Stock Market, a recognized
non-U.S. exchange or non-Nasdaq listing with at least two market makers.
Purchases through the Transfer Agent. Orders for Portfolio shares
will become effective at the net asset value per share next determined after
receipt by the Transfer Agent or other agent of a check drawn on any member of
the Federal Reserve System or after receipt by the Custodian or other agent of a
bank wire or Federal Reserve Wire. Checks must be payable in United States
dollars and will be accepted subject to collection at full face value. The
Transfer Agent and Lazard Freres, in certain cases, may agree to next day
settlement for certain purchases through the Transfer Agent.
By investing in a Portfolio, a shareholder appoints the Transfer
Agent, as agent, to establish an open account to which all shares purchased will
be credited, together with any dividends and capital gain distributions that are
paid in additional shares.
Purchases through a Lazard Freres Brokerage Account. Shares of all
of the Portfolios are sold by Lazard Freres only to customers of Lazard Freres
without a sales charge, on a continuing basis at the net asset value of the
Portfolio next determined after receipt of a purchase order by Lazard Freres.
Payments must be made to Lazard Freres within three business days of the order.
Because Lazard Freres does not forward investors' funds until the business day
on which the order is settled, it may benefit from temporary use of these funds.
Please contact your Lazard Freres account representative for specific
instructions on how to purchase Portfolio shares through your Lazard Freres
brokerage account.
Authorized Brokers. The Fund has authorized one or more brokers to
accept on its behalf purchase and redemption orders. Such brokers are authorized
to designate other intermediaries to accept purchase and redemption orders on
the Fund's behalf. The Fund will be deemed to have received a purchase or
redemption order when an authorized broker or, if applicable, a broker's
authorized designee, accepts the order. Customer orders will be priced at
42
<PAGE>
the Fund's net asset value next computed after such orders are accepted by an
authorized broker or the broker's authorized designee.
Redemption Commitment. The Fund has committed to pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the value of a Portfolio's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Commission. In the case of requests for redemption in
excess of such amount, the Fund's Board reserves the rights to make payments in
whole or part in securities (which may include non-marketable securities) or
other assets of the Portfolio in case of an emergency or any time a cash
distribution would impair the liquidity of the Portfolio to the detriment of the
existing shareholders. In such event, the securities would be valued in the same
manner as the Portfolio's investments are valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b) when
trading in the markets the Portfolio ordinarily utilizes is restricted, or when
an emergency exists as determined by the Commission so that disposal of the
Portfolio's investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the Commission by order
may permit to protect the Portfolio's shareholders.
DISTRIBUTION AND SERVICING PLAN
(Open Shares Only)
Open Shares are subject to a Distribution and Servicing Plan adopted
pursuant to Rule 12b-1 under the 1940 Act. Under the Distribution and Servicing
Plan, the Fund pays Lazard Freres for advertising, marketing and distributing
each Portfolio's Open Shares and for the provision of certain services to the
holders of Open Shares a fee at an annual rate of .25% of the value of the
average daily net assets of the Portfolio's Open Class. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and services related to the maintenance of shareholder
accounts. The fee payable for such services is intended to be a "service fee" as
defined in Conduct Rules of the NASD. Under the Distribution and Servicing Plan,
Lazard Freres may make payments to third parties in respect of these services.
From time to time, Lazard Freres may defer or waive receipt of fees under the
Distribution and Servicing Plan while retaining the ability to be paid by the
Fund under the Distribution and Servicing Plan thereafter. The fees payable to
Lazard Freres under the Distribution and Servicing Plan for advertising,
marketing and distributing Open Shares and for payments to third parties are
payable without regard to actual expenses incurred.
Rule 12b-1 (the "Rule") adopted by the Commission under the 1940 Act
provides, among other things, that an investment company may bear expenses of
distributing its shares only pursuant to a plan adopted in accordance with the
Rule. The Fund's Board has adopted such a plan (the "Distribution and Servicing
Plan") with respect to each Portfolio's
43
<PAGE>
Open Shares, pursuant to which the Fund pays Lazard Freres for advertising,
marketing and distributing Open Shares of the Portfolios and for the provision
of certain services to the holders of Open Shares of the Portfolios. Lazard
Freres may make payments to certain financial institutions, securities dealers
and other industry professionals (collectively, "Service Agents") for providing
these services. The Fund's Board determined, in the exercise of its business
judgment, that the Fund's Distribution and Servicing Plan is reasonably likely
to benefit each Portfolio and holders of Open Shares.
A quarterly report of the amounts expended under the Distribution
Servicing Plan, and the purposes for which such expenditures were incurred, must
be made to the Board for its review. In addition, the Distribution and Servicing
Plan provides that it may not be amended to increase materially the costs which
holders of Open Shares of a Portfolio may bear for distribution pursuant to the
Distribution and Servicing Plan without such shareholders' approval and that
other material amendments of the Distribution and Servicing Plan must be
approved by the Board and by the Board members who are not "interested persons"
(as defined in the 1940 Act) of the Fund and have no direct or indirect
financial interest in the operation of the Distribution and Servicing Plan or in
any agreements entered into in connection with the Distribution and Servicing
Plan, by vote cast in person at a meeting called for the purpose of considering
such amendments. The Distribution and Servicing Plan is subject to annual
approval by such vote cast in person at a meeting called for the purpose of
voting on the Distribution and Servicing Plan. The Distribution and Servicing
Plan was last so approved on October 27, 1998. As to each Portfolio, the
Distribution and Servicing Plan may be terminated at any time by vote of a
majority of the Board members who are not "interested persons" and have no
direct or indirect financial interest in the operation of the Distribution and
Servicing Plan or in any agreements entered into in connection with the
Distribution and Servicing Plan or by vote of the holders of a majority of such
Portfolio's Open Shares.
For the fiscal year ended December 31, 1998, each Portfolio paid the
Distributor the amount set forth below with respect to its Open Shares under the
Distribution and Servicing Plan:
Amount Paid to Distributor
Under Distribution and Servicing
Plan For Fiscal Period
Name of Portfolio Ended December 31, 1998
----------------- -----------------------
Equity Portfolio $219,862
Mid Cap Portfolio $ 22,660
Small Cap Portfolio $245,099
Bantam Value Portfolio $ 21,161
Global Equity Portfolio $ 9,246
International Equity Portfolio $ 76,823
International Small Cap Portfolio $ 8,134
Emerging Markets Portfolio $ 29,160
44
<PAGE>
Bond Portfolio $ 28,672
High Yield Portfolio $ 573
International Fixed-Income Portfolio $ 9,533
Strategic Yield Portfolio $ 48,934
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to declare as a dividend on the outstanding shares
of each of the Bond Portfolio, High Yield Portfolio, International Fixed-Income
Portfolio and Strategic Yield Portfolio substantially all of the Portfolio's net
investment income at the close of each business day to shareholders of record at
4:00 p.m. (New York time). Net investment income for a Saturday, Sunday or
holiday will be included in the dividend declared on the previous business day.
Dividends declared on the shares of the Bond Portfolio, High Yield Portfolio,
International Fixed-Income Portfolio and Strategic Yield Portfolio ordinarily
will be paid on the last business day of each month. Shareholders who redeem all
their shares of any of these Portfolios prior to a dividend payment date will
receive, in addition to the redemption proceeds, any dividends that are declared
but unpaid. Shareholders of any of these Portfolios who redeem only a portion of
their shares will be entitled to all dividends that are declared by unpaid on
the redeemed shares on the next dividend payment date.
Dividends from net investment income on the Equity Portfolio, Mid
Cap Portfolio, International Equity Portfolio, Small Cap Portfolio,
International Small Cap Portfolio, Emerging Markets Portfolio, Global Equity
Portfolio and Bantam Value Portfolio generally will be declared and paid at
least annually and may be declared and paid twice annually.
Dividends for each Class of a Portfolio will be calculated at the
same time and in the same manner and will be of the same amount, except that
certain expenses will be borne exclusively by one Class and not by the other,
such as fees payable under the Distribution and Servicing Plan. Open Shares will
receive lower per share dividends than Institutional Shares because of the
higher expenses borne by Open Shares.
Investment income for a Portfolio includes, among other things,
interest income, accretion of market and original issue discount and
amortization of premium and, in the case of the Equity Portfolio, Mid Cap
Portfolio, International Equity Portfolio, Small Cap Portfolio, International
Small Cap Portfolio, Emerging Markets Portfolio, Global Equity Portfolio and
Bantam Value Portfolio, also would include dividends.
With respect to all of the Portfolios, net realized capital gains,
if any, will be distributed at least annually and may be declared and paid twice
annually. If a dividend check mailed to a shareholder who elected to receive
dividends and/or capital gain distributions in cash is returned as undeliverable
by the postal or other delivery service, such shareholder's distribution option
automatically will be converted to all dividends and other distributions
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution or redemption checks. Each Portfolio forwards to the
Fund's custodian the monies for dividends to be paid in cash on the payment
date.
45
<PAGE>
TAXATION
Management believes that each Portfolio has qualified for the fiscal
year ended December 31, 1998 as a "regulated investment company" under
Subchapter M of the Code. It is intended that each such Portfolio will continue
to so qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders. Each Portfolio will be treated as a separate
entity for tax purposes and thus the provisions of the Code applicable to
regulated investment companies generally will be applied to each Portfolio
separately, rather than to the Fund as a whole. As a regulated investment
company, a Portfolio will pay no Federal income tax on net investment income and
net realized securities gains to the extent that such income and gains are
distributed to shareholders in accordance with applicable provisions of the
Code. To qualify as a regulated investment company, the Portfolio must
distribute at least 90% of its net income (consisting of net investment income
and net short-term capital gain) to its shareholders and meet certain asset
diversification and other requirements. If the Portfolio did not qualify as a
regulated investment company, it would be treated for tax purposes as an
ordinary corporation subject to Federal income tax. The term "regulated
investment company" does not imply the supervision of management of investment
practices or policies by any government agency.
Any dividend or distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares below
the cost of the investment. Such a dividend or distribution would be a return of
investment in an economic sense, although taxable as stated in the Prospectus.
In addition, the Code provides that if a shareholder holds shares of a Portfolio
for six months or less and has received a capital gain distribution with respect
to such shares, any loss incurred on the sale of such shares will be treated as
long-term capital loss to the extent of the capital gain distribution received.
Corporate shareholders of the Equity Portfolio, Mid Cap Portfolio,
Small Cap Portfolio, Bantam Value Portfolio and Global Equity Portfolio will be
eligible for the dividends-received deduction on the dividends (excluding the
net capital gain dividends) paid by the Portfolio, to the extent that the
Portfolio's income is derived from certain dividends received from domestic
corporations. A corporation's dividends-received deduction will be disallowed
unless the corporation holds shares in the Portfolio for 46 days or more during
the 90-day period commencing 45 days before the shares become ex-dividend.
Furthermore, a corporation's dividends-received deduction will be disallowed to
the extent a corporation's investment in shares of the Portfolio is financed
with indebtedness. It is anticipated that distributions from Portfolios, other
than the Equity Portfolio, Mid Cap Portfolio, Small Cap Portfolio, Bantam Value
Portfolio and Global Equity Portfolio, will not qualify for the
dividends-received distribution. Each year the Fund will notify shareholders of
the federal income tax status of distributions.
The Bond Portfolio, High Yield Portfolio and International
Fixed-Income Portfolio may invest in Real Estate Mortgage Investment Conduits
("REMICs"). Interests in REMICs are classified as either "regular" interests or
"residual" interests. Under the Code, special rules apply with respect to the
treatment of a portion of the Portfolio's income from REMIC residual interests.
(Such portion is referred to herein as "Excess Inclusion Income.")
46
<PAGE>
Excess Inclusion Income generally cannot be offset by net operating losses and,
in addition, constitutes unrelated business taxable income to entities which are
subject to the unrelated business income tax. The Code provides that a portion
of Excess Inclusion Income attributable to REMIC residual interests held by
regulated investment companies such as the Portfolios shall, pursuant to
regulations, be allocated to the shareholders of such regulated investment
company in proportion to the dividends received by such shareholders.
Accordingly, shareholders of the Bond Portfolio, High Yield Portfolio and
International Fixed-Income Portfolio generally will not be able to use net
operating losses to offset such Excess Inclusion Income. In addition, if a
shareholder of one of the Portfolios is an entity subject to the unrelated
business income tax (including a qualified pension plan, an IRA, a 401(k) plan,
a Keogh plan, or another tax-exempt entity) and is allocated any amount of
Excess Inclusion Income, such a shareholder may be required to file a return and
pay a tax on such Excess Inclusion Income even though a shareholder might not
have been required to pay such tax or file such return absent the receipt of
such Excess Inclusion Income. The Investment Manager anticipates that only a
small portion, if any, of the assets of the Bond Portfolio, High Yield Portfolio
and International Fixed-Income Portfolio will be invested in REMIC residual
interests. Accordingly, the amount of Excess Inclusion Income, if any, received
by the Portfolios and allocated to their shareholders should be quite small.
Shareholders that are subject to the unrelated business income tax should
consult their own tax adviser regarding the treatment of their income derived
from the Portfolios.
Except as discussed above with respect to Excess Inclusion Income, a
dividend or capital gains distribution with respect to shares held by a
tax-deferred or qualified plan, such as an IRA, 403(b)(7) retirement plan or
corporate pension or profit sharing plan, will not be taxable to the plan.
Distributions from such plans will be taxable to individual participants under
applicable tax rules without regard to the income earned by the qualified plan.
Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gains and losses. However, all or a portion of the
gain or loss realized from the disposition of foreign currency, non-U.S. dollar
denominated debt instruments, and certain financial futures and options, may be
treated as ordinary income or loss under Section 988 of the Code. In addition,
all or a portion of the gain realized from the disposition of certain market
discount bonds will be treated as ordinary income under Section 1276 of the
Code. Finally, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section 1258
of the Code. "Conversion transactions" are defined to include certain forward,
futures, option and straddle transactions, transactions marketed or sold to
produce capital gains, or transactions described in Treasury regulations to be
issued in the future.
Under Section 1256 of the Code, gain or loss realized by a Portfolio
from certain financial futures and options transactions (other than those taxed
under Section 988 of the Code) will be treated as 60% long-term capital gain or
loss and 40% short-term capital gain or loss. Gain or loss will arise upon the
exercise or lapse of such futures and options as well as from closing
transactions. In addition, any such futures or options remaining unexercised at
the end of the Portfolio's taxable year will be treated as sold for their then
fair market value, resulting in
47
<PAGE>
additional gain or loss to the Portfolio characterized in the manner described
above.
Offsetting positions held by a Portfolio involving financial futures
and options may constitute "straddles." Straddles are defined to include
"offsetting positions" in actively traded personal property. The tax treatment
of straddles is governed by Sections 1092 and 1258 of the Code, which, in
certain circumstances, overrides or modifies the provisions of Sections 988 and
1256 of the Code. As such, all or a portion of any short- or long-term capital
gain from certain "straddle" transactions may be recharacterized as ordinary
income.
If a Portfolio were treated as entering into straddles by reason of
its future or options transactions, such straddles could be characterized as
"mixed straddles" if the futures or options transactions comprising such
straddles were governed by Section 1256 of the Code. The Portfolio may make one
or more elections with respect to "mixed straddles." Depending upon which
election is made, if any, the results to the Portfolio may differ. If no
election is made, to the extent the straddle rules apply to positions
established by the Portfolio, losses realized by the Portfolio will be deferred
to the extent of unrealized gain in any offsetting positions. Moreover, as a
result of the straddle and conversion transaction rules, short-term capital loss
on straddle positions may be recharacterized as long-term capital loss, and
long-term capital gain may be recharacterized as short-term capital gain or
ordinary income.
The Taxpayer Relief Act of 1997 included constructive sale
provisions that generally apply if a Portfolio either (1) holds an appreciated
financial position with respect to stock, certain debt obligations, or
partnership interests ("appreciated financial position") and then enters into a
short sale, futures or forward contract, or offsetting notional principal
contract (collectively, a "Contract") with respect to the same or substantially
identical property or (2) holds an appreciated financial position that is a
Contract and then acquires property that is the same as, or substantially
identical to, the underlying property. In each instance, with certain
exceptions, the Portfolio generally will be taxed as if the appreciated
financial position were sold at its fair market value on the date the Portfolio
enters into the financial position or acquires the property, respectively.
Transactions that are identified hedging or straddle transactions under other
provisions of the Code can be subject to the constructive sale provisions.
Income received by a Portfolio from sources within foreign countries
may be subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of each Portfolio's assets to be
invested in various countries is not known.
If more than 50% of the value of a Portfolio's total assets at the
close of its taxable year consists of the stock or securities of foreign
corporations, the Portfolio may elect to "pass through" to its shareholders the
amount of foreign income taxes paid by the Portfolio. Pursuant to such election,
shareholders would be required: (i) to include in gross income, even though not
actually received, their respective pro rata shares of the foreign taxes paid by
the Portfolio; (ii) treat their income from the Portfolio as being from foreign
sources to the extent that the Portfolio's income is from foreign sources; and
(iii) either to deduct their pro rata share
48
<PAGE>
of foreign taxes in computing their taxable income, or to use it as a foreign
tax credit against federal income (but not both). No deduction for foreign taxes
could be claimed by a shareholder who does not itemize deductions.
It is anticipated that each of the International Equity Portfolio,
International Fixed-Income Portfolio, International Small Cap Portfolio,
Emerging Markets Portfolio, Global Equity Portfolio and Bantam Value Portfolio
will be operated so as to meet the requirements of the Code to "pass through" to
shareholders of the Portfolio credits for foreign taxes paid, although there can
be no assurance that these requirements will be met. Each shareholder will be
notified within 45 days after the close of each taxable year of the Portfolio
whether the foreign taxes paid by the Portfolio will "pass through" for that
year, and, if so, the amount of each shareholder's pro rata share of (i) the
foreign taxes paid, and (ii) the Portfolio's gross income from foreign sources.
Of course, shareholders who are not liable for federal income taxes, such as
retirement plans qualified under Section 401 of the Code, will not be affected
by any such "pass through" of foreign tax credits.
If a Portfolio invests in an entity that is classified as a "passive
foreign investment company" ("PFIC") for Federal income tax purposes, the
operation of certain provisions of the Code applying to PFICs could result in
the imposition of certain Federal income taxes on the Portfolio. In addition,
gain realized from the sale, other disposition or marking-to-market of PFIC
securities may be treated as ordinary income under Section 1291 or Section 1296
of the Code.
Investment by a Portfolio in securities issued at a discount or
providing for deferred interest or for payment of interest in the form of
additional obligations could, under special tax rules, affect the amount, timing
and character of distributions to shareholders by causing a Portfolio to
recognize income prior to the receipt of cash payments. For example, the
Portfolio could be required to recognize annually a portion of the discount (or
deemed discount) at which such securities were issued and to distribute an
amount equal to such income in order to maintain its qualification as a
regulated investment company. In such case, the Portfolio may have to dispose of
securities which it might otherwise have continued to hold in order to generate
cash to satisfy these distribution requirements.
PERFORMANCE INFORMATION
Current yield is computed pursuant to a formula which operates as
follows: The amount of the relevant Portfolio's expenses accrued for the 30-day
period (net of reimbursements) is subtracted from the amount of the dividends
and interest earned (computed in accordance with the regulatory requirements) by
such Portfolio during the period. That result is then divided by the product of:
(a) the average daily number of such Portfolio's shares outstanding during the
period that were entitled to receive dividends, and (b) the net asset value per
share on the last day of the period less any undistributed earned income per
share reasonably expected to be declared as a dividend shortly thereafter. The
quotient is then added to 1, and
49
<PAGE>
that sum is raised to the 6th power, after which 1 is subtracted. The current
yield is then arrived at by multiplying the result by-2. A Portfolio's "actual
distribution rate" is computed in the same manner as yield, except that actual
income dividends declared per share during the period in question is substituted
for net investment income per share.
The yield and the actual distribution rate for the 30-day period
ended December 31, 1998 for Institutional Shares and Open Shares of each
Portfolio indicated below was as follows:
Name of Portfolio 30-Day Yield Distribution Rate
- ----------------- --------------------- ----------------------
Institutional Open Institutional Open
Shares Shares Shares Shares
------ ------ ------ ------
Bond 5.64% 5.27% 5.38% 5.02%
High Yield 9.33% 9.03% 9.03% 8.74%
International Fixed-Income 3.21% 2.90% 1.13% 1.04%
Strategic Yield 7.02% 6.61% 6.94% 5.99%
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
distributions), dividing by the amount of the initial investment, taking the
"n"th root of the quotient (where "n" is the number of years in the period) and
subtracting 1 from the result.
The average annual total return of Institutional Shares and Open
Shares for the indicated Portfolio and periods ended December 31, 1998 (the date
listed in the footnote is the beginning of the period for the indicated
Portfolio) was as follows:
Institutional Shares Average Annual Total Returns
For Periods Ended December 31, 1998
-----------------------------------
Name of Portfolio 1-Year 5-Years 10-Years
- ----------------- ------ ------- --------
Equity 17.31% 20.36% 16.83%(3)
International Equity 16.04% 11.22% 11.26%(4)
International Fixed-Income 13.20% 7.00% 7.86%(5)
Bond 5.77% 5.93% 6.69%(6)
Strategic Yield 0.75% 6.00% 7.36%(7)
Small Cap (12.62)% 11.45% 16.11%(8)
50
<PAGE>
International Small Cap 7.55% 3.94% 5.58%(1)
Emerging Markets (23.49)% (5.10)%(2) N/A
Bantam Value (13.82)% 16.39%(9) N/A
Global Equity 17.10% 16.09%(10) N/A
Mid Cap 3.65% 5.58%(11) N/A
High Yield N/A(12) N/A N/A
- ---------------
(1) December 1, 1993.
(2) July 15, 1994.
(3) June 1, 1987.
(4) October 29, 1991.
(5) November 8, 1991.
(6) November 12, 1991.
(7) October 1, 1991.
(8) October 30, 1991.
(9) March 1, 1996.
(10) January 4, 1996.
(11) November 4, 1997.
(12) January 2, 1998.
Open Shares Average Annual Total Returns
For Periods Ended December 31, 1998
-----------------------------------
Name of Portfolio 1-Year 5-Years 10-Years
- ----------------- ------ ------- --------
Equity 16.98% 18.95%(1) N/A
International Equity 15.82% 15.44%(2) N/A
International Fixed-Income 12.92% 3.72%(3) N/A
Bond 5.42% 6.93%(4) N/A
Strategic Yield 0.37% 2.12%(2) N/A
Small Cap (12.86)% 4.82%(5) N/A
International Small Cap 7.21% 1.97%(6) N/A
Emerging Markets (23.30)% (17.99)%(3) N/A
Bantam Value (14.02)% 4.96%(2) N/A
Global Equity 16.82% 17.52%(5) N/A
Mid Cap 3.42% 5.34%(7) N/A
High Yield N/A(8) N/A N/A
- ---------------
(1) February 5, 1997.
(2) January 23, 1997.
(3) January 8, 1997.
51
<PAGE>
(4) March 5, 1997.
(5) January 30, 1997.
(6) February 13, 1997.
(7) November 4, 1997.
(8) February 24, 1998.
Total return is calculated by subtracting the amount of the relevant
Portfolio's net asset value per share at the beginning of a stated period from
the net asset value per share at the end of the period (after giving effect to
the reinvestment of dividends and distributions during the period), and dividing
the result by the net asset value per share at the beginning of the period.
The total return of Institutional Shares and Open Shares for the
indicated Portfolio from inception through December 31, 1998 (the date listed in
the footnote is the date operations commenced or, with respect to Open Shares,
the initial public offering date for the indicated Portfolio) was as follows:
Total Return Through December 31, 1998
--------------------------------------
Name of Portfolio Institutional Shares Open Shares
- ----------------- -------------------- -----------
Equity 403.93%(1) 39.08%(13)
Mid Cap 6.50%(2) 6.22%(2)
International Equity 114.93%(3) 32.12%(14)
International Fixed-Income 72.06%(4) 7.49%(15)
Bond 59.05%(5) 13.03%(16)
Strategic Yield 67.42%(6) 4.15%(14)
Small Cap 191.73%(7) 9.44%(17)
International Small Cap 31.80%(8) 3.74%(18)
Emerging Markets (20.86)%(9) (32.49)%(15)
Bantam Value 53.85%(10) 9.84%(14)
Global Equity 56.27%(11) 36.34%(17)
High Yield 2.90%(12) (2.24)%(19)
- -------------------
(1) June 1, 1987.
(2) November 4, 1997.
(3) October 29, 1991.
(4) November 8, 1991.
(5) November 12, 1991.
(6) October 1, 1991.
(7) October 30, 1991.
(8) December 1, 1993.
(9) July 15, 1994.
(10) March 1, 1996.
52
<PAGE>
(11) January 4, 1996.
(12) January 2, 1998.
(13) February 5, 1997.
(14) January 23, 1997.
(15) January 8, 1997.
(16) March 5, 1997.
(17) January 30, 1997.
(18) February 13, 1997.
(19) February 24, 1998.
A Portfolio's yield, actual distribution rate and total return are
not fixed and will fluctuate in response to prevailing market conditions or as a
function of the type and quality of the securities held by such Portfolio, its
average portfolio maturity and its expenses. Yield, actual distribution rate and
total return information is useful in reviewing a Portfolio's performance and
such information may provide a basis for comparison with other investments but
such information may not provide a basis for comparison with certificates of
deposit, which pay a fixed rate of return, or money market funds, which seek a
stable net asset value. Investment return and principal value of an investment
in a Portfolio will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Performance of each Class will be calculated separately and will
take into account any applicable distribution and service fees. As a result, at
any given time, the performance of Open Shares should be expect to be lower than
that of Institutional Shares.
From time to time, the Fund may compare a Portfolio's performance
against one or more broad-based indices or data from Lipper Analytical Services,
Inc., Money Magazine, Morningstar, Inc. and other industry publications. In
addition, the Fund may compare a Portfolio's performance against inflation with
the performance of other instruments against inflation, such as short-term
Treasury Bills (which are direct obligations of the U.S. Government) and
FDIC-insured bank money market accounts.
INFORMATION ABOUT THE FUND AND PORTFOLIOS
On January 1, 1992, the Fund on behalf of the Equity Portfolio
acquired the assets and liabilities of Lazard Equity Fund, formerly a portfolio
of Scudder Fund, Inc. ("Scudder Fund") an open-end, diversified management
investment company. Lazard Freres has agreed to indemnify Scudder Fund and its
directors from any and all claims arising out of the transfer of assets to the
maximum extent that Scudder Fund would be so permitted by the Maryland General
Corporation Law, subject to the limitations of the 1940 Act. In addition, the
Fund has agreed to indemnify, with respect to the Equity Portfolio, the Scudder
Fund and its directors and officers from claims arising out of acts or omissions
occurring prior to the transfer to the same extent that such individuals could
have been indemnified by the Scudder Fund. If, however, the Fund (or the Equity
Portfolio) ceases to exist, Lazard Freres has agreed, in lieu of the Fund, to so
indemnify to so indemnify the directors and officers of Scudder Fund.
53
<PAGE>
As of April 6, 1999, the following shareholders owned beneficially
or of record 5% or more of the indicated Portfolio's outstanding shares:
Percentage of Total
Institutional
Name and Address Shares Outstanding
- ---------------- ------------------
EQUITY PORTFOLIO
Smith Barney Inc. 14.90%
00109801250
388 Greenwich Street
New York, NY 10013-2339
Seagrams Retirement Savings and Investment Trust 9.34%
c/o The Bank of New York
Attn: Alex Kovalenko
1 Wall Street, 12th Floor
New York, NY 10005-2501
Lazard Freres & Co. LLC 7.04%
Employee Savings Plan--Equity Fund
Attn: Francis J. Conroy
30 Rockefeller Plaza
New York, NY 10112
MID CAP PORTFOLIO
Lazard Freres & Co. LLC 16.09%
District No. 9 IAMAW
30 Rockefeller Plaza, 60th Floor
New York, NY 10112
Norwest Bank Colorado N.A. 5.53%
Cust FBO City of Aurora Fire MPAP
740 Broadway 8751
Denver, CO 80203-3410
SMALL CAP PORTFOLIO
Merrill Lynch For The Sole 9.40%
Benefit of Its Customers
Attn: Fund Admin LZSCX
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
54
<PAGE>
Percentage of Total
Institutional
Name and Address Shares Outstanding
- ---------------- ------------------
Lazard Freres & Co. LLC 7.71%
Mercantile Safe Deposit & Trust Co., Custodian for
Bakery & Confectionery Intl.
Pension Plan--Small Cap--A/C26501-25
Attn: Charles Loritz
PO Box 17002
30 Rockefeller Plaza
New York, NY 10112
Northern Trust Trustee 5.34%
FBO ITT Industries Master Retirement Trust 22-51598
PO Box 92956
Chicago, IL 60675-2956
BANTAM VALUE PORTFOLIO
Lazard Freres & Co. LLC 9.92%
United Food & Commercial
Workers Unions & Empl Pen Fund Small Cap
1800 Phoenix Blvd. Ste. 310
30 Rockefeller Plaza
New York, NY 10112
Lazard Freres & Co. LLC 7.74%
National Automatic Sprinkler Industry
Small Cap Pension Fund
Board of Trustees
c/o Michael Jacobson
8000 Corporate Drive
30 Rockefeller Plaza
New York, NY 10112
Lazard Freres & Co. LLC 7.68%
Graphic Communications Intl.
Union Supplemental Retirement & Disability
--Fund--Small Cap
Attn: Mr. G L Griesbauer Jr.
1900 L Street NW
30 Rockefeller Plaza
New York, NY 10112
55
<PAGE>
Percentage of Total
Institutional
Name and Address Shares Outstanding
- ---------------- ------------------
Lazard Freres & Co. LLC 6.82%
Ursinus College
Attn: Business Office
P.O. Box 1000
Main Street
Collegeville, PA 19426-1000
Lazard Freres & Co. LLC 5.55%
Smith College
Attn: Jonathan Lovell
Budget Director
College Hall
Northampton, MA 01063-0001
GLOBAL EQUITY PORTFOLIO
Blue Cross Blue Shield of 58.86%
Massachusetts Inc. Managed Care
Attn: Treasury 01/06
100 Summer Street
Boston, MA 02110-2106
Lazard Freres & Co. LLC 10.12%
The Baycrest Centre Foundation
Helaine Maisels
Admin Assistance Finance Dept.
3560 Bathurst Street
North York, Ontario
Blue Cross Blue Shield of 9.33%
Massachusetts Inc. Indemnity
Attn: Treasury 01/06
100 Summer Street
Boston, MA 02110-2106
Lazard Freres & Co. LLC 8.42%
Mount Sinai Hospital
Foundation of Toronto
Attn: Marty Stein
331-600 University Avenue
Toronto, Ontario
56
<PAGE>
Percentage of Total
Institutional
Name and Address Shares Outstanding
- ---------------- ------------------
INTERNATIONAL EQUITY PORTFOLIO
Lazard Freres & Co. LLC 8.92%
Mercantile Safe Deposit & Trust Co.
Custodian for Bakery & Confectionery Intl. Eq.
A/C26501-33
Attn: Charles Loritz
PO Box 17002
30 Rockefeller Plaza
New York, NY 10112
Merrill Lynch For The Sole
Benefit Of Its Customers
Attn: Fund Admin LZIEX
4800 Deerlake Dr. E FL 2
Jacksonville, FL 32246 5.50%
INTERNATIONAL SMALL CAP PORTFOLIO
Lazard Freres & Co. LLC 7.57%
The George Washington
University Int'l Small Cap
Attn: Louis Katz & Courtney Lowe
2121 I Street
707 Rice Hall
30 Rickefeller Plaza
New York, NY 10112
Lazard Freres & Co. LLC
United Air Lines Inc. Pension & Welfare Plans 5.83%
Administration Committee
Attn: David V Drystra
PO Box 66100
30 Rockefeller Plaza
New York, NY 10112
57
<PAGE>
Percentage of Total
Institutional
Name and Address Shares Outstanding
- ---------------- ------------------
EMERGING MARKETS PORTFOLIO
Lazard Freres & Co. LLC 5.85%
University of British Columbia
Faculty Pension Plan
Stanley Hamilton/Dir Ops
235-2075 Wesbrook Mall
Vancouver, BC
Merrill Lynch For The Sole 5.74%
Benefit Of Its Customers
Attn: Fund Admin LZEMX
4800 Deer Lake Dr East 2nd Fl
Jacksonville, FL 32246-6484
Lazard Freres & Co. LLC 5.26%
United Air Lines Inc. Pension & Welfare Plans
Administration Committee
Attn: David V Drystra
PO Box 66100
30 Rockefeller Plaza
New York, NY 10112
BOND PORTFOLIO
Lazard Freres & Co. LLC 7.30%
Elaine Louise David-Weill
C/O Janis Inscho
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, NY 10112
Lazard Freres & Co. LLC 5.32%
Local 1922 Pension Fund
Attn: Laurie Greco Fund Mngr
1065 Old Country Road Suite 214
Westbury, NY 11590-5628
58
<PAGE>
Percentage of Total
Institutional
Name and Address Shares Outstanding
- ---------------- ------------------
INTERNATIONAL FIXED-INCOME PORTFOLIO
Lazard Freres & Co. LLC 32.08%
Graphic Communications Intl.
Union Supplemental Retirement
Disability Fund--Fixed-Income A/C
Attn: Mr. G L Griesbauer Jr.
1900 L Street NW
30 Rockefeller Plaza
New York, NY 10112
M & I Trust Co., Custodian for 18.50%
CUNA Individual Acct Master Plan
1000 N. Water St., 14th Floor
Milwaukee, WI 53202-6648
Smith Barney Inc. 10.11%
00109801250
388 Greenwich Street
New York, NY 10013-2339
HIGH YIELD PORTFOLIO
MAC & CO A/C IBWF8440002 49.08%
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
Lazard Freres & Co. LLC 16.06%
Employee Security Fund of the
30 Rockefeller Plaza 60th Floor
New York, NY 10112-0002
Lazard Freres & Co. LLC 12.89%
Mass Bay Transportation
30 Rockefeller Plaza 60th Floor
New York, NY 10112-0002
Lazard Freres & Co. LLC 7.49%
Steamfitters Local Union 420
30 Rockefeller Plaza 60th Fl.
New York, NY 10112-0002
59
<PAGE>
Percentage of Total
Institutional
Name and Address Shares Outstanding
- ---------------- ------------------
STRATEGIC YIELD PORTFOLIO 14.58%
Lazard Freres & Co. LLC
Mack Trucking Inc. Retirement Trust - Strategic Yield
Attn: Mark Cherry
2100 Mack Blvd.
Allentown, PA 18103-5622
HEP & Co. 9.17%
MF MAC 9139-027
Calabasas, CA
Mac & Co A/C-CLRF5053712 6.50%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
Lazard Freres & Co. LLC 5.74%
DePauw University
Attn: Thomas S. Dixon
313 South Locust Street
Greencastle, IN 46135-1736
Percentage of Total
Name and Address Open Shares Outstanding
- ---------------- -----------------------
EQUITY PORTFOLIO
Connecticut General Life Ins. Co. 83.97%
One Commercial Plaza
280 Trumbull Street
Attn: Liz Pezda H-19-B
P.O. Box 2975
Hartford, CT 06104-2975
SMALL CAP PORTFOLIO
Connecticut General Life Ins Co. 68.53%
One Commercial Plaza
280 Trumbull St.
Attn: Liz Pezda H-19-B
P.O. Box 2975
Hartford, CT 06104-2975
60
<PAGE>
Percentage of Total
Name and Address Open Shares Outstanding
- ---------------- -----------------------
BANTAM VALUE PORTFOLIO
Charles Schwab & Co. Inc. 13.36%
Special Custody Account
For Benefit of Customers
Attn: Mutual Fund 101 Montgomery St.
San Francisco, CA 94104
Wendel & Co 725000 6.85%
The Bank of New York
Mutual Fund/Reorg Dept.
PO Box 1066
Wall Street Station
New York, NY 10268-1066
GLOBAL EQUITY PORTFOLIO
Cushion Trust Limited 27.26%
21 Moorfields
London EC2P 2HT United Kingdom
Lazard Freres & Co. LLC 18.90%
Gaetana Enders
555 Park Avenue
New York, NY 10021-8166
Trifid Securities Limited 5.66%
PO Box 108
2-6 Church Street
St. Helier
Jersey
Channel Islands JE4 8QD
Lazard Freres & Co. LLC 5.53%
Estate of H. Fred Baerwald
Attn Jessica Bourgeois
229 Berkeley Place
Brooklyn, NY 11217-3801
61
<PAGE>
Percentage of Total
Name and Address Open Shares Outstanding
- ---------------- -----------------------
INTERNATIONAL EQUITY PORTFOLIO
Connecticut General Life Insurance Co. 35.73%
One Commercial Plaza
280 Trumbull St.
Attn: Liz Pezda H-19-B
P.O. Box 2975
Hartford, CT 06104-2975
Smith Barney 401K Advisor Gr Tr 6.72%
Smith Barney Corporate Trust Co.
DTD 01/01/1998 Pl Val Scvcs
2 Tower Center
PO Box 1063
East Brunswick, NJ 08816-1063
EMERGING MARKETS PORTFOLIO
Charles Schwab & Co. Inc 16.27%
Special Custody Account
For Benefit of Customers
Attn: Mutual Fund 101 Montgomery St.
San Francisco, CA 94104
Resource Partners LLC 9.64%
225 Main Street
Westport, CT 06880-3216
Saxon & Co FBO A/C 8.03%
10 01 042 0617829 52106N889
P.O. Box 7780-1888
Philadelphia, PA 19182-0001
Sax & Co FBO 7.94%
A/C 10 01 042 0617730 52106N889
P.O. Box 7780-1888
Philadelphia, PA 19182-0001
PCM Managed Equity Fund I LP 7.86%
4200 Somerset Dr Ste 200
Prairie Village, KS 66208-5244
62
<PAGE>
Percentage of Total
Name and Address Open Shares Outstanding
- ---------------- -----------------------
INTERNATIONAL SMALL CAP PORTFOLIO
Thomas J. Kohout Trustee 12.12%
Thomas J. Kohout Trustee Rev Trust
U/A 12/16/77 Restated 10/09/98
1910 East Bay Tree Circle
Lakeside Val Vista Estates
Gilbert, AZ 85234-4938
Marsha Von Mueffling Crawford 9.79%
770 Park Ave. Apt. 6D
New York, NY 10021-4153
Wendel & Co A/C 154948 8.11%
The Bank of New York
Mutual Fund Reorg Dept.
P.O. Box 1066
Wall Street Station
New York, NY 10268-1066
Lazard Freres and Co. LLC 5.34%
Jeremy N. Rubenstein
Linda Tang Rubenstein
Tenants by the Entirety
5805 Rockmere Drive
Bethesda, MD 20816-2445
BOND PORTFOLIO
Lazard Freres and Co. LLC 11.63%
SUNY Univ. Hospital @ Brooklyn
Brooklyn Anesthesia Research
PC Retirement Trust
Attn: Ed Hahn
450 Clarkson Avenue
30 Rockefeller Plaza
New York, NY 10112
63
<PAGE>
Percentage of Total
Name and Address Open Shares Outstanding
- ---------------- -----------------------
Lazard Freres & Co. LLC 9.83%
The Catholic Cemeteries of The
Archdiocese of Washington Inc.
Attn Jane S. Landon
13801 Georgia Avenue
Silver Spring, MD 20906-5271
INTERNATIONAL FIXED-INCOME PORTFOLIO
Lazard Freres & Co. LLC 13.29%
Trust U/A DTD 10/30/96 Between
Jane Engelhard Settlor & EG
Beimfohr J. Bemberg S Craighead
Mrs. Engelhard c/o Mrs. Simonton
97 Main St.
30 Rockefeller Plaza
New York, NY 10112
Lazard Freres & Co. LLC 6.11%
NationsBank NA-Madeira School
Attn: Franklin B. Smith
8328 Georgetown Pike
McLean, VA 22102-1203
STRATEGIC YIELD PORTFOLIO
Lazard Freres & Co. LLC 5.46%
North Ottawa Community Hospital
Funded Depreciation Account
Attn: Jim Davidson
1309 Sheldon Road
Grand Haven, MI 49417-2488
MID CAP PORTFOLIO
Connecticut General Life Ins. Co. 71.69%
One Commercial Plaza
280 Trumbull Street
Attn Liz Pezda H-19-B
P.O. Box 2975
Hartford, CT 06104-2975
64
<PAGE>
Percentage of Total
Name and Address Open Shares Outstanding
- ---------------- -----------------------
HIGH YIELD PORTFOLIO
Lazard Freres & Co. LLC 60.43%
Marvin Josephson
30 Rockefeller Plaza 60th Fl.
New York, NY 10112-0002
Casey C. Sasner 7.60%
Rick M. Sasner JT Ten
115 Monument Street
Pacific Palisades, CA 90272-3856
Lazard Freres & Co. LLC 7.13%
Mitchel G. Garren
30 Rockefeller Plaza 60th Fl.
New York, NY 10112-0002
Lazard Freres & Co. LLC 5.59%
Frances J. Brooks
30 Rockefeller Plaza 60th Fl.
New York, NY 10112-0002
A shareholder who beneficially owns, directly or indirectly, more
than 25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
Certain of the shareholders are investment management clients of the
Investment Manager that have entered into agreements with the Investment Manager
pursuant to which the Investment Manager has investment discretion and voting
power over any assets held in the clients' accounts, including shares of the
Portfolios. For purposes of the list above, the Fund considers the Investment
Manager to be a beneficial owner of Portfolio shares held in management accounts
on behalf of its investment management clients.
Generally, all shares have equal voting rights and will be voted in
the aggregate, and not by class, except where voting by Class is required by law
or where the matter involved affects only one Class. As used in this Statement
of Additional Information, the vote of a majority of the outstanding voting
securities means, with respect to the Fund or a Portfolio, the vote of the
lesser of (i)-67% of the shares represented at a meeting if the holders of more
than 50% of the outstanding shares of the Fund or Portfolio, as the case may be,
are present in person or by proxy, or (ii) more than 50% of the outstanding
shares of the Fund or Portfolio, as the case may be. Shareholders are entitled
to one vote for each full share held, and fractional votes for fractional shares
held.
Each share of the applicable Class of a Portfolio is entitled to
such dividends and distributions out of the income earned on the assets
belonging to that Portfolio as are declared in
65
<PAGE>
the discretion of the Fund's Board of Directors. In the event of the liquidation
of a Portfolio, shares of each Class of the Portfolio are entitled to receive
the assets attributable to such Class of that Portfolio that are available for
distribution based upon the relative net assets of the applicable Class.
Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non-assessable by the Fund.
COUNSEL AND INDEPENDENT AUDITORS
Legal matters in connection with the issuance of the shares of the
Fund offered hereby will be passed upon by Stroock & Stroock & Lavan LLP, 180
Maiden Lane, New York, New York 10038-4982.
Anchin, Block & Anchin LLP, 1375 Broadway, New York, New York 10018,
has been selected as the independent auditors for the Fund.
ADDITIONAL INFORMATION
The Fund's Registration Statement, including the Prospectus, the
Statement of Additional Information and the exhibits filed therewith, may be
examined at the office of the Commission in Washington, D.C. Statements
contained in the Prospectus or this Statement of Additional Information as to
the content of any contract or other document referred to herein or in the
Prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
A special service is available to banks, brokers, investment
advisers, trust companies and others who have a number of accounts in any
Portfolio. In addition to the copy of the regular Statement of Account furnished
to the registered holder after each transaction, a monthly summary of accounts
can be provided. The monthly summary will show for each account the account
number, the month-end share balance and the dividends and distributions paid
during the month. All costs of this service will be borne by the Portfolio. For
information on the special monthly summary of accounts, contact the Fund.
66
<PAGE>
APPENDIX
Description of certain ratings.
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB
Bonds rated BB have less near-term vulnerability to default than
other speculative grade bonds. However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payment.
B
Bonds rated B have a greater vulnerability to default but presently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
67
<PAGE>
CCC
Bonds rated CCC have a current identifiable vulnerability to
default, and are dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayment of principal. In
the event of adverse business, financial or economic conditions to meet timely
payments of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.
CC
The rating CC is typically applied to bonds subordinated to senior
debt which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to bonds subordinated to senior
debt which is assigned an actual or implied CCC- rating.
D
Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
S&P's letter ratings may be modified by the additional of a plus or
a minus sign, which is used to show relative standing within the major ratings
categories, except in the AAA (Prime Grade) category.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Issues assigned an A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1
This designation indicates the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted within a plus sign (+)
designation.
68
<PAGE>
A-2
Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
Moody's
Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities of fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa
Bond which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
69
<PAGE>
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca
Bonds which are rated Ca present obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a rating for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be evidenced
by leading market positions in well established industries, high rates of return
on funds employed, conservative capitalization structures with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2)
have a strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.
70
<PAGE>
THE LAZARD FUNDS, INC.
PART C. OTHER INFORMATION
Item 23. Exhibits
(a)(1) Articles of Incorporation1
(a)(2) Articles of Amendment7
(a)(3) Articles Supplementary7
(b) By-Laws1
(d)(1) Form of Investment Management Agreement between
the Registrant and Lazard Asset Management
with respect to the Lazard International Equity
Portfolio4
(d)(2) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with
respect to the Lazard International Fixed-Income
Portfolio4
(d)(3) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with respect
to the Lazard Bond Portfolio4
(d)(4) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with respect
to the Lazard Strategic Yield Portfolio4
(d)(5) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with
respect to the Lazard Small Cap Portfolio4
(d)(6) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with respect to
the Lazard Equity Portfolio4
(d)(7) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with
respect to the Lazard Emerging Market Portfolio3
(d)(8) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with
respect to the Lazard International Small Cap Portfolio3
(d)(9) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with
respect to the Lazard Global Equity Portfolio5
(d)(10) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with
respect to the Lazard Bantam Value Portfolio5
(d)(11) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with
respect to the Lazard Emerging World Funds Portfolio5
(d)(12) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with
respect to the Lazard Mid Cap Portfolio8
(d)(13) Form of Investment Management Agreement between the
Registrant and Lazard Asset Management with respect to
the Lazard High Yield Portfolio8
(d)(14) Form of Investment Management Agreement between the Registrant
and Lazard Asset Management with respect to the Lazard
Mortgage Portfolio9
(e) Distribution Agreement, as revised7
(g) Form of Custodian Agreement2
(h)(1) Form of Transfer Agency and Service Agreement2
(h)(2) Form of Administration Agreement between the Registrant
and State Street Bank and Trust Company5
(i) Opinion and Consent of Counsel6
(j) Consent of Independent Auditors
(m) Distribution and Servicing Plan8
(n) Financial Data Schedule
(o) Rule 18f-3 Plan7
Other Exhibits:
Power of Attorney of Messrs. Burke, Lieberman, Eig,
Gullquist, Reiss and Rutledge3
Power of Attorney of Mr. Davidson6
Power of Attorney of Mr. Frischling7
Power of Attorney of Mr. Katz8
- ---------------
1. Incorporated by reference from Registrant's Registration Statement on
Form N-1A (file Nos. 33-40682 and 811-6312) filed with the Securities
and Exchange Commission on May 20, 1991.
2. Incorporated by reference from Registrant's Pre-Effective Amendment
No. 1 filed with the Securities and Exchange Commission on
July 23, 1991.
3. Incorporated by reference from Registrant's Post-Effective Amendment
No. 5 filed with the Securities and Exchange Commission on
September 1, 1993.
<PAGE>
4. Incorporated by reference from Registrant's Post-Effective Amendment
No. 6 filed with the Securities and Exchange Commission on March
31, 1994.
5. Incorporated by reference from Registrant's Post-Effective Amendment
No. 8 filed with the Securities and Exchange Commission on October
13, 1995.
6. Incorporated by reference from Registrant's Post-Effective Amendment
No. 9 filed with the Securities and Exchange Commission on December
27, 1995.
7. Incorporated by reference from Registrant's Post-Effective Amendment
No. 10 filed with the Securities and Exchange Commission on August
15, 1996.
8. Incorporated by reference from Registrant's Post-Effective Amendment
No. 15 filed with the Securities and Exchange Commission on
October 31, 1997.
9. To be filed by amendment.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification
Reference is made to Article EIGHTH of the Registrant's Articles of
Incorporation filed as Exhibit 1 and to Section 2-418 of the Maryland General
Corporation Law. The application of these provisions is limited by Article VIII
of the Registrant's By-Laws filed as Exhibit 2 and by the following undertaking
set forth in the rules promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in such Act and is, therefore,
unenforceable. In the event that a claim for indemnificaetion against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in such Act and will be
governed by the final adjudication of such issue.
Reference also is made to the Investment Management Agreements and the
Distribution Agreement filed as Exhibits 5 and 6, respectively.
Item 26. Business and Other Connections of Investment Advisers.
The description of the Investment Manager under the Captions
"Fund Management - Investment Manager" in the Prospectus and
"Management" in the Statement of Additional Information consituting
Parts A and B, respectively, of this Registration Statement is
incorporated by reference herein. Following is a list of the General
Members of Lazard Freres & Co. LLC, together with thier other business
connections which are of substantial nature during the previous two
years:
Name and Address of Company with
Name of General Member which General Member is Connected Capacity
- ---------------------- --------------------------------- --------
Eileen D. Alexanderson None
William Araskog None
F. Harlan Batrus Mutual of America Capital
Management Corp. Director
666 Fifth Avenue
New York, New York 10103
Ryan Labs, Inc. Director
350 Albany Street
New York, New York 10280
A. J. Technologies Owner
New York, New York
Gerardo Braggiotti Lazard S.P.A. Managing Director
Via dell'Orso, 2
20121 Milano, Italia
Lazard Brothers & Co. Ltd. Managing Director
21 Moorfields
London EC2P 2HT
England
Centrale of Mediobanca Director
S.P.A. (prior to 12/97) Centrale,
Milan Italy Sec Generale
Patrick J. Callahan, Jr. Berry Metal Co. Director
Route 68
Harmony, Pennsylvania 16307
Michigan Wheel Corp. Director
1501 Buchanan Avenue
Southwest Grand Rapids, Michigan 49507
Rotation Dynamics Corp. Director
15 Salt Creek Lane
Suite 316
Hinsdale, Illinois 60521
Somerset Technologies, Inc. Director
(prior to 12/97)
P.O. Box 791
New Brunswick, New Jersey 08903
BT Capital Corp. Director
New York, New York
Michel David-Weill Lazard Freres & Co. LLC Chairman
30 Rockefeller Plaza
New York, New York 10020
Lazard Freres & Cie General Partner
121 Boulevard Haussmann
75382 Paris Cedex 08, France
Lazard Partners L.P. Chairman
30 Rockefeller Plaza
New York, New York 10020
Corporate Advisers, L.P. Member of
30 Rockefeller Plaza Investment
New York, New York 10020 Advisory Board
The Dannon Company, Inc. Director
22-11 38th Avenue
Long Island City, New York 11101
Eurafrance President and
12 Avenue Percier Chairman of
75008 Paris, France the Board
Exor Group Director
19 Avenue Montaigne
75008 Paris, France
Euralux Director
8 Rue Ste-Zithe
2763 Luxembourg
Group Danone Director
7 Rue de Teheran
75008 Paris, France
ITT Industries, Inc. Director
320 Park Avenue
New York, New York 10022
La France S.A. Director
7 & 9 Boulevard Haussmann
75009 Paris, France
Lazard Brothers & Co., Limited Deputy
21 Moorfields Chairman
London EC2P-2HT
England
Pearson plc Director
Millbank Tower
London SWI P4QZ
Publicis S.A. Director
133 Champs-Ezlysees
75008 Paris, France
S.A. de la Rue Imperiale de Lyo Director
49, Rue de la Republique
Lyon (Rhone) 69002
France
Compagnie De Credit Premanent
121, Boulevard Haussmann a Paris Seme rep. of LFC
France (Director)
Maison Lazard S.A. Director
Paris, France
Maison Lazard & Cie General
Paris, France Partner
Maison Lazard Development Chairman
Paris, France
Parteger Gerant
Paris, France (Partner)
Parteman Gerant
Paris, France (Partner)
Partemiel General
Paris, France Partner
Partena General
Paris, France Partner
IFI SpA Director
(prior to 9/98)
Torino, Italy
IFIL SpA Director
Torino, Italy
Fonds Partenaires - Gestion Investments Director
Paris, France
John V. Doyle None
Thomas F. Dunn None
Norman Eig Lazard Freres & Co. LLC Vice Chairman
30 Rockefeller Plaza
New York, New York 10020
The Lazard Funds, Inc. Director,
30 Rockefeller Plaza Chairman
New York, New York 10020
Lazard Retirement Series, Inc. Director,
30 Rockefeller Plaza Chairman
New York, New York 10020
Lazard Investment Funds Director
Limited
20/22 Lower Hatch Street
Dublin 2
Ireland
Lazard Pension Management, Inc. Director,
30 Rockefeller Plaza Chief Investment
New York, New York 10020 Officer &
Treasurer
Lazard Asset Management Director
Holdings Limited
21 Moorfields
London EC2P 2HT
England
Lazard Asset Management Director
Pacific Co.
Level 49, Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Australia
Lazard Asset Management Director
Limited
21 Moorfields
London EC2P 2HT
England
Lazard Asset Management Member of the
(Deutschland) GmbH Supervisory
Ulmenstrasse 37-39 Board
60325 Frankfurt am Main
Federal Republic of Germany
Lazard Asset Management Managing
(Deutschland) Gesellschaft Director
fur Beteiligungen mbH
Ulmenstrasse 37-39
60325 Frankfurt am Main
Federal Republic of Germany
Lazard Asset Management (CI) Holdings Ltd. Director
Lazard House P.O. Box 108
2-6 Church Street St. Helier
Jersey, JE4 8QD Channel Islands
Richard P. Emerson None
Peter R. Ezersky Cakewalk LLC Board Member
New York, New York
Eli H. Fink Deloitte & Touche LLP Partner,
(Prior to 4/98) Vice Chairman
1633 Broadway
New York, New York 10019
Jonathan F. Foster None
Robert P. Freeman Lazard Freres Real Estate Investors, LLC President
30 Rockefeller Plaza
New York, New York 10020
The Fortress Group, Inc. Director
(prior to 9/98)
1650 Tyson Blvd. Suite 600
McLean, VA 22102
ARV Assisted Living, Inc. Director
245 Fischer Ave., Suite D-1
Costa Mesa, CA 92626
United Dominion Realty Trust Director
10 South Sixth Street
Richmond, Virginia 23219
Albert H. Garner None
James S. Gold Smart & Final Inc. Director
4700 South Boyle Avenue
Los Angeles, California 90058
The Hain Food Group Director
59 Charles Lindbergh Blvd.
Uniondale, NY 11553
Jeffrey A. Golman None
Steven J. Golub Lazard Freres & Co. LLC Chief
30 Rockefeller Plaza Financial
New York, New York 10020 Officer
Mineral Technologies Inc. Director
405 Lexington Avenue
New York, New York 10174-1901
Herbert W. Gullquist Lazard Freres & Co., LLC Vice Chairman
30 Rockefeller Plaza
New York, New York 10020
The Lazard Funds, Inc. Director,
30 Rockefeller Plaza President
New York, New York 10020
Lazard Retirement Series Director,
30 Rockefeller Plaza President
New York, New York 10020
Lazard Far East Investors Director
Limited
Lazard House, P.O. Box 108
2-6 Church Street, St. Helier
Jersey, JE4 8QD Channel Islands
Lazard Asset Management (Canada), Inc. Director,
30 Rockefeller Plaza President
New York, New York 10020
Lazard Pension Management, Inc. Director,
30 Rockefeller Plaza President
New York, New York 10020
Lazard Asset Management Director
Holdings Limited
21 Moorfields
London EC2P 2HT
England
Lazard Asset Management Director,
Pacific Co. Chairman
Level 49, Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Australia
Lazard Asset Management Director
Limited
21 Moorfields
London EC2P 2HT
England
Lazard Asset Management Member of the
(Deutschland) GmbH Supervisory
Ulmenstrasse 37-39 Board
60325 Frankfurt am Main
Federal Republic of Germany
Lazard Asset Management Managing
(Deutschland) Gesellschaft Director
fur Beteiligungen mbH
Ulmenstrasse 37-39
60325 Frankfurt am Main
Federal Republic of Germany
The Egypt Trust Member of
11 Rue Aldringen the Advisory
Luxembourg 1-2960 Board
Lazard Asset Management Egypt Board
3, Shagaret El Dor Street, Member
Apt. 31
Zamalek, Cairo, Egypt
Thomas R. Haack None
Ira O. Handler None
Yasushi Hatakeyama None
Melvin L. Heineman Lazard Freres & Co., Ltd Director
21 Moorfields
London EC2P 2HT
England
Lazard Asset Management Pacific Co. Director
Level 49, Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Australia
Lazard Pension Management, Inc. Director
30 Rockefeller Plaza & Vice
New York, New York 10020 President
Scott D. Hoffman None
Robert E. Hougie None
Kenneth M. Jacobs ARV Assisted Living, Inc. Director
245 Fischer Ave., Suite D-1
Costa Mesa, CA 92626
James L. Kempner None
Ivan-Jacques Kerno J.P. Morgan & Co. Inc. Managing
(prior to 4/98) Director
Paris, France
Larry A. Kohn None
Lee O. Kraus None
Sandra A. Lamb None
Michael S. Liss None
William R. Loomis, Jr. Englehard Corp. Director
Iselin, New Jersey
Minorco S.A. Director
(prior to 11/98)
Boite Postal 185
L-2011 Luxembourg
Minorco (U.S.A.) Inc. Director
(prior to 9/98)
30 Rockefeller Plaza
Suite 4212
New York, NY 10112
Terra Industries, Inc. Director
600 4th Street
Sioux City, Iowa 51101
Ripplewood Holdings LLC Director
New York, New York
J. Robert Lovejoy None
Matthew, J. Lustig None
Thomas E. Lynch None
Mark T. McMaster None
Anthony E. Meyer Lazard Freres Real Managing
Estate Investors, LLC Director
30 Rockefeller Plaza
New York, New York 10020
Atlas Industrial Corporation Director
Reno, Nevada
Dermody Properties Director
Reno, Nevada
Center Trust Inc. Director
Manahattan Beach CA
Prometheus Realty Investors LLC Director
New York, New York
Destination Europe, Ltd. Director
London United Kingdom
Damon Mezzacappa Lazard Freres & Co. LLC Vice Chairman
30 Rockefeller Plaza
New York, New York 10020
Corporate Advisors, L.P. Member of
30 Rockefeller Plaza Investment
New York, New York 10020 Advisory Board
Richard W. Moore Jr. None
Robert P. Morgenthau Lazard Asset Management Director,
(Canada), Inc. Vice
30 Rockefeller Plaza President
New York, New York 10020
Lazard Investment Funds Limited Director
20/22 Lower Hatch Street
Dublin 2
Ireland
Lazard Fund Manager (CI) Limited Director
Lazard House P.O. Box 108
2-6 Church Street St. Helier
Jersey, JE4 8QD Channel Islands
Lazard Global Bond Fund plc Director
20/22 Lower Hatch Street
Dublin 2
Ireland
Lazard Global Equity Fund plc Director
20/22 Lower Hatch Street
Dublin 2
Ireland
Lazard Global Liquidity Fund plc Director
20/22 Lower Hatch Street
Dublin 2
Ireland
Lazard Strategic Yield Fund plc Director
20/22 Lower Hatch Street
Dublin 2
Ireland
Global Funds Management plc Director
20/22 Lower Hatch Street
Dublin 2
Ireland
Lazard Asset Management (CI) Director
Holdings Ltd.
Lazard House P.O. Box 108
2-6 Church Street St. Helier
Jersey, JE4 8QD Channel Islands
Lazard Asset Management (CI) Ltd Director
Lazard House P.O. Box 108
2-6 Church Street St. Helier
Jersey, JE4 8QD Channel Islands
Lazard Investment Funds (CI) Ltd Director
Lazard House P.O. Box 108
2-6 Church Street St. Helier
Jersey, JE4 8QD Channel Islands
Lazard Funds Administration Services Director
(CI) Ltd.
Lazard House P.O. Box 108
2-6 Church Street St. Helier
Jersey, JE4 8QD Channel Islands
Lazard Fund Managers (CI) Ltd. Director
Guernsey
Lazard Global Bond Fund Director
20/22 Lower Hatch Street
Dublin 2
Ireland
Lazard Investment Funds Ltd. Director
Guernsey
Bitterroot Enterprises Director
Sunvalley, Idaho
Steven J. Niemczyk None
Hamish W. M. Norton None
James A. Paduano Donovan Data Systems, Inc. Director
666 Fifth Avenue
New York, New York 10019
Secure Products Inc. Director
47 Maple Street
Summit, NJ 07901
Adam P. Parten None
Louis Perlmutter None
Russell E. Planitzer Intersolv, Inc. Director
9420 Key West Ave.
Rockville, MD 20850
Steven L. Rattner Lazard Freres & Co. LLC Deputy Chief
30 Rockefeller Plaza Executive
New York, New York 10020
John R. Reinsberg Lazard Asset Management Executive
Pacific Co. Vice President,
Level 49, Governor Phillip Director
Tower
1 Farrer Place
Sydney NSW 2000
Australia
Lazard Asset Management Member of the
(Deutschland) GmbH Supervisory
Ulmenstrasse 37-39 Board
60325 Frankfurt am Main
Federal Republic of Germany
Louis G. Rice None
Luis E. Rinaldini None
Bruno M. Roger
AXA Supervisory
21 Rue de Chateaudun Board
75441 Paris France Member
CAP Gemini Sogeti Supervisory
6, Bid Jean Pain a Grenoble (38005) Board Member
France
Compagnie De Credit Board Member
121, Boulevard Haussmann a Paris Seme
France
Compagnie De Saint-Gobain Board Member
Les Miroirs
18 Avenue d'Alsace
Paris la Defense (92096)
France
Eurafrance Vice Chairman
12, Avenue Percier a Paris Seme & CEO
France
Financiere Et Industrielle Gaz Chairman &
Et Eaux CEO
3, Rue Jacques Bingen a Paris 17eme
France
Fonds Partenaires Gestion (F.P.G.) Board Member
121, Boulevard Haussmann a Paris Seme
France
Lazard Freres & Cie General
121 Boulevard Haussmann Partner
75382 Paris Cedex 08, France
LVMH-Moet Hennessy Louis Vuitton Director
30, Avenue Hoche a Paris 8eme without power
France of vote
Marine-Wendel Director
189, Rue Taitbout a Paris 9eme Permanent
France Representative
Pinault-Printemps-Redoute Supervisory
61, Rue Caumartin Board Member
75009 Paris
Sidel Director
66, Rue de Miromesnil Permanent
75008 Paris Representative
Societe Francoise Generale Director
Immobiliere (S.F.G.I.) Permanent
23, rue de I'Arcasde a Paris 8eme Representative
France
Sofina (Belgique) Board Member
Rue de Naples, 38-B-1050 Bruzelles
Thomson CSF Board Member
51 Esplanade du General de Gaulle
La Defense 10-92800 Puteaux
France
Michael S. Rome None
Steven H. Sands Isogen LLC Director
Skila, Inc. Director
Gary S. Shedlin None
Arthur P. Solomon Alexander Haagen Director
FAC Director
Berkshire Realty Trust Director
1 Beacon Street, Suite 1550
Boston, MA 02108
Cliveden Director
Hill House
1 Little New Street
London EC4A 3TR
England
David A. Tanner E.M. Warburg, Pincus Managing
& Co. LLC (prior to 12/97) Director
466 Lexington Avenue
New York, New York 10017
Golden Books Family Director
Entertainment Inc.
888 7th Ave.
New York, New York 10106
Renaissance Re Holdings Director
Ltd. (prior to 7/98)
Hamilton, Bermuda
Poserdon Resources Inc. Director
Stamford, CT
Charter Financial Inc. Director
New York, New York
Classic Sports, Inc. Director
(prior to 9/97)
New York, New York
Information Ventures LLC Director
(prior to 9/97)
Greenwich, CT
David L. Tashjian None
J. Mikesell Thomas None
Michael P. Triguboff Lazard Asset Management Pacific Co. Managing Director
Level 49, Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Australia
Lazard Japan Asset Management K.K. Director
AIG Building 2nd Floor
1-3, Marunouchi 1-chome
Chiyoda-ku, Toyko 100-0005, Japan
Donald A. Wagner None
Ali E. Wambold The Albert Fisher Group plc Director
(prior to 1/99)
Fisher House
61 Thames Street
Windsor, Berkshire SO4 IQW
England
Lazard Freres & Co., Ltd. Director
21 Moorfields
London EC2P 2HT
England
Tomkins PLC Director
East Putney House
84 Upper Richmond Road
London SW15 2ST
England, UK
Corporate Advisors L.P. Member of
30 Rockefeller Plaza Investment
New York, NY 10020 Advisory
Board
Lazard S.P.A. Director
(prior to 12/98)
Via dell'Orso, 2
20121 Milano, Italia
Lazard & Co. GmbH Director
Ulmenstrasse 37-39
60325 Frankfurt am Main
Federal Republic of Germany
Michael A. Weinstock None
Antonio F. Weiss None
Alexander E. Zagoneos The Egypt Trust Director
11 Rue Aldringen
Luxembourg 1-2960
Flemings Continental European Director
Investment Trust, plc
25 Copthall Avenue
London EC2R 7DR
Gartmore Emerging Pacific Director
Investment Trust plc
Gartmore House
16-18 Monument Street
London EC3R 8AJ
The Greek Progress Fund Director
Ergobank
5, Evripidou
40-44, Praxit, Elous
105-61 Athens
Greece
Jupiter International Green Director
Investment Trust plc
Knightsbridge House
197 Knightsbridge
London SW7 1R8
England
Latin American Investment Trust plc Director
Exchange House
Primrose Street
London EC2A 2NY
New Zealand Investment Trust plc Director
23 Cathedral Yard
Exeter
Devon EX1 1HB
Taiwan Opportunities Fund Ltd. Director
c/o Martin-Currie
20 Castle Terrace
Edinburgh EHI 2ES
U.K.
The World Trust Fund Director
Kredietrust
11 rue Aldringen
Luxembourg 1-2960
Lazard Select Investment Trust Ltd. Director
Lazard House P.O. Box 108
2-6 Church Street
St. Helier
Jersey, JE4 8QD
Channel Islands
Ermitage Selz Fund Director
Forum Bourse
17 Rue Des Bains
Boite Pastale 44
L-2010 Luxembourg
Lazard Asset Management Egypt Director
3, Shagaret El Dor Street, Apt. 31
Zamalek, Cairo, Egypt
Taiwan American Fund Limited Director
c/o Martin-Currie
20 Castle Terrace
Edinburgh EHI 2ES
U.K.
Corporate Advisors L.P. Member of
30 Rockefeller Plaza Investment
New York, NY 10020 Advisory
Board
Michael A. Weinstock None
Antonio F. Weiss None
Alexander E. Zagoneos The Egypt Trust Director
11 Rue Aldringen
Luxembourg 1-2960
Lazard Emerging World Fund Director
30 Rockefeller Plaza
New York, NY 10020
Flemings Continental European Director
Investment Trust, plc
25 Copthall Avenue
London EC2R 7DR
Gartmore Emerging Pacific Director
Investment Trust plc
Gartmore House
16-18 Monument Street
London EC3R 8AJ
The Greek Progress Fund Director
Ergobank
5, Evripidou
40-44, Praxit, Elous
105-61 Athens
Greece
Jupiter International Green Director
Investment Trust plc
Knightsbridge House
197 Knightsbridge
London SW7 1R8
England
Latin American Investment Trust plc Director
Exchange House
Primrose Street
London EC2A 2NY
New Zealand Investment Trust plc Director
23 Cathedral Yard
Exeter
Devon EX1 1HB
Taiwan Opportunities Fund Ltd. Director
c/o Martin-Currie
20 Castle Terrace
Edinburgh EHI 2ES
U.K.
The World Trust Fund Director
Kredietrust
11 rue Aldringen
Luxembourg 1-2960
Lazard Select Fund Director
Lazard House P.O. Box 108
2-6 Church Street
St. Helier
Jersey, JE4 8QD
Channel Islands
Ermitage Selz Fund Director
Forum Bourse
17 Rue Des Bains
Boite Pastale 44
L-2010 Luxembourg
Lazard Asset Management Egypt Director
3, Shagaret El Dor Street, Apt. 31
Zamalek, Cairo, Egypt
Taiwan American Fund Limited Director
c/o Martin-Currie
20 Castle Terrace
Edinburgh EHI 2ES
U.K.
Item 27. Principal Underwriters
(a) Lazard Freres & Co. LLC, through its division Lazard Asset Management,
currently serves as an investment adviser or subadviser to the
following investment companies: Lazard Retirement Series, Inc.;
American AAdvantage Fund; International Equity Fund; ISG International
Equity Fund; Fortis Series Fund, Inc. Lazard International Stock
Series; EQ Advisors Trust Lazard Large Cap Value Portfolio and Lazard
Small Cap Value Portfolio; JNL Series Trust Lazard/JNL Mid Cap Value
Series and Lazard/JNL Small Cap Value Series; The Managers Funds
Managers International Equity Fund; Members Mutual Funds Members
International Stock Fund; Nationwide Investing Foundation III Prestige
Advisor Series Prestige International Fund; Nationwide Separate Account
Trust Nationwide Small Company Fund; Pacific Select Fund Mid Cap Value
Fund; The Target Portfolio Trust Target International Equity Portfolio
and Target Small Capitalization Value Portfolio; Prudential Diversified
Funds Prudential Diversified Moderate Growth Fund and Prudential
Diversified High Growth Fund; Style Select Series, Inc. Small-Cap Value
Portfolio; TIFF Investment Program, Inc. TIFF Emerging Markets Fund;
and Travelers Series Trust Lazard International Stock Portfolio.
(b) Eileen D. Alexanderson, William Araskog, F. Harlan Batrus, Gerardo
Braggiotti, Patrick J. Callahan, Jr., Michel David-Weill, John V.
Doyle, Thomas F. Dunn, Norman Eig, Richard P. Emerson, Peter R.
Ezersky, Eli H. Fink, Jonathan F. Foster, Robert P. Freeman, Albert H.
Garner, James S. Gold, Jeffrey A. Golman, Steven J. Golub, Herbert W.
Gullquist, Thomas R. Haack, Ira O. Handler, Yasushi Hatakeyama, Melvin
L. Heineman, Scott D. Hoffman, Robert E. Hougie, Kenneth M. Jacobs,
James L. Kempner, Ivan-Jacques Kerno, Larry A. Kohn, Lee O. Kraus,
Sandra A. Lamb, Michael S. Liss, William R. Loomis, Jr., J. Robert
Lovejoy, Matthew J. Lustig, Thomas E. Lynch, Mark T. McMaster, Anthony
E. Meyer, Damon Mezzacappa, Richard W. Moore, Jr., Robert P.
Morgenthau, Steven J. Niemczyk, Hamish W. M. Norton, James A. Paduano,
Adam P. Parten, Louis Perlmutter, Russell E. Planitzer, Steven L.
Rattner, John R. Reinsberg, Louis G. Rice, Luis E. Rinaldini, Bruno M.
Roger, Michael S. Rome, Steven H. Sands, Gary S. Shedlin, Arthur P.
Solomon, David A. Tanner, David L. Tashjian, J. Mikesell Thomas,
Michael P. Triguboff, Donald A. Wagner, Ali E. Wambold, Michael A.
Weinstock, Antonio F. Weiss and Alexander E. Zagoreos are the general
members of Lazard Freres & Co. LLC. Mr. David-Weill is the senior
member of Lazard Freres & Co. LLC. The address of all such members is
30 Rockefeller Plaza, New York, New York 10020.
(c) Not applicable.
Item 28. Location of Accounts and Records
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder are maintained as follows: Journals, ledgers,
securities records and other original records are maintained primarily
at the offices of the Registrant's Custodian, State Street Bank & Trust
Company. All other records so required to be maintained are maintained
at the offices of Lazard Freres & Co. LLC, 30 Rockefeller Plaza, New
York, New York 10020.
<PAGE>
Item 29. Management Services
Not Applicable
Item 30. Undertakings
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, and State of
New York, on the 30th day of April, 1999.
THE LAZARD FUNDS, INC.
(Registrant)
By: /S/HERBERT W. GULLQUIST*
Herbert W. Gullquist, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/S/Herbert W. Gullquist* President (Principal April 30, 1999
- ----------------------- Executive, Financial
Herbert W. Gullquist and Accounting Officer)
and Director
/S/Norman Eig* Director April 30, 1999
- --------------
Norman Eig
/s/ John J. Burke* Director April 30, 1999
- ------------------
John J. Burke
/s/ Lester Z. Lieberman* Director April 30, 1999
- -----------------------
Lester Z. Lieberman
/s/ Richard Reiss, Jr.* Director April 30, 1999
- ------------------------
Richard Reiss, Jr.
/s/ John Rutledge* Director April 30, 1999
- -----------------------
John Rutledge
/s/ Kenneth S. Davidson* Director April 30, 1999
- ------------------------
Kenneth S. Davidson
/s/ Carl Frischling* Director April 30, 1999
- -----------------------
Carl Frischling
/s/ William Katz* Director April 30, 1999
- ----------------------
William Katz
*By:/s/ William G. Butterly, III
------------------------
Attorney-in-fact, William G. Butterly, III
<PAGE>
EXHIBIT INDEX
-------------
Exhibit 23 (j) Consent of Independent Auditors
Exhibit 27 (n) Financial Data Schedule
ABA
ESTABLISHED 1923
ANCHIN, BLOCK & ANCHIN LLP
Accountants and Consultants
1375 Broadway
New York, New York 10018
(212) 840-3456
FAX (212) 840-7066
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Statement of Additional information
constituting part of Lazard Funds, Inc. Post-Effective Amendment No. 18 to
Registration Statement on Form N-1A of our report dated February 4, 1999,
relating to the financial statements and financial highlights of The Lazard
Funds, Inc. which are incorporated by reference in such Statement of Additional
Information. We also consent to the incorporation by reference of our report in
the Prospectus constituting part of such Post-Effective Amendment No. 18 and to
the reference to us under the heading "Financial Highlights" in the Prospectus.
We also consent to the reference to our firm under the caption "Counsel and
Independent Auditors" in the Statement of Additional Information.
/s/ Anchin, Block & Anchin LLP
------------------------------
Anchin, Block & Anchin LLP
April 26, 1999
A MEMBER OF [HLB LOGO] INTERNATIONAL
A world-wide organization of accounting terms and business advisors
e-mail; [email protected]
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 001
<NAME> LAZARD GLOBAL EQUITY PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 19,389,067
<INVESTMENTS-AT-VALUE> 22,343,438
<RECEIVABLES> 241,255
<ASSETS-OTHER> 75,759
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,660,452
<PAYABLE-FOR-SECURITIES> 64,801
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 61,355
<TOTAL-LIABILITIES> 126,156
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,604,527
<SHARES-COMMON-STOCK> 1,347,859
<SHARES-COMMON-PRIOR> 870,086
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 9,939
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 15,214
<ACCUM-APPREC-OR-DEPREC> 2,954,922
<NET-ASSETS> 22,534,296
<DIVIDEND-INCOME> 300,096
<INTEREST-INCOME> 39,546
<OTHER-INCOME> 0
<EXPENSES-NET> 179,076
<NET-INVESTMENT-INCOME> 160,566
<REALIZED-GAINS-CURRENT> 862,558
<APPREC-INCREASE-CURRENT> 1,695,809
<NET-CHANGE-FROM-OPS> 2,718,933
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 109,536
<DISTRIBUTIONS-OF-GAINS> 821,122
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 720,557
<NUMBER-OF-SHARES-REDEEMED> 156,670
<SHARES-REINVESTED> 88,246
<NET-CHANGE-IN-ASSETS> 9,885,539
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 165,973
<OVERDISTRIB-NII-PRIOR> 30,476
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 119,985
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 373,654
<AVERAGE-NET-ASSETS> 12,298,240
<PER-SHARE-NAV-BEGIN> 11.91
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> 1.90
<PER-SHARE-DIVIDEND> 0.08
<PER-SHARE-DISTRIBUTIONS> 0.69
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.14
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 002
<NAME> LAZARD GLOBAL EQUITY PORTFOLIO CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 19,389,067
<INVESTMENTS-AT-VALUE> 22,343,438
<RECEIVABLES> 241,255
<ASSETS-OTHER> 75,759
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,660,452
<PAYABLE-FOR-SECURITIES> 64,801
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 61,355
<TOTAL-LIABILITIES> 126,156
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,604,527
<SHARES-COMMON-STOCK> 366,528
<SHARES-COMMON-PRIOR> 192,168
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 9,939
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 15,214
<ACCUM-APPREC-OR-DEPREC> 2,954,922
<NET-ASSETS> 22,534,296
<DIVIDEND-INCOME> 300,096
<INTEREST-INCOME> 39,546
<OTHER-INCOME> 0
<EXPENSES-NET> 179,076
<NET-INVESTMENT-INCOME> 160,566
<REALIZED-GAINS-CURRENT> 862,558
<APPREC-INCREASE-CURRENT> 1,695,809
<NET-CHANGE-FROM-OPS> 2,718,933
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,500
<DISTRIBUTIONS-OF-GAINS> 225,207
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 720,557
<NUMBER-OF-SHARES-REDEEMED> 156,670
<SHARES-REINVESTED> 88,246
<NET-CHANGE-IN-ASSETS> 9,885,539
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 165,973
<OVERDISTRIB-NII-PRIOR> 30,476
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 119,985
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 373,654
<AVERAGE-NET-ASSETS> 3,699,662
<PER-SHARE-NAV-BEGIN> 11.92
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 1.88
<PER-SHARE-DIVIDEND> 0.04
<PER-SHARE-DISTRIBUTIONS> 0.69
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.16
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 011
<NAME> LAZARD INTERNATIONAL SMALL CAP PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 181,782,228
<INVESTMENTS-AT-VALUE> 180,464,560
<RECEIVABLES> 541,644
<ASSETS-OTHER> 22,214
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 181,028,418
<PAYABLE-FOR-SECURITIES> 227,185
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 375,902
<TOTAL-LIABILITIES> 603,087
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 180,796,031
<SHARES-COMMON-STOCK> 15,590,528
<SHARES-COMMON-PRIOR> 12,122,940
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 35,422
<ACCUMULATED-NET-GAINS> 981,201
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,316,479)
<NET-ASSETS> 180,425,331
<DIVIDEND-INCOME> 2,742,017
<INTEREST-INCOME> 509,630
<OTHER-INCOME> 0
<EXPENSES-NET> 1,883,259
<NET-INVESTMENT-INCOME> 1,368,388
<REALIZED-GAINS-CURRENT> 12,681,814
<APPREC-INCREASE-CURRENT> (4,953,609)
<NET-CHANGE-FROM-OPS> 9,096,593
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 752,862
<DISTRIBUTIONS-OF-GAINS> 15,715,143
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,472,981
<NUMBER-OF-SHARES-REDEEMED> 6,331,278
<SHARES-REINVESTED> 1,398,105
<NET-CHANGE-IN-ASSETS> 36,858,067
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,609,323
<OVERDISTRIB-NII-PRIOR> 18,014
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,354,903
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,900,980
<AVERAGE-NET-ASSETS> 177,428,617
<PER-SHARE-NAV-BEGIN> 11.69
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.83
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 1.12
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.40
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 012
<NAME> LAZARD INTERNATIONAL SMALL CAP PORTFOLIO CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 181,782,228
<INVESTMENTS-AT-VALUE> 180,464,560
<RECEIVABLES> 541,644
<ASSETS-OTHER> 22,214
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 181,028,418
<PAYABLE-FOR-SECURITIES> 227,185
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 375,902
<TOTAL-LIABILITIES> 603,087
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 180,796,031
<SHARES-COMMON-STOCK> 232,449
<SHARES-COMMON-PRIOR> 160,229
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 35,422
<ACCUMULATED-NET-GAINS> 981,201
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,316,479)
<NET-ASSETS> 180,425,331
<DIVIDEND-INCOME> 2,742,017
<INTEREST-INCOME> 509,630
<OTHER-INCOME> 0
<EXPENSES-NET> 1,883,259
<NET-INVESTMENT-INCOME> 1,368,388
<REALIZED-GAINS-CURRENT> 12,681,814
<APPREC-INCREASE-CURRENT> (4,953,609)
<NET-CHANGE-FROM-OPS> 9,096,593
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,976
<DISTRIBUTIONS-OF-GAINS> 221,751
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,472,981
<NUMBER-OF-SHARES-REDEEMED> 6,331,278
<SHARES-REINVESTED> 1,398,105
<NET-CHANGE-IN-ASSETS> 36,858,067
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,609,323
<OVERDISTRIB-NII-PRIOR> 18,014
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,354,903
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,900,980
<AVERAGE-NET-ASSETS> 3,253,646
<PER-SHARE-NAV-BEGIN> 11.69
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0.83
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 1.12
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.38
<EXPENSE-RATIO> 1.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 021
<NAME> LAZARD EMERGING MARKETS PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 381,056,579
<INVESTMENTS-AT-VALUE> 304,067,832
<RECEIVABLES> 2,949,109
<ASSETS-OTHER> 1,166,469
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 308,183,410
<PAYABLE-FOR-SECURITIES> 914,612
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,044,900
<TOTAL-LIABILITIES> 1,959,512
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 436,700,968
<SHARES-COMMON-STOCK> 42,950,229
<SHARES-COMMON-PRIOR> 25,697,597
<ACCUMULATED-NII-CURRENT> 220,015
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 53,707,257
<ACCUM-APPREC-OR-DEPREC> (76,989,828)
<NET-ASSETS> 306,223,898
<DIVIDEND-INCOME> 7,311,312
<INTEREST-INCOME> 1,418,920
<OTHER-INCOME> 0
<EXPENSES-NET> 3,622,032
<NET-INVESTMENT-INCOME> 5,108,200
<REALIZED-GAINS-CURRENT> (48,799,388)
<APPREC-INCREASE-CURRENT> (28,009,620)
<NET-CHANGE-FROM-OPS> (71,700,808)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,058,419
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,171,158
<NUMBER-OF-SHARES-REDEEMED> 17,440,111
<SHARES-REINVESTED> 853,584
<NET-CHANGE-IN-ASSETS> 62,114,811
<ACCUMULATED-NII-PRIOR> 48,851
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 5,665,366
<GROSS-ADVISORY-FEES> 2,794,119
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,658,267
<AVERAGE-NET-ASSETS> 267,747,809
<PER-SHARE-NAV-BEGIN> 9.20
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> (2.26)
<PER-SHARE-DIVIDEND> 0.10
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 6.94
<EXPENSE-RATIO> 1.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 022
<NAME> LAZARD EMERGING MARKETS PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 381,056,579
<INVESTMENTS-AT-VALUE> 304,067,832
<RECEIVABLES> 2,949,109
<ASSETS-OTHER> 1,166,469
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 308,183,410
<PAYABLE-FOR-SECURITIES> 914,612
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,044,900
<TOTAL-LIABILITIES> 1,959,512
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 436,700,968
<SHARES-COMMON-STOCK> 1,176,048
<SHARES-COMMON-PRIOR> 844,049
<ACCUMULATED-NII-CURRENT> 220,015
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 53,707,257
<ACCUM-APPREC-OR-DEPREC> (76,989,828)
<NET-ASSETS> 306,223,898
<DIVIDEND-INCOME> 7,311,312
<INTEREST-INCOME> 1,418,920
<OTHER-INCOME> 0
<EXPENSES-NET> 3,622,032
<NET-INVESTMENT-INCOME> 5,108,200
<REALIZED-GAINS-CURRENT> (48,799,388)
<APPREC-INCREASE-CURRENT> (28,009,620)
<NET-CHANGE-FROM-OPS> (71,700,808)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 121,120
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,171,158
<NUMBER-OF-SHARES-REDEEMED> 17,440,111
<SHARES-REINVESTED> 853,584
<NET-CHANGE-IN-ASSETS> 62,114,811
<ACCUMULATED-NII-PRIOR> 48,851
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 5,665,366
<GROSS-ADVISORY-FEES> 2,794,119
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,658,267
<AVERAGE-NET-ASSETS> 11,664,068
<PER-SHARE-NAV-BEGIN> 9.20
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> (2.26)
<PER-SHARE-DIVIDEND> 0.08
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 6.97
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 031
<NAME> LAZARD SMALL CAP PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 1,409,642,345
<INVESTMENTS-AT-VALUE> 1,499,501,478
<RECEIVABLES> 16,647,439
<ASSETS-OTHER> 208
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,516,149,125
<PAYABLE-FOR-SECURITIES> 6,527,195
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,571,661
<TOTAL-LIABILITIES> 11,098,856
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,416,125,856
<SHARES-COMMON-STOCK> 81,187,480
<SHARES-COMMON-PRIOR> 72,186,366
<ACCUMULATED-NII-CURRENT> 7,069,548
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 8,004,268
<ACCUM-APPREC-OR-DEPREC> 89,859,133
<NET-ASSETS> 1,505,050,269
<DIVIDEND-INCOME> 14,048,859
<INTEREST-INCOME> 6,014,341
<OTHER-INCOME> 0
<EXPENSES-NET> 12,981,415
<NET-INVESTMENT-INCOME> 7,081,785
<REALIZED-GAINS-CURRENT> (8,015,535)
<APPREC-INCREASE-CURRENT> (200,026,407)
<NET-CHANGE-FROM-OPS> (200,960,157)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 682,951
<DISTRIBUTIONS-OF-GAINS> 7,744,125
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 46,638,750
<NUMBER-OF-SHARES-REDEEMED> 35,121,183
<SHARES-REINVESTED> 572,637
<NET-CHANGE-IN-ASSETS> 13,877,899
<ACCUMULATED-NII-PRIOR> 681,981
<ACCUMULATED-GAINS-PRIOR> 8,277,695
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,726,934
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,000,595
<AVERAGE-NET-ASSETS> 1,465,545,205
<PER-SHARE-NAV-BEGIN> 20.02
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> (2.60)
<PER-SHARE-DIVIDEND> 0.01
<PER-SHARE-DISTRIBUTIONS> 0.10
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 17.39
<EXPENSE-RATIO> 0.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 032
<NAME> LAZARD SMALL CAP PORTFOLIO CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 1,409,642,345
<INVESTMENTS-AT-VALUE> 1,499,501,478
<RECEIVABLES> 16,647,439
<ASSETS-OTHER> 208
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,516,149,125
<PAYABLE-FOR-SECURITIES> 6,527,195
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,571,661
<TOTAL-LIABILITIES> 11,098,856
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,416,125,856
<SHARES-COMMON-STOCK> 5,391,454
<SHARES-COMMON-PRIOR> 2,302,364
<ACCUMULATED-NII-CURRENT> 7,069,548
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 8,004,268
<ACCUM-APPREC-OR-DEPREC> 89,859,133
<NET-ASSETS> 1,505,050,269
<DIVIDEND-INCOME> 14,048,859
<INTEREST-INCOME> 6,014,341
<OTHER-INCOME> 0
<EXPENSES-NET> 12,981,415
<NET-INVESTMENT-INCOME> 7,081,785
<REALIZED-GAINS-CURRENT> (8,015,535)
<APPREC-INCREASE-CURRENT> (200,026,407)
<NET-CHANGE-FROM-OPS> (200,960,157)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 533,570
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 46,638,750
<NUMBER-OF-SHARES-REDEEMED> 35,121,183
<SHARES-REINVESTED> 572,637
<NET-CHANGE-IN-ASSETS> 13,877,899
<ACCUMULATED-NII-PRIOR> 681,981
<ACCUMULATED-GAINS-PRIOR> 8,277,695
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,726,934
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,000,595
<AVERAGE-NET-ASSETS> 98,045,949
<PER-SHARE-NAV-BEGIN> 20.02
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (2.60)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.10
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 17.35
<EXPENSE-RATIO> 1.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 041
<NAME> LAZARD STRATEGIC YIELD PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 436,009,870
<INVESTMENTS-AT-VALUE> 421,895,565
<RECEIVABLES> 20,834,800
<ASSETS-OTHER> 31,305
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 442,761,670
<PAYABLE-FOR-SECURITIES> 18,003,195
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,699,114
<TOTAL-LIABILITIES> 22,702,309
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 454,082,459
<SHARES-COMMON-STOCK> 44,107,303
<SHARES-COMMON-PRIOR> 41,370,616
<ACCUMULATED-NII-CURRENT> 1,046,593
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 21,201,218
<ACCUM-APPREC-OR-DEPREC> (13,868,473)
<NET-ASSETS> 420,059,361
<DIVIDEND-INCOME> 1,472,366
<INTEREST-INCOME> 34,318,958
<OTHER-INCOME> 0
<EXPENSES-NET> 4,170,124
<NET-INVESTMENT-INCOME> 31,621,200
<REALIZED-GAINS-CURRENT> (30,022,479)
<APPREC-INCREASE-CURRENT> (3,041,073)
<NET-CHANGE-FROM-OPS> (1,442,352)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20,259,420
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 13,228,346
<NUMBER-OF-SHARES-SOLD> 66,561,229
<NUMBER-OF-SHARES-REDEEMED> 65,362,961
<SHARES-REINVESTED> 2,443,251
<NET-CHANGE-IN-ASSETS> 5,307,140
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 574,424
<OVERDIST-NET-GAINS-PRIOR> 92,655
<GROSS-ADVISORY-FEES> 3,422,135
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,181,649
<AVERAGE-NET-ASSETS> 436,711,183
<PER-SHARE-NAV-BEGIN> 9.66
<PER-SHARE-NII> 0.76
<PER-SHARE-GAIN-APPREC> (0.69)
<PER-SHARE-DIVIDEND> 0.44
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.28
<PER-SHARE-NAV-END> 9.01
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 042
<NAME> LAZARD STRATEGIC YIELD PORTFOLIO CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 436,009,870
<INVESTMENTS-AT-VALUE> 421,895,565
<RECEIVABLES> 20,834,800
<ASSETS-OTHER> 31,305
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 442,761,670
<PAYABLE-FOR-SECURITIES> 18,003,195
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,699,114
<TOTAL-LIABILITIES> 22,702,309
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 454,082,459
<SHARES-COMMON-STOCK> 2,489,504
<SHARES-COMMON-PRIOR> 1,584,672
<ACCUMULATED-NII-CURRENT> 1,046,593
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 21,201,218
<ACCUM-APPREC-OR-DEPREC> (13,868,473)
<NET-ASSETS> 420,059,361
<DIVIDEND-INCOME> 1,472,366
<INTEREST-INCOME> 34,318,958
<OTHER-INCOME> 0
<EXPENSES-NET> 4,170,124
<NET-INVESTMENT-INCOME> 31,621,200
<REALIZED-GAINS-CURRENT> (30,022,479)
<APPREC-INCREASE-CURRENT> (3,041,073)
<NET-CHANGE-FROM-OPS> (1,442,352)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 826,847
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 592,897
<NUMBER-OF-SHARES-SOLD> 66,561,229
<NUMBER-OF-SHARES-REDEEMED> 65,362,961
<SHARES-REINVESTED> 2,443,251
<NET-CHANGE-IN-ASSETS> 5,307,140
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 574,424
<OVERDIST-NET-GAINS-PRIOR> 92,655
<GROSS-ADVISORY-FEES> 3,422,135
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,181,649
<AVERAGE-NET-ASSETS> 19,573,493
<PER-SHARE-NAV-BEGIN> 9.66
<PER-SHARE-NII> 0.73
<PER-SHARE-GAIN-APPREC> (0.69)
<PER-SHARE-DIVIDEND> 0.40
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.28
<PER-SHARE-NAV-END> 9.02
<EXPENSE-RATIO> 1.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 051
<NAME> LAZARD BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 116,606,674
<INVESTMENTS-AT-VALUE> 116,527,612
<RECEIVABLES> 5,458,314
<ASSETS-OTHER> 354
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 121,986,280
<PAYABLE-FOR-SECURITIES> 6,078,715
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 284,462
<TOTAL-LIABILITIES> 6,363,177
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 116,074,933
<SHARES-COMMON-STOCK> 10,154,742
<SHARES-COMMON-PRIOR> 9,217,915
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 180,455
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 192,313
<ACCUM-APPREC-OR-DEPREC> (79,062)
<NET-ASSETS> 115,623,103
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,520,653
<OTHER-INCOME> 0
<EXPENSES-NET> 851,753
<NET-INVESTMENT-INCOME> 5,668,900
<REALIZED-GAINS-CURRENT> 1,363,055
<APPREC-INCREASE-CURRENT> (1,212,836)
<NET-CHANGE-FROM-OPS> 5,819,119
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,116,571
<DISTRIBUTIONS-OF-GAINS> 1,476,082
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,086,060
<NUMBER-OF-SHARES-REDEEMED> 3,006,796
<SHARES-REINVESTED> 671,450
<NET-CHANGE-IN-ASSETS> 15,912,479
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 132,961
<OVERDISTRIB-NII-PRIOR> 136,318
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 523,656
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 873,401
<AVERAGE-NET-ASSETS> 93,262,341
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> 0.55
<PER-SHARE-DISTRIBUTIONS> 0.15
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.89
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 052
<NAME> LAZARD BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 116,606,674
<INVESTMENTS-AT-VALUE> 116,527,612
<RECEIVABLES> 5,458,314
<ASSETS-OTHER> 354
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 121,986,280
<PAYABLE-FOR-SECURITIES> 6,078,715
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 284,462
<TOTAL-LIABILITIES> 6,363,177
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 116,074,933
<SHARES-COMMON-STOCK> 1,540,500
<SHARES-COMMON-PRIOR> 726,613
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 180,455
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 192,313
<ACCUM-APPREC-OR-DEPREC> (79,062)
<NET-ASSETS> 115,623,103
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,520,653
<OTHER-INCOME> 0
<EXPENSES-NET> 851,753
<NET-INVESTMENT-INCOME> 5,668,900
<REALIZED-GAINS-CURRENT> 1,363,055
<APPREC-INCREASE-CURRENT> (1,212,836)
<NET-CHANGE-FROM-OPS> 5,819,119
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 589,208
<DISTRIBUTIONS-OF-GAINS> 219,505
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,086,060
<NUMBER-OF-SHARES-REDEEMED> 3,006,796
<SHARES-REINVESTED> 671,450
<NET-CHANGE-IN-ASSETS> 15,912,479
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 132,961
<OVERDISTRIB-NII-PRIOR> 136,318
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 523,656
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 873,401
<AVERAGE-NET-ASSETS> 11,468,765
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> 0.52
<PER-SHARE-DISTRIBUTIONS> 0.15
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.88
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 061
<NAME> LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 112,517,182
<INVESTMENTS-AT-VALUE> 116,898,630
<RECEIVABLES> 4,062,096
<ASSETS-OTHER> 10,365
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120,971,091
<PAYABLE-FOR-SECURITIES> 225,938
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 494,379
<TOTAL-LIABILITIES> 720,317
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115,109,368
<SHARES-COMMON-STOCK> 10,782,322
<SHARES-COMMON-PRIOR> 11,439,832
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 282,389
<ACCUMULATED-NET-GAINS> 389,612
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,034,183
<NET-ASSETS> 120,250,774
<DIVIDEND-INCOME> 27,582
<INTEREST-INCOME> 6,107,211
<OTHER-INCOME> 0
<EXPENSES-NET> 1,259,571
<NET-INVESTMENT-INCOME> 4,875,222
<REALIZED-GAINS-CURRENT> (139,509)
<APPREC-INCREASE-CURRENT> 9,605,472
<NET-CHANGE-FROM-OPS> 14,341,185
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,954,550
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,308,792
<NUMBER-OF-SHARES-REDEEMED> 4,049,751
<SHARES-REINVESTED> 239,953
<NET-CHANGE-IN-ASSETS> 7,293,536
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 1,450,070
<OVERDIST-NET-GAINS-PRIOR> 298,988
<GROSS-ADVISORY-FEES> 857,644
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,289,051
<AVERAGE-NET-ASSETS> 110,539,364
<PER-SHARE-NAV-BEGIN> 9.63
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 0.98
<PER-SHARE-DIVIDEND> 0.22
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.71
<EXPENSE-RATIO> 1.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 062
<NAME> LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 112,517,182
<INVESTMENTS-AT-VALUE> 116,898,630
<RECEIVABLES> 4,062,096
<ASSETS-OTHER> 10,365
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120,971,091
<PAYABLE-FOR-SECURITIES> 225,938
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 494,379
<TOTAL-LIABILITIES> 720,317
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115,109,368
<SHARES-COMMON-STOCK> 444,293
<SHARES-COMMON-PRIOR> 287,789
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 282,389
<ACCUMULATED-NET-GAINS> 389,612
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,034,183
<NET-ASSETS> 120,250,774
<DIVIDEND-INCOME> 27,582
<INTEREST-INCOME> 6,107,211
<OTHER-INCOME> 0
<EXPENSES-NET> 1,259,571
<NET-INVESTMENT-INCOME> 4,875,222
<REALIZED-GAINS-CURRENT> (139,509)
<APPREC-INCREASE-CURRENT> 9,605,472
<NET-CHANGE-FROM-OPS> 14,341,185
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 62,023
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,308,792
<NUMBER-OF-SHARES-REDEEMED> 4,049,751
<SHARES-REINVESTED> 239,953
<NET-CHANGE-IN-ASSETS> 7,293,536
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 1,450,070
<OVERDIST-NET-GAINS-PRIOR> 298,988
<GROSS-ADVISORY-FEES> 857,644
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,289,051
<AVERAGE-NET-ASSETS> 3,813,134
<PER-SHARE-NAV-BEGIN> 9.63
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> 0.96
<PER-SHARE-DIVIDEND> 0.21
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.69
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 071
<NAME> LAZARD INTERNATIONAL EQUITY PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 2,428,029,380
<INVESTMENTS-AT-VALUE> 2,919,297,732
<RECEIVABLES> 12,260,145
<ASSETS-OTHER> 1,363,690
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,932,921,567
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,329,131
<TOTAL-LIABILITIES> 6,329,131
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,444,989,945
<SHARES-COMMON-STOCK> 189,079,168
<SHARES-COMMON-PRIOR> 150,349,803
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 20,141,111
<ACCUMULATED-NET-GAINS> 10,250,130
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 491,493,472
<NET-ASSETS> 2,926,592,436
<DIVIDEND-INCOME> 52,760,910
<INTEREST-INCOME> 6,005,981
<OTHER-INCOME> 0
<EXPENSES-NET> 23,442,773
<NET-INVESTMENT-INCOME> 35,324,118
<REALIZED-GAINS-CURRENT> 136,266,402
<APPREC-INCREASE-CURRENT> 178,170,268
<NET-CHANGE-FROM-OPS> 349,760,788
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25,534,748
<DISTRIBUTIONS-OF-GAINS> 144,495,716
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 90,975,345
<NUMBER-OF-SHARES-REDEEMED> 61,418,428
<SHARES-REINVESTED> 11,505,252
<NET-CHANGE-IN-ASSETS> 816,074,053
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 12,212,664
<OVERDISTRIB-NII-PRIOR> 21,193,548
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19,452,067
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,447,273
<AVERAGE-NET-ASSETS> 2,562,871,845
<PER-SHARE-NAV-BEGIN> 13.97
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 2.03
<PER-SHARE-DIVIDEND> 0.14
<PER-SHARE-DISTRIBUTIONS> 0.81
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.23
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 072
<NAME> LAZARD INTERNATIONAL EQUITY PORTFOLIO CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 2,428,029,380
<INVESTMENTS-AT-VALUE> 2,919,297,732
<RECEIVABLES> 12,260,145
<ASSETS-OTHER> 1,363,690
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,932,921,567
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,329,131
<TOTAL-LIABILITIES> 6,329,131
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,444,989,945
<SHARES-COMMON-STOCK> 3,106,682
<SHARES-COMMON-PRIOR> 773,878
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 20,141,111
<ACCUMULATED-NET-GAINS> 10,250,130
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 491,493,472
<NET-ASSETS> 2,926,592,436
<DIVIDEND-INCOME> 52,760,910
<INTEREST-INCOME> 6,005,981
<OTHER-INCOME> 0
<EXPENSES-NET> 23,442,773
<NET-INVESTMENT-INCOME> 35,324,118
<REALIZED-GAINS-CURRENT> 136,266,402
<APPREC-INCREASE-CURRENT> 178,170,268
<NET-CHANGE-FROM-OPS> 349,760,788
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 250,536
<DISTRIBUTIONS-OF-GAINS> 2,219,617
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 90,975,345
<NUMBER-OF-SHARES-REDEEMED> 61,418,428
<SHARES-REINVESTED> 11,505,252
<NET-CHANGE-IN-ASSETS> 816,074,053
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 12,212,664
<OVERDISTRIB-NII-PRIOR> 21,193,548
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19,452,067
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,447,273
<AVERAGE-NET-ASSETS> 30,737,083
<PER-SHARE-NAV-BEGIN> 13.95
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 2.00
<PER-SHARE-DIVIDEND> 0.09
<PER-SHARE-DISTRIBUTIONS> 0.81
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.23
<EXPENSE-RATIO> 1.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 081
<NAME> LAZARD HIGH YIELD PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-02-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 43,145,346
<INVESTMENTS-AT-VALUE> 41,999,685
<RECEIVABLES> 1,259,835
<ASSETS-OTHER> 19,624
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43,279,144
<PAYABLE-FOR-SECURITIES> 320,865
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74,716
<TOTAL-LIABILITIES> 395,581
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,280,385
<SHARES-COMMON-STOCK> 4,453,235
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 21,463
<ACCUMULATED-NET-GAINS> (2,229,698)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,145,661)
<NET-ASSETS> 42,883,563
<DIVIDEND-INCOME> 182,639
<INTEREST-INCOME> 2,800,635
<OTHER-INCOME> 0
<EXPENSES-NET> 316,477
<NET-INVESTMENT-INCOME> 2,666,797
<REALIZED-GAINS-CURRENT> (2,212,117)
<APPREC-INCREASE-CURRENT> (1,145,661)
<NET-CHANGE-FROM-OPS> (690,981)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,724,646
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,226,535
<NUMBER-OF-SHARES-REDEEMED> 944,650
<SHARES-REINVESTED> 272,079
<NET-CHANGE-IN-ASSETS> 42,883,563
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 225,562
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 485,518
<AVERAGE-NET-ASSETS> 30,175,659
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.88
<PER-SHARE-GAIN-APPREC> (0.57)
<PER-SHARE-DIVIDEND> 0.89
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.42
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 082
<NAME> LAZARD HIGH YIELD PORTFOLIO CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Feb-24-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 43,145,346
<INVESTMENTS-AT-VALUE> 41,999,685
<RECEIVABLES> 1,259,835
<ASSETS-OTHER> 19,624
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43,279,144
<PAYABLE-FOR-SECURITIES> 320,865
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74,716
<TOTAL-LIABILITIES> 395,581
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,280,385
<SHARES-COMMON-STOCK> 100,729
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 21,463
<ACCUMULATED-NET-GAINS> (2,229,698)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,145,661)
<NET-ASSETS> 42,883,563
<DIVIDEND-INCOME> 182,639
<INTEREST-INCOME> 2,800,635
<OTHER-INCOME> 0
<EXPENSES-NET> 316,477
<NET-INVESTMENT-INCOME> 2,666,797
<REALIZED-GAINS-CURRENT> (2,212,117)
<APPREC-INCREASE-CURRENT> (1,145,661)
<NET-CHANGE-FROM-OPS> (690,981)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 21,381
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,226,535
<NUMBER-OF-SHARES-REDEEMED> 944,650
<SHARES-REINVESTED> 272,079
<NET-CHANGE-IN-ASSETS> 42,883,563
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 225,562
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 485,518
<AVERAGE-NET-ASSETS> 270,820
<PER-SHARE-NAV-BEGIN> 10.37
<PER-SHARE-NII> 0.72
<PER-SHARE-GAIN-APPREC> (0.94)
<PER-SHARE-DIVIDEND> 0.73
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.42
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 091
<NAME> LAZARD EQUITY PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 396,057,275
<INVESTMENTS-AT-VALUE> 482,055,098
<RECEIVABLES> 7,662,852
<ASSETS-OTHER> 3,622
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 489,721,572
<PAYABLE-FOR-SECURITIES> 9,353,643
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,618,109
<TOTAL-LIABILITIES> 10,971,752
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 378,079,574
<SHARES-COMMON-STOCK> 16,605,093
<SHARES-COMMON-PRIOR> 16,695,862
<ACCUMULATED-NII-CURRENT> 119,713
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,552,710
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 85,997,823
<NET-ASSETS> 478,749,820
<DIVIDEND-INCOME> 8,478,127
<INTEREST-INCOME> 881,152
<OTHER-INCOME> 0
<EXPENSES-NET> 3,991,535
<NET-INVESTMENT-INCOME> 5,367,744
<REALIZED-GAINS-CURRENT> 36,224,831
<APPREC-INCREASE-CURRENT> 24,446,325
<NET-CHANGE-FROM-OPS> 66,038,900
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,333,091
<DISTRIBUTIONS-OF-GAINS> 21,315,461
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,831,291
<NUMBER-OF-SHARES-REDEEMED> 7,177,813
<SHARES-REINVESTED> 1,521,109
<NET-CHANGE-IN-ASSETS> 122,363,648
<ACCUMULATED-NII-PRIOR> 19,492
<ACCUMULATED-GAINS-PRIOR> 6,334,927
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,316,469
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,993,992
<AVERAGE-NET-ASSETS> 354,251,244
<PER-SHARE-NAV-BEGIN> 19.98
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 3.10
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 1.35
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 21.75
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 092
<NAME> LAZARD EQUITY PORTFOLIO CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 396,057,275
<INVESTMENTS-AT-VALUE> 482,055,098
<RECEIVABLES> 7,662,852
<ASSETS-OTHER> 3,622
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 489,721,572
<PAYABLE-FOR-SECURITIES> 9,353,643
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,618,109
<TOTAL-LIABILITIES> 10,971,752
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 378,079,574
<SHARES-COMMON-STOCK> 5,406,563
<SHARES-COMMON-PRIOR> 1,141,207
<ACCUMULATED-NII-CURRENT> 119,713
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,552,710
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 85,997,823
<NET-ASSETS> 478,749,820
<DIVIDEND-INCOME> 8,478,127
<INTEREST-INCOME> 881,152
<OTHER-INCOME> 0
<EXPENSES-NET> 3,991,535
<NET-INVESTMENT-INCOME> 5,367,744
<REALIZED-GAINS-CURRENT> 36,224,831
<APPREC-INCREASE-CURRENT> 24,446,325
<NET-CHANGE-FROM-OPS> 66,038,900
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 934,432
<DISTRIBUTIONS-OF-GAINS> 6,695,483
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,831,291
<NUMBER-OF-SHARES-REDEEMED> 7,177,813
<SHARES-REINVESTED> 1,521,109
<NET-CHANGE-IN-ASSETS> 122,363,648
<ACCUMULATED-NII-PRIOR> 19,492
<ACCUMULATED-GAINS-PRIOR> 6,334,927
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,316,469
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,993,992
<AVERAGE-NET-ASSETS> 87,944,627
<PER-SHARE-NAV-BEGIN> 19.99
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 3.12
<PER-SHARE-DIVIDEND> 0.20
<PER-SHARE-DISTRIBUTIONS> 1.35
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 21.76
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 101
<NAME> LAZARD MID CAP PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 70,950,524
<INVESTMENTS-AT-VALUE> 72,787,709
<RECEIVABLES> 94,270
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 19,001
<TOTAL-ASSETS> 72,900,980
<PAYABLE-FOR-SECURITIES> 614,859
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 210,042
<TOTAL-LIABILITIES> 824,901
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,945,063
<SHARES-COMMON-STOCK> 5,327,538
<SHARES-COMMON-PRIOR> 4,851,388
<ACCUMULATED-NII-CURRENT> 13,218
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 280,613
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,837,185
<NET-ASSETS> 72,076,079
<DIVIDEND-INCOME> 708,363
<INTEREST-INCOME> 239,771
<OTHER-INCOME> 0
<EXPENSES-NET> 670,857
<NET-INVESTMENT-INCOME> 277,277
<REALIZED-GAINS-CURRENT> 1,047,283
<APPREC-INCREASE-CURRENT> 551,315
<NET-CHANGE-FROM-OPS> 1,875,875
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 238,083
<DISTRIBUTIONS-OF-GAINS> 593,806
<DISTRIBUTIONS-OTHER> 18,334
<NUMBER-OF-SHARES-SOLD> 3,975,009
<NUMBER-OF-SHARES-REDEEMED> 2,211,398
<SHARES-REINVESTED> 101,125
<NET-CHANGE-IN-ASSETS> 20,490,590
<ACCUMULATED-NII-PRIOR> 12,085
<ACCUMULATED-GAINS-PRIOR> (1,143)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 459,760
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 794,288
<AVERAGE-NET-ASSETS> 52,237,474
<PER-SHARE-NAV-BEGIN> 10.26
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.31
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.11
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.46
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 102
<NAME> LAZARD MID CAP PORTFOLIO CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 70,950,524
<INVESTMENTS-AT-VALUE> 72,787,709
<RECEIVABLES> 94,270
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 19,001
<TOTAL-ASSETS> 72,900,980
<PAYABLE-FOR-SECURITIES> 614,859
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 210,042
<TOTAL-LIABILITIES> 824,901
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,945,063
<SHARES-COMMON-STOCK> 1,564,634
<SHARES-COMMON-PRIOR> 176,048
<ACCUMULATED-NII-CURRENT> 13,218
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 280,613
<OVERDISTRIBUTION-GAINS> 0
<APPREC-INCREASE-CURRENT> 1,837,185
<NET-ASSETS> 72,076,079
<DIVIDEND-INCOME> 708,363
<INTEREST-INCOME> 239,771
<OTHER-INCOME> 0
<EXPENSES-NET> 670,857
<NET-INVESTMENT-INCOME> 277,277
<REALIZED-GAINS-CURRENT> 1,047,283
<ACCUM-APPREC-OR-DEPREC> 551,315
<NET-CHANGE-FROM-OPS> 1,875,875
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 51,279
<DISTRIBUTIONS-OF-GAINS> 171,721
<DISTRIBUTIONS-OTHER> 3,181
<NUMBER-OF-SHARES-SOLD> 3,975,009
<NUMBER-OF-SHARES-REDEEMED> 2,211,398
<SHARES-REINVESTED> 101,125
<NET-CHANGE-IN-ASSETS> 20,490,590
<ACCUMULATED-NII-PRIOR> 12,085
<ACCUMULATED-GAINS-PRIOR> (1,143)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 459,760
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 794,288
<AVERAGE-NET-ASSETS> 9,063,949
<PER-SHARE-NAV-BEGIN> 10.26
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.32
<PER-SHARE-DIVIDEND> 0.04
<PER-SHARE-DISTRIBUTIONS> 0.11
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.45
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 103
<NAME> LAZARD BANTAM VALUE PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 71,710,100
<INVESTMENTS-AT-VALUE> 66,568,916
<RECEIVABLES> 739,147
<ASSETS-OTHER> 527
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67,308,590
<PAYABLE-FOR-SECURITIES> 25,938
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 488,410
<TOTAL-LIABILITIES> 514,348
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71,862,799
<SHARES-COMMON-STOCK> 4,899,918
<SHARES-COMMON-PRIOR> 4,887,256
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 72,627
<OVERDISTRIBUTION-GAINS> 0
<APPREC-INCREASE-CURRENT> (5,141,184)
<NET-ASSETS> 66,794,242
<DIVIDEND-INCOME> 238,085
<INTEREST-INCOME> 261,509
<OTHER-INCOME> 0
<EXPENSES-NET> 830,680
<NET-INVESTMENT-INCOME> 1,330,274
<REALIZED-GAINS-CURRENT> 72,685
<ACCUM-APPREC-OR-DEPREC> (12,144,931)
<NET-CHANGE-FROM-OPS> (10,741,972)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 805,472
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,649,655
<NUMBER-OF-SHARES-REDEEMED> 1,709,851
<SHARES-REINVESTED> 70,235
<NET-CHANGE-IN-ASSETS> (11,525,719)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 896,674
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 575,206
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 876,144
<AVERAGE-NET-ASSETS> 68,229,866
<PER-SHARE-NAV-BEGIN> 14.32
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> (1.98)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.15
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.19
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874964
<NAME> THE LAZARD FUNDS, INC.
<SERIES>
<NUMBER> 104
<NAME> LAZARD BANTAM VALUE PORTFOLIO CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 71,710,100
<INVESTMENTS-AT-VALUE> 66,568,916
<RECEIVABLES> 739,147
<ASSETS-OTHER> 527
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67,308,590
<PAYABLE-FOR-SECURITIES> 25,938
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 488,410
<TOTAL-LIABILITIES> 514,348
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71,862,799
<SHARES-COMMON-STOCK> 582,897
<SHARES-COMMON-PRIOR> 585,520
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 72,627
<OVERDISTRIBUTION-GAINS> 0
<APPREC-INCREASE-CURRENT> (5,141,184)
<NET-ASSETS> 66,794,242
<DIVIDEND-INCOME> 238,085
<INTEREST-INCOME> 261,509
<OTHER-INCOME> 0
<EXPENSES-NET> 830,680
<NET-INVESTMENT-INCOME> 1,330,274
<REALIZED-GAINS-CURRENT> 72,685
<ACCUM-APPREC-OR-DEPREC> (12,144,931)
<NET-CHANGE-FROM-OPS> (10,741,972)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 91,260
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,649,655
<NUMBER-OF-SHARES-REDEEMED> 1,709,851
<SHARES-REINVESTED> 70,235
<NET-CHANGE-IN-ASSETS> (11,525,719)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 896,674
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 575,206
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 876,144
<AVERAGE-NET-ASSETS> 8,464,221
<PER-SHARE-NAV-BEGIN> 14.26
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> (1.96)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.15
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.11
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
