REGISTRATION NO. 333-77493
===============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
|X| PRE-EFFECTIVE AMENDMENT NO. 1 | | POST-EFFECTIVE AMENDMENT NO. __
(CHECK APPROPRIATE BOX OR BOXES)
THE LAZARD FUNDS, INC.
------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
(800) 632-6000
--------------
(AREA CODE AND TELEPHONE NUMBER)
30 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10112
-----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES: NUMBER,
STREET, CITY, STATE, ZIP CODE)
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WILLIAM G. BUTTERLY III, ESQ.
C/O THE LAZARD FUNDS, INC.
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
COPY TO:
STUART H. COLEMAN, ESQ.
STROOCK & STROOCK & LAVAN LLP
180 MAIDEN LANE
NEW YORK, NEW YORK 10038-4982
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable
after this Registration Statement is declared effective.
Registrant is registering shares of common stock, par value $.001 per
share. No filing fee is required because Registrant previously registered
1,550,000,000 shares on Form N-1A (Registration Nos. 33-40682, 811-06312)
pursuant to Rule 24f-2 under the Investment Company Act of 1940.
It is proposed that this filing will become effective on June 1, 1999
pursuant to Rule 488.
<PAGE>
THE LAZARD FUNDS, INC.
Form N-14
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
PROSPECTUS/PROXY STATEMENT
FORM N-14 ITEM NO. CAPTION
- ------------------ ----------------------------
PART A
Item 1. Beginning of Registration Cover Page
Statement and Outside Front Cover
Page of Prospectus
Item 2. Beginning and Outside Back Cover Cover Page
Page of Prospectus
Item 3. Synopsis Information and Risk Summary
Factors
Item 4. Information About the Transaction Letter to Shareholders;
Summary; Reasons for the
Exchange; Information About
the Exchange
Item 5. Information About the Registrant Letter to Shareholders;
Additional Information About
Each Portfolio
Item 6. Information About the Company Letter to Shareholders;
Additional Being Acquired
Information About Each
Portfolio
Item 7. Voting Information Letter to Shareholders;
Voting Information
Item 8. Interest of Certain Persons and Not Applicable
Experts
Item 9. Additional Information Required Not Applicable
for Reoffering by Persons Deemed
to be Underwriters
<PAGE>
STATEMENT OF ADDITIONAL
INFORMATION CAPTION
PART B ------------------------
- ------
Item 10. Cover Page Statement of Additional
Information Cover Page
Item 11. Table of Contents Not Applicable
Item 12. Additional Information about the Statement of Additional
Information Registrant of The
Lazard Funds, Inc. dated May
1, 19991
Item 13. Additional Information about the Statement of Additional
Information Company being
Acquired of The Lazard Funds,
Inc. dated May 1, 19991
Item 14. Financial Statements Statement of Additional
Information of The Lazard
Funds, Inc. dated May 1,
19991
PART C
Item 15. Indemnification
Item 16. Exhibits
Item 17. Undertakings
- -------------------
1 Incorporated herein by reference to the Registration Statement of the
Registrant on Form N-1A dated May 1, 1999 (File No. 33-40682).
<PAGE>
LAZARD BANTAM VALUE PORTFOLIO
c/o The Lazard Funds, Inc.
30 Rockefeller Plaza
New York, New York 10112
Dear Shareholder:
As a shareholder in Lazard Bantam Value Portfolio, you are being asked
to vote on an important proposal to exchange your shares of Lazard Bantam Value
Portfolio for shares of Lazard Small Cap Portfolio. A shareholder meeting of the
Lazard Bantam Value Portfolio is scheduled for July 16, 1999. The enclosed
materials describe the proposal in detail.
Management has determined that it would be in the best interest of
shareholders to consolidate the Lazard Bantam Value Portfolio into the Lazard
Small Cap Portfolio. The Lazard Small Cap Portfolio has the same investment
objective and substantially similar management policies as those of the Lazard
Bantam Value Portfolio.
The exchange will not result in any sales charges and will not result
in the imposition of Federal income tax on you.
The Board Members recommend a vote "FOR" the proposal. Regardless of
the number of shares you own, it is important that they be represented and
voted. Please take the time to read the enclosed materials and SIGN, DATE AND
MAIL THE PROXY CARD AS SOON AS POSSIBLE. Your prompt response will help save the
expenses related to additional solicitation.
If you have any questions regarding the enclosed proxy materials, or
need assistance in voting your shares, please contact our proxy solicitor, D.F.
King & Co., at 1-800-848-3155 between the hours of 9:00 a.m. and 8:00 p.m., New
York time.
We appreciate the time and consideration that you can give to this
matter.
Sincerely,
Herbert W. Gullquist,
President, THE LAZARD FUNDS, INC.
June 7, 1999
<PAGE>
LAZARD BANTAM VALUE PORTFOLIO
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders:
A Special Meeting of Shareholders of Lazard Bantam Value Portfolio
(the "Portfolio"), a series of The Lazard Funds, Inc. (the "Fund"), will be held
at the offices of the Fund, 30 Rockefeller Plaza, 58th Floor, New York, New York
10112, on Friday, July 16, 1999 at 10:00 a.m. for the following purposes:
1. To approve or disapprove an Agreement and Plan of Reorganization
providing for the transfer of all of the Portfolio's assets (subject to
liabilities), attributable to its Institutional Shares and Open Shares, to the
Lazard Small Cap Portfolio (the "Small Cap Portfolio"), a series of the Fund,
solely in exchange (the "Exchange") for Institutional Shares and Open Shares,
respectively, of the Small Cap Portfolio. The Portfolio will distribute the
Institutional Shares and Open Shares of the Small Cap Portfolio received in the
Exchange to its Institutional Class and Open Class shareholders, respectively,
in an amount equal in net asset value to the Institutional Shares and Open
Shares, respectively, of the Portfolio held by such shareholders as of the date
of the Exchange, after which the Portfolio will be terminated as a series of the
Fund; and
2. To transact such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.
Shareholders of record at the close of business on June 1, 1999 will
be entitled to receive notice of and to vote at the meeting.
By Order of the Board of Directors
William G. Butterly, III
Secretary
New York, New York
June 7, 1999
===============================================================================
WE NEED YOUR PROXY VOTE IMMEDIATELY
A SHAREHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT IS VITAL. BY
LAW, THE MEETING OF SHAREHOLDERS WILL HAVE TO BE ADJOURNED WITHOUT CONDUCTING
ANY BUSINESS IF LESS THAN A QUORUM OF THE SHARES ELIGIBLE TO VOTE ARE
REPRESENTED. IN THAT EVENT, THE PORTFOLIO, AT SHAREHOLDERS' EXPENSE, WOULD
CONTINUE TO SOLICIT VOTES IN AN ATTEMPT TO ACHIEVE A QUORUM. CLEARLY, YOUR VOTE
COULD BE CRITICAL TO ENABLE THE PORTFOLIO TO HOLD THE MEETING AS SCHEDULED, SO
PLEASE RETURN YOUR PROXY CARD IMMEDIATELY. YOU AND ALL OTHER SHAREHOLDERS WILL
BENEFIT FROM YOUR COOPERATION.
===============================================================================
<PAGE>
June 1, 1999
TRANSFER OF THE ASSETS OF
LAZARD BANTAM VALUE PORTFOLIO
TO AND IN EXCHANGE FOR
INSTITUTIONAL SHARES AND OPEN SHARES OF
LAZARD SMALL CAP PORTFOLIO
PROSPECTUS/PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, JULY 16, 1999
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of The Lazard Funds, Inc. (the "Fund"), on
behalf of its Lazard Bantam Value Portfolio (the "Bantam Value Portfolio"), to
be used at the Special Meeting of Shareholders (the "Meeting") of the Bantam
Value Portfolio to be held on Friday, July 16, 1999 at 10:00 a.m., at the
offices of the Fund, 30 Rockefeller Plaza, 58th Floor, New York, New York 10112,
for the purposes set forth in the accompanying Notice of Special Meeting of
Shareholders. Shareholders of record at the close of business on June 1, 1999
(each, a "Shareholder" and, collectively, the "Shareholders") are entitled to
receive notice of and to vote at the Meeting.
It is proposed that the Bantam Value Portfolio transfer all of its
assets, subject to liabilities, attributable to its Institutional Shares and
Open Shares, to the Lazard Small Cap Portfolio, another series of the Fund (the
"Small Cap Portfolio," and, together with the Bantam Value Portfolio, the
"Portfolios"), in exchange (the "Exchange") for Institutional Shares and Open
Shares, respectively, of the Small Cap Portfolio (collectively, "Small Cap
Portfolio Shares"), all as more fully described herein. The investment objective
of the Small Cap Portfolio is capital appreciation. Upon completion of the
Exchange, Small Cap Portfolio Shares received by the Bantam Value Portfolio will
be distributed to Bantam Value Portfolio Shareholders, with each Bantam Value
Portfolio Shareholder receiving a pro rata distribution of Small Cap Portfolio
Shares (or fractions thereof) for Bantam Value Portfolio shares held prior to
the Exchange. Thus, each Shareholder will receive a number of Institutional
Shares or Open Shares of the Small Cap Portfolio (or fractions thereof) equal in
value to the aggregate net asset value of the Shareholder's Institutional Shares
or Open Shares, respectively, of the Bantam Value Portfolio as of the date of
the Exchange.
----------------------------------
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely information about the Small Cap Portfolio that
Shareholders should know before voting on the Proposal or receiving Small Cap
Portfolio Shares.
A Statement of Additional Information dated June 1, 1999, relating to
this Prospectus/Proxy Statement, has been filed with the Securities and Exchange
Commission (the "Commission") and is incorporated herein by reference in its
entirety. The Commission maintains a Web site (http://www.sec.gov) that contains
the Statement of Additional Information, material incorporated by reference, and
other information regarding the Small Cap Portfolio and the Bantam Value
Portfolio. For a free copy of the Statement of Additional Information, write to
the Fund at its principal executive offices located at 30 Rockefeller Plaza, New
York, New York 10112, or call 1-800-632-6000.
- -------------------------------------------------------------------------------
AN INVESTMENT IN A PORTFOLIO IS NOT A BANK DEPOSIT. IT IS NOT INSURED OR
GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. IT IS NOT A COMPLETE
INVESTMENT PROGRAM. YOU COULD LOSE MONEY IN A PORTFOLIO, BUT YOU ALSO HAVE THE
POTENTIAL TO MAKE MONEY.
- -------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SECURITIES DESCRIBED IN THIS PROSPECTUS/PROXY STATEMENT OR DETERMINED WHETHER
THIS PROSPECTUS/PROXY STATEMENT IS TRUTHFUL OR COMPLETE. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A CRIME.
- -------------------------------------------------------------------------------
<PAGE>
Each Portfolio is an open-end management investment company, with the
same investment adviser, distributor and investment objective. Both Portfolios
also have substantially similar management policies. The substantive differences
between the Bantam Value Portfolio and the Small Cap Portfolio are set forth in
this Prospectus/Proxy Statement.
The Fund's Prospectus dated May 1, 1999, as revised June 1, 1999, and
Annual Report for the fiscal year ended December 31, 1998 accompany this
Prospectus/Proxy Statement and are incorporated herein by reference.
Shareholders are entitled to one vote for each Bantam Value Portfolio
share held and fractional votes for each fractional Bantam Value Portfolio share
held. Institutional Class and Open Class Shareholders will vote together on the
Proposal. Bantam Value Portfolio shares represented by executed and unrevoked
proxies will be voted in accordance with the specifications made thereon. If the
enclosed form of proxy is executed and returned, it nevertheless may be revoked
by giving another proxy or by letter or telegram directed to the Bantam Value
Portfolio, which must indicate the Shareholder's name and account number. To be
effective, such revocation must be received before the Meeting. Also, any
Shareholder who attends the Meeting in person may vote by ballot at the Meeting,
thereby canceling any proxy previously given. As of May 14, 1999, there were
3,774,681 Institutional Shares and 321,973 Open Shares of the Bantam Value
Portfolio issued and outstanding.
Proxy materials will be mailed to shareholders of record on or about
June 7, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Summary.................................................................
Reasons for the Exchange................................................
Information about the Exchange..........................................
Additional Information about each Portfolio.............................
Voting Information......................................................
Financial Statements and Experts........................................
Other Matters...........................................................
Notice to Banks, Broker/Dealers and
Voting Trustees and Their Nominees....................................
Appendix A:Form of Agreement and
Plan of Reorganization................................................. A-1
<PAGE>
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION PROVIDING FOR THE
TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE BANTAM VALUE
PORTFOLIO TO THE SMALL CAP PORTFOLIO
SUMMARY
This Summary is qualified by reference to the more complete
information contained elsewhere in this Prospectus/Proxy Statement, the Fund's
Prospectus and the form of Agreement and Plan of Reorganization attached to this
Prospectus/Proxy Statement as Appendix A.
PROPOSED TRANSACTION. The Fund's Board, including the Board members
who are not "interested persons" (as defined in the Investment Company Act of
1940, as amended (the "1940 Act")), has unanimously approved an Agreement and
Plan of Reorganization (the "Plan"). The Plan provides that, subject to the
requisite approval of Bantam Value Portfolio Shareholders, the Bantam Value
Portfolio transfer to the Small Cap Portfolio all of its assets (subject to
liabilities), attributable to its Institutional Shares and Open Shares, in
exchange for Institutional Shares and Open Shares, respectively, of the Small
Cap Portfolio having an aggregate net asset value equal to the aggregate net
asset value of the Institutional Shares and Open Shares, respectively, of the
Bantam Value Portfolio as of the closing date of the Exchange. The Bantam Value
Portfolio will distribute such Small Cap Portfolio Shares among its
Shareholders. Each Institutional Class and Open Class Shareholder of the Bantam
Value Portfolio will receive Institutional Shares and Open Shares, respectively,
of the Small Cap Portfolio (or fractions thereof), having an aggregate net asset
value equal to the aggregate net asset value of the Shareholder's Institutional
Shares or Open Shares of the Bantam Value Portfolio as of the date of the
Exchange. Thereafter, the Bantam Value Portfolio will be terminated as a series
of the Fund.
As a result of the Exchange, each Shareholder will cease to be a
shareholder of the Bantam Value Portfolio and will become a shareholder of the
Small Cap Portfolio as of the close of business on the closing date of the
Exchange.
The Fund's Board has concluded unanimously that the Exchange would be
in the best interests of Shareholders of the Bantam Value Portfolio and the
interests of existing Shareholders of the Bantam Value Portfolio would not be
diluted as a result of the transactions contemplated thereby. See "Reasons for
the Exchange."
TAX CONSEQUENCES. The Exchange is designed to qualify for Federal
income tax purposes as a tax-free reorganization. As a condition to the closing
of the Exchange, each Portfolio will receive an opinion of counsel to the effect
that, for Federal income tax purposes, (a) no gain or loss will be recognized by
Bantam Value Portfolio Shareholders for Federal income tax purposes as a result
of the Exchange, (b) the holding period and aggregate tax basis of the Small Cap
Portfolio Shares received by a Bantam Value Portfolio Shareholder will be the
same as the holding period and aggregate tax basis of the Shareholder's Bantam
Value Portfolio shares, and (c) the holding period and tax basis of the Bantam
Value Portfolio's assets transferred to the Small Cap Portfolio as a result of
the Exchange will be the same as the holding period and tax basis of such assets
held by the Bantam Value Portfolio immediately prior to the Exchange. See
"Information about the Exchange--Tax Consequences."
COMPARISON OF THE PORTFOLIOS. The following discussion is qualified by
the more complete information set forth in the Fund's Prospectus, which is
incorporated herein by reference.
GENERAL. Each Portfolio is an open-end, management investment company
advised by Lazard Asset Management ("LAM"). Each Portfolio has the same
investment objective, namely to seek capital appreciation.
The management policies of the Portfolios are substantially similar in
that each Portfolio seeks to achieve its investment objective by investing
primarily in equity securities, principally common stocks, of U.S. companies
that LAM believes are undervalued based on earnings, cash flow and asset values.
The Bantam Value Portfolio invests primarily in U.S. companies with a market
capitalization under $500 million, while the Small Cap Portfolio invests
primarily in U.S. companies with a market capitalization in the range of
companies represented in the Russell 2000 Index. The Russell 2000 Index is
composed of selected common stocks of small, generally unseasoned U.S. companies
with market capitalizations generally ranging between $250 million and $2.5
billion.
Under normal market conditions, each Portfolio invests at least 80% of
its total assets in small capitalization equity securities, which include common
stocks, preferred stocks, convertible securities and warrants. The Bantam Value
Portfolio also may invest in American and Global Depositary Receipts ("ADRs and
GDRs"); the Small Cap Portfolio may not invest in ADRs and GDRs. Each Portfolio
may invest up to 20% of its total assets in larger capitalization equity
securities or investment grade debt securities, including cash equivalents. The
Bantam Value Portfolio may invest up to 10% of its total assets in foreign
securities trading in U.S. markets; the Small Cap Portfolio may not invest in
these securities.
Each Portfolio may engage in lending portfolio securities. In
addition, the Bantam Value Portfolio may engage--and the Small Cap Portfolio
may not engage--in options transactions and leveraging.
For more information on either Portfolio's management policies, see
"Investment Objectives, Strategies and Risks--Lazard Small Cap Portfolio" and
"--Lazard Bantam Value Portfolio" in the Fund's Prospectus.
RISK FACTORS. The investment risks of each Portfolio are substantially
similar. Each Portfolio invests primarily in common stocks of small
capitalization U.S. companies that LAM believes are undervalued. Because stocks
fluctuate in price, the value of your investment in either Portfolio will
fluctuate, which means that you could lose money. A Portfolio's stock
investments could cause sudden drops in share price or contribute to long-term
underperformance. 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. Value stocks
involve the risk that they may never reach what LAM believes is their full
market value. Each Portfolio is a non-diversified investment company, meaning
that the proportion of its assets that may be invested in the securities of a
single issuer is not limited by the 1940 Act. Accordingly, each Portfolio's
securities may be more sensitive to changes in the market value of a single
company or industry. In addition, the Bantam Value Portfolio may invest in ADRs
and GDRs and may engage in options transactions and leveraging. These securities
and investment techniques involve added risks to which the Small Cap Portfolio
is not subject.
See "Investment Objectives, Strategies and Risks--Lazard Small Cap
Portfolio---Risk Factors" and "--Lazard Bantam Value Portfolio--Risk Factors" in
the Fund's Prospectus for a further description of investment risks.
FEES AND EXPENSES. The following information concerning fees and
expenses of each Portfolio is derived from information set forth under the
caption "Risk/Return Summary and Portfolio Expenses--Lazard Small Cap Portfolio"
and "--Lazard Bantam Value Portfolio" in the Fund's Prospectus. Annual portfolio
operating expenses set forth below are for the fiscal year ended December 31,
1998 for the Small Cap Portfolio and for the fiscal year ending December 31,
1999 for the Bantam Value Portfolio. The "Pro Forma After Exchange" information
is based on assets of each Portfolio as of May 14, 1999. Annual portfolio
operating expenses are paid out of Portfolio assets, so their effect is included
in the Portfolio's share price.
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO
OPERATING EXPENSES
(expenses that are
deducted from
Portfolio assets):
PRO FORMA AFTER
EXCHANGE
SMALL CAP BANTAM VALUE SMALL CAP
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------- ----------------------- ----------------------
INSTITU- INSTITU- INSTITU-
TIONAL OPEN TIONAL OPEN TIONAL OPEN
SHARES SHARES SHARES SHARES SHARES SHARES
-------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Management Fees .75% .75% .75% .75% .75% .75%
Distribution and Service
(12b-1)Fees none .25% none .25% none .25%
Other Expenses .06% .09% .34% .60% .06% .09%
Total Annual Portfolio
Operating Expenses .81% 1.09% 1.09% 1.60% .81% 1.09%
Fee Waiver and
Expense Reimbursement* N/A N/A .04% .25% N/A N/A
Net Expenses* .81% 1.09% 1.05% 1.35% .81% 1.09%
- -----------------------
* Reflects a contractual obligation by LAM to reimburse the Bantam Value
Portfolio through December 31, 1999 to the extent Total Annual Portfolio
Operating Expenses exceed 1.05% and 1.35% of the average daily net assets
of the Bantam Value Portfolio's Institutional Shares and Open Shares,
respectively.
</TABLE>
EXAMPLE
This example is intended to help you compare the costs of investing in
the Bantam Value Portfolio, the Small Cap Portfolio and the combined Portfolio
after the Exchange. It uses the same hypothetical conditions other funds use in
their prospectuses: $10,000 initial investment, 5% total return each year and no
changes in operating expenses, except for the first year periods for the Bantam
Value Portfolio. The figures shown would be the same whether you sold your
shares at the end of a period or kept them. Because actual return and expenses
will be different, your actual costs may be higher or lower.
<TABLE>
<CAPTION>
PRO FORMA
AFTER EXCHANGE
SMALL CAP BANTAM VALUE SMALL CAP
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- --------------------- ---------------------
INSTITU- INSTITU- INSTITU-
TIONAL OPEN TIONAL OPEN TIONAL OPEN
SHARES SHARES SHARES SHARES SHARES SHARES
------- ------ -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
1 Year $83 $111 $107* $137* $ 83 $111
3 Years $259 $347 $343* $481* $259 $347
5 Years $450 $601 $597* $847* $450 $601
10 Years $1,002 $1,329 $1,325* $1,879* $1,002 $1,329
- ---------------------
* Year 1 fees and expenses are based on a contractual agreement.
</TABLE>
PAST PERFORMANCE. The two tables below show the Small Cap Portfolio's
annual returns for its Institutional Shares and long-term performance for its
Institutional Shares and Open Shares. The first table shows you how the Small
Cap Portfolio's performance has varied from year to year. The second compares
the Small Cap Portfolio's performance over time to that of the Russell 2000
Index. Both tables assume reinvestment of dividends and distributions. For
performance information of the Bantam Value Portfolio, see the Fund's Prospectus
under the caption of "Risk/Return Summary and Portfolio Expenses--Lazard Bantam
Value Portfolio." As with all mutual funds, the past is not a prediction of the
future.
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 EACH YEAR (%)
INSTITUTIONAL SHARES
24.75% 30.09% 2.03% 21.52% 23.93% 28.06% (12.62)%
- --------------------------------------------------------------------
'92 '93 '94 '95 '96 '97 '98
Best Quarter: Q4 '98 +18.39%
Worst Quarter: Q3 '98 -25.53%
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
Since
1 Year 5 Years Inception
Institutional Shares (12.62%) 11.45% 16.11%1
Open Shares (12.86%) N/A 4.82%2
Russell 2000 Index (2.55%) 11.86% 13.89%
(Institutional)
8.49%
(Open)
- -------------
1 Inception date was 10/30/91.
2 Inception date was 1/30/97.
INVESTMENT RESTRICTIONS. The 1940 Act requires that certain investment
policies and restrictions be designated as fundamental policies that cannot be
changed without shareholder approval. In addition, the Bantam Value Portfolio
has adopted certain non-fundamental policies which may be changed by vote of a
majority of the Fund's Board members at any time. The investment policies and
restrictions of the Portfolios are substantially similar. Differences between
the Portfolios are noted below, although none of these differences has any
material effect on the portfolio management of the Portfolios.
The Small Cap Portfolio may borrow money from banks for temporary
purposes up to 15% of the value of its total assets. The Bantam Value Portfolio
may borrow money to the extent permitted under the 1940 Act (which currently
limits borrowing to no more than 33-1/3% of the Portfolio's total assets). The
Small Cap Portfolio may lend portfolio securities up to 33-1/3% of its total
assets, while the Bantam Value Portfolio may lend portfolio securities up to 10%
of its total assets. The Small Cap Portfolio may not purchase securities of
other investment companies, except in connection with a merger, consolidation or
reorganization. The Bantam Value Portfolio has adopted this investment
restriction as a non-fundamental policy. In addition, the Bantam Value Portfolio
has a non-fundamental policy permitting it to purchase securities of other
investment companies to the extent permitted under the 1940 Act (which currently
limits such purchases to 10% of the Portfolio's total assets in securities of
all other investment companies, 5% of the Portfolio's total assets in the
securities of any one investment company or 3% of the total voting stock of
anyone investment company). Neither Portfolio may purchase or sell real estate
or real estate limited partnership interests, except that the Bantam Value
Portfolio may purchase and sell securities that are secured by real estate.
Neither Portfolio may purchase or sell commodities or commodity contracts,
except that the Bantam Value Portfolio may purchase and sell swaps, options,
futures and forward contracts, including those relating to indices. Neither
Portfolio may invest in interests in oil and gas; this investment restriction is
a non-fundamental policy of the Bantam Value Portfolio. Neither Portfolio may
make short sales; this investment restriction is a non-fundamental policy of the
Bantam Value Portfolio. Neither Portfolio may make investments for the purpose
of exercising control or management; this investment restriction is a
non-fundamental policy of the Bantam Value Portfolio. In all other respects, the
investment policies and restrictions of the Portfolios are identical.
INVESTMENT ADVISER. LAM serves as both the Bantam Value Portfolio's
and the Small Cap Portfolio's investment adviser. LAM 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 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. LAM provides investment management services to client discretionary
accounts with assets totaling approximately $64 billion as of March 31, 1999.
Each Portfolio's primary portfolio managers are Herbert W. Gullquist
and Eileen Alexanderson. Mr. Gullquist has been Vice Chairman of LAM since 1997.
He joined LAM in November, 1982. Ms. Alexanderson has been a Managing Director
of LAM since January, 1997. Prior thereto, she was a Senior Vice President of
LAM. She joined LAM in 1979.
CAPITALIZATION. Each Portfolio has classified its shares into two
classes--Institutional Shares and Open Shares. The following table sets forth as
of December 31, 1998 (1) the capitalization of each class of the Bantam Value
Portfolio, (2) the capitalization of each class of the Small Cap Portfolio, and
(3) the pro forma capitalization of the Small Cap Portfolio, as adjusted showing
the effect of the Exchange had it occurred on such date.
<TABLE>
<CAPTION>
PRO FORMA
AFTER EXCHANGE
SMALL CAP BANTAM VALUE SMALL CAP
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------- --------------------- ---------------------------
INSTITUTIONAL OPEN INSTITUTIONAL OPEN INSTITUTIONAL OPEN
SHARES SHARES SHARES SHARES SHARES SHARES
-------------- ------------ -------------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Total net $1,411,502,906 $93,547,363 $59,737,554 $7,056,688 $1,471,240,460 $100,604,051
assets
Net asset
value per share $17.39 $17.35 $12.19 $12.11 $17.39 $17.35
Shares outstanding 81,187,480 5,391,454 4,899,918 582,897 84,602,672 5,798,504
</TABLE>
<PAGE>
As of May 14, 1999, there were 57,555,982 Institutional Shares of the
Small Cap Portfolio outstanding at a net asset value per share of $18.52 and
5,657,079 Open Shares of the Small Cap Portfolio outstanding at a net asset
value per share of $18.46. As of such date, there were 3,774,681 Institutional
Shares of the Bantam Value Portfolio outstanding at a net asset value per share
of $13.61 and 321,973 Open Shares of the Bantam Value Portfolio outstanding at a
net asset value per share of $13.49. For information as to beneficial or record
ownership of shares of the Bantam Value Portfolio and Small Cap Portfolio, see
"Voting Information" below.
PURCHASE PROCEDURES. The purchase procedures of the Bantam Value
Portfolio and the Small Cap Portfolio with respect to each corresponding class
of shares are identical. See "Shareholder Information--How to Buy Shares" in the
Fund's Prospectus for a complete discussion of purchase procedures.
REDEMPTION PROCEDURES. The redemption procedures of the Bantam Value
Portfolio and the Small Cap Portfolio with respect to each class of shares are
identical. See "Shareholder Information--Selling Shares" in the Fund's
Prospectus for a complete discussion of redemption procedures.
DISTRIBUTIONS. The dividend and distribution policies of each
Portfolio are identical. See "Account Policies, Dividends and Taxes" in the
Fund's Prospectus for a complete discussion of such policies.
<PAGE>
SHAREHOLDER SERVICES. The shareholder services (including the Exchange
Privilege) offered by the Bantam Value Portfolio and the Small Cap Portfolio
with respect to each corresponding class of shares are identical. See
"Shareholder Information--Investor Services" in the Fund's Prospectus for a
complete description of shareholder services.
DISTRIBUTION AND SERVICING (12B-1) PLAN. The Fund on behalf of each
Portfolio has adopted a Distribution and Servicing Plan pursuant to Rule 12b-1
under the 1940 Act with respect to the Portfolio's Open Shares. The Plan is
identical as to each Portfolio. Under the Plan, the Fund pays its distributor
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 the
annual rate of .25% of the value of the daily net assets of the Portfolio's Open
Shares. Because this fee is paid out of the Portfolio's assets on an ongoing
basis, over time it will increase the cost of your investment and may cost you
more than paying other types of sales charges.
REASONS FOR THE EXCHANGE
The Fund's Board members have concluded that the Exchange is in the
best interests of each Portfolio's shareholders. The Board believes that the
Exchange will permit shareholders to pursue the same investment objective in a
larger fund without diluting shareholders' interests. The Bantam Value Portfolio
has been unable to attract sufficient assets to operate efficiently without
expense subsidization. As of May 14, 1999, the Bantam Value Portfolio had assets
under management of approximately $55,700,000. The expense ratio of the Small
Cap Portfolio is lower than that of the Bantam Value Portfolio. By combining the
Bantam Value Portfolio with the Small Cap Portfolio, Bantam Value Portfolio
Shareholders should obtain the benefits of economies of scale, which may result
in lower overall expense ratios by spreading the fixed costs of fund operations
over a larger asset base.
In determining whether to recommend approval of the Exchange, the
Board considered the following factors, among others: (1) the compatibility of
each Portfolio's investment objective, management policies and investment
restrictions, as well as shareholder services offered by each Portfolio; (2) the
terms and conditions of the Exchange and their conclusion that the Exchange
would not result in dilution of shareholder interests; (3) expense ratios and
published information regarding the fees and expenses of each Portfolio, as well
as the expense ratios of similar funds and the estimated expense ratio of the
combined Portfolio; (4) the tax-free nature of the Exchange; and (5) the
estimated costs incurred by each Portfolio as a result of the Exchange. In
addition, the Board considered the Bantam Value Portfolio's inability to attract
sufficient assets to operate efficiently without expense subsidization.
<PAGE>
INFORMATION ABOUT THE EXCHANGE
PLAN OF EXCHANGE. The following summary of the Plan is qualified in
its entirety by reference to the form of Plan attached hereto as Appendix A. The
Plan provides that the Small Cap Portfolio will acquire all of the assets of the
Bantam Value Portfolio, in exchange for Small Cap Portfolio Shares, and assume
the Bantam Value Portfolio's liabilities on July 30, 1999 or such later date as
may be agreed upon by the parties (the "Closing Date"). The number and Class of
Small Cap Portfolio Shares to be issued to the Bantam Value Portfolio will be
determined on the basis of the relative net asset values per share and aggregate
net assets of the respective Class of shares of each Portfolio, generally
computed as of the close of trading on the floor of the New York Stock Exchange
(currently at 4:00 p.m., New York time) (except for options and futures
contracts, if any, which will be valued 15 minutes after the close of trading)
on the Closing Date (the "Valuation Time"). Portfolio securities of each
Portfolio will be valued in accordance with the valuation practices of the Small
Cap Portfolio, which are described under the caption "Shareholder Information --
General" in the Fund's Prospectus and under the caption "Determination of Net
Asset Value" in the Statement of Additional Information.
Before the Closing Date, the Bantam Value Portfolio will declare a
dividend or other distribution which, together with all previous dividends and
other distributions, will have the effect of distributing to Bantam Value
Portfolio Shareholders all of the Bantam Value Portfolio's previously
undistributed investment company taxable income (computed without regard to any
deduction for dividends paid) and all of its net capital gains realized in the
taxable year ending on or prior to the Closing Date (after reduction for any
capital loss carryforward).
As conveniently as practicable after the Closing Date, the Bantam
Value Portfolio will distribute pro rata to its Institutional Class and Open
Class shareholders of record as of the Valuation Time, in liquidation of the
Bantam Value Portfolio, Institutional Shares and Open Shares, respectively, of
the Small Cap Portfolio received by it in the Exchange. Such distribution will
be accomplished by establishing an account on the share records of the Small Cap
Portfolio in the name of each Bantam Value Portfolio Shareholder, each account
representing the respective pro rata number of Small Cap Portfolio Shares due to
each Bantam Value Portfolio Shareholder. After such distribution and the winding
up of its affairs, the Bantam Value Portfolio will be terminated as a series of
the Fund. After the Closing Date, any outstanding certificates representing
Bantam Value Portfolio Shares will represent the Small Cap Portfolio Shares
distributed to the record holders of the Bantam Value Portfolio. Upon
presentation to the transfer agent of the Small Cap Portfolio, Bantam Value
Portfolio Share certificates will be exchanged for Small Cap Portfolio Share
certificates, at the applicable exchange rate. Certificates for Small Cap
Portfolio Shares will be issued only upon the investor's written request.
The Plan may be amended at any time prior to the Exchange. The Bantam
Value Portfolio will provide its Shareholders with information describing any
material amendment to the Plan prior to the Meeting. The obligations of each
Portfolio under the Plan are subject to various conditions, including approval
by the requisite number of Bantam Value Portfolio Shares and the continuing
accuracy of various representations and warranties of each Portfolio being
confirmed by the respective parties.
The total expenses of the Exchange are expected to be approximately
$30,000, and will be borne pro rata according to the aggregate net assets of
each Portfolio.
If the Exchange is not approved by Shareholders of the Bantam Value
Portfolio, the Fund's Board will consider other appropriate courses of action.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of the Bantam Value
Portfolio's assets for Small Cap Portfolio Shares is intended to qualify for
Federal income tax purposes as a tax-free reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"). As a condition to
the closing of the Exchange, each Portfolio will receive the opinion of Stroock
& Stroock & Lavan LLP, counsel to each Portfolio, substantially to the effect
that, on the basis of the existing provisions of the Code, Treasury regulations
issued thereunder, current administrative regulations and pronouncements and
court decisions, and certain facts, assumptions and representations, for Federal
income tax purposes: (1) the transfer of all of the Bantam Value Portfolio's
assets in exchange for Small Cap Portfolio Shares and the assumption by the
Small Cap Portfolio of the Bantam Value Portfolio's liabilities will constitute
a "reorganization" within the meaning of Section 368(a)(1)(C)of the Code; (2) no
gain or loss will be recognized by the Bantam Value Portfolio upon the transfer
of its assets to the Small Cap Portfolio solely in exchange for Small Cap
Portfolio Shares and the assumption by the Small Cap Portfolio of the Bantam
Value Portfolio's liabilities or upon the distribution (whether actual or
constructive) of Small Cap Portfolio Shares to the Bantam Value Portfolio
Shareholders in exchange for their Bantam Value Portfolio Shares; (3) no gain or
loss will be recognized by the Small Cap Portfolio upon the receipt of the
Bantam Value Portfolio's assets solely in exchange for Small Cap Portfolio
Shares and the assumption by the Small Cap Portfolio of the Bantam Value
Portfolio's liabilities; (4) no gain or loss will be recognized by the Bantam
Value Portfolio Shareholders upon the exchange of Bantam Value Portfolio Shares
for Small Cap Portfolio Shares; (5) the aggregate tax basis for Small Cap
Portfolio Shares received by each Bantam Value Portfolio Shareholder pursuant to
the Exchange will be the same as the aggregate tax basis for Bantam Value
Portfolio Shares held by such Shareholder immediately prior to the Exchange, and
the holding period of Small Cap Portfolio Shares to be received by each Bantam
Value Portfolio Shareholder will include the period during which the Bantam
Value Portfolio Shares surrendered in exchange therefor were held by such
Shareholder (provided the Bantam Value Portfolio Shares were held as capital
assets on the date of the Exchange); and (6) the tax basis of the Bantam Value
Portfolio's assets acquired by the Small Cap Portfolio will be the same as the
tax basis of such assets to the Bantam Value Portfolio immediately prior to the
Exchange, and the holding period of the Bantam Value Portfolio's assets in the
hands of the Small Cap Portfolio will include the period during which those
assets were held by the Bantam Value Portfolio.
No opinion will be expressed as to the effect of the reorganization on
(i) the Bantam Value Portfolio or the Small Cap Portfolio with respect to any
asset as to which any unrealized gain or loss is required to be recognized for
Federal income tax purposes at the end of a taxable year (or on the termination
or transfer thereof) under a mark-to-market system of accounting, and (ii) any
Bantam Value Portfolio Shareholder that is required to recognize unrealized
gains and losses for Federal income tax purposes under a mark-to-market system
of accounting.
NEITHER PORTFOLIO HAS SOUGHT A TAX RULING FROM THE INTERNAL REVENUE
SERVICE ("IRS"). THE OPINION OF COUNSEL IS NOT BINDING ON THE IRS NOR DOES IT
PRECLUDE THE IRS FROM ADOPTING A CONTRARY POSITION. Bantam Value Portfolio
Shareholders should consult their tax advisers regarding the effect, if any, of
the proposed Exchange in light of their individual circumstances. Since the
foregoing discussion relates only to the Federal income tax consequences of the
Exchange, Bantam Value Portfolio Shareholders also should consult their tax
advisers as to state and local tax consequences, if any, of the Exchange.
REQUIRED VOTE AND BOARD'S RECOMMENDATION
The Fund's Board has approved the Plan and the Exchange and has
determined that (i) participation in the Exchange is in the Bantam Value
Portfolio's best interests and (ii) the interests of Bantam Value Portfolio
Shareholders will not be diluted as a result of the Exchange. An affirmative
vote of a majority of the Bantam Value Portfolio's outstanding shares is
required to approve the Plan and the Exchange.
THE FUND'S BOARD, INCLUDING THE "NON-INTERESTED" BOARD MEMBERS,
RECOMMENDS THAT BANTAM VALUE PORTFOLIO SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
PLAN AND THE EXCHANGE.
ADDITIONAL INFORMATION ABOUT EACH PORTFOLIO
Information about the Portfolios is incorporated by reference into
this Prospectus/Proxy Statement from the Fund's Prospectus and Statement of
Additional Information, each dated May 1, 1999, forming a part of its
Registration Statement on Form N-1A (File No. 33-40682).
<PAGE>
Each Portfolio is subject to the requirements of the 1940 Act, and
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Fund may be inspected and copied at the Public
Reference Facilities of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at the Northeast regional office of the Commission at
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material also can be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549, at prescribed rates.
VOTING INFORMATION
In addition to the use of the mails, proxies may be solicited
personally, by telephone or by telegraph, and the Bantam Value Portfolio may pay
persons holding its Shares in their names or those of their nominees for their
expenses in sending soliciting materials to their principals. The Bantam Value
Portfolio may retain an outside firm to assist in the solicitation of proxies
primarily by contacting shareholders by telephone and telegram, which would cost
approximately $10,000 and would be borne pro rata between the Portfolios.
Authorizations to execute proxies may be obtained by telephonic or
electronically transmitted instructions in accordance with procedures designed
to authenticate the shareholder's identity.
<PAGE>
In all cases where a telephonic proxy is solicited, the shareholder
will be asked to provide his or her address, social security number (in the case
of an individual) or taxpayer identification number (in the case of a
non-individual) and the number of shares owned and to confirm that the
shareholder has received the Prospectus/Proxy Statement and proxy card in the
mail. Within 72 hours of receiving a shareholder's telephonic or electronically
transmitted voting instructions, a confirmation will be sent to the shareholder
to ensure that the vote has been taken in accordance with the shareholder's
instructions and to provide a telephone number to call immediately if the
shareholder's instructions are not correctly reflected in the confirmation.
Shareholders requiring further information with respect to telephonic or
electronically transmitted voting instructions or the proxy generally should
contact D.F. King & Co., Inc. toll free at 1-800-848-3155 between the hours of
9:00 a.m. and 8:00 p.m., New York time. Any shareholder giving a proxy may
revoke it at any time before it is exercised by submitting to the Fund a written
notice of revocation or a subsequently executed proxy or by attending the
Meeting and voting in person.
If a proxy is properly executed and returned accompanied by
instructions to withhold authority to vote, represents a broker "non-vote" (that
is, a proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to vote
Bantam Value Portfolio Shares on a particular matter with respect to which the
broker or nominee does not have discretionary power) or is marked with an
abstention (collectively, "abstentions"), the Bantam Value Portfolio Shares
represented thereby will be considered to be present at the Meeting for purposes
of determining the existence of a quorum for the transaction of business.
Abstentions will not constitute a vote "for" or "against" a matter and will be
disregarded in determining the "votes cast" on an issue. For this reason,
abstentions will have the effect of a "no" vote for the purpose of obtaining
requisite approval for the Proposal.
If a quorum is not present at the Meeting, or if a quorum is present
but sufficient votes to approve the Proposal are not received, the persons named
as proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether to adjourn the Meeting, the
following factors may be considered: the nature of the Proposal, the percentage
of votes actually cast, the percentage of negative votes actually cast, the
nature of any further solicitation and the information to be provided to
Shareholders with respect to the reasons for the solicitation. Any adjournment
will require the affirmative vote of a majority of those shares affected by the
adjournment that are represented at the Meeting in person or by proxy. If a
quorum is present, the persons named as proxies will vote those proxies which
they are entitled to vote "FOR" the Proposal in favor of such adjournment, and
will vote those proxies required to be voted "AGAINST" the Proposal against any
adjournment. A quorum is constituted with respect to the Bantam Value Portfolio
by the presence in person or by proxy of the holders of more than one-third of
the outstanding Bantam Value Portfolio Shares entitled to vote at the Meeting.
The votes of Small Cap Portfolio Shareholders are not being solicited
since their approval or consent is not necessary for the Exchange.
As of May 14, 1999, the following Shareholders were known by the
Bantam Value Portfolio to own of record 5% or more of the outstanding voting
shares of the indicated Class of the Bantam Value Portfolio:
<TABLE>
<CAPTION>
NAME AND ADDRESS BANTAM VALUE PORTFOLIO
- ---------------- -----------------------------------------------------------------
PERCENTAGE OF
NUMBER OF SHARES SHARES OUTSTANDING
---------------- -------------------
BEFORE AFTER
EXCHANGE EXCHANGE
-------- ---------
Institutional Class
<S> <C> <C> <C>
Lazard Freres and Co. LLC 427,936.68 11.34% .52%
United Food and Commercial
Workers
Unions & Employers Pension Fund
30 Rockefeller Plaza
New York, NY 10112
Lazard Freres and Co. LLC 333,942.42 8.85% .41%
National Automatic Sprinkler
Industry Small Cap Pension FD
Board of Trustees
c/o Michael Jacobson
30 Rockefeller Plaza
New York, NY 10112
Lazard Freres and Co. LLC
Graphic Communications Int'l
Union Supplemental Retirement &
Disability Fund--Small Cap
Attn: Mr. G.L. Griesbauer, Jr. 331,234.54 8.78% .40%
30 Rockefeller Plaza
New York, NY 10112
Lazard Freres and Co. LLC 294,155.49 7.80% .36%
Ursinus College
Attn: Business Office
P.O. Box 1000 Main Street
Collegeville, PA 19426-1000
Lazard Freres and Co. LLC 209,999.69 5.57% .26%
Maytag Corporation Pension Plan
Attn: Ms. Cheryl J. Ritter
403 West 4th Street North
Newton, IA 50208-3026
Lazard Freres and Co. LLC 189,586.32 5.02% .23%
Davenport International-Bantam
Bld Associates
Attn: Brett Rousch
30 Rockefeller Plaza
New York, NY 10112
Open Class
Charles Schwab & Co. Inc. 38,855.58 12.64% .48%
Special Custody Account
For Benefit of Customers
Attn: Mutual FD
101 Montgomery Street
San Francisco, CA 94104
Wendel & Co. #725000 26,481.34 8.62% .33%
The Bank of New York
Mutual Fund/Reorg. Dept.
P.O. Box 1066
Wall Street Station
New York, NY 10268-1066
</TABLE>
As of May 14, 1999, the following were known by the Small Cap
Portfolio to own of record 5% or more of the outstanding voting shares of the
indicated Class of the Small Cap Portfolio:
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP PORTFOLIO
-----------------------------------------------
PERCENTAGE OF SHARES
NAME AND ADDRESS NUMBER OF SHARES OUTSTANDING
- ---------------- ----------------- --------------------
BEFORE AFTER
EXCHANGE EXCHANGE
---------- ----------
Institutional Class
<S> <C> <C> <C>
Lazard Freres and Co. LLC 5,399,058.14 9.40% 8.95%
Mercantile Safe Dep & Tru Co. CUS
for Bakery & Confectionery Int'l
Pension--Small Cap-A/C 26501-25
Attn: Charles Loritz
30 Rockefeller Plaza
New York, NY 10112
Northern Trust TTTEE 3,742,709.01 6.52% 6.20%
FBO ITT Industries Master
Retirement Trust #22-51598
P.O. Box 92956
Chicago, IL 60675-2956
Open Class
Connecticut General Life Ins. Co. 3,648,684.73 64.57% 61.91%
One Commercial Plaza
280 Trumbull Street
Attn: Liz Pezda H-19-B
P.O. Box 2975
Hartford, CT 06104-2975
Charles Schwab & Co. Inc. 379,955.87 6.72% 6.45%
Special Custody Account
For Benefit of Customers
Attn: Mutual FD
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
A shareholder who beneficially owns, directly or indirectly, more than
25% of a Portfolio's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of that Portfolio.
As of May 14, 1999, Board members and officers of the Fund, as a
group, owned less than 1% of the Small Cap Portfolio's outstanding shares. As of
May 14, 1999, Board members and officers of the Fund, as a group, owned less
than 1% of the Bantam Value Portfolio's outstanding shares.
<PAGE>
FINANCIAL STATEMENTS AND EXPERTS
The audited financial statements of the Bantam Value Portfolio and the
Small Cap Portfolio for the fiscal year ended December 31, 1998 have been
incorporated herein by reference in reliance upon the authority of the report
given by Anchin, Block & Anchin LLP, the Fund's independent auditors.
OTHER MATTERS
The Fund's Board members are not aware of any other matters which may
come before the Meeting. However, should any such matters properly come before
the Meeting, it is the intention of the persons named in the accompanying form
of proxy to vote the proxy in accordance with their judgment on such matters.
NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES
AND THEIR NOMINEES
Please advise the Bantam Value Portfolio, in care of D.F. King & Co.,
Inc., 77 Water Street, New York, NY 10005, whether other persons are the
beneficial owners of Bantam Value Portfolio Shares for which proxies are being
solicited from you, and, if so, the number of copies of the Prospectus/Proxy
Statement and other soliciting material you wish to receive in order to supply
copies to the beneficial owners of such Shares.
<PAGE>
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS WHO
DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO COMPLETE, DATE, SIGN
AND RETURN THE PROXY CARD IN THE ENCLOSED STAMPED ENVELOPE.
<PAGE>
APPENDIX A
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated May 6, 1999 (the
"Agreement"), between THE LAZARD FUNDS, INC., a Maryland corporation (the
"Fund"), on behalf of its Lazard Bantam Value Portfolio (the "Bantam Value
Portfolio"), and the Fund, on behalf of its Lazard Small Cap Portfolio (the
"Small Cap Portfolio" and, together with the Bantam Value Portfolio, the
"Portfolios").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of the
assets of the Bantam Value Portfolio, attributable to such Portfolio's
Institutional Shares and Open Shares, in exchange solely for Institutional
Shares and Open Shares, respectively, of common stock, par value $.001 per
share, of the Small Cap Portfolio (collectively, "Small Cap Portfolio Shares"),
and the assumption by the Small Cap Portfolio of the liabilities of the Bantam
Value Portfolio, attributable to its Institutional Shares and Open Shares, and
the distribution of the Small Cap Portfolio Shares to the shareholders of the
Bantam Value Portfolio in liquidation of the Bantam Value Portfolio as provided
herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
<PAGE>
WHEREAS, each Portfolio is a registered, open-end, non-diversified
management investment company;
WHEREAS, the Bantam Value Portfolio owns securities which are assets
of the character in which the Small Cap Portfolio is permitted to invest;
WHEREAS, both the Small Cap Portfolio and the Bantam Value Portfolio
are authorized to issue their respective Institutional Shares and Open Shares of
common stock;
WHEREAS, the Fund's Board has determined that the exchange of all of
the assets and the liabilities of the Bantam Value Portfolio for Small Cap
Portfolio Shares is in the best interests of the Small Cap Portfolio and its
shareholders and that the interests of the Small Cap Portfolio's existing
shareholders would not be diluted as a result of this transaction; and
WHEREAS, the Fund's Board has determined that the exchange of all of
the assets and the liabilities of the Bantam Value Portfolio for Small Cap
Portfolio Shares is in the best interests of the Bantam Value Portfolio and its
shareholders and that the interests of the Bantam Value Portfolio's existing
shareholders would not be diluted as a result of this transaction:
<PAGE>
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE BANTAM VALUE PORTFOLIO IN EXCHANGE FOR THE
SMALL CAP PORTFOLIO SHARES AND ASSUMPTION OF SMALL CAP PORTFOLIO
LIABILITIES AND LIQUIDATION OF THE BANTAM VALUE PORTFOLIO.
1.1. Subject to the terms and conditions contained herein, the Bantam
Value Portfolio agrees to assign, transfer and convey to the Small Cap Portfolio
all of the assets of the Bantam Value Portfolio, including all securities and
cash (subject to liabilities), attributable to its Institutional Shares and Open
Shares, and the Small Cap Portfolio agrees in exchange therefor (i) to deliver
to the Bantam Value Portfolio the number of Small Cap Portfolio Institutional
Shares and Open Shares, respectively, including fractional shares, determined as
set forth in paragraph 2.3; and (ii) to assume the liabilities of the Bantam
Value Portfolio, attributable to its Institutional Shares and Open Shares, as
set forth in paragraph 1.2. Such transactions shall take place at the closing
(the "Closing") on the closing date (the "Closing Date") provided for in
paragraph 3.1. In lieu of delivering certificates for the Small Cap Portfolio
Shares, the Small Cap Portfolio shall credit the Small Cap Portfolio Shares to
the Bantam Value Portfolio's account on the books of the Small Cap Portfolio and
shall deliver a confirmation thereof to the Bantam Value Portfolio.
<PAGE>
1.2. The Bantam Value Portfolio will endeavor to discharge all of its
known liabilities and obligations prior to the Closing Date. The Small Cap
Portfolio shall assume all liabilities, expenses, costs, charges and reserves,
attributable to the Bantam Value Portfolio's Institutional Shares and Open
Shares, reflected on an unaudited statement of assets and liabilities of the
Bantam Value Portfolio prepared by Lazard Asset Management, as of the Valuation
Time (as defined in paragraph 2.1), in accordance with generally accepted
accounting principles consistently applied from the prior audited period. The
Small Cap Portfolio shall assume only those liabilities of the Bantam Value
Portfolio reflected in that unaudited statement of assets and liabilities and
shall not assume any other liabilities, whether absolute or contingent.
1.3. Delivery of the assets of the Bantam Value Portfolio to be
transferred shall be made on the Closing Date and shall be delivered to State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
the Fund's custodian (the "Custodian"), for the account of the Small Cap
Portfolio, with all securities not in bearer or book-entry form duly endorsed,
or accompanied by duly executed separate assignments or stock powers, in proper
form for transfer, with signatures guaranteed, and with all necessary stock
transfer stamps, sufficient to transfer good and marketable title thereto
(including all accrued interest and rights pertaining thereto) to the Custodian
for the account of the Small Cap Portfolio free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of immediately available funds payable to the order of the Custodian
for the account of the Small Cap Portfolio.
1.4. The Bantam Value Portfolio will pay or cause to be paid to the
Small Cap Portfolio any interest received on or after the Closing Date with
respect to assets transferred to the Small Cap Portfolio hereunder. The Bantam
Value Portfolio will transfer to the Small Cap Portfolio any distributions,
rights or other assets received by the Bantam Value Portfolio after the Closing
Date as distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Small Cap Portfolio
on the Closing Date and shall not be separately valued.
1.5. As soon after the Closing Date as is conveniently practicable
(the "Liquidation Date"), the Bantam Value Portfolio will liquidate and
distribute pro rata to the Bantam Value Portfolio's Institutional Class and Open
Class shareholders of record, determined as of the Valuation Time (collectively,
the "Bantam Value Portfolio Shareholders"), the Institutional Shares and Open
Shares, respectively, of the Small Cap Portfolio received by the Bantam Value
Portfolio pursuant to paragraph 1.1. Such liquidation and distribution will be
accomplished by the transfer of the applicable Class of Small Cap Portfolio
Shares then credited to the account of the Bantam Value Portfolio on the books
of the Small Cap Portfolio to open accounts on the share records of the Small
Cap Portfolio in the names of the Bantam Value Portfolio Shareholders and
representing the respective pro rata number of the applicable Class of Small Cap
Portfolio Shares due such shareholders. All issued and outstanding shares of the
Bantam Value Portfolio simultaneously will be canceled on the books of the
Bantam Value Portfolio.
1.6. Ownership of Small Cap Portfolio Shares will be shown on the
books of the Small Cap Portfolio's transfer agent. Shares of the Small Cap
Portfolio will be issued in the manner described in the Fund's current
prospectus and statement of additional information.
1.7. Any transfer taxes payable upon issuance of the Small Cap
Portfolio Shares in a name other than the registered holder of the Small Cap
Portfolio shares on the books of the Bantam Value Portfolio as of that time
shall, as a condition of such issuance and transfer, be paid by the person to
whom such Small Cap Portfolio Shares are to be issued and transferred.
1.8. Any reporting responsibility of the Bantam Value Portfolio is and
shall remain the responsibility of the Bantam Value Portfolio up to and
including the Closing Date and such later date on which the Bantam Value
Portfolio's existence is terminated as a series of the Fund.
<PAGE>
2. VALUATION.
2.1. The value of the Bantam Value Portfolio's assets to be acquired
by the Small Cap Portfolio hereunder shall be the value of such assets computed
as of the close of trading on the floor of the New York Stock Exchange
(currently, 4:00 p.m., New York time), except that options and futures contracts
will be valued 15 minutes after the close of trading on the floor of the New
York Stock Exchange, on the Closing Date (such time and date being hereinafter
called the "Valuation Time"), using the valuation procedures set forth in the
Fund's Articles of Incorporation, as the same may have been amended (the "Fund's
Articles of Incorporation"), and then-current prospectus or statement of
additional information.
2.2. The net asset value of a Small Cap Portfolio Share shall be the
net asset value per share computed as of the Valuation Time, using the valuation
procedures set forth in the Fund's Article of Incorporation and then-current
prospectus or statement of additional information.
2.3. The number of Institutional Shares and Open Shares of the Small
Cap Portfolio to be issued (including fractional shares, if any) in exchange for
the Bantam Value Portfolio's net assets attributable to the Bantam Value
Portfolio's Institutional Shares and Open Shares, respectively, shall be
determined by dividing the value of the net assets of the applicable Class of
the Bantam Value Portfolio determined using the same valuation procedures
referred to in paragraph 2.1 by the net asset value of one Small Cap Portfolio
Share of the corresponding Class determined in accordance with paragraph 2.2.
2.4. All computations of value shall be made in accordance with the
regular practices of the Fund.
3. CLOSING AND CLOSING DATE.
3.1. The Closing Date shall be July 30, 1999 or such later date as the
parties may mutually agree. All acts taking place at the Closing shall be deemed
to take place simultaneously as of the close of business on the Closing Date
unless otherwise provided. The Closing shall be held at 5:00 p.m., New York
time, at the offices of The Lazard Funds, Inc., 30 Rockefeller Center, New York,
New York, or such other time and/or place as the parties may mutually agree.
3.2. The Custodian shall deliver at the Closing a certificate of an
authorized officer stating that the Bantam Value Portfolio's portfolio
securities, cash and any other assets have been presented for examination to the
Small Cap Portfolio prior to the Closing Date and have been delivered in proper
form to the Small Cap Portfolio.
3.3. If at the Valuation Time (a) the New York Stock Exchange or
another primary trading market for portfolio securities of either Portfolio
shall be closed to trading or trading thereon shall be restricted; or (b)
trading or the reporting of trading on said Exchange or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of either
Portfolio is impracticable, the Closing Date shall be postponed until the first
business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4. The transfer agent for the Bantam Value Portfolio shall deliver
at the Closing a certificate of an authorized officer stating that its records
contain the names and addresses of the Bantam Value Portfolio Shareholders and
the number and percentage ownership of outstanding Institutional Shares and Open
Shares of the Bantam Value Portfolio owned by each such Shareholder immediately
prior to the Closing. The Small Cap Portfolio shall issue and deliver a
confirmation evidencing the Small Cap Portfolio Shares to be credited on the
Closing Date to the Fund's Secretary, or provide evidence satisfactory to the
Bantam Value Portfolio that such Small Cap Portfolio Shares have been credited
to the Bantam Value Portfolio's account on the books of the Small Cap Portfolio.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, receipts or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES.
4.1. The Bantam Value Portfolio represents and warrants to the Small
Cap Portfolio as follows:
(a) The Bantam Value Portfolio is a series of the Fund, a
corporation duly organized and validly existing and in good standing under the
laws of the State of Maryland, and has the power to own all its properties and
assets and to carry out this Agreement.
(b) The Bantam Value Portfolio is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end,
non-diversified, management investment company, and such registration has not
been revoked or rescinded and is in full force and effect.
(c) The Bantam Value Portfolio is not, and the execution,
delivery and performance of this Agreement will not result, in material
violation of the Fund's Articles of Incorporation or its Bylaws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Bantam Value Portfolio is a party or by which it is bound.
(d) The Bantam Value Portfolio has no material contracts or other
commitments outstanding (other than this Agreement) which will be terminated
with liability to it on or prior to the Closing Date.
(e) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Bantam Value Portfolio or any of its properties
or assets which, if adversely determined, would materially and adversely affect
its financial condition or the conduct of its business. The Bantam Value
Portfolio knows of no facts which might form the basis for the institution of
such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(f) The Statement of Assets and Liabilities of the Bantam Value
Portfolio for the fiscal year ended December 31, 1998 has been audited by
Anchin, Block & Anchin LLP, independent auditors, and is in accordance with
generally accepted accounting principles, consistently applied, and such
statement (copies of which have been furnished to the Small Cap Portfolio)
fairly reflects the financial condition of the Bantam Value Portfolio as of such
date, and there are no known contingent liabilities of the Bantam Value
Portfolio as of such date not disclosed therein.
(g) Since December 31, 1998, there has not been any material
adverse change in the Bantam Value Portfolio's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Bantam Value Portfolio of indebtedness
maturing more than one year from the date such indebtedness was incurred, except
as disclosed on the statement of assets and liabilities referred to in Section
1.2 hereof.
(h) At the Closing Date, all Federal and other tax returns and
reports of the Bantam Value Portfolio required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Bantam Value Portfolio's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns.
(i) For each fiscal year of its operation, the Bantam Value
Portfolio has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of each Class of the Bantam
Value Portfolio are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of each Class of the Bantam Value Portfolio will, at the time
of Closing, be held by the persons and in the amounts set forth in the records
of the transfer agent as provided in paragraph 3.4. The Bantam Value Portfolio
does not have outstanding any options, warrants or other rights to subscribe for
or purchase any of the Bantam Value Portfolio shares, nor is there outstanding
any security convertible into any of the Bantam Value Portfolio shares.
<PAGE>
(k) On the Closing Date, the Bantam Value Portfolio will have
full right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(l) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary action
on the part of the Fund's Board and, subject to the approval of the Bantam Value
Portfolio Shareholders and assuming due execution and delivery hereof by the
Small Cap Portfolio, this Agreement will constitute the valid and legally
binding obligation of the Bantam Value Portfolio, enforceable in accordance with
its terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect thereto,
and to general principles of equity and the discretion of the court (regardless
of whether the enforceability is considered in a proceeding in equity or at
law).
(m) The proxy statement of the Bantam Value Portfolio (the "Proxy
Statement") included in the Registration Statement referred to in paragraph 5.5
(other than information therein that has been furnished by the Small Cap
Portfolio) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading.
4.2. The Small Cap Portfolio represents and warrants to the Bantam
Value Portfolio as follows:
(a) The Small Cap Portfolio is a series of the Fund, a
corporation duly organized, validly existing and in good standing under the laws
of Maryland, and has power to carry on its business as it is now being conducted
and to carry out this Agreement.
(b) The Small Cap Portfolio is registered under the 1940 Act as
an open-end, non-diversified management investment company, and such
registration has not been revoked or rescinded and is in full force and effect.
(c) The current prospectus and statement of additional
information of the Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act and the rules and regulations of the Securities and Exchange Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading.
(d) The Small Cap Portfolio is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of the
Fund's Articles of Incorporation or its Bylaws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Small Cap
Portfolio is a party or by which it is bound.
(e) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Small Cap Portfolio or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Small Cap Portfolio
knows of no facts which might form the basis for the institution of such
proceedings, and is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
contemplated herein.
(f) The Statement of Assets and Liabilities of the Small Cap
Portfolio for the fiscal year ended December 31, 1998 has been audited by
Anchin, Block & Anchin LLP, independent auditors, and is in accordance with
generally accepted accounting principles, consistently applied, and such
statement (copies of which have been furnished to the Bantam Value Portfolio)
fairly reflects the financial condition of the Small Cap Portfolio as of such
date.
(g) Since December 31, 1998, there has not been any material
adverse change in the Small Cap Portfolio's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Small Cap Portfolio of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed on the statement of assets and liabilities as of December 31, 1998
referred to in Section 4.2(f) hereof.
(h) At the Closing Date, all Federal and other tax returns and
reports of the Small Cap Portfolio required by law then to be filed shall have
been filed, and all Federal and other taxes shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof.
(i) For each fiscal year of its operation, the Small Cap
Portfolio has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of each Class of the Small
Cap Portfolio are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Small Cap Portfolio does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Small Cap Portfolio Shares, nor is there outstanding any
security convertible into any Small Cap Portfolio Shares.
(k) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary
action, if any, on the part of the Fund's Board members and, subject to the
approval of the Bantam Value Portfolio Shareholders and assuming due execution
and delivery hereof by the Bantam Value Portfolio, this Agreement will
constitute the valid and legally binding obligation of the Small Cap Portfolio
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the discretion of
the court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(l) The Proxy Statement included in the Registration Statement
(only insofar as it relates to the Small Cap Portfolio and is based on
information furnished by the Small Cap Portfolio) will, on the effective date of
the Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not materially misleading.
5. COVENANTS OF THE PORTFOLIOS.
5.1. Each Portfolio will operate its business in the ordinary course
between the date hereof and the Closing Date, it being understood that such
ordinary course of business will include payment of customary dividends and
distributions.
5.2. The Bantam Value Portfolio will call a meeting of the Bantam
Value Portfolio Shareholders to consider and act upon this Agreement and to take
all other action necessary to obtain approval of the transactions contemplated
herein.
5.3. Subject to the provisions of this Agreement, each Portfolio will
take, or cause to be taken, all action, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
5.4. As promptly as practicable, but in any case within sixty days
after the Closing Date, the Bantam Value Portfolio shall furnish the Small Cap
Portfolio, in such form as is reasonably satisfactory to the Small Cap
Portfolio, a statement of the earnings and profits of the Bantam Value Portfolio
for Federal income tax purposes which will be carried over to the Small Cap
Portfolio as a result of Section 381 of the Code and which will be certified by
the Fund's President or its Vice President and Treasurer.
<PAGE>
5.5. The Bantam Value Portfolio will provide the Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all to
be included in a Registration Statement on Form N-14 of the Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended, and the 1940 Act in connection with the
meeting of the Bantam Value Portfolio Shareholders to consider approval of this
Agreement and the transactions contemplated herein.
5.6. The Small Cap Portfolio agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act
and such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SMALL CAP PORTFOLIO.
The obligations of the Small Cap Portfolio to complete the
transactions provided for herein shall be subject, at its election, to the
performance by the Bantam Value Portfolio of all the obligations to be performed
by it hereunder on or before the Closing Date and, in addition thereto, the
following conditions:
6.1. All representations and warranties of the Bantam Value Portfolio
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2. The Bantam Value Portfolio shall have delivered to the Small Cap
Portfolio a statement of the assets and liabilities, together with a list of the
Bantam Value Portfolio's portfolio securities showing the tax basis of such
securities by lot and the holding periods of such securities, as of the Closing
Date, certified by the Fund's Treasurer.
6.3. The Bantam Value Portfolio shall have delivered to the Small Cap
Portfolio on the Closing Date a certificate executed in its name by the Fund's
President or Vice President and its Treasurer, in form and substance
satisfactory to the Small Cap Portfolio, to the effect that the representations
and warranties of the Bantam Value Portfolio made in this Agreement are true and
correct at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters as the
Small Cap Portfolio shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BANTAM VALUE PORTFOLIO.
The obligations of the Bantam Value Portfolio to complete the
transactions provided for herein shall be subject, at its election, to the
performance by the Small Cap Portfolio of all the obligations to be performed by
it hereunder on or before the Closing Date and, in addition thereto, the
following conditions:
7.1 All representations and warranties of the Small Cap Portfolio
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2. The Small Cap Portfolio shall have delivered to the Bantam Value
Portfolio on the Closing Date a certificate executed in its name by the Fund's
President or Vice President and its Treasurer, in form and substance reasonably
satisfactory to the Bantam Value Portfolio, to the effect that the
representations and warranties of the Small Cap Portfolio made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and as to such
other matters as the Bantam Value Portfolio shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PORTFOLIO.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to either Portfolio, the other party to this Agreement
shall, at its option, not be required to complete the transactions contemplated
by this Agreement.
8.1. This Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of the outstanding
shares of the Bantam Value Portfolio in accordance with the provisions of the
Fund's Articles of Incorporation.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Securities and Exchange Commission and of state Blue Sky and securities
authorities) deemed necessary by either Portfolio to permit consummation, in all
material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order or permit would
not involve a risk of a material adverse effect on the assets or properties of
either Portfolio, provided that either party hereto may for itself waive any of
such conditions.
8.4. The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5. The Bantam Value Portfolio shall have declared a dividend or
other distribution which, together with all previous dividends and other
distributions, shall have the effect of distributing to the Bantam Value
Portfolio Shareholders all of the Bantam Value Portfolio's investment company
taxable income for all taxable years ending on or prior to the Closing Date
(computed without regard to any deduction for dividends paid) and all of its net
capital gain realized in all such taxable years (after reduction for any capital
loss carryforward).
8.6. The parties shall have received an opinion of Stroock & Stroock &
Lavan LLP substantially to the effect that for Federal income tax purposes:
(a) The transfer of all or substantially all of the Bantam Value
Portfolio's assets in exchange for the Small Cap Portfolio Shares and the
assumption by the Small Cap Portfolio of certain identified liabilities of the
Bantam Value Portfolio will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by the
Small Cap Portfolio upon the receipt of the assets of the Bantam Value Portfolio
solely in exchange for the Small Cap Portfolio Shares and the assumption by the
Small Cap Portfolio of certain identified liabilities of the Bantam Value
Portfolio; (c) No gain or loss will be recognized by the Bantam Value Portfolio
upon the transfer of the Bantam Value Portfolio's assets to the Small Cap
Portfolio solely in exchange for the Small Cap Portfolio Shares and the
assumption by the Small Cap Portfolio of certain identified liabilities of the
Bantam Value Portfolio or upon the distribution (whether actual or constructive)
of the Small Cap Portfolio Shares to Bantam Value Portfolio Shareholders in
exchange for their shares of the Bantam Value Portfolio; (d) No gain or loss
will be recognized by the Bantam Value Portfolio Shareholders upon the exchange
of their Bantam Value Portfolio shares for Small Cap Portfolio Shares; (e) The
aggregate tax basis for the Small Cap Portfolio Shares received by each of the
Bantam Value Portfolio Shareholders pursuant to the Reorganization will be the
same as the aggregate tax basis of the Bantam Value Portfolio shares held by
such shareholder immediately prior to the Reorganization, and the holding period
of the Small Cap Portfolio Shares to be received by each Bantam Value Portfolio
Shareholder will include the period during which the Bantam Value Portfolio
shares exchanged therefor were held by such Shareholder (provided the Bantam
Value Portfolio shares were held as capital assets on the date of the
Reorganization); and (f) The tax basis of the Bantam Value Portfolio assets
transferred to the Small Cap Portfolio will be the same as the tax basis of such
assets to the Bantam Value Portfolio immediately prior to the Reorganization,
and the holding period of the assets of the Bantam Value Portfolio in the hands
of the Small Cap Portfolio will include the period during which those assets
were held by the Bantam Value Portfolio.
No opinion will be expressed as to the effect of the reorganization on
(i) the Bantam Value Portfolio or the Small Cap Portfolio with respect to any
asset as to which any unrealized gain or loss is required to be recognized for
Federal income tax purposes at the end of a taxable year (or on the termination
or transfer thereof) under a mark-to-market system of accounting, and (ii) any
Bantam Value Portfolio Shareholder that is required to recognize unrealized
gains and losses for Federal income tax purposes under a mark-to-market system
of accounting.
9. TERMINATION OF AGREEMENT.
9.1. This Agreement and the transaction contemplated hereby may be
terminated and abandoned by resolution of the Board at any time prior to the
Closing Date (and notwithstanding any vote of the Bantam Value Portfolio
Shareholders) if circumstances should develop that, in the opinion of the Board,
make proceeding with the Agreement inadvisable.
9.2. If this Agreement is terminated and the transaction contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this Agreement
shall become void and have no effect, without any liability on the part of any
party hereto or the Board members, officers or shareholders of either Fund, in
respect of this Agreement, except that the parties shall bear the aggregate
expenses of the transaction contemplated hereby in proportion to their
respective net assets as of the date this Agreement is terminated or the
exchange contemplated hereby is abandoned.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions
may be waived by the Fund's Board if, in the judgment of the Fund's Board, such
waiver will not have a material adverse effect on the benefits intended under
this Agreement to the shareholders of the Portfolio.
11. MISCELLANEOUS.
11.1. None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2. This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and merges
and supersedes all prior discussions, agreements and understandings of every
kind and nature between them relating to the subject matter hereof. Neither
party shall be bound by any condition, definition, warranty or representation,
other than as set forth or provided in this Agreement or as may be, on or
subsequent to the date hereof, set forth in a writing signed by the party to be
bound thereby.
11.3. This Agreement shall be governed and construed in accordance
with the internal laws of the State of New York, without giving effect to
principles of conflict of laws; provided, however, that the due authorization,
execution and delivery of this Agreement by the Small Cap Portfolio and the
Bantam Value Portfolio shall be governed and construed in accordance with the
internal laws of Maryland without giving effect to principles of conflict of
laws.
11.4. This Agreement may be executed in counterparts, each of which,
when executed and delivered, shall be deemed to be an original.
11.5. This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
11.6. (a) Any references in this Agreement to actions taken,
deliveries by or to, or representations and warranties made by or to, the Small
Cap Portfolio shall be deemed references to actions taken, deliveries by or to,
representations and warranties made by or to, the Fund on behalf of the Small
Cap Portfolio.
(b) Any references in this Agreement to actions taken, deliveries
by or to, or representations and warranties made by or to, the Bantam Value
Portfolio shall be deemed references to actions taken, deliveries by or to,
representations and warranties made by or to, the Fund on behalf of the Bantam
Value Portfolio.
<PAGE>
IN WITNESS WHEREOF, each Portfolio has caused this Agreement and Plan
of Reorganization to be executed and attested on its behalf by its duly
authorized representatives as of the date first above written.
THE LAZARD FUNDS, INC.
on behalf of its Lazard Small
Cap Portfolio
By: /s/ HERBERT W. GULLQUIST
--------------------------
Herbert W. Gullquist,
President
ATTEST: /s/ WILLIAM G. BUTTERLY, III
-----------------------------
William G. Butterly, III,
Vice President and Secretary
THE LAZARD FUNDS, INC.
on behalf of its Lazard Bantam
Value Portfolio
By: /s/ HERBERT W. GULLQUIST
-------------------------
Herbert W. Gullquist,
President
ATTEST: /s/ WILLIAM G. BUTTERLY, III
-----------------------------
William G. Butterly, III,
Vice President and Secretary
<PAGE>
LAZARD BANTAM VALUE PORTFOLIO
The undersigned shareholder of the Lazard Bantam Value Portfolio (the
"Portfolio"), a series of The Lazard Funds, Inc. (the "Fund"), hereby appoints
William G. Butterly, III and James Giallanza, and each of them, the attorneys
and proxies of the undersigned, with full power of substitution, to vote, as
indicated herein, all of the shares of common stock of the Portfolio standing in
the name of the undersigned at the close of business on June 1, 1999, at a
Special Meeting of Shareholders to be held at the offices of the Fund, 30
Rockefeller Plaza, 58th Floor, New York, New York 10112, at 10:00 a.m. on
Friday, July 16, 1999, and at any and all adjournments thereof, with all of the
powers the undersigned would possess if then and there personally present and
especially (but without limiting the general authorization and power hereby
given) to vote as indicated on the proposal, as more fully described in the
Prospectus/Proxy Statement for the meeting.
Please mark boxes in blue or black ink.
1. To approve or disapprove an Agreement and Plan of Reorganization
providing for the transfer of all of the assets, subject to liabilities, of the
Portfolio, attributable to the Portfolio's Institutional Shares and Open Shares,
in exchange for Institutional Shares and Open Shares, respectively, of Lazard
Small Cap Portfolio, and the pro rata distribution of those shares to Portfolio
Institutional Class and Open Class shareholders, respectively, and the
subsequent termination of the Portfolio as a series of the Fund.
FOR AGAINST ABSTAIN
/ / / / / /
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting, or any adjournment(s)
thereof.
THIS PROXY IS SOLICITED BY THE FUND'S BOARD OF DIRECTORS AND WILL BE VOTED FOR
THE ABOVE PROPOSAL UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or names
appearing on this proxy. If shares are held
jointly, each holder should sign. If signing is by
attorney, executor, administrator, trustee or
guardian, please give full title.
Dated: _____________________, 1999
--------------------------
Signature(s)
--------------------------
Signature(s)
Sign, Date and Return the Proxy
Card Promptly Using the
Enclosed Envelope
<PAGE>
Lazard Funds
Prospectus
May 1, 1999
As Revised June 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 of Contents
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Page
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CAREFULLY REVIEW THIS 6 RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
IMPORTANT SECTION, WHICH ------------------------------------------------
SUMMARIZES EACH PORTFOLIO'S 6 Lazard Equity Portfolio
INVESTMENTS, RISKS, PAST 8 Lazard Mid Cap Portfolio
PERFORMANCE AND FEES. 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 30 INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INFORMATION ON INVESTMENT -----------------------------------------------
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 40 FUND MANAGEMENT
DETAILS ON THE PEOPLE AND -----------------------------------------------
ORGANIZATIONS WHO OVERSEE THE 40 Investment Manager
PORTFOLIOS. 40 Principal Portfolio Managers
41 Administrator
41 Distributor
41 Custodian
-----------------------------------------------
REVIEW THIS SECTION FOR 41 SHAREHOLDER INFORMATION
DETAILS ON HOW SHARES ARE -----------------------------------------------
VALUED, HOW TO PURCHASE, SELL 41 General
AND EXCHANGE SHARES, RELATED 42 How to Buy Shares
CHARGES AND PAYMENTS OF 43 Distribution and Service (12b-1) Fees
DIVIDENDS AND DISTRIBUTIONS. 43 How to Sell Shares
43 Investor Services
44 General Policies
45 Account Policies, Dividends and Taxes
-----------------------------------------------
REVIEW THIS SECTION FOR RECENT 45 FINANCIAL HIGHLIGHTS
FINANCIAL INFORMATION.
-----------------------------------------------
WHERE TO LEARN MORE ABOUT THE BACK COVER
PORTFOLIOS -----------------------------------------------
- --------------------------------------------------------------------------------
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 price-to-earnings 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:
x seeking a long-term goal such as retirement
x looking to add a growth component to your portfolio
x 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:
x pursuing a short-term goal or investing emergency reserves
x 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:
x looking to add a monthly income component to your investments
x seeking higher potential returns than those offered by money market funds
x willing to accept the risks of price and dividend fluctuations
These Portfolios may not be appropriate if you are:
x investing emergency reserves
x 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 STRATEGIES
The Portfolio invests primarily in equity securities, 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 RISKS
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.
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
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
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)
INCEPTION PAST PAST PAST SINCE
DATE YEAR 5 YEARS 10 YEARS INCEPTION
- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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%
- --------------------------------------------------------------------------------
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.
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 STRATEGIES
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.
Principal Investment Risks
While stocks have historically been a leading choice 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, which means that it may invest a greater
percentage of its assets in a particular company compared to funds that are
diversified. 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
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
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.
- --------------------------------------------------------------------------------
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 1.05% and 1.35% of the
average daily net assets of the Portfolio's Institutional Shares and Open
Shares, respectively.
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.
LAZARD MIDCAP 1 3 5 10
PORTFOLIO Year+ Years+ Years+ Years+
INSTITUTIONAL SHARES $107 $373 $658 $1,473
- --------------------------------------------------------------------------------
OPEN SHARES $137 $493 $873 $1,939
- --------------------------------------------------------------------------------
+ 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 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, which means that it may invest a greater
percentage of its assets in a particular company compared to funds that are
diversified. 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
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
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)
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)
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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%
- --------------------------------------------------------------------------------
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.
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 STRATEGIES
The Portfolio invests primarily in equity securities 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 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, which means that it may invest a greater
percentage of its assets in a particular company compared to funds that are
diversified. 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
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1997 33.94%
1998 -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.
- --------------------------------------------------------------------------------
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 1.05% and 1.35% of the
average daily net assets of the Portfolio's Institutional Shares and Open
Shares, respectively.
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.
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 RISKS
While stocks have historically been a leading choice 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, which means that it may invest a greater
percentage of its assets in a particular company compared to funds that are
diversified. 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
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1997 15.26%
1998 17.10%
- --------------------------------------------------------------------------------
Best quarter: 12/31/98 18.45%
Worst quarter: 9/30/98 (16.39)%
- --------------------------------------------------------------------------------
14
<PAGE>
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%
- --------------------------------------------------------------------------------
MSCIWORLD INDEX 24.32% 17.57%
(Institutional)
20.19%
(Open)
- --------------------------------------------------------------------------------
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.
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 1.05% and 1.35% of the
average daily net assets of the Portfolio's Institutional Shares and Open
Shares, respectively.
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.
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 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, which means that it may invest a greater
percentage of its assets in a particular company compared to funds that are
diversified. 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
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
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.
- --------------------------------------------------------------------------------
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%
- --------------------------------------------------------------------------------
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.
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 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 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, which means that it may invest a greater
percentage of its assets in a particular company compared to funds that are
diversified. 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 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 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
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
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>
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)
- --------------------------------------------------------------------------------
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.
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 1.04% and 1.43% of the
average daily net assets of the Portfolio's Institutional Shares and Open
Shares, respectively.
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.
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 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, which means that it may invest a greater
percentage of its assets in a particular company compared to funds that are
diversified. 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
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
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>
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)%
- --------------------------------------------------------------------------------
MSCIEmerging (25.34)% (8.70)%
Markets (Free) Index (Institutional)
(19.40)%
(Open)
- --------------------------------------------------------------------------------
IFCInvestable Total (22.02)% (8.85)%
Return Index (Institutional)
(19.53)%
(Open)
- --------------------------------------------------------------------------------
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.
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 1.28% and 1.60% of the
average daily net assets of the Portfolio's Institutional Shares and Open
Shares, respectively.
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.
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 STRATEGIES
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 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 RISKS
While bonds are designed to produce a stable stream of income, their prices move
inversely with changes in interest rates. The Portfolio is subject to credit
risk, 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, which means that it may invest a greater
percentage of its assets in a particular company compared to funds that are
diversified. 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
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
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.
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 1.28% and 1.60% of the
average daily net assets of the Portfolio's Institutional Shares and Open
Shares, respectively.
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.
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 STRATEGIES
The Portfolio invests primarily in high-yielding 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 RISKS
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 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, which means that it may invest a greater
percentage of its assets in a particular company compared to funds that are
diversified. 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 the Portfolio had not completed a year of operations as of the date of the
financial data presented in this Prospectus, 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.
- --------------------------------------------------------------------------------
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 1.05% and 1.35% of the
average daily net assets of the Portfolio's Institutional Shares and Open
Shares, respectively.
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.
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 STRATEGIES
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
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 and 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 RISKS
While bonds are designed to produce a stable stream of 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, which means that it may invest a greater
percentage of its assets in a particular company compared to funds that are
diversified. 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
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
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>
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)
- --------------------------------------------------------------------------------
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.
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 1.09% and 1.35% of the
average daily net assets of the Portfolio's Institutional Shares and Open
Shares, respectively.
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.
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 STRATEGIES
The Portfolio invests 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 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 RISKS
While bonds are designed to produce a stable stream of 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, which means that it may invest a greater
percentage of its assets in a particular company compared to funds that are
diversified. Accordingly, the Portfolio's securities may be more sensitive to
changes in the 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.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
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)
- --------------------------------------------------------------------------------
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.
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%
- --------------------------------------------------------------------------------
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. the Portfolio will perform in the future.
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 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 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.
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 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. 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.
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 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, 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 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 and 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, 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, 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)
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 NAV and thus affect the Portfolio's NAV on 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. Please note the following minimums in effect
for initial investments:
- --------------------------------------------------------------------------------
Institutional Shares $1,000,000
- --------------------------------------------------------------------------------
Open Shares 10,000
- --------------------------------------------------------------------------------
IRA Rollover/Transfer-
Open Shares 10,000
- --------------------------------------------------------------------------------
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
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.
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 port-folio 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%
<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:
YEAR FOR THE PERIOD
ENDED 11/4/97* TO
INSTITUTIONAL SHARES 12/31/98 12/31/97
---------- ----------
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%
YEAR FOR THE PERIOD
ENDED 11/4/97* TO
OPEN SHARES 12/31/98 12/31/97
---------- ----------
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%
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%
<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%
<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%
<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%
<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%
<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%
<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%
<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%
<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%
<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
Lazard Funds
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]
<PAGE>
PRELIMINARY COPY
THE LAZARD FUNDS, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
June 1, 1999
Transfer of the Assets of
LAZARD BANTAM VALUE PORTFOLIO
30 Rockefeller Plaza
New York, New York 10112
1-800-632-6000
To and in Exchange for
Institutional Shares and Open Shares of
LAZARD SMALL CAP PORTFOLIO
30 Rockefeller Plaza
New York, New York 10112
1-800-632-6000
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with the
Prospectus/Proxy Statement dated June 1, 1999, relating specifically to the
proposed transfer of all of the assets and liabilities of Lazard Bantam Value
Portfolio, attributable to its Institutional Shares and Open Shares, in exchange
for Institutional Shares and Open Shares, respectively, of Lazard Small Cap
Portfolio. The transfer is to occur pursuant to an Agreement and Plan of
Reorganization. This Statement of Additional Information consists of this cover
page and the following described documents, each of which is attached hereto and
incorporated herein by reference:
1. The Statement of Additional Information of The Lazard Funds, Inc.
dated May 1, 1999.
2. Annual Report of The Lazard Funds, Inc. for the fiscal year ended
December 31, 1998.
The Prospectus/Proxy Statement dated June 1, 1999 may be obtained by
writing to The Lazard Funds, Inc., 30 Rockefeller Plaza, New York, New York
10112.
<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
Lazard Global Equity Portfolio Fixed-Income 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................................................ 19
Management............................................................. 22
Determination of Net Asset Value....................................... 27
Portfolio Transactions................................................. 28
How to Buy and How to Sell Shares...................................... 31
Distribution and Servicing Plan........................................ 32
Dividends and Distributions............................................ 33
Taxation............................................................... 34
Performance Information................................................ 36
Information About the Fund and Portfolios.............................. 39
Counsel and Independent Auditors....................................... 51
Additional Information................................................. 51
Appendix............................................................... 53
<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 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.
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.
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 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.
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."
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 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 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 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.
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
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 at 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.
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
credit worthiness of counterparties to over-the-counter derivatives in the same
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.
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 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, 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 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 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 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
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 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.
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.
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:
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:
(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
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
(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.
<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 During
Name, Address and Age Position With Fund Past 5 Years
- -------------------------- ------------------- ----------------------------
Norman Eig* (58) Chairman of the Vice Chairman and Managing
Board Director (formerly General
Partner), Lazard Freres.
Herbert W. Gullquist* (61) President, Vice Chairman and Managing
Director 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, Montana
Butte, MT 59701 Power Company.
Kenneth S. Davidson (54) Director Managing Partner, Davidson
Davidson Capital Capital Management
Management Corporation Corporation; Director,
635 Madison Avenue, Blackthorn Fund N.V. and
16th Floor Ottertail Valley Railroad.
New York, NY 10022
Carl Frischling* (62) Director Senior Partner, Kramer,
Kramer, Levin, Levin, Naftalis & Frankel;
Naftalis & Frankel from 1992 to 1994, Senior
919 Third Avenue Partner, Reid & Priest.
New York, NY 10022
Lester Z. Lieberman (68) Director Private Investor; Director
1500 Mt. Kemble Avenue of Dowel Associates;
Morristown, NJ 07960 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 investment
1114 Avenue of the Americas manager.
New York, NY 10036
John Rutledge (50) Director President, Rutledge &
Rutledge & Company Company, an economics and
One Greenwich investment advisory firm;
Office Park Chairman, Claremont
51 Weaver Street Economics Institute.
Greenwich, CT 06831
William Katz (45) Director President and Chief
BBDO Worldwide Network Operating Officer of BBDO,
1285 Avenue of the Americas an advertising agency; from
New York, NY 10019 May 1994 to February 1996,
General Manager of BBDO;
prior thereto, Executive
Vice President and Senior
Account Director of BBDO.
William G. Butterly, III (38) Vice President, Senior Vice President, Legal
Secretary 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
the Fund and
Aggregate Compensation Lazard Retirement Fund
Name of Director From the Fund 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.
INVESTMENT MANAGER AND INVESTMENT MANAGEMENT AGREEMENTS
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 Agreements"). Pursuant to each
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 each 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 each 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:
<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:
Name of Portfolio Maximum Total Portfolio Operating Expenses
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:
<PAGE>
Fee Payable Fee Payable Fee Payable
For Fiscal For Fiscal For Fiscal
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
Name of Portfolio 1996 1997 1998
- --------------------- ------------- -------------- --------------
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
Reduction in Reduction in Reduction in
Fee For Fee For Fee For
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
December 31, December 31, December 31,
Name of Portfolio 1996 1997 1998
- ----------------- ------------ ------------------ -----------
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 $ 87,208 $ 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-
Net Fee Paid Net Fee Paid Net Fee Paid
For Fiscal For Fiscal For Fiscal
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
Name of Portfolio 1996 1997 1998
- ------------------------- -------------- -------------- -------------
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
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 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.
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 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.
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 Percentage
Amount of of Total of Total
Brokerage Brokerage Brokerage
Commissions Commissions Transactions
Brokerage Paid to Paid to Effected Through
Name of Portfolio Commissions Paid Lazard Freres 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-
YEAR ENDED DECEMBER 31, 1997
Percentage
Amount of Percentage of of Total
Brokerage Total Brokerage Brokerage
Brokerage Commissions Commissions Transactions
Commissions Paid to Paid to Effected Through
Name of Portfolio Paid Lazard Freres 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-
YEAR ENDED DECEMBER 31, 1998
Percentage of
Amount of Percentage of Total Brokerage
Brokerage Total Brokerage Transactions
Brokerage Commissions Commissions Effected
Commissions Paid to Paid to Through
Name of Portfolio Paid Lazard Freres 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 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 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 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
Name of Portfolio for Fiscal Year
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
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.
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.") 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 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 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 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:
30-Day Yield Distribution Rate
--------------------- ------------------------
Institutional Open Institutional Open
Name of Portfolio 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)
International Small Cap 7.55% 3.94% 5.58%(1)
Emerging Markets (23.49)% N/A (5.10)%(2)
Bantam Value (13.82)% 16.39%(9) N/A
Global Equity 17.10% N/A 16.09%(10)
Mid Cap 3.65% N/A 5.58%(11)
High Yield N/A N/A N/A(12)
- ---------------
(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.
(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.
(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.
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
Name and Address Institutional 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
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
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, ON M5G 1X5
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 5.50%
Benefit Of Its Customers
Attn: Fund Admin LZIEX
4800 Deerlake Dr. E FL 2
Jacksonville, FL 32246
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
Lazard Freres & Co. LLC 5.83%
United Air Lines Inc. Pension & Welfare Plans
Administration Committee
Attn: David V Drystra
PO Box 66100
30 Rockefeller Plaza
New York, NY 10112
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
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
STRATEGIC YIELD PORTFOLIO
Lazard Freres & Co. LLC 14.58%
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
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 83.97%
Life Ins. Co.
One Commercial Plaza
280 Trumbull Street
Attn: Liz Pezda H-19-B
P.O. Box 2975
Hartford, CT 06104
SMALL CAP PORTFOLIO
Connecticut General 68.53%
Life Ins Co.
One Commercial Plaza
280 Trumbull St.
Attn: Liz Pezda H-19-B
P.O. Box 2975
Hartford, CT 06104
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
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
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
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.
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
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%
Mitchell 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
define d 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 involve d 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 on e 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 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.
<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.
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.
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.
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.
<PAGE>
LAZARDFunds
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
- ------------------
JOHN J. BURKE RETIRED VICE CHAIRMAN, MONTANA POWER COMPANY
KENNETH S. DAVIDSON PRIVATE INVESTOR
NORMAN EIG VICE CHAIRMAN, LAZARD FRERES & CO. LLC
CARL FRISCHLING SENIOR PARTNER, KRAMER, LEVIN, NAFTALIS, NESSEN,
KAMIN & FRANKEL
HERBERT W. GULLQUIST VICE CHAIRMAN, LAZARD FRERES & CO. LLC
WILLIAM KATZ PRESIDENT AND CHIEF OPERATING OFFICER, BBDO NEW YORK
LESTER Z. LIEBERMAN PRIVATE INVESTOR
RICHARD REISS, JR. MANAGING PARTNER, GEORGICA ADVISERS, LLC
JOHN RUTLEDGE PRESIDENT, RUTLEDGE AND COMPANY
OFFICERS
- --------
NORMAN EIG CHAIRMAN OF THE BOARD
HERBERT W. GULLQUIST PRESIDENT
WILLIAM G. BUTTERLY, III VICE PRESIDENT AND SECRETARY
JAMES GIALLANZA TREASURER
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Overview ............................................... 2
Growth Charts .......................................... 5
Performance Table ...................................... 11
Portfolio of Investments
Lazard Equity Portfolio ............................. 14
Lazard Mid Cap Portfolio ............................ 17
Lazard Small Cap Portfolio .......................... 19
Lazard Bantam Value Portfolio ....................... 23
Lazard Global Equity Portfolio ...................... 25
Lazard International Equity Portfolio ............... 27
Lazard International Small Cap Portfolio ............ 29
Lazard Emerging Markets Portfolio ................... 32
Lazard Bond Portfolio ............................... 35
Lazard High Yield Portfolio ......................... 41
Lazard International Fixed-Income Portfolio ......... 45
Lazard Strategic Yield Portfolio .................... 54
Notes to Portfolios of Investments .................. 66
Statements of
Assets and Liabilities .............................. 70
Operations .......................................... 72
Changes in Net Assets ............................... 74
Financial Highlights ................................... 80
Notes to Financial Highlights .......................... 92
Notes to Financial Statements .......................... 93
Report of Independent Auditors ......................... 99
Tax Information (unaudited) ............................ 100
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
OVERVIEW
- --------------------------------------------------------------------------------
The record-breaking merger and acquisition activity that began 1998 was
briefly, if dramatically, interrupted by extreme volatility following the
devaluation of the Russian ruble in late August. This devaluation led to the
unraveling of the hedge fund industry, with highly sophisticated, highly
leveraged players developing stunning losses. This crisis-within-a-crisis
further upset the U.S. market, and the temporary loss of confidence was at
least as perilous as the devaluation that inspired it. When the market finally
regained momentum, it was partially due to the re-emergence of more merger and
acquisition activity. While spring had brought the remarkable union of Chrysler
and Daimler-Benz, few could have foreseen the unbelievable fourth quarter union
of Deutsche Bank and Bankers Trust, nor the Herculean joining of Exxon and
Mobil. Encouraged by these remarkable mergers, the Dow shot back up to 9000 and
investors regained much of their lost confidence. As capital markets have once
again asserted many of their fundamental strengths, analysts and consultants
are scrambling to make sense of it all. What lessons are to be derived from the
volatility? Have we truly averted a crisis, or merely postponed its arrival on
our shores? And how do the latest mergers figure into the picture? The analyses
have been diverse, with some analysts predicting a soft landing for the
economy, while the economic Cassandras augur disaster. Despite the panicky
headlines, it's our belief that 1998 didn't so much introduce risk into the
general economy as much as it reminded investors of the risk that has always
been inherent in financial markets. The real question this poses to investors
is, how does one protect one's money? And what areas of the market will be able
to maintain a reasonable degree of stability?
EUROPE
Throughout 1998, Europe prepared for the inception of its single currency, the
Euro, with remarkable cross-border merger and acquisition activity. European
Daimler-Benz's decision to reach across the Atlantic to "merge" with American
car manufacturer Chrysler (the action more closely resembled an acquisition)
set the pace for a large number of equally stunning corporate unions. All of
this was only briefly interrupted by the currency crisis in Russia before
European companies continued with an impressive show of corporate
consolidations. Such unions are underpinned by what can only be described as a
new global paradigm. Governments of industrialized countries have turned away
from state-operated socialist programs and have begun to solve economic
development problems by more aggressively undertaking capital, trade, labor and
currency deregulation as well as by privatizing enterprises that have long been
public. The result has been intense competition. Deregulated Europe is becoming
less an aggregate of separate markets and more one, sprawling market in which
all companies compete for both customers and capital. Moreover, with one
European currency, the Euro, consumers may more easily compare prices with
their neighbors. To attract capital, companies must generate competitive
returns, not just relative to peers within
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
their own country, but to industry peers across the globe as well. For example,
a French investor today should buy the most promising company within the global
automobile industry, not the most promising auto stock in France alone. Amidst
the changing environment, the typical focus of bottom-up investing--corporate
accounting, cash flow, and emerging competition--
will be crucial.
JAPAN
In 1998, Japan watched helplessly as countless economic reforms failed to
effect real change. The early summer rescue of the Yen by the U.S. Treasury did
little to reassure investors, and ultimately resulted in the Prime Minister's
resignation in July. Japanese corporations continue to be characterized by
lifetime employment, close links to the ruling party, minimal transparency, and
murky accounting. However, by the fourth quarter it was clear that at least
some of the newer reforms introduced by Hashimoto's successor, Obuchi, were
slowly taking effect, and many analysts are watching Japan expectantly. With
the valuations of Japanese corporations at record lows, and with reforms being
taken more seriously, the hope is that Japan will be able to raise itself from
its current malaise. In light of volatility in the U.S. markets, Japan is also
being regarded as having the potential to outperform, particularly if the U.S.
economy is damaged by crises in neighboring Latin America. In this uncertain
but potentially rewarding environment, bottom-up stock picking with an emphasis
on thorough research and one-on-one meetings with management will be crucial.
UNITED STATES
The volatility of late summer took many investors by surprise, as the Dow fell
over 500 points in a single day following the devaluation of the ruble. One of
the more stunning effects of the ruble's fall was the collapse of hedge fund
management team Long-Term Capital Management, Inc. ("LTCM"). Requiring a $3.65
billion bailout by a consortium of investment banks, LTCM's collapse recalled,
in its magnitude, the disastrous hubris displayed by the previous decade's
similarly-fated financial risk-takers. The shock waves created by the hedge
fund industry's downfall caused investors to seek security in large cap stocks,
which, in turn, resulted in a rocky environment for small and mid
capitalization stocks. Following the Dow's surging comeback after a shaky
fourth quarter beginning, S&P 500 stocks continue to be the best performing
asset class in the world, spurred further by low inflation, interest rate cuts
from the Federal Reserve, strong economic growth, and the advantage of a decade
of corporate restructuring. The most recent flurry of merger and acquisition
activity has benefited small and mid cap stocks, since it is those undervalued
stocks which tend to be taken over. In light of the continuing M&A phenomenon,
a focus on thoroughly knowing undervalued small and mid cap companies will be
beneficial.
CONCLUSION
Insofar as we watched the most elaborate investments collapse, while most of the
more conservative investments regained their earnings for the year, the lesson
would seem clear. That is, sometimes, the simplest things are the best
constructed. In a turbulent environment, we place our faith in the plain logic
of investing in undervalued companies that have strong management teams and real
growth potential. Admittedly, our emphasis on researching and understanding
individual companies (in an era when many investors are chasing internet
companies based on projected earnings for the year 2010) might be considered
old-fashioned. Indeed, it's not an elaborate plan--more like the investment
process stripped down to its most basic level. Which is why, when the markets
turn volatile, we don't have to move our clients' investments from company to
company in search of a safer place to put the money. It's already there.
================================================================================
THE LAZARD FUNDS, INC.
GROWTH CHARTS
- --------------------------------------------------------------------------------
LAZARD EQUITY PORTFOLIO
The Lazard Equity Portfolio seeks long-term capital appreciation through
investing primarily in equity securities of relatively large U.S. companies
that the Investment Manager believes are undervalued based on their return on
total capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD EQUITY PORTFOLIO AND THE STANDARD & POOR'S 500 STOCK INDEX
[TABLE BELOW REPRESENTS LINE CHART IN THE PRINTED REPORT]
LEP S&P 500
Dec-88 10,000.00 10,000.00
Jan-89 10,629.84 10,732.30
Feb-89 10,591.09 10,464.85
Mar-89 10,726.74 10,709.00
Apr-89 11,221.20 11,265.01
May-89 11,736.56 11,720.79
Jun-89 11,561.53 11,654.33
Jul-89 12,389.38 12,706.60
Aug-89 12,643.02 12,955.02
Sep-89 12,584.49 12,902.42
0ct-89 12,174.51 12,602.82
Nov-89 12,272.38 12,859.80
Dec-89 12,364.65 13,168.56
Jan-90 11,613.15 12,284.42
Feb-90 11,843.61 12,442.65
Mar-90 12,134.19 12,772.38
Apr-90 11,703.23 12,453.71
May-90 12,547.79 13,668.07
Jun-90 12,497.52 13,575.81
Jul-90 12,487.37 13,532.23
Aug-90 11,357.65 12,309.05
Sep-90 10,752.45 11,709.97
Oct-90 10,771.77 11,660.08
Nov-90 11,480.44 12,413.79
Dec-90 11,780.05 12,759.64
Jan-91 12,250.02 13,315.32
Feb-91 13,159.32 14,267.63
Mar-91 13,302.36 14,613.20
Apr-91 13,281.46 14,647.83
May-91 13,701.63 15,279.74
Jun-91 13,076.50 14,579.77
Jul-91 13,691.56 15,259.34
Aug-91 14,266.75 15,620.83
Sep-91 14,071.60 15,359.49
Oct-91 14,236.08 15,565.92
Nov-91 13,485.73 14,938.77
Dec-91 15,023.46 16,647.32
Jan-92 15,181.73 16,337.18
Febo92 15,583.50 16,548.75
Mar-92 15,108.69 16,226.88
Apt-92 15,039.82 16,703.30
May-92 15,015.40 16,785.14
Jun-92 14,417.23 16,535.38
Jul-92 14,828.32 17,210.85
Aug-92 14,412.35 16,858.54
Sep-92 14,632.57 17,056.63
Oct-92 14,878.69 17,115.48
Nov-92 15,590.71 17,698.26
Dec-92 15,813.32 17,915.42
Jan-93 16,111.21 18,065.19
Feb-93 16,297.40 18,311.42
Mar-93 17,004.90 18,697.79
Apr-93 16,659.24 18,245.86
May-93 17,094.69 18,733.94
Jun-93 17,194.23 18,788.83
Jul-93 17,228.22 18,713.30
Aug-93 17,868.20 19,423.28
Sep-93 17,842.60 19,274.31
0ct-93 18,566.57 19,673.09
Nov-93 18,425.23 19,485.61
Dec-93 18,757.37 19,721.19
Jan-94 19,702.67 20,391.71
Feb-94 19,446.09 19,838.28
Mar-94 18,595.32 18,973.33
Apr-94 18,905.92 19,216.57
May-94 19,130.12 19,531.91
Jun-94 18,683.97 19,053.18
Jul-94 19,341.64 19,678.89
Aug-94 20,209.71 20,485.72
Sep-94 19,884.18 19,984.85
Oct-94 20,164.01 20,433.91
Nov-94 19,443.38 19,689.70
Dec-94 19,550.66 19,981.70
Jan-95 19,877.69 20,499.83
Feb-95 20,745.03 21,298.71
Mar-95 21,327.99 21,927.23
Apr-95 21,922.44 22,572.99
May-95 22,835.28 23,475.23
Jun-95 23,548.44 24,020.56
Jul-95 24,442.45 24,817.08
Aug-95 24,814.52 24,879.37
Sep-95 25,673.15 25,929.28
Oct-95 25,501.28 25,836.71
Nov-95 26,679.37 26,970.95
Dec-95 26,918.97 27,490.41
Jan-96 27,846.68 28,426.18
Feb-96 28,635.23 28,689.69
Mar-96 28,867.15 28,965.97
Apr-96 29,486.40 29,392.93
May-96 29.837.81 30,150.97
Jun-96 29.534.32 30,265.85
Jul-96 27,927.63 28928.7O
Aug-96 28,872.97 29,538.81
Sep-96 29,914.45 31,201.26
0ct-96 30,631.84 32,061.79
Nov-96 32,698.73 34,485.34
Dec-96 32,278.93 33,802.18
Jan-97 33,822.41 35,914.14
Feb-97 34,225.06 36,195.71
Mar-97 32,950.01 34,708.43
Apr-97 33,939.85 36,780.52
May-97 36,323.78 39,019.72
Jun-97 37,516.40 40,767.80
Jul-97 40,327.58 44,011.70
Aug-97 38,918.12 41,546.16
Sep-97 40,609.47 43,821.64
Oct-97 38,286.00 42,358.00
Nov-97 39,577.99 44,318.75
Dec-97 40,389.22 45,079.71
Jan-98 40,328.61 45,578.29
Feb-98 43,219.33 48,865.39
Mar-98 45,766.40 51,367.79
Apr-98 46,110.06 51,884.55
May-98 44,897.36 50,992.14
Jun-98 45,710.00 53,063.44
Jul-98 44,530.68 52,495.66
Aug-98 37,481.47 44,895.34
Sep-98 38,845.80 47,775.37
0ct-98 42,998.42 51,663.81
Nov-98 45,621.32 54,796.70
Dec-98 47,379.56 57,957.93
LAZARD MID CAP PORTFOLIO
The Lazard Mid Cap Portfolio seeks long-term capital appreciation through
investing primarily in equity securities of medium size U.S. companies in the
range of the Russell Midcap Index that the Investment Manager believes are
undervalued based on their return on total capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD MID CAP PORTFOLIO AND THE RUSSELL MIDCAP INDEX
[TABLE BELOW REPRESENTS LINE CHART IN THE PRINTED REPORT]
Lazard Midcap Russell Midcap
11-4-97 $10000.00 $10000.00
Nov-97 $9990.00 $10033.30
Dec-97 $10274.67 $10309.21
Jan-98 $10284.68 $10115.40
Feb-98 $11145.91 $10906.42
Mar-98 $11656.64 $11423.39
Apr-98 $11696.70 $11451.95
May-98 $11115.87 $11097.51
Jun-98 $10915.78 $11251.21
Jul-98 $10174.60 $10714.64
Aug-98 $8674.86 $9000.83
Sep-98 $9095.59 $9583.37
Oct-98 $9536.73 $10236.86
Nov-98 $10128.01 $10721.57
Dec-98 $10650.11 $11350.39
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS.
<PAGE>
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THE LAZARD FUNDS, INC.
GROWTH CHARTS (CONTINUED)
- --------------------------------------------------------------------------------
LAZARD SMALL CAP PORTFOLIO
The Lazard Small Cap Portfolio seeks long-term capital appreciation through
investing primarily in equity securities of small U.S. companies in the range
of the Russell 2000 Index that the Investment Manager believes are undervalued
based on their return on total capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD SMALL CAP PORTFOLIO AND THE RUSSELL 2000 INDEX
[TABLE BELOW REPRESENTS LINE CHART IN THE PRINTED REPORT]
LSCP Russell 2000
10-30-91 10000 10000
Nov-91 9720 9537.2
Dec-91 10453.51 10300.37
Jan-92 11316.28 11135.73
Feb-92 11827.92 11460.78
Mar-92 11827.92 11072.95
Apr-92 11547.02 10684.29
May-92 11557.05 10826.39
Jun-92 10955.12 10317.65
Jul-92 11256.09 10676.30
Aug-92 10935.06 10374.37
Sep-92 11015.32 10613.29
Oct-92 11547.02 10948.25
Nov-92 12560.27 11786.66
Dec-92 13041.26 12196.96
Jan-93 13443.15 12609.46
Feb-93 13563.71 12318.69
Mar-93 14216.78 12718.30
Apr-93 13885.23 12368.68
May-93 14528.25 12915.74
Jun-93 14920.09 12995.95
Jul-93 15045.6 13175.42
Aug-93 15925.82 13744.34
Sep-93 16232.87 14132.20
Oct-93 16386.4 14496.11
Nov-93 16171.46 14023.83
Dec-93 16965.56 14503.02
Jan-94 17588.15 14957.40
Feb-94 17599.26 14903.10
Mar-94 16765.44 14118.16
Apr-94 16743.2 14201.88
May-94 16787.67 14042.11
Jun-94 16598.67 13568.33
Jul-94 16947.64 13791.39
Aug-94 17926.49 14559.57
Sep-94 17926.49 14510.21
Oct-94 17641.94 14451.59
Nov-94 16754.15 13867.6
Dec-94 17310.35 14238.84
Jan-95 17237.97 14059
Feb-95 17973.81 14644.28
Mar-95 18408.08 14895.28
Apr-95 18794.09 15226.25
May-95 19348.99 15487.99
Jun-95 20217.52 16291.51
Jul-95 21146.93 17229.9
Aug-95 21255.63 17586.39
Sep-95 21267.7 17900.48
Oct-95 20047.92 17099.97
Nov-95 20893.31 17818.34
Dec-95 21036.36 18288.39
Jan-96 21221.01 18268.64
Feb-96 22012.35 18838.07
Mar-96 22408.01 19221.43
Apr-96 23283.42 20249.2
May-96 24063.06 21047.22
Jun-96 23375.92 20183.02
Jul-96 21697.72 18420.23
Aug-96 23098.42 19489.71
Sep-96 23930.92 20251.37
Oct-96 24142.34 19939.3
Nov-96 25582.69 20760.8
Dec-96 26070.43 21304.94
Jan-97 26819.74 21730.61
Feb-97 26720.78 21203.64
Mar-97 25745.26 20203.04
Apr-97 26494.57 20259.41
May-97 29083.24 22513.27
Jun-97 30426.21 23478.19
Jul-97 31942.47 24570.63
Aug-97 32621.18 25132.8
Sep-97 34108.55 26972.27
Oct-97 32765.58 25787.38
Nov-97 32621.09 25620.54
Dec-97 33384.95 26068.89
Jan-98 33068.14 25657.53
Feb-98 35436.11 27554.65
Mar-98 36703.47 28691
Apr-98 36803.53 28849.66
May-98 34869.13 27295.82
Jun-98 33784.7 27353.14
Jul-98 31399.5 25138.9
Aug-98 25144.72 20257.43
Sep-98 25833.69 21842.78
Oct-98 27326.87 22733.52
Nov-98 28450.01 23924.53
Dec-98 29172.64 25404.98
LAZARD BANTAM VALUE PORTFOLIO
The Lazard Bantam Value Portfolio seeks long-term capital appreciation through
investing primarily in equity securities of small U.S. companies with market
capitalizations under $500 million that the Investment Manager believes are
undervalued based on their return on total capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD BANTAM VALUE PORTFOLIO AND THE RUSSELL 2000 INDEX
[TABLE BELOW REPRESENTS LINE CHART IN THE PRINTED REPORT]
LBVP Russell 2000
3-1-96 10000 10000
Mar-96 10630 10204
Apr-96 11450 10749.61
May-96 11880 11173.25
Jun-96 11770 10714.48
Jul-96 11160 9778.67
Aug-96 11930 10346.42
Sep-96 12210 10750.76
0ct-96 12730 10585.09
Nov-96 13310 11021.2
Dec-96 13329.42 11310.06
Jan-97 14082.31 11536.04
Feb-97 14050.5 11256.29
Mar-97 13520.29 10725.11
Apr-97 13265.79 10755.03
May-97 14979.59 11951.53
Jun-97 16012.29 12463.77
Jul-97 17131.96 13043.71
Aug-97 17849.41 13342.15
Sep-97 19284.32 14318.66
Oct-97 18490 13689.64
Nov-97 18121.17 13601.07
Dec-97 17853.1 13839.09
Jan-98 17204.8 13620.71
Feb-98 18813.08 14627.82
Mar-98 19897.73 15231.07
Apr-98 20022.4 15315.3
May-98 18700.87 14490.42
Jun-98 17853.72 14520.85
Jul-98 16507.55 13345.39
Aug-98 13202.74 10753.98
Sep-98 13745.37 11595.59
Oct-98 14376.28 12068.45
Nov-98 15550.83 12700.72
Dec-98 15385.37 13486.26
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
GROWTH CHARTS (CONTINUED)
- --------------------------------------------------------------------------------
LAZARD GLOBAL EQUITY PORTFOLIO
The Lazard Global Equity Portfolio seeks long-term capital appreciation through
investing primarily in the equity securities of relatively large companies,
both U.S. and non-U.S., that the Investment Manager believes are undervalued
based on their return on total capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD GLOBAL EQUITY PORTFOLIO AND THE MORGAN STANLEY CAPITAL
INTERNATIONAL WORLD INDEX
[TABLE BELOW REPRESENTS LINE CHART IN THE PRINTED REPORT]
LGEP MSCI World
1-4-96 10000 10000
Jan-96 10010 10117.88
Feb-96 10170 10177.37
Mar-96 10310 10344.59
Apr-96 10430 10585.72
May-96 10460 10592.71
Jun-96 10530 10644.19
Jul-96 10160 10265.89
Aug-96 10290 10381.79
Sep-96 10620 10786.17
0ct-96 10720 10859.3
Nov-96 11570 11465.68
Dec-96 11578.38 11279.93
Jan-97 11550 11413.71
Feb-97 11749.84 11542.8
Mar-97 11679.24 11312.29
Apr-97 11911.21 11679.94
May~97 12451.39 12398.73
Jun-97 13215.21 13014.94
Jul-97 13717.46 13612.2
Aug-97 12974.56 12699.5
Sep-97 13780.24 13387.31
0ct-97 12900 12680.55
Nov-97 13131.5 12902.79
Dec-97 13345.5 13057.88
Jan-98 13592.23 13419.61
Feb-98 14500.62 14325.19
Mar-98 15442.66 14927.9
Apr-98 15610.88 15071.53
May-98 15644.52 14880.4
Jun-98 15779.06 15231.57
Jul-98 15768.02 15204.87
Aug-98 13454.85 13174.98
Sep-98 13193.29 13405.72
0ct-98 14349.02 14615.29
Nov-98 15211.4 15482.17
Dec-98 15627.28 16236.2
LAZARD INTERNATIONAL EQUITY PORTFOLIO
The Lazard International Equity Portfolio seeks long-term capital appreciation
through investing primarily in the equity securities of non-U.S. companies that
the Investment Manager believes are undervalued based on their return on total
capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD INTERNATIONAL EQUITY PORTFOLIO AND THE MORGAN STANLEY CAPITAL
INTERNATIONAL EUROPE, AUSTRALIA AND FAR EAST INDEX
[TABLE BELOW REPRESENTS LINE CHART IN THE PRINTED REPORT]
LIEP MSCI
10-29-91 10000 10000
Nov-91 9990 9533.13
Dec-91 10319.15 10025.6
Jan-92 10459.41 9811.65
Feb-92 10569.61 9460.46
Mar-92 10319.15 8835.87
Apr-92 10539.56 8877.43
May-92 11030.47 9471.63
Jun-92 10820.08 9022.68
Jul-92 10198.93 8791.76
Aug-92 10078.7 9343.19
Sep-92 9627.87 9158.69
Oct-92 9457.55 8678.28
Nov-92 9417.48 8759.94
Dec-92 9635.88 8805.25
Jan-93 9554.57 8804.12
Feb-93 9768.02 9070.12
Mar-93 10042.46 9860.73
Apr-93 10266.08 10796.54
May-93 10550.68 11024.56
Jun-93 10428.71 10852.56
Jul-93 10744.82 11232.45
Aug-93 11539.22 11838.81
Sep-93 11203.13 11572.33
Oct-93 11793.84 11928.97
Nov-93 11569.78 10886.26
Dec-93 12627.59 11672.32
Jan-94 13826.8 12659.16
Feb-94 13396.32 12624.09
Mar-94 12842.84 12080.36
Apr-94 13324.57 12592.92
May-94 13242.57 12520.62
Jun-94 12955.58 12697.56
Jul-94 13598.43 12819.68
Aug-94 14217.01 13123.18
Sep-94 13526.27 12709.8
Oct-94 13763.39 13133.04
Nov-94 12938.62 12501.86
Dec-94 12657.4 12580.13
Jan-95 12048.76 12096.8
Feb-95 12127.66 12062.08
Mar-95 12285.46 12814.39
Apr-95 12815.2 13296.34
May-95 12927.91 13137.85
Jun-95 13142.06 12907.41
Jul-95 13976.12 13711.03
Aug-95 13728.15 13187.95
Sep-95 14032.47 13445.51
0ct-95 13807.05 13084.09
Nov-95 13942.3 13448.09
Dec-95 14320.59 13989.92
Jan-96 14400.79 14047.42
Feb-96 14607 14094.9
Mar-96 14962.15 14394.27
Apr-96 15333.92 14812.71
May-96 15230.31 14540.16
Jun-96 15518.11 14622.02
Jul-96 15091.36 14194.62
Aug-96 15114.38 14225.71
Sep-96 15471.23 14603.68
Oct-96 15540.3 14454.29
Nov-96 16357.61 15029.42
Dec-96 16559.83 14836.14
Jan-97 16134.24 14316.88
Feb-97 16535.47 14551.1
Mar-97 16936.7 14603.78
Apr-97 16814.76 14681.32
May-97 17520.06 15636.64
Jun-97 18609.71 16499
Jul-97 19038.22 16765.95
Aug-97 17838.38 15513.87
Sep-97 19344.3 16382.96
Oct-97 18144.47 15123.68
Nov-97 18266.93 14969.51
Dec-97 18520.41 15100.08
Jan-98 18957.91 15790.15
Feb-98 20045 16803.32
Mar-98 21291.19 17320.73
Apr-98 21635.88 17457.83
May-98 22220.05 17373.09
Jun-98 21982.29 17505.12
Jul-98 22248.28 17682.59
Aug-98 19193.59 15491.91
Sep-98 18220.47 15016.96
0ct-98 19605.23 16582.33
Nov-98 20724.69 17431.87
Dec-98 21493.37 18119.39
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
GROWTH CHARTS (CONTINUED)
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
The Lazard International Small Cap Portfolio seeks long-term capital
appreciation through investing primarily in equity securities of relatively
small, non-U.S. companies in the range of the Morgan Stanley Capital
International Europe, Australia and Far East Small Cap Index that the
Investment Manager believes are undervalued based on their return on total
capital or equity. The Lazard International Small Cap Portfolio operates
similarly to the Lazard Small Cap Portfolio, except that this Portfolio, by
investing primarily in the equity securities of non-U.S. issuers, considers
additional investment determinations including, among other items, the effect
of currency fluctuations and the political and economic factors of other
jurisdictions.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO, THE MORGAN STANLEY CAPITAL
INTERNATIONAL EUROPE, AUSTRALIA AND FAR EAST SMALL CAP INDEX
AND THE SALOMON EMI INDEX EX-US
[TABLE BELOW REPRESENTS LINE CHART IN THE PRINTED REPORT]
LISCP Salomon EMI Ex-US MSCI
Small Cap
12-1-93 10000 10000 10000
Dec-93 10872.5 10644 10854.3
Jan-94 12082.8 11707.3 12056.9
Feb-94 11882.7 11789.3 12286.4
Mar-94 11162.6 11595.9 12009.5
Apr-94 11042.6 11943.8 12515.7
May-94 10992.5 11773 12357.5
Jun-94 10712.5 12020.3 12610.7
Jul-94 10912.5 12157.3 12634.4
Aug-94 11352.6 12286.2 12761
Sep-94 11002.5 11934.8 12302.1
Oct-94 11092.6 12150.8 12476.1
Nov-94 10612.5 11392.6 11605.9
Dec-94 10382.4 11545.2 11756.3
Jan-95 10072.3 11170 11305.3
Feb-95 10012.3 11006.9 11155
Mar-95 9782.3 11474.7 11384.4
Apr-95 10002.3 11819 11637.6
May~95 10272.4 11612.1 11368.6
Jun-95 10362.4 11469.3 11115.4
Jul-95 10752.5 12138 11827.5
Aug-95 10652.5 11830.9 11495.1
Sep-95 10962.5 11923.2 11463.5
Oct-95 10532.4 11579.8 11004.7
Nov-95 10502.4 11702.5 11139.1
Dec-95 10567.7 12150.7 11519
Jan-96 10738.7 12367 11867
Feb-96 10829.1 12559.9 11977.8
Mar-96 10969.9 12848.8 12215.1
Apr-96 11412.3 13524.7 12856
May-96 11492.8 13415.1 12594.8
Jun-96 11533 13416.5 12579.1
Jul-96 11130.8 12909.3 11882.8
Aug-96 11482.7 13039.7 11922.4
Sep-96 11553.1 13112.7 11977.8
Oct-96 11643.6 13061.6 11764.2
Nov-96 12186.6 13275.8 11914.4
Dec-96 12221.4 13031.5 11503.1
Jan-97 12385.4 12750 11271
Feb-97 12621 12964.2 11481.2
Mar-97 12426.3 12791.8 11191.5
Apr-97 11985.8 12601.2 10818.4
May-97 12556.1 13409 11638
Jun-97 13124 13712 11847.6
Jul-97 13010.4 13504.9 11430.7
Aug-97 12618 12928.3 10701.2
Sep-97 13351.2 13158.4 10475.4
Oct-97 12711 12638.7 9895.2
Nov-97 12308.2 12075 9205.2
Dec-97 12254.2 11808.1 8668.5
Jan-98 12526.7 12300.5 9210.4
Feb-98 13679.8 13218.1 10035.7
Mar-98 14780.5 13839.4 10257.6
Apr-98 15440.9 13944.6 10237.9
May-98 15786.8 14203.9 10271.2
Jun-98 15314.8 13789.2 9862.5
Jul-98 15115.7 13694 9727.8
Aug-98 13341.1 12015.1 8433.4
Sep-98 12315.2 11702.7 8045.6
Oct-98 12657.5 12529 8690.1
Nov-98 12753.7 12929.9 9105.3
Dec-98 13179.7 13242.8 9140.2
LAZARD EMERGING MARKETS PORTFOLIO
The Lazard Emerging Markets Portfolio seeks long-term capital appreciation
through investing primarily in equity securities of non-U.S. issuers who are
located, or doing significant business, in emerging market countries. Emerging
market countries include countries where political and economic trends have
recently produced, or are producing, a more stable economy, or countries that
have recently developed, or are developing, financial markets and investment
liquidity. The Lazard Emerging Markets Portfolio seeks securities of issuers
whose potential is significantly enhanced by their relationship to the emerging
markets country that the Investment Manager believes are undervalued based on
their return on total capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF
THE LAZARD EMERGING MARKETS PORTFOLIO, THE MORGAN STANLEY CAPITAL
INTERNATIONAL EMERGING MARKETS FREE INDEX AND THE INTERNATIONAL
FINANCE CORP. INVESTABLE TOTAL RETURN INDEX
LEMP MSCI IFC
Emerging
7-15-94 10000 10000 10000
Jul-94 10210 10280 10325
Aug-94 11300 11555.75 11652.28
Sep-94 11660 11687.48 11941.49
0ct-94 11580 11477.11 11548.85
Nov-94 11320 10880.3 11113.69
Dec-94 9860 10006.61 9929.64
Jan-95 8640 8941.91 8602.34
Feb-95 8420 8712.99 8491.12
Mar-95 8400 8768.76 8469.04
Apr-95 8650 9162.48 8824.48
May-95 9160 9649.92 9154.78
Jun-95 9140 9678.87 9209.71
Jul-95 9490 9896.16 9502.77
Aug-95 9370 9663.01 9248.09
Sep-95 9460 9617.11 9177.99
0ct-95 9040 9248.96 8831.71
Nov-95 8920 9084.05 8787.55
Dec-95 9280.04 9486.93 9093.27
Jan-96 10163.86 10161.26 9855.74
Feb-96 10244.2 9999.7 9636.94
Mar-96 10244.2 10077.6 9777.64
Apr-96 10897.53 10480.5 10171.97
May-96 11269.15 10433.65 10082.56
Jun-96 11168.71 10498.76 10202.34
Jul-96 10676.56 9781.27 9532.05
Aug-96 10867.39 10031.67 9827.64
Sep-96 11168.71 10118.55 9972.49
0ct-96 11048.18 9848.69 9758.39
Nov-96 11369.58 10013.75 9902.71
Dec-96 11472.68 10059.01 9946.58
Jan-97 12240.26 10745.14 10648.61
Feb-97 12762.21 11205.35 11170.18
Mar-97 12639.4 10910.99 10890.36
Apr-97 12772.44 10930.3 10705.46
May-97 13189.13 11243.12 11069.45
Jun-97 14164.56 11844.86 11547.42
Jul-97 14143.81 12021.7 11658.91
Aug-97 12597.64 10491.94 10170.36
Sep-97 13178.75 10782.65 10501.52
0ct-97 10770 9013.36 8778.4
Nov-97 10252.45 8684.48 8369.69
Dec-97 10343.93 8893.76 8480.36
Jan-98 9781.73 8196.22 7924.29
Feb-98 10624.99 9051.71 8733.42
Mar-98 11243.37 9444.52 9075.61
Apr-98 11175.91 9341.64 9,099.O7
May-98 9837.95 8061.45 7964.29
Jun-98 9276.2 7215.84 7147.8
Jul-98 9535.01 7444.62 7433.12
Aug-98 6649.72 5292.08 5343.19
Sep-98 7088.6 5627.79 5600.97
Oct-98 7684.75 6220.4 6244.51
Nov-98 8247.27 6737.74 6714.72
Dec-98 7914.91 6640.1 6612.54
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
GROWTH CHARTS (CONTINUED)
- --------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO
The Lazard Bond Portfolio seeks to build and preserve capital through investing
in a range of bonds, including obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, mortgage-backed securities,
asset-backed securities, municipal securities and corporate fixed-income
securities.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD BOND PORTFOLIO AND THE LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND
INDEX
LBP Lehman Int. G/C
11-12-91 10000.00 10000.00
Nov-91 10103.50 10114.80
Dec-91 10392.20 10361.90
Jan-92 10277.70 10268.00
Feb-92 10304.8 10308.60
Mar-92 10242.60 10268.00
Apr-92 10323.30 10358.30
May-92 10467.00 10518.80
Jun-92 10599.70 10674.60
Jul-92 10810.90 10886.80
Aug-92 10912.90 10995.70
Sep-92 11037.20 11145.00
0ct-92 10891.40 11000.40
Nov-92 10843.60 10958.60
Dec-92 10983.30 11105.30
Jan-93 11180.90 11321.30
Feb-93 11360.50 11499.80
Mar-93 11383.20 11545.50
Apr-93 11464.60 11638.50
May-93 11409.80 11612.60
Jun-93 11626.00 11794.90
Jul-93 11713.30 11823.80
Aug-93 11912.00 12011.30
Sep-93 11901.70 12061.10
Oct-93 11939.30 12093.40
Nov-93 11903.30 12026.00
Dec-93 11926.30 12081.10
Jan-94 12117.80 12215.30
Feb-94 11910.10 12034.60
Mar-94 11640.60 11836.00
Apr-94 11494.60 11755.50
May-94 11441.80 11763.30
Jun-94 11434.40 11765.00
Jul-94 11635.30 11934.30
Aug-94 11648.20 11971.60
Sep-94 11396.70 11861.50
0ct-94 11405.80 11859.90
Nov-94 11369.80 11806.00
Dec-94 11421.20 11847.80
Jan-95 11608.40 12047.50
Feb-95 11841.20 12297.40
Mar-95 11910.40 12367.70
Apr-95 12070.80 12520.40
May-95 12550.10 12899.00
Jun-95 12643.00 12985.40
Jul-95 12573.30 12987.20
Aug-95 12703.90 13105.40
Sep-95 12843.20 13200.40
0ct-95 13022.20 13347.50
Nov-95 13167.20 13522.90
Dec-95 13271.50 13664.60
Jan-96 13387.20 13782.50
Feb-96 13239.00 13620.70
Mar-96 13151.70 13550.50
Apr-96 13119.80 13502.60
May-96 13108.10 13492.40
Jun-96 13222.80 13635.80
Jul-96 13262.50 13676.30
Aug-96 13303.60 13687.10
Sep-96 13504.50 13877.80
0ct-96 13713.00 14123.00
Nov-96 13916.30 14309.20
Dec-96 13850.60 14217.50
Jan-97 13949.50 14272.80
Feb-97 13984.30 14300.10
Mar-97 13876.20 14201.40
Apr-97 14048.20 14368.20
May-97 14187.40 14487.50
Jun-97 14318.80 14619.70
Jul-97 14578.10 14917.20
Aug-97 14531.80 14842.20
Sep-97 14717.40 15014.80
0ct-97 14865.80 15181.10
Nov-97 14894.50 15214.70
Dec-97 15036.60 15336.30
Jan-98 15228.00 15537.20
Feb-98 15223.10 15525.30
Mar-98 15233.20 15575.10
Apr-98 15303.50 15653.30
May-98 15404.70 15768.00
Jun-98 15504.80 15868.80
Jul-98 15543.60 15924.60
Aug-98 15627.50 16174.60
Sep-98 15869.70 16580.60
Oct-98 15719.00 16564.20
Nov-98 15807.00 16562.90
Dec-98 15905.00 16629.20
LAZARD HIGH YIELD PORTFOLIO
The Lazard High Yield Portfolio seeks maximum total return, from a combination
of capital appreciation and current income, by investing primarily in U.S.,
high-yielding, fixed-income securities that are rated below investment grade.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD HIGH YIELD PORTFOLIO AND THE MERRILL LYNCH HIGH YIELD MASTER II INDEX
LHYP Merrill Lynch High Yield
1-2-98 10000 10000
Jan-98 10222.27 10159.4
Feb-98 10473.66 10200.55
Mar-98 10715.86 10297.45
Apr-98 10848.05 10341.63
May-98 10849.67 10403.78
Jun-98 10878.96 10457.57
Jul-98 10969.26 10524.18
Aug-98 10353.88 9992.92
Sep-98 10147.84 10018.9
Oct-98 9801.8 9805
Nov-98 10227.2 10313.68
Dec-98 10289.58 10295.22
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
GROWTH CHARTS (CONTINUED)
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO
The Lazard International Fixed-Income Portfolio seeks high total return from a
combination of current income and capital appreciation.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO AND THE
SALOMON WORLD GOVERNMENT BOND INDEX EX-US
LIFIP SWGBI Ex-US
11-8-91 10000 10000
Nov-91 10036.5 10156
Dec-91 10394.5 10684.1
Jan-92 10093 10495
Feb-92 10106.3 10436.2
Mar-92 9966.7 10325.6
Apr-92 10027.9 10398.9
May-92 10311.9 10718.2
Jun-92 10507 11018.3
Jul-92 10664.4 11275
Aug-92 10974.1 11590.7
Sep-92 10958.8 11706.6
0ct-92 10712.4 11388.2
Nov-92 10536 11207.1
Dec-92 10606 11274.4
Jan-93 10780.4 11428.8
Feb-93 10985.4 11656.3
Mar-93 11184.5 11945.3
Apt-93 11550.9 12303.7
May-93 11746.6 12527.6
Jun-93 11625.3 12293.3
Jul-93 11657.8 12302
Aug-93 12045.5 12739.9
Sep-93 12228.8 12955.2
0ct-93 12212.1 12895.6
Nov-93 12132.2 12836.3
Dec-93 12267.5 12978.8
Jan-94 12353.8 13034.6
Feb-94 12323.5 13071.1
Mar-94 12412.5 13230.5
Apr-94 12389.6 13316.5
May-94 12309.3 13136.8
Jun-94 12613.8 13454.7
Jul-94 12603.2 13489.7
Aug-94 12505.1 13411.4
Sep-94 12749 13677
0ct-94 13068.7 14029.8
Nov-94 12838.6 13747.8
Dec-94 12779.1 13754.7
Jan-95 12966.2 14054.6
Feb-95 13374.6 14452.3
Mar-95 14465.5 15740.2
Apr-95 14872.2 16077.1
May-95 15226.3 16428.3
Jun-95 15311.4 16509.9
Jul-95 15316 16597.4
Aug-95 14508.6 15648.4
Sep-95 14894.1 16110
0ct-95 14998.8 16161.5
Nov-95 15108.8 16302.9
Dec-95 15255.6 16444.6
Jan-96 14986.2 16081.1
Feb-96 15010.8 16127.2
Mar-96 15014.5 16166.9
Apr-96 15035.6 16134.5
May-96 15090.4 16143.4
Jun-96 15176.4 16233.8
Jul-96 15569.4 16681.9
Aug-96 15659.9 16793.6
Sep-96 15684.6 16761.7
Oct-96 15935.7 17045
Nov-96 16132.2 17240.3
Dec-96 16097.2 17118.3
Jan-97 15456.4 16422.6
Feb-97 15337.2 16232.1
Mar-97 15190.8 16128.2
Apr-97 14886.4 15800.8
May-97 15387 16382.3
Jun-97 15580.3 16583.8
Jul-97 15203.7 16151
Aug-97 15175 16223.6
Sep-97 15550 16617.9
0ct-97 15729 16990.1
Nov-97 15405.9 16555.2
Dec-97 15199.7 16388
Jan-98 15267.3 16499.4
Feb-98 15514.1 16732
Mar-98 15269.2 16456
Apr-98 15603.6 16818
May-98 15492 16791.1
Jun-98 15459.5 16730.6
Jul-98 15507.4 16750.7
Aug-98 15443.8 17209.7
Sep-98 16339.5 18338.6
0ct-98 16949 19165.7
Nov-98 16740.5 18775.2
Dec-98 17205.9 19304
LAZARD STRATEGIC YIELD PORTFOLIO
The Lazard Strategic Yield Portfolio seeks total return from a combination of
current income and capital appreciation. The Lazard Strategic Yield Portfolio
may invest up to 50% of its total assets in non-U.S., fixed-income securities.
Many of the high-yielding securities in which the Lazard Strategic Yield
Portfolio invests are rated in the lower rating categories (i.e., below
investment grade) by the nationally recognized securities rating services.
These securities, which are often referred to as "junk bonds", are subject to
greater risk of loss of principal and interest than higher rated securities and
are considered to be predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD STRATEGIC YIELD PORTFOLIO AND THE ONE MONTH LIBOR USD FIXED INDEX
LSYP 30 Day Libor
Oct 1, 91 10000 10000
0ct-91 10359.7 10041.8
Nov-91 10493.2 10084.2
Dec-91 10212.9 10119.7
Jan-92 10133.8 10154.3
Feb-92 10298.7 10189.6
Mar-92 10421.4 10225
Apr-92 10420.1 10257.9
May-92 10536.4 10291.5
Jun-92 10640.3 10324.6
Jul-92 10841.5 10353.1
Aug-92 10955.8 10382.7
Sep-92 11071.4 10409.8
0ct-92 10596.5 10437.6
Nov-92 10594 10473.9
Dec-92 10821.1 10502.3
Jan-93 11106.5 10529.2
Feb-93 11322.1 10556.8
Mar-93 11506 10584.3
Apr-93 11516.1 10611.5
May-93 11617.2 10639.8
Jun-93 11928 10667.6
Jul-93 12086 10695.4
Aug-93 12184.6 10723.4
Sep-93 12172.4 10751.5
0ct-93 12354.4 10779.6
Nov-93 12391.5 10811.1
Dec-93 12508.8 10840
Jan-94 12759.9 10867.8
Feb-94 12574.3 10899.6
Mar-94 12322 10932.5
Apr-94 12151.3 10968.3
May-94 12146.9 11007.6
Jun-94 12057 11048.6
Jul-94 12191.7 11089.2
Aug-94 12357.7 11133.3
Sep-94 12288.5 11179.1
Oct-94 12258.6 11225.2
Nov-94 12315.9 11280.3
Dec-94 12216.5 11335.2
Jan-95 12206.5 11391.2
Feb-95 12267.8 11447.8
Mar-95 12329.6 11504.7
Apr-95 12613.8 11561.3
May-95 12959.5 11618.1
Jun-95 13033.5 11675.8
Jul-95 13135.4 11731.6
Aug-95 13276.8 11787.6
Sep-95 13399.8 11843.8
0ct-95 13492.7 11899.9
Nov-95 13663.8 11957.6
Dec-95 13873.3 12012.9
Jan-96 14155.6 12066
Feb-96 14102.5 12118.2
Mar-96 14205.9 12171.8
Apr-96 14340.3 12225
May-96 14478.1 12279.1
Jun-96 14643 12333.7
Jul-96 14732.3 12388.2
Aug-96 14891.4 12443
Sep-96 15216.8 12498
0ct-96 15387 12552.6
Nov-96 15619.5 12609.4
Dec-96 15780.6 12665.8
Jan-97 15977.1 12721.8
Feb-97 16135.3 12778.1
Mar-97 16052.2 12837.1
Apr-97 16140.6 12896.4
May-97 16338.9 12956
Jun-97 16499.2 13015.8
Jul-97 16611.4 13075.3
Aug-97 16526.9 13135.4
Sep-97 16702.1 13195.8
0ct-97 16487.4 13256.1
Nov-97 16582.4 13320.3
Dec-97 16618.3 13382.2
Jan-98 16761.2 13443.4
Feb-98 16926.1 13505.5
Mar-98 17145.9 13567.9
Apr-98 17241.6 13630.2
May-98 17234.2 13692.9
Jun-98 17199.7 13755.8
Jul-98 17423.3 13819
Aug-98 16550.4 13882.5
Sep-98 16550.4 13942.9
0ct-98 16326.3 14002.5
Nov-98 16644.7 14066.5
Dec-98 16742.1 14124.4
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1998
----------------------------------------------------------------
INSTITUTIONAL SHARES
---------------------------------------------------------------
ONE THREE FIVE TEN SINCE
YEAR YEAR YEAR YEAR INCEPTION*
------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Lazard Equity Portfolio 17.31% 20.74% 20.36% 16.83% 14.98%
Standard & Poor's 500 Stock Index 28.57% 28.23% 24.06% 19.21% 16.50%
Lazard Mid Cap Portfolio 3.65% -- -- -- 5.58%
Russell Midcap Index 10.10% -- -- -- 11.58%
Lazard Small Cap Portfolio (12.62%) 11.52% 11.45% -- 16.11%
Russell 2000 Index (2.55%) 11.58% 11.86% -- 13.89%
Lazard Bantam Value Portfolio (13.82%) -- -- -- 16.39%
Russell 2000 Index (2.55%) -- -- -- 11.16%
Lazard Global Equity Portfolio 17.10% -- -- -- 16.09%
MSCI World Index 24.34% -- -- -- 17.57%
Lazard International Equity Portfolio 16.04% 14.49% 11.22% -- 11.26%
MSCI EAFE Index 20.00% 9.00% 9.19% -- 8.65%
Lazard International Small Cap Portfolio 7.55% 7.64% 3.94% -- 5.58%
MSCI EAFE Small Cap Index 5.44% (7.42%) (3.38%) -- (1.75%)
Salomon EMI Index Ex-US 12.15% 2.91% 4.47% 5.68%
Lazard Emerging Markets Portfolio (23.49%) (5.17% -- -- (5.10%)
MSCI Emerging Markets Free Index (25.34%) (11.22%) -- -- (8.70%)
IFC Investable Total Return Index (22.02%) (10.07%) (8.85%)
Lazard Bond Portfolio 5.77% 6.22% 5.93% -- 6.69%
Lehman Intermediate Gov't/Corp. Bond Index 8.43% 6.76% 6.60% -- 7.35%
Lazard High Yield Portfolio -- -- -- -- --
Merrill Lynch High Yield Master II Index -- -- -- -- --
Lazard International Fixed-Income Portfolio+ 13.20% 4.09% 7.00% -- 7.86%
Salomon World Government Bond Index Ex-US+ 17.79% 5.49% 8.26% -- 9.61%
Lazard Strategic Yield Portfolio 0.75% 6.47% 6.00% -- 7.36%
One Month LIBOR USD Fixed Index 5.54% 5.55% 5.44% -- 4.88%
</TABLE>
NOTES TO PERFORMANCE TABLE
* Performance is measured for Lazard Equity Portfolio from: June 1,
1987-Institutional, February 5, 1997--Open; Lazard Mid Cap Portfolio from:
November 4, 1997--Institutional, November 4, 1997--Open; Lazard Small Cap
Portfolio from: October 30, 1991--Institutional, January 30, 1997--Open;
Lazard Bantam Value Portfolio from: March 1, 1996--Institutional, January 23,
1997--Open; Lazard Global Equity Portfolio from: January 4,
1996--Institutional, January 30, 1997--Open; Lazard International Equity
Portfolio from: October 29, 1991--Institutional, January 23, 1997--Open;
Lazard International Small Cap Portfolio from: December 1,
1993--Institutional, February 13, 1997--Open; Lazard Emerging Markets
Portfolio from: July 15, 1994--Institutional, January 8, 1997--Open; Lazard
Bond Portfolio from: November 12, 1991--Institutional, March 5, 1997--Open;
Lazard High Yield Portfolio from: January 2, 1998--Institutional, February
24, 1998--Open; Lazard International Fixed-Income Portfolio from: November 8,
1991--Institutional, January 8, 1997--Open; Lazard Strategic Yield Portfolio
from: October 1, 1991--Institutional, January 23, 1997--Open.
The performance for the relevant index is for the comparable period.
Portfolio returns are net of fees and assume reinvestment of all dividends
and distributions, if any. Certain expenses of a Portfolio may have been
reimbursed by the Investment Manager and/or the Administrator, without such
waiver/reimbursement of expenses the Portfolio's total return would have been
lower.
+ Effective January 1, 1993, the Portfolio is measured by the index
"excluding U.S." Performance of the index "Since Inception" is a blended
return of the index "including U.S." and the index "excluding U.S." for the
applicable periods.
See additional footnotes on next page.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PERFORMANCE TABLE (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1998
---------------------------------------------------------------------------------
INSTITUTIONAL SHARES
---------------------------------------------------------------------------------
ONE THREE FIVE TEN SINCE
YTD YEAR YEAR YEAR YEAR INCEPTION*
------------- ------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Lazard Equity Portfolio 17.31% 17.31% 76.01% 152.59% 373.80% 403.93%
Standard & Poor's 500 Stock Index 28.57% 28.57% 110.83% 193.89% 479.58% 486.34%
Lazard Mid Cap Portfolio 3.65% 3.65% -- -- -- 6.50%
Russell Midcap Index 10.10% 10.10% -- -- -- 13.51%
Lazard Small Cap Portfolio (12.62%) (12.62%) 38.68% 71.95% -- 191.73%
Russell 2000 Index (2.55%) (2.55%) 38.91% 75.17% -- 154.05%
Lazard Bantam Value Portfolio (13.82%) (13.82%) -- -- -- 53.85%
Russell 2000 Index (2.55%) (2.55%) -- -- -- 34.86%
Lazard Global Equity Portfolio 17.10% 17.10% -- -- -- 56.27%
MSCI World Index 24.34% 24.34% -- -- -- 62.36%
Lazard International Equity Portfolio 16.04% 16.04% 50.09% 70.21% -- 114.93%
MSCI EAFE Index 20.00% 20.00% 29.52% 55.24% -- 81.20%
Lazard International Small Cap Portfolio 7.55% 7.55% 24.72% 21.33% -- 31.80%
MSCI EAFE Small Cap Index 5.44% 5.44% (20.65%) (15.79%) -- (8.60%)
Salomon EMI Index Ex-US 12.15% 12.15% 8.99% 24.42% -- 32.43%
Lazard Emerging Markets Portfolio (23.49%) (23.49%) (14.72%) -- -- (20.86%)
MSCI Emerging Markets Free Index (25.34%) (25.34%) (30.01%) -- -- (33.60%)
IFC Investable Total Return Index (22.02%) (22.02%) (27.28%) -- -- (33.87%)
Lazard Bond Portfolio 5.77% 5.77% 19.85% 33.36% -- 59.05%
Lehman Intermediate Gov't/Corp. Bond Index 8.43% 8.43% 21.70% 37.65% -- 66.30%
Lazard High Yield Portfolio 2.90% -- -- -- -- 2.90%
Merrill Lynch High Yield Master II Index 2.95% -- -- -- -- 2.95%
Lazard International Fixed-Income Portfolio+ 13.20% 13.20% 12.79% 40.26% -- 72.06%
Salomon World Government Bond Index Ex-US+ 17.79% 17.79% 17.40% 48.74% -- 93.04%
Lazard Strategic Yield Portfolio 0.75% 0.75% 20.68% 33.84% -- 67.42%
One Month LIBOR USD Fixed Index 5.54% 5.54% 17.57% 30.30% -- 41.24%
</TABLE>
Past performance is not indicative, nor a guarantee, of future results; the
investment return and principal value of each Portfolio of The Lazard Funds,
Inc. will fluctuate, so that an investor's shares in a Portfolio, when redeemed,
may be worth more or less than their original cost. Within the longer periods
illustrated there may have been short-term fluctuations, counter to the overall
trend of investment results, and no single period of any length may be taken as
typical of what may be expected in future periods.
The performance data of the indices have been prepared from sources and data
that the Investment Manager believes to be reliable, but no representation is
made as to their accuracy. These indices are unmanaged and have no fees or
costs. The S&P 500 Stock Index is an index of common stocks and is a registered
trademark of The McGraw-Hill Companies. The Russell Midcap Index measures the
performance of the 800 smallest companies in the Russell 1000 Index. The Russell
2000 Index is an index of common stocks and is a registered trademark of the
Frank Russell Company. The Morgan Stanley Capital International (MSCI) World
Index is an arithmetic, market value-weighted average return net of dividends
taxation, which is derived from equities of Europe, Australia and Far East
(EAFE) Index countries and equities from Canada and the United States.
See additional footnotes on next page.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PERFORMANCE TABLE (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1998 PERIOD ENDED DECEMBER 31, 1998
--------------------------------------------------------------------
OPEN SHARES
--------------------------------------------------------------------
ONE SINCE ONE SINCE
YEAR INCEPTION* YTD YEAR INCEPTION*
------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Lazard Equity Portfolio 16.98% 18.95% 16.98% 16.98% 39.08%
Standard & Poor's 500 Stock Index 28.57% 31.00% 28.57% 28.57% 67.09%
Lazard Mid Cap Portfolio 3.42% 5.34% 3.42% 3.42% 6.22%
Russell Midcap Index 10.10% 11.58% 10.10% 10.10% 13.50%
Lazard Small Cap Portfolio (12.86%) 4.82% (12.86%) (12.86%) 9.44%
Russell 2000 Index (2.55%) 8.49% (2.55%) (2.55%) 16.91%
Lazard Bantam Value Portfolio (14.02%) 4.96% (14.02%) (14.02%) 9.84%
Russell 2000 Index (2.55%) 8.22% (2.55%) (2.55%) 16.57%
Lazard Global Equity Portfolio 16.82% 17.52% 16.82% 16.82% 36.34%
MSCI World Index 24.34% 20.19% 24.34% 24.34% 42.25%
Lazard International Equity Portfolio 15.82% 15.44% 15.82% 15.82% 32.12%
MSCI EAFE Index 20.00% 12.82% 20.00% 20.00% 26.36%
Lazard International Small Cap Portfolio 7.21% 1.97% 7.21% 7.21% 3.74%
MSCI EAFE Small Cap Index 5.44% (10.27%) 5.44% 5.44% (18.43%)
Salomon EMI Index Ex-US 12.15% 2.04% 12.15% 12.15% 3.86%
Lazard Emerging Markets Portfolio (23.30%) (17.99%) (23.30%) (23.30%) (32.49%)
MSCI Emerging Markets Free Index (25.34%) (19.40%) (25.34%) (25.34%) (34.77%)
IFC Investable Total Return Index (22.02%) (19.53%) (22.02%) (22.02%) (34.97%)
Lazard Bond Portfolio 5.42% 6.93% 5.42% 5.42% 13.03%
Lehman Intermediate Gov't/Corp. Bond Index 8.43% 8.66% 8.43% 8.43% 16.40%
Lazard High Yield Portfolio -- -- (2.24%) -- (2.24%)
Merrill Lynch High Yield Master II Index -- -- 0.82% -- 0.82%
Lazard International Fixed-Income Portfolio 12.92% 3.72% 12.92% 12.92% 7.49%
Salomon World Government Bond Index Ex-US 17.79% 6.81% 17.79% 17.79% 13.93%
Lazard Strategic Yield Portfolio 0.37% 2.12% 0.37% 0.37% 4.15%
One Month LIBOR USD Fixed Index 5.54% 5.61% 5.54% 5.54% 11.17%
</TABLE>
The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East
(EAFE) Index is comprised of International Equities and is compiled by Morgan
Stanley Capital International. The Morgan Stanley Capital International (MSCI)
Europe, Australia and Far East (EAFE) Small Cap Index is an arithmetic,
market-value weighted average of the performance of securities listed on the
stock exchanges of EAFE Index countries. The Salomon Extended Market Index (EMI)
Ex-US and the Salomon World Government Bond Index Ex-US are compiled by Salomon
Smith Barney. The Morgan Stanley Capital International (MSCI) Emerging Markets
Free (EMF) Index is comprised of emerging market securities in countries open to
non-local investors that are compiled by Morgan Stanley Capital International.
The IFC Investable Total Return Index is an index of emerging market securities
that represent 65% of market capital compiled by the International Finance
Corporation. The Lehman Intermediate Gov't/Corp. Bond Index is an index
calculated by Lehman Brothers. The Merrill Lynch High Yield Master II Index
provides a broad-based measure of the performance of the non-investment grade
U.S. domestic bond market. The London Interbank Offered Rates (LIBOR) US Dollar
Fixed Index is an average derived from sixteen quotations provided by banks
determined by the British Bankers Association.
This performance data is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by an effective prospectus.
Effective January 1, 1998 Lazard International Small Cap Portfolio changed its
comparative index to the MSCI EAFE Small Cap Index, from the Salomon EMI Index
Ex-US. Also on January 1, 1998, Lazard Emerging Markets Portfolio changed its
comparative index to the MSCI Emerging Markets Free Index, from the IFC
Investable Total Return Index. The Investment Manager feels that these indices
provide a more accurate comparison given each Portfolio's investment objective.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD EQUITY PORTFOLIO
COMMON STOCKS--96.1%
AEROSPACE & DEFENSE--4.2%
Allied Signal, Inc. ......................... 116,300 $ 5,153,544
British Aerospace PLC ADR (a) ............... 102,000 3,582,750
Gulfstream Aerospace Corp. (a) .............. 65,800 3,503,850
United Technologies Corp. ................... 73,400 7,982,250
-----------
20,222,394
-----------
AUTOMOTIVE--2.2%
General Motors Corp. ........................ 144,300 10,326,469
-----------
AUTO PARTS--0.7%
TRW, Inc. ................................... 62,700 3,522,956
-----------
BANKING--12.3%
Bank One Corp. .............................. 125,200 6,393,025
BankAmerica Corp. ........................... 156,350 9,400,544
Chase Manhattan Corp. ....................... 109,024 7,420,446
First Union Corp. ........................... 206,700 12,569,943
Fleet Financial Group, Inc. ................. 189,200 8,454,875
Mellon Bank Corp. ........................... 106,900 7,349,375
Washington Mutual, Inc. ..................... 196,000 7,484,750
-----------
59,072,958
-----------
CHEMICALS & PLASTICS--0.3%
Du Pont (E.I.) de Nemours &
Co ......................................... 25,800 1,369,013
-----------
COMPUTERS & BUSINESS EQUIPMENT--6.3%
Hewlett-Packard Co. ......................... 163,700 11,182,756
International Business
Machines Corp. ............................. 75,200 13,893,200
NCR Corp. (a) ............................... 124,600 5,202,050
-----------
30,278,006
-----------
CONGLOMERATES--3.8%
Philip Morris Companies, Inc. ............... 343,400 18,371,900
-----------
DIVERSIFIED--0.9%
Minnesota Mining &
Manufacturing Co. .......................... 57,800 4,111,025
-----------
DRUGS & HEALTH CARE--9.6%
American Home Products
Corp ....................................... 224,000 12,614,000
Amgen, Inc. (a) ............................. 85,200 8,908,725
Bristol-Myers Squibb Co. .................... 80,900 10,825,431
Johnson & Johnson ........................... 70,700 5,929,963
Merck & Company, Inc. ....................... 53,100 7,842,206
-----------
46,120,325
-----------
ELECTRONICS--5.6%
Honeywell, Inc. ............................. 86,900 6,544,656
Intel Corp. ................................. 59,100 7,007,044
Motorola, Inc. .............................. 85,200 5,202,525
Texas Instruments, Inc. ..................... 94,500 8,085,656
-----------
26,839,881
-----------
ENERGY--2.2%
Mobil Corp. ................................. 105,600 9,200,400
Noble Affiliates, Inc. ...................... 54,800 1,349,450
-----------
10,549,850
-----------
FINANCIAL SERVICES--5.0%
American Express Co. ........................ 39,400 4,028,650
Citigroup, Inc. ............................. 130,349 6,452,276
Morgan Stanley Dean Witter &
Co ......................................... 78,100 5,545,100
The Hartford Financial
Services Group, Inc. ....................... 141,900 7,786,762
-----------
23,812,788
-----------
FOOD & BEVERAGES--7.8%
ConAgra, Inc. ............................... 194,300 6,120,450
Diageo PLC ADR .............................. 143,572 6,640,205
Heineken NV ADR ............................. 141,350 8,511,108
PepsiCo, Inc. ............................... 218,700 8,953,031
Unilever NV ADR ............................. 86,100 7,140,919
-----------
37,365,713
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD EQUITY PORTFOLIO (CONTINUED)
HOTELS & RESTAURANTS-1.5%
McDonald's Corp. ............................ 90,400 $ 6,926,900
-----------
HOUSEHOLD PRODUCTS--0.4%
Procter & Gamble Co. ........................ 18,200 1,661,888
-----------
INDUSTRIAL & MACHINERY--
1.2%
Ingersoll-Rand Co. .......................... 119,000 5,585,563
-----------
INSURANCE--2.2%
Aetna, Inc. ................................. 78,900 6,203,512
Allstate Corp. .............................. 112,398 4,341,373
-----------
10,544,885
-----------
MULTIMEDIA--1.3%
Gannett Company, Inc. ....................... 93,600 6,037,200
-----------
OIL & GAS--1.7%
Chevron Corp. ............................... 24,500 2,031,969
Exxon Corp. ................................. 84,800 6,201,000
-----------
8,232,969
-----------
PAPER PRODUCTS--0.8%
Kimberly-Clark Corp. ........................ 70,212 3,826,554
-----------
PETROLEUM EQUIPMENT &
SERVICES--1.2%
Schlumberger Ltd. ........................... 128,900 5,945,512
-----------
PHOTOGRAPHY--1.1%
Eastman Kodak Co. ........................... 73,700 5,306,400
-----------
PUBLISHING--1.3%
New York Times Co. .......................... 185,400 6,431,062
-----------
RETAIL--5.8%
Federated Department Stores,
Inc. (a) ................................. 113,600 $ 4,948,700
Newell Co. ................................ 51,300 2,116,125
Office Depot, Inc. (a) .................... 166,100 6,135,319
Republic Industries, Inc. (a) ............. 188,900 2,786,275
Sears, Roebuck & Co. ...................... 88,300 3,752,750
TJX Companies, Inc. ....................... 111,400 3,230,600
Toys "R" Us, Inc. (a) ..................... 286,100 4,827,937
-----------
27,797,706
-----------
SERVICES--1.2%
First Data Corp. .......................... 176,600 5,596,012
------------
TELECOMMUNICATIONS--10.6%
Ameritech Corp. ........................... 200,000 12,675,000
AT&T Corp. ................................ 174,900 13,161,225
Bell Atlantic Corp. ....................... 333,700 17,686,100
SBC Communications, Inc. .................. 136,400 7,314,450
------------
50,836,775
------------
UTILITIES--4.9%
Consolidated Edison, Inc. ................. 117,600 6,218,100
Duke Energy Corp. ......................... 34,600 2,216,563
FPL Group, Inc. ........................... 103,800 6,396,675
PacifiCorp ................................ 286,700 6,038,619
Southern Co. .............................. 93,400 2,714,437
------------
23,584,394
------------
TOTAL COMMON STOCKS
(Identified cost
$374,279,275) ........................... 460,277,098
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD EQUITY PORTFOLIO (CONTINUED)
REPURCHASE AGREEMENT--4.6%
State Street Bank and Trust
Company, 4.75%, 01/04/99,
(Dated 12/31/98, collateral-
ized by $18,990,000 United
States Treasury Note, 7.875%,
11/15/04, with a value of
$22,216,401) (Identified
cost $21,778,000) ......................... $ 21,778 $21,778,000
------------
TOTAL INVESTMENTS
(Identified cost
$396,057,275) (b) ........................ 100.7% $482,055,098
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS .......................... (0.7) (3,305,278)
--------- -------------
NET ASSETS ................................. 100.0% $478,749,820
========= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD MID CAP PORTFOLIO
COMMON STOCKS--97.7%
AEROSPACE & DEFENSE--3.6%
Gulfstream Aerospace Corp. (a) .............. 22,800 $1,214,100
Litton Industries, Inc. (a) ................. 21,000 1,370,250
----------
2,584,350
----------
APPAREL & TEXTILES--1.6%
Polo Ralph Lauren Corp.,
Class A (a) ................................ 2,400 46,050
Warnaco Group, Inc., Class A ................ 42,500 1,073,125
----------
1,119,175
----------
AUTO PARTS--1.7%
Borg-Warner Automotive, Inc. ................ 21,600 1,205,550
----------
BANKING--7.7%
Hibernia Corp., Class A ..................... 64,200 1,115,475
North Fork Bancorporation,
Inc ........................................ 80,350 1,923,378
Sovereign Bancorp, Inc. ..................... 97,500 1,389,375
Union Planters Corp. ........................ 25,400 1,150,938
----------
5,579,166
----------
BROADCASTING--2.0%
King World Productions, Inc.(a) ............. 49,500 1,457,156
----------
COMMERCIAL SERVICES--4.1%
Gartner Group, Inc.,
Class A (a) ................................ 30,300 643,875
H & R Block, Inc. ........................... 29,900 1,345,500
Pittston Brink's Group ...................... 30,100 959,437
----------
2,948,812
----------
COMPUTERS & BUSINESS EQUIPMENT--4.7%
Fore Systems (a) ............................ 36,100 661,081
NCR Corp. (a) ............................... 34,500 1,440,375
Quantum Corp. (a) ........................... 59,800 1,270,750
----------
3,372,206
----------
CONSTRUCTION MATERIAL -- 1.4%
Johns Manville Corp. ........................ 63,200 $1,038,850
----------
DRUGS & HEALTH CARE--3.2%
Mallinckrodt, Inc. .......................... 43,100 1,328,019
Perrigo Co. (a) ............................. 112,900 994,931
----------
2,322,950
----------
ENERGY--0.9%
Noble Affiliates, Inc. ...................... 27,700 682,113
----------
FINANCIAL SERVICES--7.5%
Heller Financial, Inc. ...................... 54,200 1,592,125
Lennar Corp. ................................ 43,800 1,105,950
The CIT Group, Inc., Class A ................ 35,200 1,119,800
Waddell & Reed Financial, Inc. .............. 65,500 1,551,531
----------
5,369,406
----------
GAS & PIPELINE UTILITIES--0.9%
Cooper Cameron Corp. (a) .................... 25,300 619,850
----------
HOUSEHOLD APPLIANCES
& HOME FURNISHINGS--4.0%
Ethan Allen Interiors, Inc. ................. 38,900 1,594,900
Maytag Corp. ................................ 20,600 1,282,350
----------
2,877,250
----------
HOUSEHOLD PRODUCTS--1.6%
Dial Corp. .................................. 39,700 1,146,338
----------
INDUSTRIAL & MACHINERY--1.8%
Briggs & Stratton Corp. ..................... 26,300 1,311,713
----------
INSURANCE--11.2%
Ace, Ltd. ................................... 32,400 1,115,775
Ambac Financial Group, Inc. ................. 19,500 1,173,656
American Bankers Insurance
Group, Inc. ................................ 30,400 1,470,600
Everest Reinsurance Holdings ................ 39,300 1,530,244
HSB Group, Inc. ............................. 24,600 1,010,137
Old Republic International
Corp ....................................... 41,150 925,875
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD MID CAP PORTFOLIO (CONTINUED)
Reliance Group Holdings, Inc. ....................... 64,800 $ 834,300
----------
8,060,587
----------
MANUFACTURING--2.6%
Crane Co. ........................................... 33,300 1,005,244
Mark IV Industries, Inc. ............................ 64,700 841,100
----------
1,846,344
----------
OIL & GAS--1.9%
Enron Oil & Gas Co. ................................. 54,400 938,400
R & B Falcon Corp. (a) .............................. 56,900 433,862
----------
1,372,262
----------
REAL ESTATE--1.3%
Mack California Realty Corp. ........................ 29,300 904,638
----------
RESTAURANTS--2.0%
Tricon Global Restaurants, Inc.
(a) ................................................ 28,500 1,428,562
----------
RETAIL--5.0%
Circuit City Stores--Circuit
City Group ......................................... 39,300 1,962,544
Tandy Corp. ......................................... 39,800 1,639,262
----------
3,601,806
----------
RETAIL TRADE--7.5%
Consolidated Stores Corp. (a) ....................... 40,300 813,556
Ross Stores, Inc. ................................... 30,200 1,189,125
Saks, Inc. (a) ...................................... 62,400 1,969,500
TJX Companies, Inc. ................................. 50,200 1,455,800
----------
5,427,981
----------
SOFTWARE--1.1%
Autodesk, Inc. ...................................... 18,500 789,719
----------
STEEL--1.3%
Carpenter Technology Corp. .......................... 27,400 929,888
----------
TECHNOLOGY--1.8%
Advanced Micro Devices,
Inc. (a) ........................................... 33,600 $ 972,300
Altera Corp. (a) .................................... 5,900 359,162
----------
1,331,462
----------
TELEPHONE--2.7%
Cincinnati Bell, Inc. ............................... 50,800 1,920,875
----------
TRANSPORTATION & FREIGHT
SERVICES--2.2%
CNF Transportation, Inc. ............................ 43,100 1,618,944
----------
UTILITIES--10.4%
CalEnergy Company, Inc. (a) ......................... 39,300 1,363,219
Illinova Corp. ...................................... 57,400 1,435,000
Ipalco Enterprises, Inc. ............................ 33,300 1,846,069
Niagara Mohawk Power
Corp. (a) .......................................... 90,100 1,452,862
NIPSCO Industries, Inc. ............................. 47,100 1,433,606
----------
7,530,756
----------
TOTAL COMMON STOCKS
(Identified
cost $68,561,524) .................................. 70,398,709
----------
PRINCIPAL
AMOUNT
(000)
----------
REPURCHASE AGREEMENT--3.3%
State Street Bank and Trust
Company, 4.75%, 01/04/99,
(Dated 12/31/98, collateral-
ized by $2,155,000 United
States Treasury Note, 7.250%,
05/15/04, with a value of
$2,440,538) (Identified cost
$2,389,000) ............................. $2,389 2,389,000
------------
TOTAL INVESTMENTS (Identified
cost $70,950,524) (b) ................... 101.0% $72,787,709
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS ........................ (1.0) (711,630)
-------- ------------
NET ASSETS ................................ 100.0% $72,076,079
======== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD SMALL CAP PORTFOLIO
COMMON STOCKS--94.3%
APPAREL & TEXTILES--1.0%
Stride Rite Corp. ........................... 813,700 $ 7,119,875
The Timberland Co., Class A (a) ............. 179,500 8,178,469
-----------
15,298,344
-----------
AUTO PARTS--4.5%
Borg-Warner Automotive, Inc. ................ 213,000 11,888,062
Dura Automotive Systems,
Inc. (a) ................................... 357,600 12,203,100
Excel Industries, Inc. ...................... 344,700 6,032,250
Superior Industries
International, Inc. ........................ 477,100 13,269,344
Tower Automotive, Inc. (a) .................. 1,002,800 25,007,325
-----------
68,400,081
-----------
BANKING--6.1%
Bancorp Queens County, Inc. ................. 334,045 9,937,839
Coast Federal Trust (a) ..................... 310,000 2,053,750
Cullen/Frost Bankers, Inc. .................. 324,000 17,779,500
Enhance Financial Services
Group, Inc. ................................ 404,400 12,132,000
Hibernia Corp., Class A ..................... 908,770 15,789,879
HUBCO, Inc. ................................. 589,825 17,768,478
Independence Community
Bank Corp. ................................. 718,900 11,457,469
Staten Island Bancorp, Inc. ................. 214,700 4,280,581
-----------
91,199,496
-----------
BUILDING & CONSTRUCTION--0.7%
Apogee Enterprises, Inc. .................... 982,700 11,055,375
-----------
BUSINESS SERVICES AND SUPPLIES--0.8%
CDI Corp. (a) ............................... 386,100 7,794,394
Vanstar Corp. (a) ........................... 450,000 4,162,500
-----------
11,956,894
-----------
CHEMICALS & PLASTICS--1.9%
A. Schulman, Inc. ........................... 517,200 11,733,975
Ferro Corp. ................................. 290,400 $ 7,550,400
H.B. Fuller Co. ............................. 197,500 9,504,687
-----------
28,789,062
-----------
COMMERCIAL SERVICES--2.7%
Inacom Corp. (a) ............................ 592,000 8,806,000
Nielsen Media Research, Inc. ................ 940,533 16,929,594
Pittston Brink's Group ...................... 449,200 14,318,250
-----------
40,053,844
-----------
COMMUNICATION SERVICES--0.0%
Dynatech Corp. (a) .......................... 196,550 540,513
-----------
COMPUTERS & BUSINESS EQUIPMENT--2.3%
Bell & Howell Co. (a) ....................... 602,200 22,770,687
Silicon Valley Group, Inc. (a) .............. 53,500 682,125
Wang Laboratories, Inc. (a) ................. 390,400 10,833,600
-----------
34,286,412
-----------
CONSTRUCTION MATERIALS--0.7%
Lone Star Industries, Inc. .................. 273,000 10,049,813
-----------
CONTAINERS: PAPER & PLASTIC--2.0%
First Brands Corp. .......................... 753,900 29,731,931
-----------
COSMETICS & TOILETRIES--0.9%
Alberto Culver Co., Class A ................. 553,800 13,983,450
-----------
DRUGS & HEALTH CARE--1.6%
Apria Healthcare Group,
Inc. (a) ................................... 760,600 6,797,863
Magellan Health Services,
Inc. (a) ................................... 759,160 6,357,965
Perrigo Co. (a) ............................. 1,273,620 11,223,776
-----------
24,379,604
-----------
ELECTRICAL EQUIPMENT--2.7%
Anixter International, Inc. (a) ............. 988,500 20,078,906
Belden, Inc. ................................ 548,020 11,611,174
MagneTek, Inc. (a) .......................... 731,700 8,460,281
-----------
40,150,361
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------
LAZARD SMALL CAP PORTFOLIO (CONTINUED)
ELECTRONICS--3.9%
AMETEK, Inc. .................................. 733,100 $16,357,294
Credence Systems Corp. (a) .................... 700,000 12,950,000
Kemet Corp. (a) ............................... 1,230,200 13,839,750
Lattice Semiconductor
Corp. (a) .................................... 351,500 16,136,047
-----------
59,283,091
-----------
FOOD & BEVERAGES--2.7%
American Italian Pasta Co.,
Class A (a) .................................. 285,700 7,535,337
Lance, Inc. ................................... 565,600 11,276,650
Ralcorp Holdings, Inc. (a) .................... 314,200 5,734,150
Vlasic Foods International,
Inc. (a) ..................................... 648,800 15,449,550
-----------
39,995,687
-----------
GAS EXPLORATION--0.9%
Barrett Resources Corp. (a) ................... 577,800 13,867,200
-----------
HOMEBUILDERS--3.6%
Kaufman & Broad Home Corp. .................... 463,900 13,337,125
Lennar Corp. .................................. 499,800 12,619,950
Toll Brothers, Inc. (a) ....................... 738,500 16,662,406
Walter Industries, Inc. (a) ................... 753,400 11,536,438
-----------
54,155,919
-----------
HOTELS & RESTAURANTS--1.3%
Lone Star Steakhouse &
Saloon, Inc. (a) ............................. 1,047,900 9,627,581
Morton's Restaurant Group,
Inc. (a) ..................................... 356,900 6,736,487
NPC International, Inc. (a) ................... 303,000 3,654,938
-----------
20,019,006
-----------
HOUSEHOLD APPLIANCES &
HOME FURNISHINGS--3.6%
Bassett Furniture Industries,
Inc .......................................... 322,900 7,789,962
Bush Industries, Inc., Class A ................ 466,600 5,803,338
Furniture Brands International,
Inc. (a) ..................................... 839,400 $22,873,650
Harman International
Industries, Inc. ............................. 471,300 17,968,312
-----------
54,435,262
-----------
INDUSTRIAL & MACHINERY--4.7%
Briggs & Stratton Corp. ....................... 413,230 20,609,846
JLG Industries, Inc. .......................... 1,261,200 19,706,250
Regal-Beloit Corp. ............................ 640,100 14,722,300
Roper Industries, Inc. ........................ 551,800 11,242,925
Wyman-Gordon Co. (a) .......................... 340,100 3,486,025
-----------
69,767,346
-----------
INSURANCE--6.1%
American Medical Security
Group, Inc. .................................. 382,900 5,575,981
Amerin Corp. (a) .............................. 486,900 11,503,012
ARM Financial Group, Inc.,
Class A ...................................... 372,000 8,253,750
Arthur J. Gallagher & Co. ..................... 286,800 12,655,050
Delphi Financial Group, Inc.,
Class A ...................................... 289,855 15,199,272
HCC Insurance Holdings, Inc. .................. 621,900 10,960,988
NAC Re Corp. .................................. 333,505 15,653,891
Orion Capital Corp. ........................... 17,300 688,756
Reliance Group Holdings, Inc. ................. 900,400 11,592,650
-----------
92,083,350
-----------
INVESTMENT COMPANIES--0.6%
Affiliated Managers Group,
Inc. (a) ..................................... 285,100 8,517,363
-----------
LEISURE TIME--2.6%
Anchor Gaming (a) ............................. 6,000 338,250
Carmike Cinemas, Inc.,
Class A (a) .................................. 524,700 10,657,969
Polaris Industries, Inc. ...................... 524,400 20,549,925
Vail Resorts, Inc. (a) ........................ 366,000 8,052,000
-----------
39,598,144
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD SMALL CAP PORTFOLIO (CONTINUED)
MANUFACTURING--6.6%
Aeroquip-Vickers, Inc. ........................ 174,200 $ 5,215,113
Alltrista Corp. (a) ........................... 448,400 10,761,600
Carlisle Companies, Inc. ...................... 256,400 13,236,650
Crane Co. ..................................... 696,510 21,025,896
Mark IV Industries, Inc. ...................... 1,251,864 16,274,232
Modine Manufacturing Co. ...................... 356,700 12,930,375
Varlen Corp. .................................. 870,568 20,077,474
-----------
99,521,340
-----------
MEDICAL SUPPLIES--3.5%
ADAC Laboratories (a) ......................... 504,000 10,064,250
Datascope Corp. (a) ........................... 711,000 16,353,000
Dentsply International, Inc. .................. 600,800 15,470,600
The West Company, Inc. ........................ 305,100 10,888,256
-----------
52,776,106
-----------
OIL & GAS--2.5%
Atwood Oceanics, Inc. (a) ..................... 271,600 4,617,200
Devon Energy Corp. ............................ 297,400 9,126,462
Helmerich & Payne, Inc. ....................... 769,220 14,903,637
Tuboscope, Inc. (a) ........................... 364,500 2,961,563
Vintage Petroleum, Inc. ....................... 674,000 5,813,250
-----------
37,422,112
-----------
PAPER PRODUCTS--1.3%
Chesapeake Corp. .............................. 307,500 11,339,062
The Standard Register Co. ..................... 270,100 8,356,219
-----------
19,695,281
-----------
PRINTING--1.2%
Electronics for Imaging, Inc. (a) ............. 452,700 18,192,881
-----------
PUBLISHING--1.8%
Banta Corp. ................................... 671,350 18,378,206
World Color Press, Inc. (a) ................... 277,000 8,431,188
-----------
26,809,394
-----------
REAL ESTATE--4.1%
Catellus Development
Corp. (a) .................................... 528,900 $ 7,569,881
FelCor Suite Hotels, Inc. ..................... 587,025 13,538,264
Glenborough Realty Trust, Inc. ................ 681,600 13,887,600
Kilroy Realty Corp. ........................... 511,000 11,753,000
Reckson Services Industries,
Inc. (a) ..................................... 51,192 211,167
Reckson Associates Realty
Corp ......................................... 639,900 14,197,782
-----------
61,157,694
-----------
RETAIL--4.8%
Eagle Hardware & Garden,
Inc. (a) ..................................... 442,300 14,374,750
General Nutrition Companies,
Inc. (a) ..................................... 980,000 15,925,000
Genesis Direct, Inc. (a) ...................... 350,000 2,734,375
Hughes Supply, Inc. ........................... 361,400 10,570,950
Oakley, Inc. (a) .............................. 750,000 7,078,125
Pier 1 Imports, Inc. .......................... 1,011,400 9,797,937
Talbots, Inc. ................................. 379,200 11,897,400
-----------
72,378,537
-----------
RETAIL TRADE--2.1%
Cole National Corp. (a) ....................... 422,600 7,237,025
Movado Group, Inc. ............................ 304,800 8,115,300
The Elder-Beerman Stores
Corp. (a) .................................... 609,500 7,047,344
The Wet Seal, Inc., Class A (a) ............... 327,000 9,871,312
-----------
32,270,981
-----------
STEEL--0.9%
WHX Corp. (a) ................................. 1,340,000 13,483,750
-----------
TECHNOLOGY--0.5%
VLSI Technology, Inc. (a) ..................... 656,500 7,180,469
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD SMALL CAP PORTFOLIO (CONTINUED)
TELECOMMUNICATIONS--2.5%
Associated Group, Inc.,
Class B (a) .............................. 298,500 $ 12,686,250
NTL, Inc. (a) ............................. 161,700 9,125,944
Vanguard Cellular Systems,
Inc. (a) ................................. 605,600 15,632,050
Verbex Voice Systems,
Inc., (a), (h) ........................... 180,501 0
-------------
37,444,244
-------------
TELECOMMUNICATIONS EQUIPMENT--1.3%
Allen Telecom, Inc. (a) ................... 704,765 4,713,116
Oak Industries, Inc. (a) .................. 404,885 14,170,975
-------------
18,884,091
-------------
TRANSPORTATION--1.0%
Budget Group, Inc., Class A (a) ........... 538,400 8,547,100
Pittston Burlington Group ................. 596,520 6,636,285
-------------
15,183,385
-------------
UTILITIES--1.9%
Calpine Corp. (a) ......................... 668,200 16,872,050
Sierra Pacific Resources .................. 317,800 12,076,400
-------------
28,948,450
-------------
WHOLESALE TRADE--0.4%
Unisource Worldwide, Inc. ................. 927,700 6,725,825
-------------
TOTAL COMMON STOCKS
(Identified
cost $1,332,063,345) .................... 1,419,672,088
-------------
PREFERRED STOCKS--0.0%
Verbex Voice Systems,
Inc. Series F (a), (h)
(Identified cost $1,500,000) ............. 687,285 0
-------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS--0.6%
COMMUNICATIONS--0.6%
International Cable Tel, Inc.,
7.00%, 06/15/08 (a) ................... $ 5,589 $ 8,439,390
--------------
RESTAURANTS, LODGING &
ENTERTAINMENT--0.0%
Interactive Light Holdings, Inc.,
8.00%, 01/25/99 (a), (h) .............. 1,000 500,000
--------------
TELECOMMUNICATIONS--0.0%
Verbex Voice Systems, Inc.,
10.00%, 12/31/95 (a), (h) ............. 100 0
--------------
TOTAL CONVERTIBLE BONDS
(Identified
cost $6,689,000) ....................... 8,939,390
--------------
REPURCHASE AGREEMENT--4.7%
State Street Bank and Trust
Company, 4.75%, 01/04/99,
(Dated 12/31/98, collateral-
ized by $21,000,000 United
States Treasury Note, 0.000%,
07/01/99, with a value of
$21,309,500, and
$45,510,000 United States
Treasury Note, 5.625%,
12/31/99, with a value of
$45,908,213, and
$5,210,000 United States
Treasury Note, 0.000%,
06/17/99, with a value of
$5,103,195) (Identified
cost $70,890,000) ..................... 70,890 70,890,000
--------------
TOTAL INVESTMENTS
(Identified
cost $1,409,642,345) (b) ............... 99.6% $1,499,501,478
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES ................. 0.4 5,548,791
-------------- --------------
NET ASSETS .............................. 100.0% $1,505,050,269
============== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD BANTAM VALUE PORTFOLIO
COMMON STOCKS--92.0%
APPAREL & TEXTILES--6.9%
Candie's, Inc. (a) ............................... 365,800 $1,371,750
Novel Denim Holdings, Ltd. (a) 60,600 1,287,750
Stride Rite Corp. ................................ 113,300 991,375
Tefron, Ltd. (a) ................................. 150,300 986,344
----------
4,637,219
----------
AUTO PARTS--6.6%
Dura Automotive Systems,
Inc. (a) ........................................ 54,900 1,873,462
Excel Industries, Inc. ........................... 146,200 2,558,500
----------
4,431,962
----------
BANKING--0.8%
Republic Banking Corp. ........................... 47,500 504,688
----------
BUSINESS SERVICES AND SUPPLIES--7.0%
Box Hill Systems Corp. (a) ....................... 222,400 1,195,400
GP Strategies Corp. (a) .......................... 118,800 1,782,000
Paxar Corp. (a) .................................. 68,900 615,794
Vanstar Corp. (a) ................................ 116,400 1,076,700
----------
4,669,894
----------
COMMERCIAL SERVICES--1.4%
Inacom Corp. (a) ................................. 62,600 931,175
----------
DRUGS & HEALTH CARE--9.7%
Apria Healthcare Group,
Inc. (a) ........................................ 432,300 3,863,681
CorVel Corp. (a) ................................. 74,000 2,608,500
----------
6,472,181
----------
EDUCATION--3.4%
Career Education Corp. (a) ....................... 76,000 2,280,000
----------
ENGINEERING & CONSTRUCTION--3.1%
EMCOR Group, Inc. (a) ............................ 130,000 2,096,250
----------
HOTELS & RESTAURANTS---2.0%
NPC International, Inc. (a) ...................... 112,000 $1,351,000
----------
INDUSTRIAL & MACHINERY--2.9%
OmniQuip International, Inc. ..................... 127,700 1,915,500
----------
INSURANCE--5.4%
Delphi Financial Group, Inc.,
Class A ......................................... 29,011 1,521,264
ESG Re, Ltd. ..................................... 47,400 959,850
Stirling Cooke Brown
Holdings, Ltd. .................................. 64,000 1,112,000
----------
3,593,114
----------
LEISURE TIME--8.8%
Carmike Cinemas, Inc.,
Class A (a) ..................................... 77,700 1,578,281
Powerhouse Technologies,
Inc. (a) ........................................ 170,300 2,469,350
Steinway Musical
Instruments, Inc. (a) ........................... 42,900 1,115,400
Trendwest Resorts, Inc. (a) ...................... 56,300 703,750
----------
5,866,781
----------
MANUFACTURING--9.5%
Ballantyne of Omaha, Inc. (a) .................... 235,700 2,077,106
Hawk Corp., Class A (a) .......................... 120,700 1,010,863
Regal-Beloit Corp. ............................... 65,200 1,499,600
Varlen Corp. ..................................... 76,750 1,770,047
----------
6,357,616
----------
MEDICAL SUPPLIES--3.0%
ADAC Laboratories (a) ............................ 87,900 1,755,253
The West Company, Inc. ........................... 5,968 212,983
----------
1,968,236
----------
OIL & GAS--3.3%
Atwood Oceanics, Inc. (a) ........................ 61,300 1,042,100
Louis Dreyfus Natural Gas
Corp. (a) ....................................... 82,000 1,168,500
----------
2,210,600
----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ------------------------------------------------------------- -------------
LAZARD BANTAM VALUE PORTFOLIO (CONTINUED)
RETAIL TRADE--6.9%
Grand Union Co. (a) .............................. 97,000 $ 1,188,250
The Elder-Beerman Stores
Corp. (a) ....................................... 147,400 1,704,312
Vans, Inc. (a) ................................... 250,000 1,718,750
-----------
4,611,312
-----------
STEEL--2.3%
WHX Corp. (a) .................................... 152,000 1,529,500
-----------
TELECOMMUNICATIONS EQUIPMENT--2.7%
Allen Telecom, Inc. (a) .......................... 268,000 1,792,250
-----------
TOYS & AMUSEMENTS--2.1%
Midway Games, Inc. (a) ........................... 129,100 1,420,100
-----------
TRANSPORTATION--4.2%
Budget Group, Inc., Class A (a) 82,900 1,316,038
Genesee & Wyoming, Inc.,
Class A (a) ..................................... 63,000 803,250
Interpool, Inc. .................................. 39,000 653,250
-----------
2,772,538
-----------
TOTAL COMMON STOCKS
(Identified cost $66,553,100)..................... 61,411,916
-----------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------- ------------ -------------
<S> <C> <C>
REPURCHASE AGREEMENT--7.7%
State Street Bank and Trust
Company, 4.75%, 01/04/99,
(Dated 12/31/98, collateral-
ized by $5,125,000 United
States Treasury Note, 5.750%,
11/15/00, with a value of
$5,261,745) (Identified cost
$5,157,000).................... $ 5,157 $ 5,157,000
-----------
TOTAL INVESTMENTS
(Identified cost
$71,710,100) (b) .............. 99.7% $66,568,916
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ................. 0.3 225,326
------- -----------
NET ASSETS ...................... 100.0% $66,794,242
======= ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- -------------------------------- -------------------- ---------------------
LAZARD GLOBAL EQUITY PORTFOLIO
COMMON STOCKS--96.8%
AUSTRALIA--1.2%
Broken Hill Proprietary
Company, Ltd. ................ 36,541 $ 269,126
---------
FRANCE--7.1%
Alcatel Alsthom (Cie Generale) 1,560 190,850
Axa-UAP ....................... 1,870 270,918
Banque Nationale de Paris ..... 3,540 291,380
Cie de Saint Gobain ........... 850 119,952
Cie Generale des Eaux ......... 1,250 324,182
Elf Aquitaine SA .............. 1,850 213,754
Rhone-Poulenc SA .............. 3,798 195,368
---------
TOTAL FRANCE .................. 1,606,404
---------
GERMANY--5.5%
Allianz AG .................... 680 249,298
DaimlerChrysler AG (a) ........ 2,709 267,389
Hoechst AG .................... 4,500 186,577
Siemens AG .................... 3,000 193,508
Thyssen AG .................... 800 148,374
Viag AG ....................... 350 205,178
---------
TOTAL GERMANY ................. 1,250,324
---------
HONG KONG--1.0%
HSBC Holdings, Ltd. ........... 8,926 222,355
---------
ITALY--3.3%
Ente Nazionale Idrocarburi
SPA (ENI) .................... 33,700 220,121
Instituto Bancario San Paolo
di Torino (a) ................ 15,800 279,029
Telecom Italia SPA ............ 40,600 255,369
---------
TOTAL ITALY ................... 754,519
---------
JAPAN--7.3%
Matsushita Electric Industrial
Company, Ltd. ................ 16,000 282,919
Nippon Telegraph & Telephone
Corp. ........................ 24 $ 185,122
NTT Mobile Communications ..... 6 246,793
Omron Corp. ................... 9,000 123,238
Promise Company, Ltd. ......... 3,190 165,919
Ricoh Company, Ltd. ........... 31,000 285,732
Sony Corp. .................... 2,500 181,999
Sumitomo Trust & Banking,
Ltd. ......................... 45,000 119,416
Sumitomo Trust & Banking,
Ltd. (a) ..................... 1 42,902
---------
TOTAL JAPAN ................... 1,634,040
---------
NETHERLANDS--3.2%
Heineken NV ................... 5,862 352,587
ING Groep NV .................. 1,900 115,798
Philips Electronics NV ........ 3,600 241,444
---------
TOTAL NETHERLANDS ............. 709,829
---------
SPAIN--3.9%
Corporacion Bancaria de
Espana SA (Argentaria) ....... 11,500 297,372
Endesa SA ..................... 8,100 214,298
Telefonica de Espana .......... 8,227 365,271
Telefonica SA, rights (a) ..... 8,227 7,294
---------
TOTAL SPAIN ................... 884,235
---------
SWEDEN--3.1%
ABB AB ........................ 13,800 146,920
Astra AB ...................... 10,513 213,500
Svenska Handelsbanken,
Series A ..................... 5,900 248,351
Volvo AB, Series B ............ 3,800 86,993
---------
TOTAL SWEDEN .................. 695,764
---------
SWITZERLAND--3.9%
Nestle SA ..................... 133 289,488
Roche Holding AG .............. 18 219,612
Zurich Versicherungs -
Gesellschaft (a) ............. 512 379,052
---------
TOTAL SWITZERLAND ............. 888,152
---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD GLOBAL EQUITY PORTFOLIO (CONTINUED)
UNITED KINGDOM--12.8%
Allied Zurich PLC (a) ............. 8,300 $ 124,728
B.A.T Industries PLC .............. 24,900 219,256
British Aerospace PLC ............. 31,300 266,770
British Petroleum Company
PLC .............................. 15,100 224,781
Cadbury Schweppes PLC ............. 14,942 255,695
Diageo PLC ........................ 21,048 233,420
EMI Group PLC ..................... 16,800 112,484
Granada Group PLC ................. 14,400 252,401
National Westminster Bank
PLC .............................. 13,600 263,233
Prudential Corporation PLC ........ 25,500 388,990
Royal & Sun Alliance Insurance
Group PLC ........................ 29,400 239,342
Unilever PLC ...................... 26,200 294,690
-----------
TOTAL UNITED KINGDOM .............. 2,875,790
-----------
UNITED STATES--44.5%
Aetna, Inc. ....................... 2,750 216,219
AlliedSignal, Inc. ................ 3,900 172,819
American Home Products
Corp. ............................ 8,400 473,025
AT&T Corp. ........................ 6,600 496,650
BankAmerica Corp. ................. 3,930 236,291
Bell Atlantic Corp. ............... 8,100 429,300
Bristol-Myers Squibb Co. .......... 1,800 240,863
Chase Manhattan Corp. ............. 4,900 333,506
Citigroup, Inc. ................... 5,850 289,575
Exxon Corp. ....................... 3,000 219,375
Federated Department Stores,
Inc. (a) ......................... 4,800 209,100
First Data Corp. .................. 9,000 285,187
First Union Corp. ................. 3,900 237,169
Fleet Financial Group, Inc. ....... 7,300 326,219
FPL Group, Inc. ................... 3,300 203,363
General Motors Corp. .............. 5,000 357,812
Halliburton Co. ................... 3,600 106,650
Hewlett-Packard Co. ............... 4,000 273,250
Honeywell, Inc. ................... 2,800 210,875
International Business
Machines Corp. ................... 2,420 447,095
Johnson & Johnson ................. 4,400 369,050
McDonald's Corp. .................. 5,100 390,787
Merck & Company, Inc. ............. 2,000 295,375
Minnesota Mining &
Manufacturing Co. ................ 2,600 184,925
Mobil Corp. ....................... 4,900 426,912
Motorola, Inc. .................... 5,100 311,419
Philip Morris Companies, Inc. ..... 7,790 416,765
Sears, Roebuck & Co. .............. 6,470 274,975
Southern Co. ...................... 1,200 34,875
Texas Instruments, Inc. ........... 4,100 350,806
The Hartford Financial
Services Group, Inc. ............. 5,560 305,105
Toys "R" Us, Inc. (a) ............. 12,100 204,188
TRW, Inc. ......................... 4,000 224,750
United Technologies Corp. ......... 4,300 467,625
-----------
TOTAL UNITED STATES ............... 10,021,900
-----------
TOTAL COMMON STOCKS
(Identified cost $18,858,067)...... 21,812,438
-----------
PRINCIPAL
AMOUNT
(000)
----------
REPURCHASE AGREEMENT--2.4%
State Street Bank and Trust
Company, 4.75%, 01/04/99,
(Dated 12/31/98, collateralized
by $540,000 United States
Treasury Note, 5.625%,
12/31/99, with a value of
$545,400) (Identified cost
$531,000)......................... $ 531 531,000
-----------
TOTAL INVESTMENTS
(Identified cost $19,389,067) (b) 99.2% $22,343,438
CASH AND OTHER ASSETS
IN EXCESS OF LIABILITIES .......... 0.8 190,858
----------- -----------
NET ASSETS ......................... 100.0% $22,534,296
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL EQUITY PORTFOLIO
COMMON STOCKS--97.6%
AUSTRALIA--2.1%
Broken Hill Proprietary
Company, Ltd. ..................... 5,093,963 $37,517,214
Westpac Banking Corporation,
Ltd. .............................. 3,669,600 24,555,446
-----------
TOTAL AUSTRALIA .................... 62,072,660
-----------
DENMARK--1.3%
Unidanmark, Class A ................ 419,700 37,918,938
-----------
FINLAND--1.0%
Merita, Ltd. ....................... 2,200,000 13,892,920
UPM-Kymmene OYJ .................... 559,600 15,584,075
-----------
TOTAL FINLAND ...................... 29,476,995
-----------
FRANCE--15.6%
Alcatel Alsthom (Cie Generale) ..... 337,540 41,294,466
Axa-UAP ............................ 363,100 52,604,364
Banque Nationale de Paris .......... 663,922 54,647,989
Cie de Saint Gobain ................ 314,630 44,400,478
Cie Generale des Eaux .............. 336,492 87,267,644
Elf Aquitaine SA ................... 438,100 50,619,317
Michelin, Class B .................. 510,900 20,423,207
Rhone-Poulenc SA ................... 1,244,690 64,026,622
Suez Lyonnaise des Eaux ............ 203,100 41,702,522
-----------
TOTAL FRANCE ....................... 456,986,609
-----------
GERMANY--10.5%
Allianz AG ......................... 114,156 41,851,264
DaimlerChrysler AG (a) ............. 430,043 42,446,942
Hoechst AG ......................... 1,300,200 53,908,448
Metro AG ........................... 922,924 73,652,281
Siemens AG ......................... 660,400 42,597,504
Thyssen AG ......................... 114,000 21,143,286
Viag AG ............................ 54,115 31,723,482
-----------
TOTAL GERMANY ...................... 307,323,207
-----------
HONG KONG--1.0%
HSBC Holdings, Ltd. ................ 1,117,148 $27,829,207
-----------
ITALY--6.0%
Ente Nazionale Idrocarburi SPA
(ENI) ............................. 6,544,800 42,749,306
Instituto Bancario San Paolo
di Torino (a) ..................... 3,695,500 65,262,693
Telecom Italia SPA ................. 10,507,400 66,090,272
-----------
TOTAL ITALY ........................ 174,102,271
-----------
JAPAN--14.5%
Asahi Breweries, Ltd. .............. 2,393,000 35,244,096
Japan Tobacco, Inc. ................ 5,083 50,807,519
Matsushita Electric Industrial
Company, Ltd. ..................... 1,861,000 32,907,023
Nintendo Co. ....................... 340,700 33,000,133
Nippon Telegraph & Telephone
Corp. ............................. 3,193 24,628,890
Nissan Motor Company, Ltd. ......... 4,495,000 13,757,364
NTT Mobile Communications .......... 1,093 44,957,541
Omron Corp. ........................ 1,225,000 16,773,994
Orix Corp. ......................... 611,300 45,637,965
Promise Company, Ltd. .............. 569,600 29,626,254
Ricoh Company, Ltd. ................ 4,400,000 40,555,506
Sony Corp. ......................... 510,800 37,186,059
Sumitomo Trust & Banking, Ltd. 7,369,000 19,555,064
-----------
TOTAL JAPAN ........................ 424,637,408
-----------
MALAYSIA--0.3%
Genting Berhad ..................... 4,167,500 9,047,862
-----------
NETHERLANDS--3.4%
Heineken NV ........................ 865,775 52,074,613
ING Groep NV ....................... 252,600 15,395,060
Philips Electronics NV ............. 483,800 32,447,331
-----------
TOTAL NETHERLANDS .................. 99,917,004
-----------
SINGAPORE--0.9%
United Overseas Bank, Ltd. ......... 4,096,800 26,302,895
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ------------------------------------- ------------------- ---------------------
LAZARD INTERNATIONAL EQUITY
PORTFOLIO (CONTINUED)
SPAIN--6.0%
Corporacion Bancaria de
Espana SA (Argentaria) ............ 2,332,400 $ 60,312,201
Endesa SA .......................... 1,585,900 41,957,388
Telefonica de Espana ............... 1,649,618 73,241,553
Telefonica SA, rights (a) .......... 1,649,618 1,462,510
-------------
TOTAL SPAIN ........................ 176,973,652
-------------
SWEDEN--7.1%
ABB AB ............................. 2,968,000 31,598,562
Astra AB ........................... 2,601,666 52,835,133
Electrolux AB, Series B ............ 2,353,100 40,401,912
Nordbanken Holding AB .............. 2,291,600 14,666,601
Svenska Handelsbanken,
Series A .......................... 1,048,500 44,134,871
Volvo AB, Series B ................. 1,026,900 23,508,690
-------------
TOTAL SWEDEN ....................... 207,145,769
-------------
SWITZERLAND--6.1%
Nestle SA .......................... 14,754 32,113,606
Roche Holding AG ................... 3,082 37,602,329
SGS Holding SA ..................... 15,093 14,777,670
SMH AG ............................. 21,115 13,065,262
Zurich Versicherungs-
Gesellschaft ...................... 109,630 81,163,070
-------------
TOTAL SWITZERLAND .................. 178,721,937
-------------
UNITED KINGDOM--21.8%
Allied Zurich PLC (a) .............. 2,063,550 31,009,819
B.A.T Industries PLC ............... 4,823,150 42,470,003
British Aerospace PLC .............. 9,277,948 79,076,048
British Petroleum Company PLC 3,542,300 52,731,364
Cadbury Schweppes PLC .............. 1,246,431 21,329,522
Diageo PLC ......................... 3,950,194 43,807,186
EMI Group PLC ...................... 1,805,700 12,090,000
Granada Group PLC .................. 2,698,000 47,290,081
Great Universal Stores PLC ......... 3,020,600 31,867,104
Imperial Chemical Industries
PLC ............................... 3,754,300 32,528,119
Mirror Group PLC ................... 3,504,300 8,747,650
National Westminster Bank PLC 2,836,900 54,909,262
Prudential Corporation PLC ......... 3,804,500 58,035,849
Royal & Sun Alliance Insurance
Group PLC ......................... 5,400,300 43,963,233
Siebe PLC .......................... 9,911,700 38,945,291
Unilever PLC ....................... 3,376,400 37,976,787
-------------
TOTAL UNITED KINGDOM ............... 636,777,318
-------------
TOTAL COMMON STOCKS
(Identified cost
$2,363,965,380).................... 2,855,233,732
-------------
PRINCIPAL
AMOUNT
(000)
-------------
REPURCHASE AGREEMENT--2.2%
State Street Bank and Trust
Company, 4.75%, 01/04/99,
(Dated 12/31/98, collateralized
by $13,895,000 United States
Treasury Note, 6.375%,
05/15/00, with a value of
$14,346,588, and
$50,560,000 United States
Treasury Note, 5.625%,
12/31/99, with a value of
$51,002,400) (Identified cost
$64,064,000) ..................... $ 64,064 64,064,000
----------
TOTAL INVESTMENTS
(Identified
cost $2,428,029,380) (b) ......... 99.8% $2,919,297,732
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ................... 0.2 7,294,704
-------- --------------
NET ASSETS ........................ 100.0% $2,926,592,436
======== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
COMMON STOCKS--94.5%
AUSTRALIA--2.9%
Cochlear, Ltd. ..................... 931,000 $5,248,606
----------
AUSTRIA--1.0%
KTM Motorradholding AG ............. 26,500 1,783,317
----------
CANADA--2.5%
Club Monaco, Inc. (a), (c) ......... 364,200 1,846,614
Maple Leaf Foods, Inc. ............. 146,186 1,410,693
Queensway Financial Holdings,
Ltd. (a) .......................... 80,000 1,256,133
----------
TOTAL CANADA ....................... 4,513,440
----------
DENMARK--0.7%
Falck AS ........................... 14,894 1,205,225
----------
FINLAND--5.4%
Amer Group, Ltd. ................... 191,400 1,978,188
Asko OYJ-A, Class A ................ 101,730 1,729,749
Rocla OY (a) ....................... 161,500 1,140,224
Sampo Insurance Company, Ltd. 61,800 2,345,224
Santasalo-JOT Group ................ 137,000 838,282
Vaisala OY ......................... 21,400 1,762,699
----------
TOTAL FINLAND ...................... 9,794,366
----------
FRANCE--6.0%
C.E.A. Industries .................. 16,871 2,063,989
Carbone-Lorraine ................... 46,900 2,222,948
Cie des Signaux SA ................. 39,700 2,911,286
Compagnie Plastic-Omnium SA 13,860 1,326,256
SCOR SA ADR (a) .................... 33,500 2,240,313
----------
TOTAL FRANCE ....................... 10,764,792
----------
GERMANY--10.0%
Data Modul AG ...................... 31,974 1,304,591
Fielmann AG ........................ 62,300 2,990,520
Hawesko Holding AG (a) ............. 62,700 3,498,800
Holsten Brauerei AG ................ 337 69,802
Kamps AG (a) ....................... 19,500 1,263,651
KSB AG ............................. 7,850 $1,332,983
Marseille-Kliniken AG .............. 286,200 5,151,806
Prosieben Media AG ................. 54,400 2,513,381
----------
TOTAL GERMANY ...................... 18,125,534
----------
HONG KONG--2.5%
CDL Hotels International, Ltd. ..... 4,976,600 1,278,258
Esprit Asia Holdings, Ltd. ......... 5,803,500 2,509,387
Peregrine Investment Holdings,
Ltd. (d) .......................... 2,163,800 0
Shaw Brothers (Hong Kong), Ltd. 1,479,500 639,724
----------
TOTAL HONG KONG .................... 4,427,369
----------
IRELAND--2.7%
Adare Printing Group PLC ........... 308,000 2,702,558
Anglo Irish Bank Corporation
PLC ............................... 754,000 2,175,431
----------
TOTAL IRELAND ...................... 4,877,989
----------
ITALY--7.5%
Banca Popolare di Brescia .......... 215,400 5,250,005
Industrie Natuzzi SPA .............. 98,800 2,457,650
Interpump Group SPA ................ 352,000 1,724,395
Manuli Rubber Industries
SPA (a) ........................... 699,800 2,581,741
Premafin Finanziaria SPA (a) ....... 1,805,000 1,561,069
----------
TOTAL ITALY ........................ 13,574,860
----------
JAPAN--4.8%
Aderans Company, Ltd. .............. 93,700 2,909,217
Honma Golf Company, Ltd. ........... 30,600 148,872
Kawasumi Laboratories .............. 66,000 1,296,064
Laox ............................... 160,000 1,174,702
Paris Miki, Inc. ................... 137,900 3,171,517
----------
TOTAL JAPAN ........................ 8,700,372
----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL SMALL CAP
PORTFOLIO (CONTINUED)
NETHERLANDS--5.0%
Avalix Groep NV (a) ................. 162,700 $ 1,342,338
Scala Business Solutions NV,
3/31/99 warrants (a) ............... 59,100 75,611
Scala Business Solutions NV,
3/31/01 warrants (a) ............... 59,100 4,788
Scala Business Solutions NV (a) ..... 505,140 4,570,916
Telegraaf Holdings .................. 110,100 2,959,520
-----------
TOTAL NETHERLANDS ................... 8,953,173
-----------
NORWAY--2.8%
Electric Farm ASA (a) ............... 36,240 0
P4 Radio Hele Norg ASA (a) .......... 724,800 2,098,519
Schibsted ASA ....................... 240,800 3,042,285
-----------
TOTAL NORWAY ........................ 5,140,804
-----------
PORTUGAL--2.0%
Campanhia de Seguros Mundial
Confianca SA (a) ................... 110,600 3,519,135
-----------
SPAIN--2.5%
Banco Pastor SA ..................... 72,400 4,533,915
-----------
SWEDEN--6.7%
Caran AB ............................ 221,700 2,728,683
Elanders AB ......................... 124,750 2,333,842
Getinge Industries AB ............... 184,798 2,774,881
Industrial & Financial
Systems AB ......................... 239,400 2,755,009
Monark Stiga AB ..................... 348,575 1,540,203
-----------
TOTAL SWEDEN ........................ 12,132,618
-----------
SWITZERLAND--8.4%
Brauerei Eoichof AG ................. 4,228 4,355,114
Edipresse SA ........................ 12,660 3,640,314
Gretag Imaging Group (a) ............ 33,800 2,903,399
Moevenpick Holding AG ............... 1,730 967,198
SAIA-Burgess Electronics AG (a)...... 5,900 1,460,290
Swisslog Holding AG (a) ............. 19,600 1,854,845
-----------
TOTAL SWITZERLAND ................... 15,181,160
-----------
TAIWAN--1.1%
Want Want Holdings, Ltd. ............ 1,662,000 1,994,400
-----------
UNITED KINGDOM--20.0%
Ashtead Group PLC ................... 605,200 1,377,511
Carpetright PLC ..................... 357,300 1,335,645
Corporate Services Group PLC ........ 463,900 1,173,430
Denison International PLC,
ADR (a) ............................ 121,500 1,518,750
Devro PLC ........................... 468,300 1,346,003
Dialog Corp. PLC .................... 487,000 477,372
Euromoney Publications PLC .......... 50,644 1,156,928
Games Workshop Group PLC ............ 151,100 1,292,848
Goode Durrant PLC ................... 346,100 1,575,534
Hogg Robinson PLC ................... 789,400 2,698,439
Hozelock Group PLC .................. 531,800 2,650,606
Jardine Lloyd Thompson
Group PLC .......................... 769,800 2,442,795
JBA Holdings PLC .................... 535,900 1,691,660
Man (E D & F) Group PLC ............. 594,500 3,456,970
Manganese Bronze
Holdings PLC ....................... 82,800 258,621
Seton Healthcare Group PLC .......... 356,423 4,974,170
Signet Group PLC, ADR (a) ........... 217,312 3,368,336
Victrex PLC ......................... 779,900 2,163,869
Westminster Health Care
Holdings PLC ....................... 337,700 1,166,998
-----------
TOTAL UNITED KINGDOM ................ 36,126,485
-----------
TOTAL COMMON STOCKS
(Identified cost
$171,915,228)...................... 170,597,560
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ------------------------------------ ------------ ---------------
LAZARD INTERNATIONAL SMALL CAP
PORTFOLIO (CONTINUED)
REPURCHASE AGREEMENT--5.5%
State Street Bank and Trust
Company, 4.75%, 01/04/99,
(Dated 12/31/98, collateralized
by $10,300,000 United States
Treasury Note, 0.000%,
07/01/99, with a value of
$10,068,250) (Identified cost
$9,867,000) ...................... $ 9,867 $ 9,867,000
------------
TOTAL INVESTMENTS
(Identified cost
$181,782,228) (b) ............... 100.0% $180,464,560
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS ..................... 0.0 (39,229)
------- ------------
NET ASSETS ........................ 100.0% $180,425,331
======= ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD EMERGING MARKETS PORTFOLIO
COMMON STOCKS--83.2%
ARGENTINA--6.7%
Quilmes Industrial Quinsasa
ADR ................................. 722,150 $6,725,022
Telefonica de Argentina SA
ADR ................................. 213,500 5,964,656
YPF Sociedad Anonima
Class D ADR ......................... 280,300 7,830,881
----------
TOTAL ARGENTINA ...................... 20,520,559
----------
BRAZIL--5.8%
Companhia Cervejaria Brahma,
ADR ................................. 189,700 1,790,294
Eletropaulo Metropolitana -
Eletricidade de Sao Paulo SA ........ 78,020,000 3,615,923
Souza Cruz SA ........................ 861,700 5,562,576
Telecomunicacoes Brasileiras
SA ADR .............................. 95,100 6,912,581
----------
TOTAL BRAZIL ......................... 17,881,374
----------
CHILE--4.3%
AFP Provida SA ADR ................... 420,000 5,643,750
Banco BHIF ADR ....................... 216,900 1,680,975
Quinenco SA ADR ...................... 468,700 3,749,600
Santa Isabel SA ADR .................. 319,800 2,118,675
----------
TOTAL CHILE .......................... 13,193,000
----------
COLOMBIA--0.9
Banco Ganadero SA ADR ................ 295,300 2,676,156
----------
CZECH REPUBLIC--1.3%
Ceske Energeticke Zavody
AS (a) .............................. 172,000 3,868,704
----------
GREECE--2.9%
Hellenic Telecommunication
Organization SA ADR (a) ............. 17,500 231,875
Hellenic Telecommunication
Organization SA ..................... 254,222 6,767,021
Panafon Hellenic
Telecommunication Co.
ADR (a), (c) ........................ 69,400 1,839,100
----------
TOTAL GREECE ......................... 8,837,996
----------
HONG KONG--4.5%
Guangshen Railway Company,
Ltd. ADR ............................ 444,300 2,665,800
Peregrine Investment Holdings,
Ltd. (d) ............................ 2,329,000 0
Shenzhen Expressway Co. (a) .......... 21,334,000 4,956,528
Yue Yuen Industrial Holdings ......... 3,191,300 6,055,051
----------
TOTAL HONG KONG ...................... 13,677,379
----------
HUNGARY--1.1%
Magyar Olaj-es Gazipari RT. .......... 120,200 3,295,023
----------
INDIA--6.4%
Hindalco Industries, Ltd GDR ......... 264,800 3,031,960
Larsen & Toubro, Ltd. GDR (c) ........ 257,400 1,956,240
Larsen & Toubro, Ltd. ................ 798,000 3,015,752
Mahanagar Telephone Nigam,
Ltd. GDR (a), (c) ................... 545,100 6,745,613
State Bank of India GDR (a), (c) ..... 601,700 4,933,940
----------
TOTAL INDIA .......................... 19,683,505
----------
ISRAEL--4.6%
ECI Telecom, Ltd. ADR ................ 241,100 8,589,188
Supersol, Ltd. ADR ................... 452,600 5,544,350
----------
TOTAL ISRAEL ......................... 14,133,538
----------
MALAYSIA--1.3%
Jaya Tiasa Holdings Berhad ........... 2,980,000 3,960,263
----------
MEXICO--15.6%
Cemex SA de CV ....................... 2,158,904 4,652,529
Fomento Economico Mexicano
SA ADR .............................. 207,400 5,522,025
Grupo Financiero Banamex
Accival SA de CV (a) ................ 4,310,100 5,655,728
Grupo Industrial Maseca SA de
CV ADR .............................. 689,300 8,573,169
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARE VALUE
- ------------------------------------------------------------------------------
LAZARD EMERGING MARKETS
PORTFOLIO (CONTINUED)
Grupo Televisa SA (a) ................. 207,700 $ 5,127,594
Kimberly-Clark de Mexico SA ........... 2,082,800 6,643,432
Panamerican Beverages, Inc.,
Class A ADR .......................... 210,300 4,587,169
Pepsi-Gemex SA de CV GDR .............. 546,800 4,271,875
Tubos de Acero de Mexico
SA ADR ............................... 421,400 2,712,762
-----------
TOTAL MEXICO .......................... 47,746,283
-----------
PERU--2.2%
Credicorp, Ltd. ....................... 162,600 1,463,400
Telefonica del Peru SA ADR ............ 409,200 5,191,725
-----------
TOTAL PERU ............................ 6,655,125
-----------
PHILIPPINES--2.3%
Benpres Holdings Corp.
GDR (a), (c) ......................... 680,000 2,196,400
Benpres Holdings Corp. (a) ............ 29,316,000 4,747,836
-----------
TOTAL PHILIPPINES ..................... 6,944,236
-----------
POLAND--3.0%
Bank Handlowy W. Warszawie ............ 542,400 6,691,145
Telekomunikacja Polska SA
GDR (a) .............................. 495,300 2,501,265
-----------
TOTAL POLAND .......................... 9,192,410
-----------
RUSSIA--0.2%
AO Tatneft ADR ........................ 412,300 798,831
-----------
SOUTH AFRICA--10.1%
Amalgamated Banks of South
Africa, Ltd. ......................... 1,104,323 5,230,737
Barlow, Ltd. .......................... 958,515 3,677,646
JD Group, Ltd. ........................ 871,478 3,846,736
Naspers, Ltd. ......................... 873,100 3,409,215
Rembrandt Group, Ltd. ................. 835,200 5,104,528
Sanlam, Ltd. (a) ...................... 3,567,300 3,542,893
South African Breweries, Ltd. ......... 366,200 6,167,265
-----------
TOTAL SOUTH AFRICA .................... 30,979,020
-----------
SOUTH KOREA--6.6%
Samsung Electronics Co. ............... 150,215 10,076,767
SK Telecom Company, Ltd. .............. 8,493 6,224,176
SK Telecom Company, Ltd. ADR 390,061 3,973,746
-----------
TOTAL SOUTH KOREA ..................... 20,274,689
-----------
THAILAND--1.6%
Bangkok Expressway Public
Company, Ltd. (a) .................... 4,871,000 4,824,099
-----------
VENEZUELA--1.8%
Compania Anonima Nacional
Telefonos de Venezuela ADR ........... 145,500 2,591,719
Mavesa SA ADR ......................... 809,000 3,033,750
-----------
TOTAL VENEZUELA ....................... 5,625,469
-----------
TOTAL COMMON STOCKS
(Identified cost $309,980,625)........ 254,767,659
-----------
PREFERRED STOCKS--11.2%
BRAZIL--11.2%
Banco Bradesco SA ADR .................465,929,611 2,583,571
Banco Bradesco SA, rights (a) ......... 19,312,382 0
Banco Itau SA ......................... 11,786,000 5,754,881
Cemig Cia Energetica de Minas
Gerais ...............................224,447,516 4,272,360
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar GDR (a) ....................... 338,900 5,252,950
Companhia Cervejaria
Brahma (a) ........................... 8,091,100 3,535,629
Companhia Cimento Portland ............ 24,820,000 2,824,423
Companhia Paranaense de
Energia-Copel ADR .................... 433,300 3,087,262
Companhia Riograndense
Telecom .............................. 10,617,800 3,822,513
Copel Paranqense de Energia ...........236,399,000 1,702,120
Telesp Celular SA (a) ................. 36,140,000 1,588,210
-----------
TOTAL BRAZIL .......................... 34,423,919
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
LAZARD EMERGING MARKETS
PORTFOLIO (CONTINUED)
THAILAND--0.0%
Industrial Finance Corp. of
Thailand, rights (a) ................. 2,031,350 $ 0
----------
TOTAL PREFERRED STOCKS
(Identified cost $53,499,641)......... 34,423,919
----------
PRINCIPAL
AMOUNT
(000)
---------------
CONVERTIBLE BONDS--1.4%
BRAZIL--1.3%
Telesp de Sao Paulo SA ............... $ 27,806,118 3,790,174
---------
PHILIPPINES--0.1%
Bacnotan Consolidated
Industries, 5.50%,
06/21/04 (c) ........................ 1,112 378,080
---------
TOTAL CONVERTIBLE BONDS
(Identified cost $6,868,313)......... 4,168,254
---------
REPURCHASE AGREEMENT--3.5%
State Street Bank and Trust
Company, 4.75%, 01/04/99,
(Dated 12/31/98, collateralized
by $10,505,000 United States
Treasury Note, 6.750%,
04/30/00, with a value of
$10,925,200) (Identified cost
$10,708,000)......................... $ 10,708 $ 10,708,000
------------
TOTAL INVESTMENTS
(Identified cost
$381,056,579) (b) .................. 99.3% $304,067,832
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ...................... 0.7 2,156,066
-------- ------------
NET ASSETS ........................... 100.0% $306,223,898
======== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO
ASSET-BACKED SECURITIES--5.9%
Chase Manhattan Grantor Trust,
Series 1996-B, Class A
6.61%, 09/15/02 .................................... $ 516 $ 521,369
Citibank Credit Card Master
Trust, Series 1998-1, Class B
5.95%, 01/15/03 .................................... 993 990,882
Delta Funding Home Equity
Loan Trust, Series 1997-3,
Class A6, 7.72%, 05/25/20 .......................... 394 405,210
Federal Express Corp. Trust,
Series 1998-1, Class 1A
6.72%, 01/15/22 .................................... 1,288 1,343,139
First USA Credit Card Master
Trust, Series 1997-6, Class B
6.58%, 03/17/05 .................................... 1,461 1,497,218
Fleetwood Credit Grantor Trust,
Series 1997-B, Class A
6.40%, 05/15/13 .................................... 566 576,930
NationsBank Auto Owner Trust,
Series 1996-A, Class A4
6.625%, 12/15/00 ................................... 440 443,300
PNC Student Loan Trust I,
Series 1997-2, Class A7
6.728%, 01/25/07 ................................... 867 903,414
Travelers Bank Credit Card
Master Trust, Series 1998-1,
Class A, 6.00%, 01/15/05 ........................... 91 91,487
UCFC Loan Trust, Series
1997-C, Class A
8.00%, 09/15/00 .................................... 578 72,160
---------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $6,698,101)......................... 6,845,109
---------
COLLATERALIZED MORTGAGE OBLIGATIONS--17.8%
Asset Securitization Corp.:
Series 1996-D2, Class ACS2
1.49%, 02/28/26 (e) ................................ 2,125 185,274
Series 1996-MD6, Class A1B
6.88%, 11/13/29 (e) ............................... 248 $ 260,539
Series 1996-D3, Class A1A
7.01%, 10/13/26 ................................... 78 80,855
Series 1995-MD4, Class A1
7.10%, 08/13/29 ................................... 309 318,026
Series 1996-D3, Class A1B
7.21%, 10/31/26 ................................... 375 401,310
CS First Boston Mortgage:
Series 1998-C2
6.30%, 11/11/30 ................................... 550 560,141
Series 1997-C1, Class AIB
7.15%, 08/20/06 (e) ............................... 780 821,574
DLJ Mortgage Acceptance
Corp., Series 1993-MF7, Class
A1, 7.40%, 06/18/03 ................................ 328 348,126
Federal Home Loan Mortgage
Corp.:
Series 1679, Class J
6.00%, 02/15/09 ................................... 359 356,420
Series 1697, Class D
6.00%, 03/15/09 ................................... 359 354,175
Series 1513, Class L
6.50%, 07/15/07 ................................... 230 235,030
Series 1478, Class H
6.50%, 03/15/08 ................................... 373 381,626
Series G025, Class B
6.50%, 12/25/08 ................................... 707 716,940
Series 1519, Class G
6.75%, 05/15/08 ................................... 619 635,875
Series 1946, Class PD
6.75%, 05/15/24 ................................... 683 699,861
7.00%, 11/01/28 .................................... 6,233 6,356,349
Federal National Mortgage
Association REMIC:
Series 1992-203, Class SA
3.844%, 11/25/07 (e) .............................. 243 15,739
Series 1992-129, Class G
4.00%, 06/25/18 ................................... 423 417,633
Series 1994-48, Class E
6.00%, 11/25/08 ................................... 517 521,358
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
===============================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO (CONTINUED)
Series 1996-40, Class J
6.00%, 12/25/08 ................. $ 840 $ 849,450
Series 1994-28, Class H
6.25%, 03/25/23 ................. 367 369,980
Series 1993-134, Class K
6.50%, 05/25/08 ................. 295 297,194
Series 1993-206, Class KA
6.50%, 12/25/22 ................. 502 512,511
Series 1994-30, Class LC
6.50%, 07/25/23 ................. 363 363,867
Series 1999-97, Class SA
10.00%, 04/25/21 ................ 37 927
Series 1991-G13, Class L
10.095%, 05/25/21 (e) ........... 158 36,418
First Union Lehman Brothers
Bank, Series 1998-C2,
Class A1, 6.28%, 06/18/07 ........ 1,015 1,038,705
G3 Mortgage Reinsurance, Ltd.,
7.892%, 05/25/08 (c) ............. 300 269,156
GMAC Commercial Mortgage
Securities, Inc., Series
1996-C1, Class A2A
6.79%, 09/15/03 (e) ............. 266 275,298
Headlands Mortgage Securities, Inc.:
Series 1997-1, Class X1
0.686%, 03/25/27 ................ 4,755 49,890
Series 1997-4, Class X
1.121%, 11/25/27 ................ 2,790 43,783
LB Commercial Conduit
Mortgage Trust, Series
1996-C2, Class A
1.00%, 10/25/26 ................. 311 328,711
Merrill Lynch Mortgage
Investments, Inc.:
Series 1996-C1, Class IO
0.736%, 04/25/28 (c), (e) ....... 4,489 115,210
Series 1998-C3, Class A1
5.65%, 12/15/30 ................. 1,000 994,844
Midland Realty Acceptance
Corp., Series 1996-C1, Class
A2, 7.475%, 12/25/05 ............ 344 368,479
Morgan Stanley Capital One, Inc.:
Series 1998-HF1, Class X
1.046%, 02/15/18 ................ 4,384 258,986
Series 1996-WF1,Class X
1.405%, 11/15/28 (c), (e) ....... 2,696 157,972
Series 1997-C1, Class IO
2.562%, 02/15/20 (e) ............ 663 9,336
Mortgage Capital Funding, Inc.,
1.367%, 11/20/12 ................. 3,378 259,216
Prudential Home Mortgage
Security, Series 1993-41,
Class A5, 0.914%, 10/25/00....... 15,432 111,424
Structured Asset Securitization
Corp.:
Series 1996-CFL, Class X1
1.461%, 02/25/28 (e) ............ 2,067 112,161
Series 1996-CFL, Class X2
1.153%, 02/25/28 (e) ............ 1,228 27,314
United States Department
Veteran Affairs, Series 1997-1,
Class IO, 0.368%, 02/15/27
(e) .............................. 8,650 85,155
----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Identified cost $20,995,437)..... 20,602,838
----------
CORPORATE BONDS--25.2%
AEROSPACE & DEFENSE--0.7%
Raytheon Co.,
6.30%, 03/15/05 .................. 832 858,641
----------
BANKING--1.3%
Capital One Bank:
6.70%, 05/15/08 .................. 416 402,280
7.15%, 09/15/06 .................. 268 269,394
U.S. Bancorp, Inc.,
7.50%, 06/01/26 .................. 728 831,616
----------
1,503,290
----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO (CONTINUED)
BREWERY--0.8%
Anheuser Busch Company, Inc.,
7.10%, 06/15/07 ................ $ 799 $ 864,150
---------
BUILDING & CONSTRUCTION--0.8%
CSC Holdings, Ltd.,
10.50%, 05/15/16 ............... 308 361,900
Penhall Acquisition Corp.,
12.00%, 08/01/06 (c) ........... 550 517,000
---------
878,900
---------
CHEMICALS--0.2%
Climachem, Inc.,
10.75%, 12/01/07 ............... 260 261,300
---------
COMMUNICATION SERVICES--0.1%
Talton Holdings, Inc.,
11.00%, 06/30/07 ............... 73 69,350
---------
COMPUTERS & BUSINESS EQUIPMENT--0.3%
PSINet, Inc.,
10.00%, 02/15/05 ............... 310 306,900
---------
CONTAINERS--0.1%
Amtrol Acquisition, Inc.,
10.625%, 12/31/06 .............. 82 79,745
---------
ENERGY--0.4%
Midamerican Energy Co.,
6.375%, 06/15/06 ............... 454 459,689
---------
ENTERTAINMENT--1.3%
Casino America, Inc.,
12.50%, 08/01/03 ............... 144 159,120
Regal Cinemas, Inc.,
9.50%, 06/01/08 (c) ............ 730 751,900
Station Casinos, Inc.,
10.125%, 03/15/06 .............. 600 628,500
---------
1,539,520
---------
FINANCIAL SERVICES--4.9%
AT&T Capital Corp.,
6.60%, 05/15/05 ................ 586 561,423
First USA Trust,
6.50%, 01/18/06 (c) ............ 400 401,380
Ford Motor Credit Co.,
6.75%, 05/15/05 ................ 743 786,042
General Motors Acceptance
Corp.,
6.75%, 02/07/02 ............... 821 850,408
Goldman Sachs Group LP,
6.625%, 12/01/04 (c) ........... 521 532,413
Heller Financial, Inc.,
6.50%, 11/01/01 ................ 279 284,036
MBNA Corp.,
6.75%, 03/15/08 ................ 429 418,597
Republic New York Corp.,
7.25%, 07/15/02 ................ 838 872,398
Resolution Funding Strips,
0.00%, 04/15/07 ................ 1,248 825,901
Sears Roebuck Acceptance
Corp.,
7.14%, 05/02/03 ............... 149 157,553
---------
5,690,151
---------
FOOD & BEVERAGES--0.3%
Advantica Restaurant Group, Inc.,
11.25%, 01/15/08 ............... 250 253,125
Fleming Cos., Inc.,
10.50%, 12/01/04 ............... 65 61,100
---------
314,225
---------
FOOD PROCESSING--0.0%
Rifkin Acquisitions Partners LP,
11.125%, 01/15/06 .............. 40 44,000
---------
FUNERAL SERVICES--0.3%
Service Corp. International,
6.75%, 06/01/01 ................ 377 385,863
---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
37
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO (CONTINUED)
HEALTHCARE--0.7%
Dynacare, Inc.,
10.75%, 01/15/06 ................. $ 122 $ 119,560
Quest Diagnostics, Inc.,
10.75%, 12/15/06 ................. 218 241,980
Tenet Healthcare Corp.,
8.625%, 01/15/07 ................. 400 418,000
---------
779,540
---------
INDUSTRIAL--1.1%
J.H. Heafner, Inc.,
10.00%, 05/15/08 (c) ............. 310 310,000
Mediq, Inc.,
11.00%, 06/01/08 (c) ............. 350 336,000
Pen Holdings, Inc.,
9.875%, 06/15/08 ................. 400 400,000
Transdigm, Inc.,
10.375%, 12/01/08 (c) ............ 250 251,250
---------
1,297,250
---------
INDUSTRIAL & MACHINERY--0.7%
High Voltage Engineering Corp.,
10.50%, 08/15/04 ................. 374 353,430
NationsRent, Inc.,
10.375%, 12/15/08 (c) ............ 210 209,475
United Rentals, Inc.,
9.25%, 01/15/09 (c) .............. 250 251,875
---------
814,780
---------
LEISURE TIME--0.2%
Booth Creek Ski Holdings, Inc.,
12.50%, 03/15/07 ................. 270 267,300
---------
MANUFACTURING--0.0%
W.R. Carpenter North America,
Inc., 10.625%, 06/15/07 .......... 54 54,675
---------
MORTGAGE BACKED SECURITIES--1.1%
Associates Corporation North
America, 6.25%, 11/01/08 ......... 645 667,911
Fort James Corp.,
6.875%, 09/15/07 ................. 636 657,980
---------
1,325,891
---------
OIL & GAS--0.7%
Texaco Capital, Inc.,
6.00%, 06/15/05 .................. 776 785,180
---------
OTHER--0.3%
RMOF,
2.16%, 01/31/22 .................. 4,434 321,492
---------
RESTAURANTS, LODGING &
ENTERTAINMENT--0.2%
American Restaurant Group,
Inc., 11.50%, 02/15/03 ........... 205 178,350
---------
RETAIL--0.9%
Frank's Nursery & Crafts, Inc.,
10.25%, 03/01/08 ................. 300 295,500
Home Interiors & Gifts, Inc.,
10.125%, 06/01/08 (c) ............ 300 297,000
Jitney-Jungle Stores of America,
Inc., 10.375%, 09/15/07 .......... 15 15,375
Petro Stopping Centers,
10.50%, 02/01/07 ................. 365 381,425
Renters Choice, Inc.,
11.00%, 08/15/08 (c) ............. 100 101,500
---------
1,090,800
---------
TELECOMMUNICATIONS--3.4%
Coaxial Communications
Central Ohio, LLC,
10.00%, 08/15/06 (c) ............ 500 516,250
Fundy Cable Ltd.,
11.00%, 11/15/05 ................. 452 476,860
GTE Corp.,
9.10%, 06/01/03 .................. 395 451,339
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
38
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO (CONTINUED)
ITC Deltacom, Inc.,
9.75%, 11/15/08 (c) .............. $ 650 $ 672,750
LodgeNet Entertainment Corp.,
10.25%, 12/15/06 ................. 245 242,550
TCI Communications, Inc.,
6.875%, 02/15/06 ................. 673 718,138
US West Communications,
Inc.,
5.625%, 11/15/08 ................ 836 843,616
-----------
3,921,503
-----------
TRANSPORTATION--0.5%
Atlantic Express, Inc.,
10.75%, 02/01/04 ................. 407 411,070
Atlas Air, Inc.,
9.25%, 04/15/08 .................. 120 119,700
-----------
530,770
-----------
UTILITIES--3.9%
Calpine Corp.,
8.75%, 07/15/07 .................. 650 687,921
GTE North, Inc.,
6.375%, 02/15/10 ................. 1,155 1,223,757
National Rural Utilities
Cooperative,
6.125%, 05/15/05 ................ 778 810,256
Texas Utilities Co., Series B
6.375%, 10/01/04 ................. 821 848,101
Western Resources, Inc.,
7.125%, 08/01/09 ................. 850 955,952
-----------
4,525,987
-----------
TOTAL CORPORATE BONDS
(Identified cost $29,029,261)..... 29,149,242
-----------
MUNICIPALS--3.6%
California Department Water
Resource Center, Series U
5.00%, 12/01/29 ................. 570 563,781
Denver City & County Airport
Revenue, Series A
5.00%, 11/15/25 ................. 1,145 1,111,978
Houston Airport Systems
Revenue, Series B
5.00%, 07/01/25 ................. 715 694,558
Long Island Power Authority,
5.125%, 04/01/11 ................. 570 599,919
Philadelphia Airport Systems
Revenue, Series A
5.125%, 07/01/28 ................ 570 559,370
Wayne Charter County Airport
Revenue, Series A
5.00%, 12/01/22 ................. 585 569,065
-----------
TOTAL MUNICIPALS
(Identified cost $4,133,313)...... 4,098,671
-----------
MORTGAGE PASS-THROUGH
SECURITIES--23.5%
Federal Home Loan Mortgage
Corp.:
6.50%, 04/15/11 .................. 682 689,884
6.50%, 08/01/13 .................. 1,792 1,819,132
6.50%, 10/01/13 .................. 787 798,670
6.50%, 11/01/13 .................. 623 632,150
6.50%, 09/01/28 .................. 1,591 1,603,361
6.50%, 10/01/28 .................. 442 445,366
6.50%, 11/01/28 .................. 127 128,813
6.50%, TBA ....................... 1,081 1,096,869
7.00%, 08/01/09 .................. 877 895,612
7.00%, 08/01/28 .................. 132 134,786
7.472%, 09/01/26 (e) ............. 70 71,268
7.50%, 12/01/28 .................. 563 578,128
7.504%, 11/01/26 (e) ............. 92 93,446
8.00%, 03/01/28 .................. 1,126 1,166,500
Federal National Mortgage
Association:
6.50%, 08/01/28 ................. 1,646 1,658,372
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
39
<PAGE>
===============================================================================-
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO (CONTINUED)
6.50%, 09/01/28 ........................... $ 1,605 $ 1,617,154
6.50%, 12/01/28 ........................... 4,031 4,060,698
7.00%, 05/01/28 ........................... 592 604,004
7.00%, 08/01/28 ........................... 142 145,723
7.00%, TBA ................................ 1,060 1,082,525
7.075%, 05/01/06 .......................... 448 480,246
7.323%, 06/01/25 (e) ...................... 117 118,856
7.467%, 07/01/25 (e) ...................... 164 167,281
8.00%, 12/01/09 ........................... 318 327,595
8.00%, 06/01/12 ........................... 289 298,022
8.00%, 12/01/12 ........................... 480 494,325
10.00%, 08/01/18 .......................... 217 43,757
Government National Mortgage
Association:
1.00%, 06/20/28 .......................... 1,445 1,463,887
5.50%, 10/20/27 ........................... 864 874,364
6.50%, 07/20/27 ........................... 216 218,592
6.50%, 09/20/27 ........................... 324 328,592
6.625%, 09/20/26 .......................... 294 299,012
7.00%, 04/15/28 ........................... 860 880,717
8.00%, 11/15/28 ........................... 1,794 1,865,316
------------
TOTAL MORTGAGE PASS-THROUGH
SECURITIES
(Identified cost $27,180,737).............. 27,183,023
------------
U.S. GOVERNMENT
OBLIGATIONS--20.0%
Tennessee Valley Authority
Federal,
0.00%, 11/15/29 .......................... 751 731,767
United States Treasury Notes:
3.625%, 07/15/02 .......................... 1,845 1,831,163
4.75%, 11/15/08 ........................... 110 110,859
5.75%, 11/15/00 ........................... 2,700 2,752,299
United States Treasury Strips:
0.00%, 11/15/04 ........................... 13,564 10,274,458
0.00%, 05/15/09 ........................... 12,384 7,360,183
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Identified cost $22,981,825).............. 23,060,729
------------
REPURCHASE AGREEMENT--4.8%
State Street Bank and Trust
Company, 4.75%, 01/04/99,
(Dated 12/31/98, collateralized
by $5,950,000 United States
Treasury Bill, 0.000%,
12/09/99, with a value of
$5,703,075) (g) (Identified cost
$5,588,000)................................ 5,588 5,588,000
------------
TOTAL INVESTMENTS
(Identified cost $116,606,674)
(b) ....................................... 100.8% $116,527,612
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS .............................. (0.8) (904,509)
------------ ------------
NET ASSETS ................................. 100.0% $115,623,103
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD HIGH YIELD PORTFOLIO
CORPORATE BONDS--88.2%
AEROSPACE & DEFENSE--0.8%
Sabreliner Corp.,
11.00%, 06/15/08 (c) ......................... $ 400 $ 352,000
---------
AUTOMOTIVE--2.4%
J.B. Poindexter & Co.,
12.50%, 05/15/04 ............................. 500 470,000
United Rentals, Inc.,
9.25%, 01/15/09 (c) .......................... 550 555,500
---------
1,025,500
---------
BROADCASTING--4.5%
Echostar DBS Corp.,
12.50%, 07/01/02 ............................. 400 460,000
Golden Sky Systems, Inc.,
12.375%, 08/01/06 (c) ........................ 500 512,500
Paxson Communications Corp.,
11.625%, 10/01/02 ............................ 310 314,650
Radio Unica Corp.,
1.00%, 08/01/06 (c) .......................... 250 135,000
Spanish Broadcasting Systems,
Inc., 11.00%, 03/15/04 ....................... 500 530,000
---------
1,952,150
---------
BUILDING & CONSTRUCTION--1.1%
Penhall Acquisition Corp.,
12.00%, 08/01/06 (c) ......................... 500 470,000
---------
CABLE T.V. OPERATOR--6.3%
CSC Holdings, Inc.:
9.875%, 04/01/23 ............................. 358 398,275
10.50%, 05/15/16 ............................. 500 587,500
Fundy Cable, Ltd.,
11.00%, 11/15/05 ............................. 600 633,000
Coaxial Communications
Central Ohio, LLC,
10.00%, 08/15/06 (c) ......................... 500 516,250
Rifkin Acquisitions Partners LP,
11.125%, 01/15/06 ............................ 500 550,000
---------
2,685,025
---------
CHEMICALS--2.3%
Climachem, Inc.,
10.75%, 12/01/07 ............................. 495 497,475
Geo Specialty Chemicals, Inc.,
10.125%, 08/01/08 (c) ........................ 500 480,000
---------
977,475
---------
COMMERCIAL SERVICES--0.6%
Fisher Scientific International, Inc.,
9.00%, 02/01/08 (c) .......................... 250 248,750
---------
COMMUNICATION SERVICES--2.5%
Centennial Cellular Operating Co.
10.75%, 12/15/08 (c) ......................... 600 603,000
Talton Holdings, Inc.,
11.00%, 06/30/07 ............................. 500 475,000
---------
1,078,000
---------
COMPUTER SERVICES--4.0%
Concentric Network Corp.,
12.75%, 12/15/07 ............................. 500 510,000
Primark Corp.,
9.25%, 12/15/08 (c) .......................... 550 550,000
PSINet, Inc.:
10.00%, 02/15/05 ............................. 140 138,600
11.50%, 11/01/08 (c) ......................... 500 523,750
---------
1,722,350
---------
CONSUMER DURABLES--1.2%
Generac Portable Products LLC,
11.25%, 07/01/06 (c) ......................... 500 500,000
---------
CONTAINERS--2.4%
Amtrol, Inc.,
10.625%, 12/31/06 ............................ 500 486,250
Silgan Holdings, Inc.,
13.25%, 07/15/06 ............................. 500 560,000
---------
1,046,250
---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
41
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD HIGH YIELD PORTFOLIO (CONTINUED)
ENERGY--0.4%
Mariner Energy, Inc., Series B
10.50%, 08/01/06 ................ $ 200 $ 166,000
---------
ENTERTAINMENT--7.7%
Casino America, Inc.,
12.50%, 08/01/03 ................ 500 552,500
Penn National Gaming, Inc.,
10.625%, 12/15/04 ............... 500 525,000
Production Resource Group LLC,
11.50%, 01/15/08 ................ 500 490,000
Regal Cinemas, Inc.:
8.875%, 12/15/10 ................ 150 148,875
9.50%, 06/01/08 (c) ............. 500 515,000
Station Casinos, Inc.,
10.125%, 03/15/06 ............... 500 523,750
TVN Entertainment Corp.,
14.00%, 08/01/08 ................ 500 445,000
Young America Corp.,
11.625%, 02/15/06 ............... 300 126,000
---------
3,326,125
---------
FOOD & BEVERAGES--4.3%
Advantica Restaurant Group,
Inc., 11.25%, 01/15/08 .......... 700 708,750
Agrilink Foods, Inc.,
11.875%, 11/01/08 (c) ........... 600 610,500
American Restaurant Group,
Inc., 11.50%, 02/15/03 .......... 575 500,250
Mrs. Field's Original,
1.00%, 12/01/05 ................. 80 45,800
---------
1,865,300
---------
HEALTHCARE--5.0%
Dynacare, Inc.,
10.75%, 01/15/06 ................ 625 612,500
Fresenius Medical Care Capital
Trust, 9.00%, 12/01/06 .......... 250 261,250
Genesis Health Ventures, Inc.,
9.875%, 01/15/09 (c) ............ 1,100 1,061,500
Tenet Healthcare Corp.,
8.625%, 01/15/07 ................ 200 209,000
---------
2,144,250
---------
INDUSTRIAL--11.1%
Dictaphone Corp.,
11.75%, 08/01/05 ................ 500 375,000
Globe Holdings, Inc.,
1.00%, 08/01/09 (c) ............. 300 126,000
Interpool Capital Trust,
9.875%, 02/15/27 ................ 500 440,455
J.H. Heafner, Inc.,
10.00%, 05/15/08 ................ 650 650,000
Mediq, Inc.,
11.00%, 06/01/08 ................ 800 768,000
Morris Material Handling, Inc.,
9.50%, 04/01/08 ................. 450 333,000
NationsRent, Inc.,
10.375%, 12/15/08 (c) ........... 600 598,500
Transdigm, Inc.,
10.375%, 12/01/08 (c) ........... 375 376,875
Unisys Corp.,
11.75%, 10/15/04 ................ 600 696,000
W.R. Carpenter North America,
Inc., 10.625%, 06/15/07 ......... 400 405,000
---------
4,768,830
---------
LEISURE TIME--2.1%
Booth Creek Ski Holdings, Inc.,
Series B
12.50%, 03/15/07 ................ 900 891,000
---------
LODGING & ENTERTAINMENT--1.0%
Courtyard by Marriott II Ltd.,
10.75%, 02/01/08 ................ 400 414,000
---------
MANUFACTURING--5.6%
Axiohm Transaction Solutions,
9.75%, 10/01/07 ................. 500 472,500
Exide Corp.,
10.00%, 4/15/05 ................. 500 493,750
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
42
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD HIGH YIELD PORTFOLIO (CONTINUED)
Henry Co.,
10.00%, 04/15/08 ..................... $ 500 $ 500,000
High Voltage Engineering
Corp., 10.50%, 08/15/04 .............. 500 472,500
Precise Technology, Inc.,
11.125%, 06/15/07 .................... 500 482,500
----------
2,421,250
----------
MINING--1.3%
Pen Holdings, Inc.,
9.875%, 06/15/08 ..................... 550 550,000
----------
PUBLISHING--1.3%
T/SF Communications Corp.,
10.375%, 11/01/07 .................... 550 554,125
----------
RETAIL--5.2%
Frank's Nursery and Crafts, Inc.,
10.25%, 03/01/08 ..................... 350 344,750
Home Interiors & Gifts, Inc.,
10.125%, 06/01/08 (c) ................ 700 693,000
Jitney-Jungle Stores of America,
Inc., 10.375%, 09/15/07 .............. 500 512,500
Petro Stopping Centers, 10.50%,
02/01/07 ............................. 450 470,250
Renters Choice, Inc.,
11.00%, 08/15/08 (c) ................. 200 203,000
----------
2,223,500
----------
SECURITY--1.4%
Loomis Fargo & Co.,
10.00%, 01/15/04 ..................... 600 594,000
----------
TELECOMMUNICATIONS--11.3%
AMSC Acquisition, Inc.,
12.25%, 04/01/08 ..................... 500 310,000
Dobson Communications Corp.,
11.75%, 04/15/07 ..................... 250 248,750
Econophone, Inc.,
13.50%, 07/15/07 ..................... 500 511,875
Facilicom International, Inc.,
10.50%, 01/15/08 (c) ................. 249 201,690
IPC Information Systems, Inc.,
1.00%, 05/01/08 (f) .................. 200 126,000
Iridium LLC,
10.875%, 07/15/05 .................... 250 212,500
ITC Deltacom, Inc.:
9.75%, 11/15/08 (c) .................. 100 103,500
11.00%, 06/01/07 ..................... 500 547,500
LodgeNet Entertainment Corp.,
10.25%, 12/15/06 ..................... 500 495,000
Long Distance International,
Inc., 12.25%, 04/15/08 (c) ........... 300 250,500
McLeodUSA, Inc.,
9.50%, 11/01/08 (c) .................. 300 318,000
Nextel Communications, Inc.,
12.00%, 11/01/08 (c) ................. 500 552,500
Pegasus Communications Corp.,
9.75%, 12/01/06 (c) .................. 500 501,250
Qwest Communications
International, Inc.,
10.875%, 04/01/07 ................... 390 454,350
----------
4,833,415
----------
TRANSPORTATION--1.2%
Atlantic Express, Inc.,
10.75%, 02/01/04 ..................... 525 530,250
----------
TRANSPORTATION & FREIGHT
SERVICES--1.2%
Atlas Air, Inc.,
9.25%, 04/15/08 ...................... 500 498,750
----------
TOTAL CORPORATE BONDS
(Identified cost $38,613,745)......... 37,838,295
----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
43
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------
LAZARD HIGH YIELD PORTFOLIO (CONTINUED)
PREFERRED STOCKS--6.1%
Adelphia Communications
Corp. ............................ 5,000 $ 590,000
American Mobile Satellite
Corp., warrant 4/01/08 (c) ....... 500 1,940
American Restaurant Group,
Inc., 08/15/08 warrant ........... 200 2
American Restaurant Group,
Inc. ............................. 212 212,000
Dobson Communications Corp. 272 261,120
Forman Petroleum Corp.,
06/01/04 warrant ................. 250 0
Harborside Healthcare Corp. ....... 310 288,300
High Voltage Engineering Corp...... 265 259,700
Hyperion Telecommunications,
Inc. ............................. 318 252,810
Jitney-Jungle Stores of America,
Inc. ............................. 1,600 214,400
Long Distance International,
Inc., 04/13/08 warrant ........... 300 38
Nextel Communications, Inc. ....... 7 5,775
Paxson Communications Corp. ....... 17 15,385
Paxson Communications Corp. ....... 42 367,500
S.F. Holdings Group, Inc. (c) ..... 1,110 2,220
S.F. Holdings Group, Inc. ......... 330 145,200
---------
TOTAL PREFERRED STOCKS
(Identified cost $2,986,601)....... 2,616,390
---------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT--3.6%
State Street Bank and Trust
Company, 4.75%, 01/04/99,
(Dated 12/31/98, collateralized
by $1,530,000 United States
Treasury Note, 6.375%,
05/15/00, with a value of
$1,579,725) (Identified cost
$1,545,000).................... $ 1,545 $ 1,545,000
-----------
TOTAL INVESTMENTS
(Identified cost
$43,145,346) (b).............. 97.9% $41,999,685
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ................ 2.1 883,878
------- -----------
NET ASSETS ..................... 100.0% $42,883,563
======= ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO
CURRENCY DENOMINATED BONDS--88.9%
ARGENTINE PESO--1.1%
Argentina Bocon, (USD),
5.01%, 09/01/02 (e) ............ $ 35 $ 38,220
Argentina Resolution Co.,
0.00%, 07/01/99 ................ 125 118,807
Mastellone Hermanos SA,
11.75%, 04/01/08 ............... 239 192,395
Republic of Argentina:
3.01%, 04/01/01 (e) ............ 816 563,547
3.01%, 09/01/02 (e) ............ 103 96,547
3.01%, 04/01/07 (e) ............ 385 284,259
Republic of Argentina, (USD),
6.188%, 03/31/05 (e) ........... 51 43,707
----------
TOTAL ARGENTINE PESO ............ 1,337,482
----------
AUSTRALIAN DOLLAR--1.2%
Commonwealth of Australia,
9.50%, 08/15/03 (g) ............ 1,988 1,455,836
----------
AUSTRIAN SCHILLING--1.2%
Republic of Austria,
8.00%, 03/18/02 ................ 14,670 1,421,393
----------
BELGIAN FRANC--2.7%
Kingdom of Belgium,
5.75%, 03/28/08 ................ 97,496 3,180,395
----------
BRITISH POUND--9.6%
Bayerische Landesbank
Girozentrale,
6.875%, 06/07/02 .............. 826 1,428,929
Birmingham Midshires Building
Society,
9.125%, 01/05/06 .............. 150 293,290
Brunner Mond Group PLC,
12.50%, 07/15/08 ............... 198 299,352
Chelsea Village PLC,
8.875%, 12/17/07 ............... 326 551,367
Coca Cola Enterprises PLC,
6.75%, 03/12/08 ................ 158 280,385
Finance for Resident Society
House,
11.126%, 10/05/58 .............. 300 879,403
Haven Funding PLC,
8.125%, 09/30/37 ............... 290 650,139
HMV Media Group PLC,
10.875%, 05/15/08 .............. 300 463,532
Landwirtschaftliche Rentenbank,
6.375%, 03/09/05 ............... 494 867,188
Middleweb PLC,
10.50%, 05/30/08 (c) ........... 274 430,188
North American Capital Corp.,
8.25%, 11/17/03 (g) ............ 876 1,590,925
Textron Golf & Turk PLC,
8.684%, 01/30/08 (c) ........... 303 583,447
United Kingdom Treasury
Bonds:
7.25%, 12/07/07 (g) ............ 387 773,164
8.00%, 06/07/21 (g) ............ 514 1,287,776
United Kingdom Treasury
Notes, 6.50%, 12/07/03 ......... 299 544,946
William Hill Finance PLC,
10.625%, 04/30/08 .............. 330 559,229
----------
TOTAL BRITISH POUND ............. 11,483,260
----------
CANADIAN DOLLAR--1.8%
Argos Funding Trust,
5.963%, 02/27/06 ............... 250 161,923
Government of Canada,
8.00%, 06/01/23 ................ 682 615,964
Molson Breweries Company, Ltd.,
6.00%, 06/02/08 (c) ............ 800 534,903
Province of Quebec,
8.625%, 11/04/11 ............... 111 232,899
Quebec Housing,
8.95%, 05/13/13 ................ 407 352,148
UniHost Corp.,
10.00%, 06/30/03 ............... 402 239,333
----------
TOTAL CANADIAN DOLLAR ........... 2,137,170
----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO (CONTINUED)
COLOMBIAN PESO--0.0%
Salomon COP Swap,
0.00%, 01/06/99 ................. $ 50 $ 52,385
----------
CROATIAN KUNA--0.1%
Republic of Croatia,
6.563%, 07/31/06 ................ 153 122,020
----------
DANISH KRONE--5.3%
Kingdom of Denmark:
7.00%, 11/10/24 ................. 5,452 1,096,517
8.00%, 03/15/06 ................. 15,774 3,056,502
Nykredit AS,
5.00%, 10/01/29 ................. 2,381 349,801
Realkredit Danmark,
5.00%, 10/01/29 ................. 11,757 1,726,335
Unikredit Realkred,
5.00%, 10/01/29 ................. 1,190 173,985
----------
TOTAL DANISH KRONE ............... 6,403,140
----------
FINNISH MARKKA--1.0%
Republic of Finland,
9.50%, 03/15/04 ................. 5,000 1,251,912
----------
FRENCH FRANC--6.1%
Credit Foncier de France
7.50%, 03/29/05 ................. 18,250 3,848,462
Government of France:
0.00%, 10/25/19 ................. 15,923 1,029,541
0.00%, 04/25/21 ................. 29,202 1,737,704
Neopost,
6.131%, 09/30/07 (c), (e) ....... 1,900 327,938
Republic of France,
4.00%, 07/12/00 ................. 1,958 354,758
----------
TOTAL FRENCH FRANC ............... 7,298,403
----------
GERMAN MARK--18.4%
AirTouch Communications, Inc.,
5.50%, 07/24/08 ................. 620 375,038
Autobahn Tank & Rast,
6.00%, 10/16/00 ................. 425 265,211
Bundesrepublik Deutschland,
0.00%, 01/04/24 ................. 4,011 687,112
Core Dem,
6.39%, 07/05/15 ................. 400 235,209
Derby Cycle Corp.,
9.375%, 05/15/08 ................ 379 167,146
Deutsche Bank AG,
11.00%, 04/15/99 ................ 100 106,440
Euronet Services, Inc.,
12.375%, 07/01/06 ............... 1,061 203,720
Exide Holdings,
9.125%, 04/15/04 (c) ............ 1,005 590,964
Federal Republic of Germany:
0.00%, 01/04/21 (g) ............. 5,587 1,110,964
6.00%, 09/15/03 (g) ............. 3,020 2,018,649
6.00%, 07/04/07 (g) ............. 11,377 7,847,713
6.50%, 10/14/05 (g) ............. 7,082 4,948,391
Geberit International SA,
10.125%, 04/15/07 ............... 302 208,388
Impress Metal Pack Holding,
9.875%, 05/29/07 (c) ............ 927 609,063
Ineos PLC,
8.625%, 04/30/05 ................ 890 499,310
Land Hessen,
6.00%, 11/29/13 ................. 1,000 711,998
LBK Hess Thur Giro,
9.00%, 09/06/04 ................. 60 115,135
Sirona Dental Systems,
9.125%, 07/15/08 (c) ............ 845 501,950
Texon International PLC,
10.00%, 02/01/08 ................ 948 443,682
Viatel, Inc.:
10.00%, 04/15/11 warrant (c)..... 41 0
11.15%, 04/15/08 (c) ............ 800 477,619
----------
TOTAL GERMAN MARK ................ 22,123,702
----------
GREEK DRACHMA--0.7%
Republic of Hellenic:
8.90%, 04/01/03 ................. 70,000 262,363
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO (CONTINUED)
12.80%, 06/30/00 ............................ $ 30,000 $ 108,207
13.00%, 08/14/03 (e) ........................ 113,000 410,204
----------
TOTAL GREEK DRACHMA ......................... 780,774
----------
HUNGARIAN FORINT--0.7%
Government of Hungary:
16.00%, 01/12/00 ........................... 110,000 514,638
16.50%, 04/12/99 ........................... 39,000 180,869
23.00%, 05/06/99 ........................... 7,000 33,211
Republic of Hungary,
19.50%, 01/12/99 ........................... 12,000 55,725
----------
TOTAL HUNGARIAN FORINT ...................... 784,443
----------
IRISH POUND---0.5%
Republic of Ireland,
8.00%, 08/18/06 ............................ 295 556,964
----------
ITALIAN LIRA--0.9%
Films PLC,
5.785%, 03/31/05 (e) ....................... 1,000,000 586,652
Republic of Italy,
10.50%, 04/28/14 ........................... 40 101,387
Societa Sportiva Lazio SPA,
6.375%, 10/15/07 ........................... 723,544 426,657
----------
TOTAL ITALIAN LIRA .......................... 1,114,696
----------
JAPANESE YEN--18.4%
Asterique,
2.48%, 01/23/02 ............................ 191,549 1,694,374
European Investment Bank,
3.00%, 09/20/06 ............................ 562,000 5,321,725
Export-Import Bank of Japan,
4.375%, 10/01/03 (g) ....................... 509,000 5,132,773
International Bank for
Reconstruction and Development,
4.75%, 12/20/04 (g) ........................ 808,500 8,470,298
Nippon Credit Bank, Ltd.,
1.80%, 07/27/00 ............................ 60,000 519,328
Republic of Austria:
4.50%, 09/28/05 ............................ 80,000 841,220
6.25%, 10/16/03 ............................ 15,000 163,534
----------
TOTAL JAPANESE YEN .......................... 22,143,252
----------
LEBANESE POUND--0.7%
LBP Treasury Bill,
0.00%, 03/18/99 ............................ 125,600 81,015
LBP Treasury Note,
0.00%, 02/11/99 ............................ 534,830 377,970
Paribas LBP Treasury Note,
18.12%, 01/21/99 ........................... 546,220 388,938
----------
TOTAL LEBANESE POUND ........................ 847,923
----------
MEXICAN PESO--1.0%
Mexican Cetes:
0.00%, 01/14/99 ............................ 3,500 350,633
0.00%, 02/11/99 ............................ 780 75,618
0.00%, 04/08/99 ............................ 2,876 267,447
0.00%, 07/08/99 ............................ 680 58,898
UDI Bonos,
7.00%, 05/27/99 ............................ 350 83,789
United Mexican States, (USD):
0.00%, 01/01/03 ............................ 769 0
6.039%, 12/31/19 (e), (g) .................. 500 406,250
----------
TOTAL MEXICAN PESO .......................... 1,242,635
----------
MOROCCAN DIRHAM--0.1%
Morocco Restructuring &
Consolidation Agreement,
(USD), 6.063%, 01/01/09 (e)................ 200 156,000
----------
NETHERLANDS GUILDER--1.3%
Government of Netherlands,
8.75%, 01/15/07 ............................ 1,426 994,337
West LB Finance Curacao NV,
8.125%, 01/24/07 ........................... 310 581,990
----------
TOTAL NETHERLANDS GUILDER ................... 1,576,327
----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO (CONTINUED)
POLISH ZLOTY--0.1%
Polish Treasury Bill,
0.00%, 08/04/99 ................... $ 650 $ 171,815
---------
SOUTH AFRICAN RAND--0.3%
Government of Namibia:
12.00%, 04/15/02 .................. 210 30,662
12.00%, 04/15/05 .................. 210 28,531
Lesotho Highlands Water,
12.50%, 04/15/02 .................. 997 151,997
Republic of South Africa,
12.00%, 02/28/05 .................. 740 106,622
South African Roads,
11.50%, 09/30/05 .................. 500 66,728
---------
TOTAL SOUTH AFRICAN RAND ........... 384,540
---------
SPANISH PESETA--0.5%
Catalunya Generalitat,
9.30%, 11/24/03 ................... 67,000 582,219
---------
SWEDISH KRONA--2.6%
Forenings Sparbanken,
0.00%, 03/29/99 ................... 4,300 315,862
Kingdom of Sweden:
9.00%, 04/20/09 ................... 7,200 1,237,101
10.25%, 05/05/03 .................. 7,300 1,128,136
Svenska Kredit:
0.00%, 01/15/99 ................... 640 159,180
0.00%, 01/25/99 ................... 3,300 244,628
---------
TOTAL SWEDISH KRONA ................ 3,084,907
---------
TURKISH LIRA--0.8%
Turkey Daily Roll 2
0.00%, 02/18/99 ................... 62,000 214,227
Turkey DMG Daily Reset,
0.00%, 02/24/99 ................... 109,000 373,169
Turkey DMG Daily Reset 4,
0.00%, 02/26/99 ................... 71,576 242,551
Turkey DMG Daily Reset 5,
0.00%, 03/30/99 ................... 55,000 177,312
---------
TOTAL TURKISH LIRE ................. 1,007,259
---------
UNITED STATES DOLLAR--11.8%
Cellco Finance NV,
15.00%, 08/01/05 (c) .............. 50 43,000
Chase Credit Card Master Trust,
5.00%, 08/15/08 (g) .............. 1,800 1,115,253
Citibank,
17.00%, 06/21/99 (g) .............. 140 139,370
Credit Lyonnais Paris,
6.563%, 09/19/49 (e), (g) ......... 580 469,800
Federal Farm Credit Banks,
5.55%, 07/01/99 (g) ............... 450 451,197
Federal Home Loan Banks,
5.54%, 07/13/99 ................... 110 110,292
Federal National Mortgage
Association,
2.125%, 10/09/07 ................. 700,000 6,256,966
Finance One PLC, (USD),
2.00%, 08/31/01 (d) ............... 220 0
High Voltage Engineering Corp.,
10.50%, 08/15/04 (g) ............. 157 148,365
Imasac SA,
11.00%, 05/02/05 (c) .............. 100 66,000
ING Bank NV, (London):
0.00%, 02/12/99 (c) ............... 400 450,000
0.00%, 02/12/99 ................... 100 113,500
0.00%, 08/11/99 (c) ............... 400 424,000
Interbank AKK Trust,
9.00%, 02/28/01 (c) ............... 250 215,000
International Finance Corp.,
11.75%, 08/15/99 .................. 750 19,205
Merrill Lynch & Company, Inc.:
5.375%, 01/04/09 .................. 830 508,478
7.375%, 12/17/07 .................. 192 345,107
Rao Gazprom,
12.75%, 03/13/00 .................. 159 53,869
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO (CONTINUED)
Republic of Panama,
4.00%, 07/17/14 ............................. $ 325 $ 242,125
Republic of Peru,
0.00%, 09/05/04 ............................. 600 399,420
Salomon Brothers Structured Note,
0.00%, 01/07/99 ............................. 230 233,149
Silgan Holdings, Inc.,
13.25%, 07/15/06 ............................ 1 1,120
SK Telecom Company, Ltd.,
7.75%, 04/29/04 (g) ......................... 300 269,103
Subic Power Corp.,
9.50%, 12/28/08 (g) ......................... 103 77,586
Talton Holdings, Inc.,
11.00%, 06/30/07 (g) ........................ 186 176,700
TTB Finance Cayman, Ltd.,
6.176%, 03/18/07 (e), (g) ................... 486 403,380
United States Treasury Bills,
5.16%, 05/27/99 ............................. 160 156,652
United States Treasury Bonds,
0.00%, 11/15/24 (g) ......................... 2,095 520,126
United States Treasury Strips,
0.00%, 02/15/16 (g) ......................... 2,090 814,870
-----------
TOTAL UNITED STATES DOLLAR ................... 14,223,633
-----------
TOTAL CURRENCY DENOMINATED
BONDS
(Identified cost $102,541,756)............... 106,924,485
-----------
SHARES
------------
PREFERRED STOCKS--0.0%
Forman Petroleum Corp.
warrant 6/01/04 ............................. 309 0
Forman Petroleum Corp.,
rights ...................................... 51 5
ICG Holdings, Inc. ........................... 6 6,300
Paxson Communications Corp. 15 13,575
-----------
TOTAL PREFERRED STOCKS
(Identified cost $23,961).................... 19,880
-----------
PRINCIPAL
AMOUNT
---------------
COMMERCIAL PAPER--6.2%
American Express Credit Corp.:
4.50%, 05/27/99 ............................. $ 110 $ 107,993
4.70%, 07/06/99 ............................. 125 121,965
4.90%, 03/10/99 ............................. 124 122,852
4.95%, 03/16/99 ............................. 187 185,097
4.98%, 01/22/99 ............................. 50 49,855
5.00%, 02/19/99 ............................. 78 77,469
Ford Motor Credit Corp.,
5.25%, 06/16/08 ............................. 572 355,870
General Electric Capital
Corp.:
4.86%, 07/26/99 ............................. 250 243,047
4.90%, 03/31/99 ............................. 252 248,947
4.90%, 05/25/99 ............................. 100 98,040
4.90%, 06/07/99 ............................. 129 126,244
5.06%, 03/29/99 ............................. 172 169,897
5.08%, 02/23/99 ............................. 465 461,522
5.11%, 03/02/99 ............................. 100 99,148
5.12%, 01/08/99 ............................. 195 194,806
5.23%, 02/09/99 ............................. 197 195,884
5.32%, 01/11/99 ............................. 100 99,852
5.33%, 01/07/99 ............................. 466 465,599
5.42%, 02/25/99 ............................. 160 158,675
5.47%, 01/25/99 ............................. 143 142,479
General Motors Acceptance
Corp.:
5.05%, 02/24/99 ............................. 100 99,243
5.07%, 01/28/99 ............................. 275 273,954
5.08%, 01/14/99 ............................. 200 199,633
5.09%, 01/04/99 ............................. 240 239,898
5.15%, 01/20/99 ............................. 140 139,619
5.15%, 02/16/99 ............................. 426 423,197
5.16%, 01/12/99 ............................. 140 139,779
5.19%, 01/11/99 ............................. 100 99,852
5.19%, 01/22/99 ............................. 100 99,697
5.19%, 02/05/99 ............................. 290 288,523
5.21%, 02/09/99 ............................. 110 109,379
5.24%, 02/12/99 ............................. 100 99,389
5.24%, 02/16/99 ............................. 80 79,464
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO (CONTINUED)
5.25%, 01/04/99 .............................. $ 100 $ 99,956
5.30%, 02/25/99 .............................. 160 158,705
5.32%, 01/13/99 .............................. 108 107,809
6.50%, 03/23/04 .............................. 77 131,510
Prudential Funding Corp.:
4.00%, 09/24/99 .............................. 150 145,567
4.50%, 09/09/99 .............................. 240 233,893
4.75%, 03/11/99 .............................. 144 142,290
4.80%, 06/07/99 .............................. 109 106,718
5.03%, 02/18/99 .............................. 130 129,128
5.05%, 02/01/99 .............................. 90 89,609
5.22%, 01/04/99 .............................. 150 149,935
------------
TOTAL COMMERCIAL PAPER
(Identified cost $7,509,188).................. 7,511,988
------------
DISCOUNT NOTES--0.8%
Federal Farm Credit Banks:
0.00%, 11/03/99 .............................. 449 431,902
0.00%, 12/21/99 .............................. 317 302,536
Federal National Mortgage
Association,
0.00%, 01/07/99 ............................. 191 190,839
------------
TOTAL DISCOUNT NOTES
(Identified cost $925,277).................... 925,277
------------
REPURCHASE AGREEMENT--1.3%
State Street Bank and Trust Co.,
4.75%, 01/04/99, (Dated
12/31/98, collateralized by
$1,510,000 United States
Treasury Note, 5.750%,
11/15/00, with a value of
$1,550,290) (g) (Identified cost
$1,517,000)................................... $ 1,517 $ 1,517,000
------------
TOTAL INVESTMENTS
(Identified cost
$112,517,182) (b)............................ 97.2% $116,898,630
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ............................... 2.8 3,352,144
-------- ------------
NET ASSETS .................................... 100.0% $120,250,774
========= ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward Foreign Currency Contracts open at December 31, 1998:
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Purchase Contracts Date Currency Date Value (Depreciation)
- -------------------- ------------ ---------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
ARS 1/5/99 178,190 $ 173,000 $ 178,297 $ 5,297
ARS 7/1/99 114,840 110,000 112,247 2,247
ATS 3/11/99 2,964,511 252,654 253,709 1,055
BEL 3/11/99 39,479,722 1,153,670 1,146,361 (7,309)
BRL 1/6/99 339,360 280,000 279,792 (208)
CAD 3/11/99 4,468,208 2,876,924 2,923,719 46,795
CHF 3/11/99 1,215,274 888,813 891,087 2,274
CLP 1/12/99 10,351,000 22,000 21,787 (213)
CLP 1/20/99 65,730,000 140,000 137,986 (2,014)
CLP 2/5/99 108,813,000 230,000 227,379 (2,621)
CLP 2/24/99 47,260,000 100,000 98,308 (1,692)
CNY 1/7/99 291,295 35,000 35,159 159
CNY 1/28/99 2,305,875 275,000 277,579 2,579
COP 1/7/99 424,804,800 269,000 271,586 2,586
CRC 2/1/99 24,867,900 90,000 90,705 705
CRC 2/12/99 22,189,312 80,000 80,611 611
CZK 6/28/99 15,971,050 445,000 522,162 77,162
CZK 7/16/99 3,107,000 90,220 101,419 11,199
CZK 11/18/99 6,526,800 210,000 210,729 729
DEM 3/11/99 8,864,844 5,309,361 5,337,647 28,286
EEK 1/7/99 2,658,978 197,183 198,975 1,792
EEK 1/11/99 956,912 67,000 69,277 2,277
EEK 1/13/99 1,472,490 107,509 109,987 2,478
EEK 3/31/99 3,461,220 252,507 252,165 (342)
EGP 1/12/99 482,776 140,000 140,677 677
EGP 2/9/99 251,835 73,000 73,157 157
EGP 2/18/99 449,111 130,000 130,343 343
ESP 3/11/99 2,818,936,918 19,912,197 19,905,742 (6,455)
FRF 3/11/99 36,005,845 6,435,804 6,462,408 26,604
GBP 3/11/99 326,515 548,405 541,317 (7,088)
GRD 2/16/99 5,000,000 15,559 17,726 2,167
GRD 5/6/99 8,748,120 26,946 30,640 3,694
GRD 12/28/99 93,381,860 317,000 317,899 899
GTQ 1/11/99 644,370 95,846 95,853 7
GTQ 1/21/99 542,520 80,000 80,317 317
HUF 3/11/99 41,624,330 187,000 188,885 1,885
HUF 3/23/99 31,550,400 144,000 142,664 (1,336)
IDR 1/8/99 2,200,000,000 195,122 272,931 77,809
IDR 1/11/99 200,000,00 18,613 24,742 6,129
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Purchase Contracts Date Currency Date Value (Depreciation)
- -------------------- ------------ ---------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
IDR 3/10/99 1,000,000,000 $ 123,916 $ 117,578 $ (6,338)
IDR 6/7/99 1,103,700,000 128,561 121,765 (6,796)
IEP 3/11/99 32,600 48,509 48,658 149
ILS 2/16/99 1,560,461 359,000 370,594 11,594
ILS 6/11/99 611,200 160,000 141,531 (18,469)
INR 1/14/99 8,620,000 200,000 202,118 2,118
INR 2/9/99 4,764,100 110,000 111,224 1,224
INR 2/25/99 7,352,000 160,000 170,897 10,897
INR 4/6/99 3,236,400 72,000 74,432 2,432
INR 5/25/99 1,790,000 40,000 40,574 574
ITL 3/11/99 20,828,940,081 12,606,730 12,641,073 34,343
JPY 3/11/99 347,781,419 2,950,398 3,105,200 154,802
KES 1/4/99 4,051,087 66,411 65,531 (880)
KES 2/4/99 7,629,100 124,000 121,509 (2,491)
KES 2/12/99 3,684,000 60,000 58,402 (1,598)
KRW 1/22/99 67,000,000 50,000 55,426 5,426
KRW 2/8/99 253,270,000 190,000 209,500 19,500
KRW 2/26/99 25,160,000 20,000 20,768 768
KRW 4/20/99 174,900,000 110,000 143,540 33,540
KRW 4/27/99 270,300,000 170,000 221,645 51,645
KRW 7/26/99 309,125,000 250,000 250,818 818
KRW 9/29/99 187,500,000 150,000 151,230 1,230
MXN 3/29/99 1,815,116 172,000 171,741 (259)
NLG 3/11/99 7,852,537 4,176,437 4,194,328 17,891
PEN 3/2/99 291,640 92,000 90,676 (1,324)
PLN 1/4/99 883,632 240,000 251,467 11,467
PLN 1/25/99 519,033 143,000 146,850 3,850
PLN 7/6/99 455,588 125,000 124,703 (297)
PLN 7/13/99 916,392 240,000 250,526 10,526
PLN 11/5/99 519,012 139,000 139,088 88
SKK 2/16/99 3,022,400 80,000 80,523 523
SKK 2/19/99 2,921,100 78,170 77,737 (433)
SVC 2/16/99 590,330 67,000 66,892 (108)
THB 1/8/99 6,870,000 190,833 188,895 (1,938)
THB 5/27/99 4,000,000 109,022 108,874 (148)
THB 12/21/99 7,071,000 187,113 188,976 1,863
UYU 6/7/99 1,244,235 109,000 109,263 263
XEU 3/11/99 12,640 15,000 14,883 (117)
ZAR 11/26/99 398,790 63,000 61,552 (1,448)
------------ ----------- ---------
$ 66,350,433 $66,964,961 $ 614,528
------------ ----------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Sale Contracts Date Currency Date Value (Depreciation)
- ------------------ ------------ ---------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
ARS 1/5/99 178,190 $ 177,604 $ 178,297 $ (693)
ARS 7/1/99 114,840 112,610 112,247 363
AUD 3/11/99 495,629 316,220 303,897 12,323
DEM 1/7/99 329,000 197,183 197,474 (291)
DEM 1/11/99 113,230 67,000 67,977 (977)
DEM 1/13/99 180,000 107,509 108,072 (563)
DEM 2/19/99 130,000 78,170 78,196 (26)
DEM 3/11/99 28,563,069 17,150,934 17,198,224 (47,290)
DKK 3/11/99 24,915,081 3,919,945 3,922,175 (2,230)
ESP 3/11/99 2,115,613,420 15,132,646 14,939,268 193,378
FIM 3/11/99 523,643 103,939 103,061 878
GBP 3/11/99 1,889,436 3,147,224 3,132,426 14,798
GRD 2/16/99 5,000,000 17,724 17,726 (2)
INR 4/6/99 1,000,000 22,573 22,998 (425)
JPY 3/11/99 305,539,788 2,667,800 2,728,042 (60,242)
KES 1/4/99 4,051,087 64,921 65,531 (610)
KRW 2/8/99 103,270,000 72,879 85,422 (12,543)
KRW 4/20/99 174,900,000 99,658 143,540 (43,882)
KRW 4/27/99 270,300,000 187,460 221,646 (34,186)
KRW 7/26/99 309,125,000 250,000 250,818 (818)
NOK 3/11/99 482,658 64,136 63,135 1,001
PLN 1/4/99 883,632 252,683 251,467 1,216
SEK 3/11/99 1,196,346 147,933 147,706 227
THB 1/8/99 6,870,000 186,939 188,895 (1,956)
XEU 3/11/99 1,981,566 1,156,811 1,155,768 1,043
------------ ----------- -----------
$ 45,702,501 $45,684,008 $ 18,493
------------ ----------- -----------
Gross unrealized appreciation on Forward Foreign Currency Contracts $ 911,677
===========
Gross unrealized depreciation on Forward Foreign Currency Contracts $(278,656)
===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------- -------------------- ---------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD PORTFOLIO
CURRENCY DENOMINATED
BONDS--85.6%
ARGENTINE PESO--2.2%
Argentina Bocon, (USD):
1.00%, 04/01/01 (g) ........... $ 5,243 $ 3,620,929
1.00%, 09/01/02 ............... 1,955 2,134,860
Argentina Resolution Co.,
0.00%, 07/01/99 ............... 965 917,189
Mastellone Hermanos SA,
11.75%, 04/01/08 .............. 356 286,580
Republic of Argentina,
1.00%, 09/01/02 ............... 686 643,018
Republic of Argentina, (USD),
6.188%, 03/31/05 (e) .......... 1,804 1,525,778
-----------
TOTAL ARGENTINE PESO ........... 9,128,354
-----------
AUSTRALIAN DOLLAR--1.0%
Credit Foncier,
8.50%, 09/09/02 (g) ........... 6,000 3,994,730
-----------
BRITISH POUND--4.6%
Bimingham Midshires
Building Society,
9.125%, 01/05/06 ............. 650 1,270,923
Brunner Mond Group PLC,
12.50%, 07/15/08 .............. 884 1,336,501
Chelsea Village PLC,
8.875%, 12/17/07 (g) .......... 1,233 2,085,386
Coca Cola Enterprises,
6.75%, 03/12/08 ............... 778 1,380,630
Finance for Social Resources,
11.126%, 10/05/58 (g) ......... 600 1,758,806
HMV Media Group PLC,
10.875%, 05/15/08 ............. 670 1,035,222
Landwirtschaftliche Rentenbank,
6.375%, 03/09/05 .............. 1,829 3,210,702
Middleweb PLC,
10.50%, 05/30/08 (c) .......... 1,170 1,836,933
North American Capital Corp.,
8.25%, 11/17/03 ............... 1,225 2,224,752
Textron Golf & Turk PLC,
8.684%, 01/30/08 (c) .......... 1,121 2,158,563
William Hill Finance PLC,
10.625%, 04/30/08 (g) ......... 611 1,035,421
-----------
TOTAL BRITISH POUND ............ 19,333,839
-----------
CANADIAN DOLLAR--0.7%
Argos Funding Trust,
5.963%, 02/27/06 .............. 1,000 647,694
Molson Breweries Company, Ltd.,
6.00%, 06/02/08 (c) ........... 629 420,568
Quebec Province,
8.625%, 11/04/11 .............. 431 904,319
UniHost Corp.,
10.00%, 06/30/03 .............. 1,714 1,020,438
-----------
TOTAL CANADIAN DOLLAR .......... 2,993,019
-----------
COLOMBIAN PESO--0.1%
Salomon COP Swap (USD),
0.00%, 01/06/99 ............... 380 398,126
-----------
CROATIAN KUNA--0.2%
Republic of Croatia, (USD),
6.563%, 07/31/06 .............. 904 717,762
-----------
DANISH KRONE--4.2%
Kingdom of Denmark,
8.00%, 03/15/06 ............... 59,730 11,573,784
Nykredit AS,
5.00%, 10/01/29 ............... 20,427 3,000,997
Realkredit Danmark,
5.00%, 10/01/29 ............... 13,258 1,946,734
Unikredit Realkredit,
5.00%, 10/01/29 (g) ........... 8,904 1,301,820
-----------
TOTAL DANISH KRONE ............. 17,823,335
-----------
FRENCH FRANC--2.6%
Credit Foncier de France,
7.50%, 03/29/05 ............... 46,200 9,742,407
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ------------------------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Neopost,
6.131%, 09/30/07 (c), (e) ............................................. $ 7,800 $1,346,271
----------
TOTAL FRENCH FRANC ..................................................... 11,088,678
----------
GERMAN MARK--4.4%
AirTouch Communications, Inc.,
5.50%, 07/24/08 ....................................................... 2,420 1,463,856
Autobahn Tank & Rast,
6.00%, 10/16/00 (g) ................................................... 1,833 1,143,838
Bt & Co. Croatia Index Note,
1.00%, 03/01/99 ....................................................... 1,500 186,667
Bt Croatia,
1.00%, 10/01/99 ....................................................... 1,000 224,109
Core Dem,
6.39%, 07/05/15 ....................................................... 2,400 1,411,256
Derby Cycle Corp.,
9.375%, 05/15/08 ...................................................... 1,561 688,429
Deutsche Bank AG,
11.00%, 04/15/99 ...................................................... 1,300 1,383,720
Euronet Services, Inc.,
12.375%, 07/01/06 (g) ................................................. 4,525 868,835
Exide Holdings,
9.125%, 04/15/04 (c) .................................................. 4,051 2,382,083
Geberit International SA,
10.125%, 04/15/07 ..................................................... 1,189 820,443
Impress Metal Pack Holding,
9.875%, 05/29/07 (c), (g) ............................................. 4,157 2,731,258
Ineos PLC,
8.625%, 04/30/05 (g) .................................................. 3,725 2,089,809
Sirona Dental Systems,
9.125%, 07/15/08 (c) .................................................. 3,655 2,171,157
Texon International PLC,
10.00%, 02/01/08 ...................................................... 1,938 907,020
----------
TOTAL GERMAN MARK ...................................................... 18,472,480
----------
GREEK DRACHMA--0.7%
Republic of Hellenic:
8.90%, 04/01/03 ....................................................... 110,000 412,284
12.80%, 06/30/00 ...................................................... 110,000 396,759
13.00%, 08/14/03 (e) .................................................. 605,000 2,196,227
----------
TOTAL GREEK DRACHMA .................................................... 3,005,270
----------
HUNGARIAN FORINT--1.3%
Government of Hungary:
16.00%, 01/12/00 ...................................................... 555,000 2,596,579
23.00%, 05/06/99 ...................................................... 110,000 521,888
Republic of Hungary:
16.50%, 04/12/99 ...................................................... 250,000 1,159,417
16.50%, 07/24/99 ...................................................... 165,000 767,206
19.50%, 01/12/99 ...................................................... 64,000 297,202
----------
TOTAL HUNGARIAN FORINT ................................................. 5,342,292
----------
INDONESIAN RUPIAH---0.0%
Polysindo Eka:
10.00%, 03/16/00 ...................................................... 194 9,709
19.00%, 04/26/99 ...................................................... 5,000,000 31,250
----------
TOTAL INDONESIAN RUPIAH ................................................ 40,959
----------
ITALIAN LIRA--1.0%
Films PLC,
5.785%, 03/31/05 (e) .................................................. 4,200,000 2,463,939
Societa Sportiva Lazio SPA,
6.375%, 10/15/07 ...................................................... 3,038,887 1,791,960
----------
TOTAL ITALIAN LIRA ..................................................... 4,255,899
----------
JAPANESE YEN--1.0%
Asterique,
2.48%, 01/23/02 (g) ................................................... 286,282 2,532,349
Export-Import Bank of Japan,
8.00%, 06/04/00 ....................................................... 130 130,233
International Bank for
Reconstruction and Development,
4.50%, 03/20/03 (g) ................................................... 15,300 154,370
Nippon Credit Bank, Ltd.,
1.80%, 07/27/00 ....................................................... 140,000 1,211,765
----------
TOTAL JAPANESE YEN ..................................................... 4,028,717
----------
LEBANESE POUND--1.1%
LBP Treasury Bill,
0.00%, 03/18/99 ....................................................... 600,100 387,079
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
LBP Treasury Note,
0.00%, 02/11/99 ................. $1,697,090 $1,199,352
Paribas LBP Treasury Bills:
18.12%, 01/21/99 ................ 2,794,200 1,989,618
18.70%, 01/14/99 ................ 1,197,820 857,608
----------
TOTAL LEBANESE POUND ............. 4,433,657
----------
LITHUANIAN LITAS--0.0%
Lithuanian Treasury Bill,
0.00%, 01/22/99 ................. 358 89,036
----------
MEXICAN PESO--2.3%
Mexican Cetes:
0.00%, 01/14/99 ................. 8,280 829,499
0.00%, 04/08/99 ................. 21,318 1,981,932
0.00%, 07/08/99 ................. 9,610 832,368
1.00%, 06/03/99 ................. 3,003 267,169
UDI Bonos,
7.00%, 05/27/99 ................. 2,100 502,730
United Mexican States, (USD):
6.039%, 12/31/19 (e) ............ 1,000 812,500
6.098%, 12/31/19 (e) ............ 1,250 1,015,625
6.116%, 12/31/19 (e) ............ 1,250 1,015,625
6.25%, 12/31/19 (e) ............. 1,150 898,495
6.25%, 12/31/19 (e) ............. 2,000 1,562,600
----------
TOTAL MEXICAN PESO ............... 9,718,543
----------
MOROCCAN DIRHAM---0.4%
Morocco Restructuring &
Consolidation Agreement, (USD),
6.063%, 01/01/09 (e) ............ 1,900 1,482,000
----------
PERUVIAN NOUVEAU
SOL--0.3%
Peru Trade Finance Paper,
0.00%, 09/04/04 ................. 2,099 1,397,578
----------
PHILIPPINES PESO--0.1%
Government of Philippines,
11.875%, 01/16/99 ............... 10,000 257,391
Republic of the Philippines GDR
6.50%, 12/01/17 ................. 250 217,500
----------
TOTAL PHILIPPINES PESO ........... 474,891
----------
POLISH ZLOTY--0.6%
Government of Poland:
12.00%, 06/15/02 ................ 1,300 378,370
15.00%, 06/12/99 ................ 1,800 512,051
Polish Treasury Bill,
0.00%, 08/04/99 ................. 5,800 1,533,117
----------
TOTAL POLISH ZLOTY ............... 2,423,538
----------
SLOVAKIAN KORUNA--0.0%
International Finance Corp.,
11.75%, 08/15/99 ................ 3,550 90,903
----------
SOUTH AFRICAN RAND--0.5%
Government of Namibia:
12.00%, 04/15/02 ................ 1,460 213,172
12.00%, 04/15/05 ................ 1,460 198,359
Lesotho Highlands Water,
12.50%, 04/15/02 ................ 4,960 756,172
Republic of South Africa,
12.00%, 02/28/05 ................ 6,170 889,002
South African Roads,
11.50%, 09/30/05 ................ 975 130,120
----------
TOTAL SOUTH AFRICAN RAND ......... 2,186,825
----------
SWEDISH KRONA--1.0%
Forenings Sparbanken,
0.00%, 03/29/99 ................. 27,200 1,998,012
Svensk Exportkredit AB:
0.00%, 01/15/99 ................. 3,000 746,157
0.00%, 01/25/99 ................. 19,400 1,438,115
----------
TOTAL SWEDISH KRONA .............. 4,182,284
----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
THAILAND BAHT--0.0%
Finance One PLC, (USD),
2.00%, 08/31/01 (d) ............... $ 1,515 $ 0
Morgan Guaranty Trust,
0.00%, 07/31/99 (d) ............... 10,569 0
---------
TOTAL THAILAND BAHT ................ 0
---------
TURKISH LIRA--1.2%
Turkey DMG Daily Reset,
0.00%, 02/24/99 ................... 398,000 1,362,582
Turkey DMG Daily Reset 4,
0.00%, 02/26/99 ................... 944,237 3,199,738
Turkey DMG Daily Reset 5,
0.00%, 03/30/99 ................... 210,000 677,011
---------
TOTAL TURKISH LIRE ................. 5,239,331
---------
UNITED STATES DOLLAR--54.1%
Advantica Restaurant Group, Inc.,
11.25%, 01/15/08 (g) .............. 2,500 2,531,250
Agrilink Foods, Inc.,
11.875%, 11/01/08 (c) ............. 725 737,687
American Restaurant Group,
Inc., 11.50%, 02/15/03 ............ 1,750 1,522,500
AMSC Acquisition, Inc.,
12.25%, 04/01/08 .................. 1,300 806,000
Amtrol, Inc.,
10.625%, 12/31/06 ................. 1,010 982,225
Asset Securitization Corp.:
Series 1997-D5, Class C
1.385%, 02/14/41 (e) ............. 12,951 1,252,617
Series 1996-D2, Class ACS2
1.49%, 02/28/26 (e) .............. 7,035 613,364
Atlantic Express Transportation
Corp.,
10.75%, 02/01/04 .................. 1,254 1,266,540
Atlas Air, Inc.,
9.25%, 04/15/08 ................... 250 249,375
Booth Creek Ski Holdings, Inc.,
12.50%, 03/15/07 .................. 1,542 1,526,580
Calpine Corp.,
10.50%, 05/15/06 .................. 470 518,175
Casino America, Inc.,
12.50%, 08/01/03 .................. 646 713,830
Cellco Finance NV,
15.00%, 08/01/05 (c) .............. 310 266,600
Citibank Pen Time Deposit,
17.00%, 06/21/99 .................. 720 716,760
Climachem, Inc.,
10.75%, 12/01/07 (g) .............. 2,074 2,084,370
Coaxial Communications
Central Ohio, LLC.,
10.00%, 08/15/06 (c), (g) ......... 2,100 2,168,250
Community Distributors, Inc.,
10.25%, 10/15/04 (g) .............. 150 138,000
Concentric Network Corp.,
12.75%, 12/15/07 .................. 1,695 1,728,900
Courtyard by Marriott II, Ltd.,
Series B
10.75%, 02/01/08 (g) ............. 1,310 1,355,850
Credit Lyonnais Paris,
6.563%, 09/19/49 (e) .............. 2,130 1,725,300
Credit Suisse First Boston Mortgage,
Series 1998-C2, Class A 1
5.96%, 11/11/30 (g) .............. 3,383 3,432,338
CSC Holdings, Inc.:
9.875%, 02/15/13 .................. 650 724,750
10.50%, 05/15/16 (g) .............. 1,883 2,212,525
Dictaphone Corp.,
11.75%, 08/01/05 (g) .............. 2,579 1,934,250
Dobson Communications
Corp.,
11.75%, 04/15/07 ................. 847 842,765
Dynacare, Inc.,
10.75%, 01/15/06 (g) .............. 2,522 2,471,560
Echostar DBS Corp.,
12.50%, 07/01/02 (g) .............. 1,241 1,427,150
Econophone, Inc.,
13.50%, 07/15/07 (g) .............. 2,800 2,866,500
Federal Farm Credit Banks,
5.55%, 07/01/99 ................... 3,300 3,308,778
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Federal Home Loan Mortgage
Corp.:
Series 1974, Class VI
0.25%, 03/15/09 ...................................................... $ 20,632 $ 116,057
5.54%, 07/13/99 ...................................................... 565 566,503
6.50%, 05/01/13 ...................................................... 17,376 17,631,335
6.50%, 09/01/13 ...................................................... 1,333 1,353,476
6.50%, 10/01/13 ...................................................... 1,644 1,668,944
6.50%, 11/01/28 ...................................................... 2,507 2,525,546
7.00%, 08/01/28 ...................................................... 2,455 2,503,167
7.00%, 11/01/28 ...................................................... 9,697 9,885,037
7.50%, 12/01/28 ...................................................... 1,046 1,074,106
8.00%, 03/01/28 ...................................................... 2,090 2,164,221
8.00%, 12/01/28 ...................................................... 2,828 2,927,857
Federal National Mortgage
Association:
Series 1992-203, Class SA
3.844%, 11/25/07 (e) ................................................. 935 60,493
5.45%, 04/15/99 ...................................................... 900 900,846
6.50%, 09/01/28 ...................................................... 6,780 6,824,576
6.50%, 10/01/28 ...................................................... 9,719 9,783,854
6.50%, 11/01/28 ...................................................... 2,884 2,903,241
6.50%, 12/01/28 ...................................................... 2,860 2,879,557
8.00%, 06/01/12 ...................................................... 1,287 1,325,303
8.00%, 12/01/12 ...................................................... 2,134 2,197,842
Series 38, Class 2
10.00%, 08/01/18 ..................................................... 904 182,184
Series 1992-97, Class SA
10.00%, 04/25/21 (e) ................................................. 248 6,215
Series G-13, Class L
10.095%, 05/25/21 (e) ................................................ 709 163,208
First USA Trust, Series 1998-1
6.50%, 01/18/06 (c), (e) .............................................. 1,600 1,605,520
Fisher Scientific International, Inc.,
9.00%, 02/01/08 (c) ................................................... 1,700 1,700,000
Ford Motor Credit Corp.,
5.25%, 06/16/08 (g) ................................................... 2,157 1,341,977
Frank's Nursery and Crafts,
Inc.,
10.25%, 03/01/08 ...................................................... 1,000 985,000
Fresenius Medical Care Capital Trust,
9.00%, 12/01/06 ....................................................... 500 522,500
Fundy Cable, Ltd.,
11.00%, 11/15/05 (g) .................................................. 1,208 1,274,440
G3 Mortgage Reinsurance Ltd.,
7.892%, 05/25/08 (c), (e) ............................................. 1,500 1,345,781
Generac Portable Products LLC,
11.25%, 07/01/06 (c) .................................................. 700 700,000
Genesis Health Ventures, Inc.,
9.875%, 01/15/09 (c) .................................................. 900 868,500
GMAC Commercial Mortgage
Security, Inc., Series 1997-C2,
Class A
6.451%, 12/15/04 ..................................................... 2,813 2,895,561
Government National
Mortgage Association:
7.00%, 04/15/28 ...................................................... 527 539,797
7.00%, 11/15/28 ....................................................... 1,083 1,108,280
8.00%, 11/15/28 ....................................................... 8,890 9,240,968
Headlands Mortgage
Securities, Inc.:
Series 1997-1, Class X1
0.686%, 03/25/27 (e) ................................................. 67,969 713,005
Series 1997-4, Class X
1.121%, 11/25/27 (e) ................................................. 25,621 402,001
High Voltage Engineering
Corp.,
10.50%, 08/15/04 ...................................................... 1,954 1,846,530
Home Interiors & Gifts,
10.125%, 06/01/08 (c) ................................................. 2,850 2,821,500
Imasac SA,
11.00%, 05/02/05 (c) .................................................. 400 264,000
ING Bank NV:
0.00%, 02/12/99 (c) ................................................... 1,400 1,575,000
0.00%, 02/12/99 ....................................................... 1,100 1,248,500
0.00%, 08/11/99 (c) ................................................... 1,300 1,378,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Interbank AKK Trust,
Series 1995-1, Class 1
9.00%, 02/28/01 (c) ............... $ 1,000 $ 860,000
IPC Information Systems, Inc.,
1.00%, 05/01/08 (e) ................ 500 315,000
Iridium LLC/CAP,
10.875%, 07/15/05 .................. 600 510,000
J.H. Heafner, Inc.:
10.00%, 05/15/08 ................... 550 550,000
10.00%, 05/15/08 (c) ............... 425 425,000
Jitney-Jungle Stores of America, Inc.,
10.375%, 09/15/07 .................. 1,635 1,675,875
LB Commercial Conduit
Mortgage Trust,
Series 1996-C2, Class A
7.434%, 10/25/26 .................. 3,076 3,244,694
Lodgenet Entertainment Corp.,
10.25%, 12/15/06 ................... 585 579,150
Long Distance International,
Inc.,
12.25%, 04/15/08 (c) .............. 1,497 1,249,995
Loomis Fargo & Co.,
10.00%, 01/15/04 ................... 725 717,750
Mediq, Inc.,
11.00%, 06/01/08 ................... 1,350 1,296,000
Merrill Lynch & Company, Inc.:
5.375%, 01/04/09 ................... 3,590 2,199,322
7.375%, 12/17/07 ................... 575 1,033,524
Merrill Lynch Mortgage
Investments, Inc.,
Series 1996-C1, Class IO
0.736%, 04/25/28 (c), (e) ......... 17,954 460,791
Morgan Stanley Capital One,
Inc.:
Series 1998 HF1, Class X
1.046%, 02/15/18 .................. 19,644 1,160,228
Series 1996-WF1, Class X
1.405%, 11/15/28 (c), (e) ......... 6,315 370,020
Series 1997-C1, Class IO
2.562%, 02/15/20 (e) .............. 2,786 39,186
Series 1998-HF2 Class A1
6.01%, 11/15/30 (g) ............... 5,906 5,967,472
Mortgage Capital Funding, Inc.,
Series 1997-MC2, Class X
1.367%, 11/20/12 .................. 15,136 1,161,238
Mosaic Re, Ltd.,
14.02%, 07/09/99 (c) ............... 750 770,625
Mrs. Field's Original,
1.00%, 12/01/05 .................... 820 469,450
Nationslink Funding Corp.,
Series 1998-2, Class A1
6.001%, 11/20/07 .................. 3,292 3,320,505
NationsRent, Inc.,
10.375%, 12/15/08 (c) .............. 1,500 1,496,250
Pacific Reinsurance,
1.00%, 05/31/03 .................... 1,340 1,336,650
Paxson Communications Corp.,
11.625%, 10/01/02 (g) .............. 1,865 1,892,975
Pen Holdings, Inc.,
9.875%, 06/15/08 ................... 750 750,000
Penhall Acquisition Corp.,
12.00%, 08/01/06 (c), (g) .......... 3,000 2,820,000
Penn National Gaming, Inc.,
10.625%, 12/15/04 .................. 1,150 1,207,500
Petro Stopping Centers,
10.50%, 02/01/07 (g) ............... 1,570 1,640,650
Poindexter (J.B.) & Co.,
12.50%, 05/15/04 ................... 1,472 1,383,680
Primark Corp.,
9.25%, 12/15/08 (c) ................ 1,250 1,250,000
Production Resource Group,
11.50%, 01/15/08 ................... 67 65,660
Prudential Home Mortgage
Security:
Series 1993-5, Class A9
0.439%, 03/25/00 (e) ............... 52,391 127,312
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Series 1993-24, Class A7
0.509%, 07/25/00 ...................................................... $ 51,556 $ 181,995
Series 1993-41, Class A5
0.914%, 10/25/00 (e) ................................................. 15,433 111,427
PSINet, Inc.:
10.00%, 02/15/05 (g) .................................................. 1,770 1,752,300
11.50%, 11/01/08 (c) .................................................. 450 471,375
Quest Diagnostics, Inc.,
10.75%, 12/15/06 ...................................................... 1,248 1,385,280
Qwest Communications
International, Inc.,
10.875%, 04/01/07 ..................................................... 50 58,250
Radio Unica Corp.,
1.00%, 08/01/06 (c) ................................................... 600 324,000
Rao Gazprom,
12.75%, 03/13/00 ...................................................... 702 237,838
Renters Choice Inc.,
11.00%, 08/15/08 (c) .................................................. 400 406,000
Republic of Panama,
4.00%, 07/17/14 (e) ................................................... 2,020 1,504,900
Republic of Peru:
0.00%, 09/05/04 ....................................................... 1,900 1,264,830
4.00%, 03/07/17 ....................................................... 250 156,875
Residential Mortgage Funding,
2.011%, 01/03/20 ...................................................... 11,659 705,415
Residential Reinsurance,
9.848%, 06/01/99 ...................................................... 750 759,600
Rifkin Acquisitions Partners LP,
11.125%, 01/15/06 ..................................................... 1,304 1,434,400
RMOF:
2.16%, 01/31/22 ....................................................... 17,618 1,277,344
2.185%, 07/15/22 (g) .................................................. 27,073 1,996,636
Sabreliner Corp.,
11.00%, 06/15/08 (c) .................................................. 600 528,000
Salomon Brothers Structured
Note:
0.00%, 01/07/99 ...................................................... 500 506,845
0.00%, 01/14/99 ...................................................... 814 825,144
Silgan Holdings, Inc.,
13.25%, 07/15/06 (g) .................................................. 1,446 1,619,520
Sino Properties,
6.10%, 03/27/03 ....................................................... 2,200 1,320,000
SK Telecom Company, Ltd.,
7.75%, 04/29/04 (g) ................................................... 2,225 1,995,845
Spanish Broadcasting Systems, Inc.,
11.00%, 03/15/04 (g) .................................................. 2,006 2,126,360
Station Casinos, Inc.,
10.125%, 03/15/06 ..................................................... 900 942,750
Structured Asset Securitization
Corp.:
Series 1996-CFL, Class X1
1.461%, 02/25/28 (e) ................................................. 5,579 302,638
Series 1996-CFL, Class X2
1.153%, 02/25/28 (e) ................................................. 2,573 57,223
Subic Power Corp.,
9.50%, 12/28/08 ....................................................... 379 284,483
Swiss Re Earthquake Fund,
10.493%, 07/16/00 ..................................................... 1,000 1,005,000
T/SF Communications Corp.,
10.375%, 11/01/07 ..................................................... 1,360 1,370,200
Talton Holdings, Inc.,
11.00%, 06/30/07 ...................................................... 551 523,450
Transdigm, Inc.,
10.375%, 12/01/08 (c) ................................................. 875 879,375
Trinity Re Florida Huricane
Fund 99,
10.00%, 12/31/99 (e) ................................................. 1,550 1,550,000
TTB Finance Cayman, Ltd.,
6.176%, 03/18/07 (e) .................................................. 1,926 1,598,580
TVN Entertainment Corp.,
14.00%, 08/01/08 (g) .................................................. 2,025 1,802,250
UCFC Loan Trust,
8.00%, 09/15/00 ....................................................... 2,304 287,640
United Rentals, Inc.,
9.25%, 01/15/09 (c) ................................................... 1,000 1,007,500
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ----------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
United States Department of
Veteran Affairs REMIC, Series
1997-1, Class IO
0.368%, 02/15/27 (e) ........... $ 34,343 $ 338,066
U.S. Can Corp.,
10.125%, 10/15/06 .............. 1,761 1,805,025
W.R. Carpenter North America,
Inc.,
10.625%, 06/15/07 (g) .......... 1,917 1,940,962
-----------
TOTAL UNITED STATES DOLLAR ...... 227,137,040
-----------
TOTAL CURRENCY DENOMINATED
BONDS
(Identified cost
$373,108,172).................. 359,479,086
-----------
SHARES
-------
PREFERRED STOCKS--2.3%
Adelphia Communications
Corp. .......................... 18,220 2,149,960
American Mobile Satellite
Corp. 4/1/08 warrants (c) ...... 1,300 5,044
Dobson Communications
Corp. .......................... 1,092 1,048,320
Echostar Communications
Corp. .......................... 47 48,880
Forman Petroleum Corp. .......... 161 16
Forman Petroleum Corp.
6/1/04 warrants ................ 1,144 1
Georgetown Re, Ltd. ............. 2 1,000,000
Harborside Healthcare Corp. ..... 1,034 961,620
High Voltage Engineering Corp. 1,459 1,429,820
Hyperion Telecommunications,
Inc. ........................... 989 786,255
ICG Holdings, Inc. .............. 786 825,300
Long Distance International, Inc.
4/13/08 warrants ............... 1,497 187
Nextel Communications, Inc.,
Class A ........................ 3,598 85,003
Nextel Communications, Inc. ....... 9 9,000
Nextel Communications, Inc. ....... 52 42,900
Paxson Communications Corp. 54 48,870
Paxson Communications Corp. 105 918,750
Spanish Broadcasting Systems,
Inc. 6/30/99 warrants (c) ........ 800 164,000
United Mexican States, rights ..... 8,530,200 0
XCL, Ltd. (c) ..................... 190 15,200
XCL, Ltd. (c) ..................... 1,960 156,800
---------
TOTAL PREFERRED STOCKS
(Identified cost $10,218,572)..... 9,695,926
---------
PRINCIPAL
AMOUNT
(000)
---------
COMMERCIAL PAPER--6.2%
American Express Credit Corp.:
4.50%, 05/27/99 ................. $ 654 642,065
4.70%, 07/06/99 .................. 465 453,708
4.90%, 03/10/99 .................. 496 491,409
5.00%, 02/19/99 .................. 427 424,094
General Electric Capital Corp.:
4.86%, 07/26/99 .................. 1,470 1,429,119
4.90%, 03/31/99 .................. 967 955,286
4.90%, 05/25/99 .................. 520 509,808
4.90%, 06/07/99 .................. 214 209,427
5.06%, 03/29/99 .................. 814 804,046
5.11%, 03/02/99 .................. 420 416,423
5.12%, 01/08/99 .................. 772 771,232
5.23%, 02/09/99 .................. 170 169,037
5.24%, 01/27/99 .................. 489 487,149
5.32%, 01/11/99 .................. 226 225,666
5.33%, 01/07/99 .................. 1,033 1,032,082
5.42%, 02/25/99 .................. 1,100 1,090,891
5.47%, 01/25/99 .................. 610 607,776
General Motors Acceptance
Corp.:
5.05%, 02/24/99 ................. 540 535,910
5.07%, 01/28/99 .................. 635 632,586
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ----------------------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
5.08%, 01/14/99 ..................................................... $ 4,660 $ 658,789
5.09%, 01/04/99 ..................................................... 1,113 1,112,528
5.15%, 01/20/99 ..................................................... 940 937,445
5.15%, 02/16/99 ..................................................... 1,688 1,676,892
5.16%, 01/12/99 ..................................................... 865 863,636
5.19%, 01/11/99 ..................................................... 1,582 1,579,658
5.19%, 02/05/99 ..................................................... 450 447,707
5.24%, 02/12/99 ..................................................... 380 377,677
5.24%, 02/16/99 ..................................................... 375 372,489
5.25%, 01/04/99 ..................................................... 532 531,767
5.30%, 02/25/99 ..................................................... 1,100 1,091,093
5.32%, 01/13/99 ..................................................... 521 520,076
6.50%, 03/23/04 ..................................................... 256 437,229
Prudential Funding Corp.:
4.00%, 09/24/99 ..................................................... 770 747,242
4.65%, 04/06/99 ..................................................... 400 395,092
4.75%, 03/23/99 ..................................................... 305 301,740
5.03%, 02/18/99 ..................................................... 685 680,406
5.05%, 02/01/99 ..................................................... 425 423,170
5.10%, 01/11/99 ..................................................... 372 371,473
5.25%, 01/07/99 ..................................................... 795 794,305
------------
TOTAL COMMERCIAL PAPER
(Identified cost $26,215,770)........................................ 26,208,128
------------
DISCOUNT NOTES--0.7%
Federal Farm Credit Banks:
0.00%, 11/03/99 ..................................................... 344 330,754
0.00%, 12/21/99 ..................................................... 1,772 1,691,150
Federal National Mortgage
Association:
0.00%, 01/07/99 .................................................... 947 946,200
0.00%, 03/11/99 ..................................................... 90 89,104
------------
TOTAL DISCOUNT NOTES
(Identified cost $3,049,266)......................................... 3,057,208
------------
U.S. GOVERNMENT OBLIGATIONS--2.7%
United States Treasury Bills,
5.16%, 05/27/99 ..................................................... 1,210 1,184,679
United States Treasury Notes:
4.75%, 11/15/08 (g) ................................................. 4,010 4,041,318
5.75%, 11/15/00 ..................................................... 6,000 6,116,220
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Identified cost $11,305,090)........................................ 11,342,217
------------
REPURCHASE AGREEMENT--2.9%
State Street Bank and Trust Co.,
4.75%, 01/04/99, (Dated
12/31/98, collateralized by
$11,545,000 United States
Treasury Note, 0.000%,
07/01/99 with a value of
$11,285,238, and
$1,065,000 United States
Treasury Note, 6.000%,
06/30/99, with a value of
$1,072,322) (g) (Identified
cost $12,113,000).................................................... 12,113 12,113,000
------------
TOTAL INVESTMENTS
(Identified cost
$436,009,870) (b)................................................... 100.4% $421,895,565
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS .................................................... (0.4) (1,836,204)
---------- ------------
NET ASSETS ........................................................... 100.0% $420,059,361
========== ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward Foreign Currency Contracts open at December 31, 1998:
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Purchase Contracts Date Currency Date Value (Depreciation)
- -------------------- ------------ ---------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
ARS 1/5/99 1,237,030 $ 1,201,000 $ 1,237,773 $ 36,773
ARS 7/1/99 929,160 890,000 908,181 18,181
BRL 1/6/99 1,611,960 1,330,000 1,329,013 (987)
CLP 1/12/99 560,836,000 1,192,000 1,180,429 (11,571)
CLP 1/20/99 441,330,000 940,000 926,476 (13,524)
CLP 2/24/99 255,204,000 540,000 530,864 (9,136)
CNY 1/7/99 6,616,547 795,000 798,618 3,618
CNY 1/28/99 5,324,475 635,000 640,955 5,955
COP 1/4/99 236,355,000 150,000 151,528 1,528
COP 1/7/99 1,631,313,600 1,033,000 1,042,932 9,932
CRC 2/1/99 117,431,750 425,000 428,328 3,328
CRC 2/12/99 105,399,232 380,000 382,901 2,901
CZK 6/28/99 118,257,550 3,295,000 3,866,346 571,346
CZK 7/16/99 6,960,000 202,102 227,190 25,088
CZK 11/18/99 1,243,200 40,000 40,139 139
DEM 3/11/99 30,558,498 18,397,667 18,399,700 2,033
DKK 3/11/99 20,396,089 3,177,951 3,210,787 32,836
EEK 1/11/99 5,395,455 390,000 403,257 13,257
EEK 1/13/99 7,141,577 521,420 533,439 12,019
EEK 1/27/99 6,764,744 488,715 502,884 14,169
EEK 3/31/99 13,268,010 967,945 966,633 (1,312)
EGP 1/12/99 2,982,866 865,000 869,184 4,184
EGP 2/9/99 586,466 170,000 170,365 365
EGP 2/18/99 2,366,470 685,000 686,809 1,809
ESP 3/11/99 2,224,885,870 16,018,714 15,710,889 (307,825)
FRF 3/11/99 1,170,066 205,715 210,006 4,291
GBP 3/11/99 1,359,765 2,243,705 2,254,305 10,600
GRD 3/18/99 30,000,000 90,498 105,850 15,352
GRD 4/14/99 300,000,000 903,615 1,054,154 150,539
GRD 12/28/99 476,335,860 1,617,000 1,621,586 4,586
GRD 12/29/99 45,694,000 155,000 155,538 538
GTQ 1/21/99 6,275,431 925,375 929,047 3,672
HUF 3/23/99 66,825,500 305,000 302,169 (2,831)
IDR 1/8/99 8,700,000,000 771,619 1,079,318 307,699
IDR 1/11/99 4,000,000,000 372,266 494,842 122,576
IDR 1/28/99 4,200,000,000 516,923 511,431 (5,492)
IDR 3/10/99 4,000,000,000 495,663 470,312 (25,351)
IDR 6/7/99 1,839,500,000 214,269 202,942 (11,327)
ILS 2/16/99 5,948,270 1,370,000 1,412,656 42,656
ILS 6/11/99 4,622,200 1,210,000 1,070,325 (139,675)
INR 1/14/99 28,446,000 660,000 666,990 6,990
INR 2/9/99 12,993,000 300,000 303,339 3,339
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Purchase Contracts Date Currency Date Value (Depreciation)
- -------------------- ------------ ---------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
INR 2/25/99 50,545,000 $ 1,100,000 $ 1,174,919 $ 74,919
INR 4/6/99 20,227,500 450,000 465,198 15,198
INR 5/25/99 23,270,000 520,000 527,460 7,460
JPY 3/11/99 132,631,800 1,117,276 1,184,216 66,940
KES 1/4/99 32,445,521 531,893 524,845 (7,048)
KES 1/11/99 13,763,792 226,378 222,165 (4,213)
KES 2/12/99 27,630,000 450,000 438,014 (11,986)
KRW 2/8/99 466,550,000 350,000 385,920 35,920
KRW 4/20/99 3,466,200,000 2,180,000 2,844,705 664,705
KRW 4/27/99 1,160,700,000 730,000 951,772 221,772
KRW 7/26/99 1,817,655,000 1,470,000 1,474,809 4,809
KRW 9/29/99 962,500,000 770,000 776,316 6,316
MXN 3/29/99 8,590,142 814,000 812,775 (1,225)
NZD 3/11/99 1,228,549 656,598 646,982 (9,616)
PEN 3/2/99 1,331,400 420,000 413,954 (6,046)
PHP 1/7/99 28,768,000 640,000 740,489 100,489
PLN 1/4/99 4,097,843 1,113,000 1,166,178 53,178
PLN 1/25/99 2,214,056 610,000 626,424 16,424
PLN 2/23/99 1,640,989 465,001 461,248 (3,753)
PLN 7/6/99 1,694,786 465,000 463,894 (1,106)
PLN 7/13/99 114,549 30,000 31,316 1,316
SKK 2/16/99 14,167,500 375,000 377,453 2,453
SKK 2/19/99 15,953,700 426,927 424,564 (2,363)
SVC 2/16/99 2,801,866 318,000 317,488 (512)
THB 1/8/99 34,000,000 944,444 934,853 (9,591)
THB 5/27/99 24,000,000 654,129 653,243 (886)
THB 12/21/99 34,997,000 926,092 935,314 9,222
XEU 3/11/99 27,481 32,611 32,357 (254)
ZAR 11/26/99 2,177,520 344,000 336,091 (7,909)
----------- ----------- ----------
$86,217,511 $88,335,392 $2,117,881
----------- ----------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Sale Contracts Date Currency Date Value (Depreciation)
- ------------------ ------------ ---------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
ARS 1/5/99 1,237,030 $ 1,232,961 $ 1,237,772 $ (4,811)
ARS 7/1/99 929,160 911,120 908,181 2,939
AUD 3/11/99 6,950,946 4,481,970 4,262,007 219,963
CAD 3/11/99 3,433,392 2,210,642 2,246,599 (35,957)
COP 1/4/99 236,355,000 153,267 151,529 1,738
DEM 1/11/99 659,100 390,000 395,685 (5,685)
DEM 1/13/99 873,000 521,420 524,149 (2,729)
DEM 1/27/99 828,001 488,715 497,466 (8,751)
DEM 2/19/99 710,000 426,926 427,071 (145)
DEM 3/11/99 84,720,151 50,913,628 51,011,192 (97,564)
DEM 3/31/99 1,610,000 967,945 970,359 (2,414)
DKK 3/11/99 144,372,158 22,741,029 22,727,312 13,717
ESP 3/11/99 2,271,146,847 16,042,453 16,037,558 4,895
FRF 3/11/99 63,813,320 11,407,458 11,453,355 (45,897)
GBP 3/11/99 14,921,257 24,809,620 24,737,405 72,215
GRD 4/14/99 15,000,000 52,699 52,708 (9)
INR 2/9/99 12,993,000 298,210 303,339 (5,129)
ITL 3/11/99 7,140,509,223 4,319,466 4,333,571 (14,105)
JPY 3/11/99 1,959,397,625 16,358,451 17,494,673 (1,136,222)
KES 1/4/99 32,445,521 519,960 524,845 (4,885)
KRW 2/8/99 466,550,000 329,252 385,920 (56,668)
KRW 4/20/99 3,466,200,000 2,204,290 2,844,705 (640,415)
KRW 4/27/99 1,160,700,000 804,959 951,771 (146,812)
NZD 3/11/99 1,219,460 657,899 642,196 15,703
PHP 1/7/99 25,000,000 608,273 643,501 (35,228)
PLN 1/4/99 4,097,843 1,171,817 1,166,178 5,639
THB 1/8/99 34,000,000 925,170 934,853 (9,683)
XEU 3/11/99 5,155,627 6,076,156 6,070,607 5,549
------------ ------------ -----------
$172,025,756 $173,936,507 $(1,910,751)
------------ ------------ -----------
Gross unrealized appreciation on Forward Foreign Currency Contracts $ 3,055,778
===========
Gross unrealized depreciation on Forward Foreign Currency Contracts $ 2,848,648
===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
===============================================================================-
THE LAZARD FUNDS, INC.
NOTES TO PORTFOLIOS OF INVESTMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) For federal income tax purposes, the aggregate cost, aggregate gross
unrealized appreciation, aggregate gross unrealized depreciation and the
net unrealized appreciation (depreciation) is as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE NET
GROSS GROSS UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION
PORTFOLIO COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ------------------------------ ---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Equity $ 396,057,275 $ 93,163,852 $ 7,166,029 $ 85,997,823
Mid Cap 70,950,524 8,474,504 6,637,319 1,837,185
Small Cap 1,411,268,006 235,760,470 147,526,998 88,233,472
Bantam Value 71,845,466 7,934,561 13,211,111 (5,276,550)
Global Equity 19,471,020 3,607,411 734,993 2,872,418
International Equity 2,453,528,690 637,325,686 171,556,644 465,769,042
International Small Cap 181,782,228 29,916,347 31,234,015 (1,317,668)
Emerging Markets 382,075,916 14,815,304 92,823,388 (78,008,084)
Bond 116,880,591 1,190,577 1,543,556 (352,979)
High Yield 43,329,180 463,679 1,793,174 (1,329,495)
International Fixed-Income 113,120,321 5,224,245 1,445,936 3,778,309
Strategic Yield 433,907,627 6,076,730 18,088,792 (12,012,062)
</TABLE>
(c) Pursuant to Rule 144A of the Securities Act of 1933, these securities
may only be resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 1998, these securities
amounted to $1,846,614, $18,049,373, $5,691,131, $11,562,725, $5,254,072
and $42,137,646 or 1.0%, 5.9%, 4.9%, 27.0%, 4.4% and 10.0% of net assets
for International Small Cap Portfolio, Emerging Markets Portfolio, Bond
Portfolio, High Yield Portfolio, International Fixed-Income Portfolio and
Strategic Yield Portfolio, respectively.
(d) Bankrupt security valued at zero
(e) Variable rate security. Interest rate shown is the current rate.
(f) Front Loaded Interest Reduction Bond.
(g) Segregated securities for when-issued purchases and/or forward foreign
currency contracts.
(h) At December 31, 1998, Small Cap Portfolio held the following securities
which were private placements and therefore restricted as to resale, and
represented 0.03% (at value) of the net assets of the Portfolio:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
- ------------------------------------------------------------- ------------- ------------
<S> <C> <C>
Interactive Light Holdings, Inc. 8.00%, 1/25/99 02/04/94 $1,000,000
Verbex Voice Systems, Inc. Series F Preferred (conv.) 07/12/93 1,500,000
Verbex Voice Systems, Inc. 06/07/94 76,661
Verbex Voice Systems, Inc. 10.00%, 12/31/95 07/06/94 103,840
----------
$2,680,501
==========
</TABLE>
Interactive Light Holdings, Inc. and Verbex Voice Systems Inc. are valued as
determined in good faith and in accordance with the procedures adopted by the
Board of Directors. Small Cap Portfolio will bear any cost, including those
involved in registration under the Securities Act of 1933, in connection with
the disposition of such securities.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
NOTES TO PORTFOLIOS OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
Abbreviations:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
TBA--Settlement is on a delayed delivery or when-issued basis with final
maturity to be announced in the future.
REMIC--Real Estate Mortgage Investment Conduit
CURRENCY TERMS
--------------
ARS--Argentine Peso IEP--Irish Pound
ATS--Austrian Schilling ILS--Israeli Shekel
AUD-- Australian Dollar INR--Indian Rupee
BEL-- Belgian Franc ITL--Italian Lira
BRL--Brazilian Real JPY--Japanese Yen
CAD-- Canadian Dollar KES--Kenyan Shilling
CHF-- Swiss Franc KRW--South Korean Won
CLP-- Chilean Peso MXN--Mexican Peso
CNY--Chinese Yuan Renminbi NLG--Netherlands Guilder
COP-- Colombian Peso NOK--Norwegian Krone
CRC--Costa Rican Colon NZD--New Zealand Dollar
CZK-- Czech Koruna PEN--Peruvian Nouveau Sol
DEM--Deutsche Mark PHP--Philippine Peso
DKK--Danish Krone PLN--Polish Zloty
EEK--Estonian Krune SEK--Swedish Krona
EGP--Eqyptian Pound SKK--Slovakian Koruna
ESP--Spanish Peseta SVC--El Salvador Colon
FIM--Finnish Markka THB--Thailand Baht
FRF-- French Franc TRL--Turkish Lira
GBP-- Pound Sterling USD--United States Dollar
GRD--Greek Drachma UYU--Uruguayan Peso
GTQ--Guatemalan Quetzal VEB--Venezuelan Bolivar
HUF--Hungarian Forint XEU--European Currency Unit (ECU)
IDR--Indonesian Rupiah ZAR--South African Rand
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
NOTES TO PORTFOLIOS OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS BY INDUSTRY, FOR THOSE PORTFOLIOS PREVIOUSLY PRESENTED BY
COUNTRY:
<TABLE>
<CAPTION>
LAZARD LAZARD LAZARD LAZARD
GLOBAL INTERNATIONAL INTERNATIONAL EMERGING
EQUITY EQUITY SMALL CAP MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
INDUSTRY
Advertising ............................. --% --% 2.0% --%
Apparel & Textiles ...................... -- -- 2.4 --
Aerospace & Defense ..................... 5.0 2.7 -- --
Automotive .............................. 3.2 3.4 2.0 --
Banks and Financial Services ............ 16.7 19.7 10.9 13.8
Brewery ................................. -- -- 2.5 5.9
Broadcasting ............................ -- -- 1.4 1.7
Business Services & Supplies ............ -- -- 1.7 --
Chemicals & Plastics .................... 0.8 3.0 2.7 --
Communication Services .................. 1.1 1.5 -- --
Computer Software ....................... -- -- 5.0 --
Computer Services ....................... -- -- 1.5 --
Computers & Business Equipment .......... 3.2 -- -- --
Conglomerates ........................... 3.3 3.0 -- 8.0
Construction & Materials ................ 0.5 1.5 -- 7.0
Construction & Mining Equipment ......... -- -- 0.7 --
Consumer Goods .......................... 0.9 3.5 -- --
Diversified Holding Company ............. 0.8 -- 2.2 --
Drugs & Health Care ..................... 8.0 3.1 5.7 --
Electrical Equipment .................... 3.6 4.9 -- 3.3
Electronics ............................. 5.5 1.7 5.4 --
Energy .................................. 1.9 -- -- --
Food & Beverages ........................ 6.3 6.3 5.3 9.2
Hospitals & Long-Term Care .............. -- -- 3.5 --
Hotels & Restaurants .................... 1.7 -- 1.3 --
Household Products ...................... -- 1.4 2.8 --
Industrial & Machinery .................. -- -- 3.9 --
Insurance ............................... 8.3 10.6 6.5 1.1
Leisure/Entertainment ................... 1.6 2.3 1.5 --
Manufacturing ........................... 2.4 5.0 1.8 --
Medical Supplies ........................ -- -- 3.1 --
Metals .................................. -- -- -- 1.0
Newspaper ............................... -- -- 1.7 --
Office Equipment ........................ 1.3 1.4 -- --
Oil & Gas ............................... 3.9 5.0 -- 3.9
Paper Products .......................... -- 0.5 -- 2.2
Petroleum Equipment & Services .......... 1.7 1.8 -- --
Plastics ................................ -- -- 1.4 --
Printing ................................ -- -- 2.8 1.1
Publishing .............................. -- 0.3 2.3 --
Railroad ................................ -- -- -- 0.9
Repurchase Agreement .................... 2.4 2.2 5.5 3.5
Retail .................................. 3.1 3.6 8.3 6.8
Services ................................ 1.3 -- 1.4 --
Steel ................................... -- -- -- 0.9
Telecommunications ...................... 7.7 5.7 -- 21.8
Tobacco ................................. 1.0 3.2 -- 1.8
Toys & Amusement ........................ -- 1.1 0.8 --
Utilities ............................... 2.0 1.4 -- 5.4
---- ------- ----- -------
Total Investments ....................... 99.2% 99.8% 100.0% 99.3%
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
NOTES TO PORTFOLIOS OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS BY ASSET TYPE, FOR THOSE PORTFOLIOS PREVIOUSLY PRESENTED BY
CURRENCY:
LAZARD LAZARD
INTERNATIONAL STRATEGIC
FIXED-INCOME YIELD
PORTFOLIO PORTFOLIO
--------------- ------------
ASSET TYPE
Asset-Backed Securities ...................... 1.1% 1.2%
Collateralized Mortgage Obligations .......... 0.2 4.2
Commercial Paper ............................. 6.2 6.2
Corporate Bonds .............................. 38.8 40.4
Discount Notes ............................... 0.6 --
Foreign Government Obligations ............... 40.8 16.3
Preferred Stocks ............................. -- 2.3
REMICs ....................................... -- 0.1
Repurchase Agreement ......................... 1.3 2.9
Step-up Bonds ................................ 0.2 0.3
Structured Notes ............................. 0.9 3.0
United States Government Obligations ......... 7.1 23.5
---- -------
Total Investments ............................ 97.2% 100.4%
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
LAZARD
EQUITY
PORTFOLIO
-----------------
ASSETS
Investments in securities, at value (cost $396,057,275,
$70,950,524, $1,409,642,345, $71,710,100,
$19,389,067, $2,428,029,380, $181,782,228,
$381,056,579, $116,606,674, $43,145,346,
$112,517,182 and $436,009,870, respectively) ................ $ 482,055,098
Cash ......................................................... 3,622
Foreign currency (cost $0, $0, $0, $0, $69, $1,377,617,
$21,323, $253,343, $0, $0, $9,598 and $30,350,
respectively) ............................................... --
Receivables for:
Investments sold ............................................ 3,447,007
Dividends and interest ...................................... 621,752
Capital stock sold .......................................... 3,594,093
Gross appreciation on foreign currency contracts ............ --
Due from Manager ............................................. --
Deferred organizational expenses ............................. --
-------------
Total assets ................................................. 489,721,572
-------------
LIABILITIES
Payables for:
Investments purchased ....................................... 9,353,643
Capital stock repurchased ................................... 1,191,528
Dividends payable ........................................... --
Gross depreciation on foreign currency contracts ............ --
Investment management fees payable ........................... 296,743
Accrued directors' fees payable .............................. 2,688
Accrued distribution fees payable ............................ 24,578
Accrued expenses and other payables .......................... 102,572
-------------
Total liabilities ............................................ 10,971,752
-------------
Net assets ................................................... 478,749,820
=============
NET ASSETS
Paid in capital .............................................. 378,079,574
Undistributed (distributions in excess of) investment
income--net ................................................. 119,713
Unrealized appreciation (depreciation) on:
Investments--net ............................................ 85,997,823
Foreign currency--net........................................ --
Accumulated realized gain (loss)--net ........................ 14,552,710
-------------
Net assets ................................................... $ 478,749,820
=============
INSTITUTIONAL SHARES
Net assets ................................................... $ 361,126,116
Shares of capital stock outstanding* ......................... 16,605,093
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ..... $ 21.75
OPEN SHARES
Net assets ................................................... $ 117,623,704
Shares of capital stock outstanding* ......................... 5,406,563
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ..... $ 21.76
<TABLE>
<CAPTION>
LAZARD
LAZARD LAZARD BANTAM
MID CAP SMALL CAP VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (cost $396,057,275,
$70,950,524, $1,409,642,345, $71,710,100,
$19,389,067, $2,428,029,380, $181,782,228,
$381,056,579, $116,606,674, $43,145,346,
$112,517,182 and $436,009,870, respectively) ................ $ 72,787,709 $1,499,501,478 $ 66,568,916
Cash ......................................................... 446 208 22
Foreign currency (cost $0, $0, $0, $0, $69, $1,377,617,
$21,323, $253,343, $0, $0, $9,598 and $30,350,
respectively) ............................................... -- -- --
Receivables for:
Investments sold ............................................ -- 7,935,045 617,904
Dividends and interest ...................................... 63,811 1,962,147 28,243
Capital stock sold .......................................... 30,459 6,750,247 93,000
Gross appreciation on foreign currency contracts ............ -- -- --
Due from Manager ............................................. -- -- --
Deferred organizational expenses ............................. 18,555 -- 505
-------------- -------------- --------------
Total assets ................................................. 72,900,980 1,516,149,125 67,308,590
-------------- -------------- --------------
LIABILITIES
Payables for:
Investments purchased ....................................... 614,859 6,527,195 25,938
Capital stock repurchased ................................... 100,329 3,423,577 386,342
Dividends payable ........................................... -- -- --
Gross depreciation on foreign currency contracts ............ -- -- --
Investment management fees payable ........................... 42,498 921,426 40,574
Accrued directors' fees payable .............................. 2,688 2,688 2,688
Accrued distribution fees payable ............................ 3,342 19,893 1,526
Accrued expenses and other payables .......................... 61,185 204,077 57,280
-------------- -------------- --------------
Total liabilities ............................................ 824,901 11,098,856 514,348
-------------- -------------- --------------
Net assets ................................................... 72,076,079 1,505,050,269 66,794,242
============== ============== ==============
NET ASSETS
Paid in capital .............................................. 69,945,063 1,416,125,856 71,862,799
Undistributed (distributions in excess of) investment
income--net ................................................. 13,218 7,069,548 --
Unrealized appreciation (depreciation) on:
Investments--net ............................................ 1,837,185 89,859,133 (5,141,184)
Foreign currency-- net ...................................... -- -- --
Accumulated realized gain (loss)--net ........................ 280,613 (8,004,268) 72,627
-------------- -------------- --------------
Net assets ................................................... $ 72,076,079 $1,505,050,269 $ 66,794,242
============== ============== ==============
INSTITUTIONAL SHARES
Net assets ................................................... $ 55,730,688 $1,411,502,906 $ 59,737,554
Shares of capital stock outstanding* ......................... 5,327,538 81,187,480 4,899,918
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ..... $ 10.46 $ 17.39 $ 12.19
OPEN SHARES
Net assets ................................................... $ 16,345,391 $ 93,547,363 $ 7,056,688
Shares of capital stock outstanding* ......................... 1,564,634 5,391,454 582,897
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ..... $ 10.45 $ 17.35 $ 12.11
</TABLE>
* $0.001 par value, 1,550,000,000 shares authorized for the Portfolios in
total.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
===============================================================================-
LAZARD LAZARD LAZARD LAZARD
GLOBAL INTERNATIONAL INTERNATIONAL EMERGING
EQUITY EQUITY SMALL CAP MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
===============================================================================
$ 22,343,438 $ 2,919,297,732 $180,464,560 $ 304,067,832
736 398 954 912,890
69 1,363,292 21,260 253,579
150,981 -- -- --
36,774 5,370,220 400,545 1,087,369
53,500 6,889,925 141,099 1,861,740
-- -- -- --
74,593 -- -- --
361 -- -- --
------------ --------------- ------------ --------------
22,660,452 2,932,921,567 181,028,418 308,183,410
------------ --------------- ------------ --------------
64,801 -- 227,185 914,612
-- 3,737,157 143,041 621,583
-- -- -- --
-- -- -- --
-- 1,801,595 118,332 254,749
2,688 2,688 2,688 2,688
972 9,650 613 2,133
57,695 778,041 111,228 163,747
------------ --------------- ------------ --------------
126,156 6,329,131 603,087 1,959,512
------------ --------------- ------------ --------------
22,534,296 2,926,592,436 180,425,331 306,223,898
============ =============== ============ ==============
19,604,527 2,444,989,945 180,796,031 436,700,968
(9,939) (20,141,111) (35,422) 220,015
2,954,371 491,268,352 (1,317,668) (76,988,747)
551 225,120 1,189 (1,081)
(15,214) 10,250,130 981,201 (53,707,257)
------------ --------------- ------------ --------------
$ 22,534,296 $ 2,926,592,436 $180,425,331 $ 306,223,898
============ =============== ============ ==============
$ 17,710,122 $ 2,879,288,851 $177,779,327 $ 298,032,599
1,347,859 189,079,168 15,590,528 42,950,229
$ 13.14 $ 15.23 $ 11.40 $ 6.94
$ 4,824,174 $ 47,303,585 $ 2,646,004 $ 8,191,299
366,528 3,106,682 232,449 1,176,048
$ 13.16 $ 15.23 $ 11.38 $ 6.97
LAZARD LAZARD
LAZARD LAZARD INTERNATIONAL STRATEGIC
BOND HIGH YIELD FIXED-INCOME YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------- --------------- --------------- ----------------
$116,527,612 $ 41,999,685 $116,898,630 $ 421,895,565
354 178 833 938
-- -- 9,532 30,367
1,679,503 232,838 658,694 5,573,624
1,017,297 1,026,997 2,142,915 7,640,647
2,761,514 -- 348,810 4,564,751
-- -- 911,677 3,055,778
-- -- -- --
-- 19,446 -- --
------------ ------------- ------------ --------------
121,986,280 43,279,144 120,971,091 442,761,670
------------ ------------- ------------ --------------
6,078,715 320,865 225,938 18,003,195
117,000 -- 47,062 625,201
48,847 5,107 5,692 829,815
-- -- 278,656 2,848,648
46,473 7,271 80,936 255,874
2,688 2,688 2,688 2,688
3,098 182 866 3,633
66,356 59,468 78,479 133,255
------------ ------------- ------------ --------------
6,363,177 395,581 720,317 22,702,309
------------ ------------- ------------ --------------
115,623,103 42,883,563 120,250,774 420,059,361
============ ============= ============ ==============
116,074,933 46,280,385 115,109,368 454,082,459
(180,455) (21,463) (282,389) 1,046,593
(79,062) (1,145,661) 4,381,448 (14,114,305)
-- -- 652,735 245,832
(192,313) (2,229,698) 389,612 (21,201,218)
------------ ------------- ------------ --------------
$115,623,103 $ 42,883,563 $120,250,774 $ 420,059,361
============ ============= ============ ==============
$100,396,638 $ 41,934,583 $115,500,090 $ 397,599,151
10,154,742 4,453,235 10,782,322 44,107,303
$ 9.89 $ 9.42 $ 10.71 $ 9.01
$ 15,226,465 $ 948,980 $ 4,750,684 $ 22,460,210
1,540,500 100,729 444,293 2,489,504
$ 9.88 $ 9.42 $ 10.69 $ 9.02
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD LAZARD
EQUITY MID CAP
PORTFOLIO PORTFOLIO
--------------- --------------
<S> <C> <C>
INVESTMENT INCOME
INCOME:
Interest ......................................................... $ 881,152 $ 239,771
Dividends ........................................................ 8,478,127 708,363
----------- ------------
Total investment income* .......................................... 9,359,279 948,134
----------- ------------
EXPENSES:
Management fees .................................................. 3,316,469 459,760
Administration fees .............................................. 133,439 57,261
Distribution fees (Open Shares) .................................. 219,862 22,660
Custodian fees ................................................... 105,896 57,369
Professional services ............................................ 40,466 47,058
Registration fees ................................................ 51,450 24,653
Shareholders' services ........................................... 69,307 56,271
Directors' fees and expenses ..................................... 13,838 13,902
Shareholders' reports ............................................ 14,740 11,537
Amortization of organizational expenses .......................... -- 38,639
Other ............................................................ 28,525 5,178
----------- ------------
Total expenses before fees waived and expenses reimbursed ......... 3,993,992 794,288
Management fees waived and expenses reimbursed ................... -- (119,681)
Administration fees waived ....................................... -- (3,750)
Expense reductions ............................................... (2,457) --
----------- ------------
Expenses--net ..................................................... 3,991,535 670,857
----------- ------------
INVESTMENT INCOME (LOSS)--NET ..................................... 5,367,744 277,277
----------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY--NET
Realized gain (loss) on:
Investments--net ................................................ 36,224,831 1,047,283
Foreign currency--net ........................................... -- --
Net change in unrealized appreciation (depreciation) on:
Investments--net ................................................ 24,446,325 551,315
Foreign currency--net ........................................... -- --
----------- ------------
Realized and unrealized gain (loss) on investments and
foreign currency--net ........................................... 60,671,156 1,598,598
----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ...................................................... $66,038,900 $ 1,875,875
=========== ============
* Net of foreign withholding taxes of: ........................... $ 59,398 $ 1,416
=========== ============
<CAPTION>
LAZARD LAZARD
SMALL CAP BANTAM VALUE
PORTFOLIO PORTFOLIO
----------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
INCOME:
Interest ......................................................... $ 6,014,341 $ 261,509
Dividends ........................................................ 14,048,859 238,085
-------------- ---------------
Total investment income* .......................................... 20,063,200 499,594
-------------- ---------------
EXPENSES:
Management fees .................................................. 11,726,934 575,206
Administration fees .............................................. 301,361 60,339
Distribution fees (Open Shares) .................................. 245,099 21,161
Custodian fees ................................................... 259,546 62,640
Professional services ............................................ 63,132 41,464
Registration fees ................................................ 112,104 27,724
Shareholders' services ........................................... 137,718 57,800
Directors' fees and expenses ..................................... 13,837 13,837
Shareholders' reports ............................................ 25,426 9,548
Amortization of organizational expenses .......................... -- 182
Other ............................................................ 115,438 6,243
-------------- ---------------
Total expenses before fees waived and expenses reimbursed ......... 13,000,595 876,144
Management fees waived and expenses reimbursed ................... -- (40,732)
Administration fees waived ....................................... -- --
Expense reductions ............................................... (19,180) (4,732)
-------------- ---------------
Expenses--net ..................................................... 12,981,415 830,680
-------------- ---------------
INVESTMENT INCOME (LOSS)--NET ..................................... 7,081,785 (331,086)
-------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY--NET
Realized gain (loss) on:
Investments--net ................................................ (8,015,535) 72,685
Foreign currency--net ........................................... -- --
Net change in unrealized appreciation (depreciation) on:
Investments--net ................................................ (200,026,407) (12,144,931)
Foreign currency--net ........................................... -- --
-------------- ---------------
Realized and unrealized gain (loss) on investments and
foreign currency--net ........................................... (208,041,942) (12,072,246)
-------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ...................................................... $ (200,960,157) $ (12,403,332)
============== ===============
* Net of foreign withholding taxes of: ........................... $ 24,052 $ --
============== ===============
</TABLE>
** Commenced operations on January 2, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
LAZARD LAZARD LAZARD LAZARD
GLOBAL INTERNATIONAL INTERNATIONAL EMERGING
EQUITY EQUITY SMALL CAP MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------- ---------------- --------------- -----------------
$ 39,546 $ 6,005,981 $ 509,630 $ 1,418,920
300,096 52,760,910 2,742,017 7,311,312
---------- -------------- ------------- ---------------
339,642 58,766,891 3,251,647 8,730,232
---------- -------------- ------------- ---------------
119,985 19,452,067 1,354,903 2,794,119
48,200 404,362 81,137 100,882
9,246 76,823 8,134 29,160
82,696 2,949,209 279,094 508,629
32,758 56,198 34,824 40,873
19,953 218,590 42,231 78,815
46,211 109,072 53,020 66,953
11,137 13,838 13,904 13,837
1,210 19,566 10,967 13,517
182 -- 3,214 4,678
2,076 147,548 19,552 6,804
---------- -------------- ------------- ---------------
373,654 23,447,273 1,900,980 3,658,267
(194,578) -- (16,356) (17,870)
-- -- -- --
-- (4,500) (1,365) (18,365)
---------- -------------- ------------- ---------------
179,076 23,442,773 1,883,259 3,622,032
---------- -------------- ------------- ---------------
160,566 35,324,118 1,368,388 5,108,200
---------- -------------- ------------- ---------------
878,761 145,444,421 13,308,772 (48,041,891)
(16,203) (9,178,019) (626,958) (757,497)
1,695,964 177,729,923 (4,961,310) (28,054,440)
(155) 440,345 7,701 44,820
---------- -------------- ------------- ---------------
2,558,367 314,436,670 7,728,205 (76,809,008)
---------- -------------- ------------- ---------------
$2,718,933 $ 349,760,788 $ 9,096,593 $ (71,700,808)
========== ============== ============= ===============
$ 18,473 $ 6,250,498 $ 433,482 $ 683,973
========== ============== ============= ===============
LAZARD LAZARD LAZARD
LAZARD HIGH INTERNATIONAL STRATEGIC
BOND YIELD FIXED-INCOME YIELD
PORTFOLIO PORTFOLIO** PORTFOLIO PORTFOLIO
--------------- ---------------- --------------- ----------------
$ 6,520,653 $ 2,800,635 $ 6,107,211 $ 34,318,958
-- 182,639 27,582 1,472,366
------------- --------------- ------------ -------------
6,520,653 2,983,274 6,134,793 35,791,324
------------- --------------- ------------ -------------
523,656 225,562 857,644 3,422,135
65,947 49,968 67,871 136,257
28,672 573 9,533 48,934
117,717 50,586 207,503 368,520
35,347 31,193 35,990 48,036
28,778 27,756 23,582 42,931
50,280 41,432 54,165 64,419
13,837 11,175 13,837 13,846
1,328 638 10,409 8,819
-- 44,902 -- --
7,839 1,733 8,517 27,752
------------- --------------- ------------ -------------
873,401 485,518 1,289,051 4,181,649
(11,309) (125,291) (21,538) --
-- (43,750) -- --
(10,339) -- (7,942) (11,525)
------------- --------------- ------------ -------------
851,753 316,477 1,259,571 4,170,124
------------- --------------- ------------ -------------
5,668,900 2,666,797 4,875,222 31,621,200
------------- --------------- ------------ -------------
1,363,055 (2,212,117) 1,433,652 (23,125,302)
-- -- (1,573,161) (6,897,177)
(1,212,836) (1,145,661) 8,149,616 (1,923,204)
-- -- 1,455,856 (1,117,869)
------------- --------------- ------------ -------------
150,219 (3,357,778) 9,465,963 (33,063,552)
------------- --------------- ------------ -------------
$ 5,819,119 $ (690,981) $ 14,341,185 $ (1,442,352)
============= =============== ============ =============
$ -- $ -- $ 31,059 $ --
============= =============== ============ =============
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD EQUITY
PORTFOLIO
------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment income (loss)--net .................................................... $ 5,367,744 $ 3,266,345
Realized gain (loss) on investments and foreign currency--net .................... 36,224,831 58,942,717
Change in unrealized appreciation (depreciation)--net ............................ 24,446,325 9,469,216
-------------- --------------
Net increase (decrease) in net assets resulting from operations ................... 66,038,900 71,678,278
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From investment income--net
Institutional Shares ............................................................ (4,333,091) (3,202,517)
Open Shares ..................................................................... (934,432) (70,473)
From realized gains--net
Institutional Shares ............................................................ (21,315,461) (53,939,994)
Open Shares ..................................................................... (6,695,483) (2,267,870)
In excess of investment income--net
Institutional Shares ............................................................ -- --
Open Shares ..................................................................... -- --
In excess of realized gains--net
Institutional Shares ............................................................ -- --
Open Shares ..................................................................... -- --
-------------- --------------
Net decrease in net assets resulting from distributions ........................... (33,278,467) (59,480,854)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from sales
Institutional Shares ............................................................ 87,372,723 90,619,277
Open Shares ..................................................................... 120,385,150 30,083,744
Net proceeds from reinvestment of distributions
Institutional Shares ............................................................ 24,696,654 54,569,340
Open Shares ..................................................................... 7,533,249 2,261,137
Cost of shares redeemed
Institutional Shares ............................................................ (111,996,715) (103,551,489)
Open Shares ..................................................................... (38,387,846) (8,398,580)
-------------- --------------
Net increase (decrease) in net assets from capital stock transactions ............. 89,603,215 65,583,429
-------------- --------------
Total increase (decrease) in net assets ........................................... 122,363,648 77,780,853
Net assets at beginning of period ................................................. 356,386,172 278,605,319
-------------- --------------
Net assets at end of period* ...................................................... $ 478,749,820 $ 356,386,172
============== ==============
SHARES ISSUED AND REPURCHASED:
INSTITUTIONAL SHARES:
Shares outstanding at beginning of period ........................................ 16,695,862 14,480,367
-------------- --------------
Shares sold ...................................................................... 4,095,584 4,234,980
Shares issued to shareholders from reinvestment of distributions ................. 1,165,225 2,733,379
Shares repurchased ............................................................... (5,351,578) (4,752,864)
-------------- --------------
Net increase (decrease) .......................................................... (90,769) 2,215,495
-------------- --------------
Shares outstanding at end of period .............................................. 16,605,093 16,695,862
============== ==============
OPEN SHARES:
Shares outstanding at beginning of period ........................................ 1,141,207 --
-------------- --------------
Shares sold ...................................................................... 5,735,707 1,390,648
Shares issued to shareholders from reinvestment of distributions ................. 355,884 113,384
Shares repurchased ............................................................... (1,826,235) (362,825)
-------------- --------------
Net increase (decrease) .......................................................... 4,265,356 1,141,207
-------------- --------------
Shares outstanding at end of period .............................................. 5,406,563 1,141,207
============== ==============
* Includes undistributed (distributions in excess of) investment income--net ..... $ 119,713 $ 19,492
============== ==============
</TABLE>
** Commenced operations on November 4, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
LAZARD MID CAP LAZARD SMALL CAP LAZARD BANTAM VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------- --------------------------------------- ---------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997** 1998 1997 1998 1997
- ----------------- ----------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
$277,277 $ 76,325 $ 7,081,785 $ 4,109,963 $ (331,086) $ (242,145)
1,047,283 (1,143) (8,015,535) 180,850,768 72,685 10,157,779
551,315 1,285,870 (200,026,407) 111,151,369 (12,144,931) 3,977,235
- -------------- ------------- -------------- -------------- --------------- ---------------
1,875,875 1,361,052 (200,960,157) 296,112,100 (12,403,332) 13,892,869
- -------------- ------------- -------------- -------------- --------------- ---------------
(238,083) (69,578) (682,951) (3,427,982) -- --
(51,279) (1,235) -- -- -- --
{593,806) -- (7,744,125) (188,272,138) (805,472) (9,019,744)
(171,721) -- (533,570) (5,550,731) (91,260) (964,614)
(18,334) -- -- -- -- --
(3,181) -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
- -------------- ------------- -------------- -------------- --------------- ---------------
(1,076,404) (70,813) (8,960,646) (197,250,851) (896,732) (9,984,358)
- -------------- ------------- -------------- -------------- --------------- ---------------
20,622,564 48,808,885 726,841,164 580,429,963 15,742,416 31,919,201
20,111,962 2,003,215 131,639,336 52,536,821 6,621,216 10,151,848
781,532 64,808 10,219,065 179,673,475 802,893 8,989,030
211,355 809 521,384 5,399,865 74,738 900,973
(16,067,323) (346,699) (577,391,571) (399,682,887) (15,048,400) (10,133,057)
(5,968,971) (235,768) (68,030,676) (7,451,540) (6,418,518) (1,965,892)
- -------------- ------------- -------------- -------------- --------------- ---------------
19,691,119 50,295,250 223,798,702 410,905,697 1,774,345 39,862,103
- -------------- ------------- -------------- -------------- --------------- ---------------
20,490,590 51,585,489 13,877,899 509,766,946 (11,525,719) 43,770,614
51,585,489 -- 1,491,172,370 981,405,424 78,319,961 34,549,347
- -------------- ------------- -------------- -------------- --------------- ---------------
$ 72,076,079 $ 51,585,489 $1,505,050,269 $1,491,172,370 $ 66,794,242 $ 78,319,961
============== ============= ============== ============== =============== ===============
4,851,388 -- 72,186,366 53,230,190 4,887,256 2,746,889
- -------------- ------------- -------------- -------------- --------------- ---------------
1,986,263 4,879,588 39,866,121 28,061,127 1,165,000 2,177,512
79,580 6,442 544,378 9,286,832 64,129 647,359
(1,589,693) (34,642) (31,409,385) (18,391,783) (1,216,467) (684,504)
- -------------- ------------- -------------- -------------- --------------- ---------------
476,150 4,851,388 9,001,114 18,956,176 12,662 2,140,367
- -------------- ------------- -------------- -------------- --------------- ---------------
5,327,538 4,851,388 81,187,480 72,186,366 4,899,918 4,887,256
============== ============= ============== ============== =============== ===============
176,048 -- 2,302,364 -- 585,520 --
- -------------- ------------- -------------- -------------- --------------- ---------------
1,988,746 199,579 6,772,629 2,362,406 484,655 642,453
21,545 80 28,259 277,559 6,106 64,441
(621,705) (23,611) (3,711,798) (337,601) (493,384) (121,374)
- -------------- ------------- -------------- -------------- --------------- ---------------
1,388,586 176,048 3,089,090 2,302,364 (2,623) 585,520
- -------------- ------------- -------------- -------------- --------------- ---------------
1,564,634 176,048 5,391,454 2,302,364 582,897 585,520
============== ============= ============== ============== =============== ===============
$ 13,218 $ 12,085 $ 7,069,548 $ 681,981 $ -- $ --
============== ============= ============== ============== =============== ===============
</TABLE>
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD GLOBAL EQUITY
PORTFOLIO
---------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment income (loss)--net .................................................... $ 160,566 $ 115,429
Realized gain (loss) on investments and foreign currency--net .................... 862,558 856,254
Change in unrealized appreciation (depreciation)--net ............................ 1,695,809 652,357
------------ ------------
Net increase (decrease) in net assets resulting from operations ...................
2,718,933 1,624,040
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From investment income--net
Institutional Shares ............................................................ (109,536) (105,741)
Open Shares ..................................................................... (14,500) (13,063)
From realized gains--net
Institutional Shares ............................................................ (821,122) (947,173)
Open Shares ..................................................................... (225,207) (128,664)
In excess of investment income--net
Institutional Shares ............................................................ -- (6,344)
Open Shares ..................................................................... -- (830)
In excess of realized gains--net
Institutional Shares ............................................................ (10,308) --
Open Shares ..................................................................... (3,101) --
------------ ------------
Net decrease in net assets resulting from distributions ........................... (1,183,774) (1,201,815)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from sales
Institutional Shares ............................................................ 6,063,563 2,036,594
Open Shares ..................................................................... 3,126,095 2,834,230
Net proceeds from reinvestment of distributions
Institutional Shares ............................................................ 933,169 1,020,486
Open Shares ..................................................................... 204,554 141,752
Cost of shares redeemed
Institutional Shares ............................................................ (1,037,949) (2,916,057)
Open Shares ..................................................................... (939,052) (674,496)
------------ ------------
Net increase (decrease) in net assets from capital stock transactions ............. 8,350,380 2,442,509
------------ ------------
Total increase in net assets ...................................................... 9,885,539 2,864,734
Net assets at beginning of year ................................................... 12,648,757 9,784,023
------------ ------------
Net assets at end of year* ........................................................ $ 22,534,296 $ 12,648,757
============ ============
SHARES ISSUED AND REPURCHASED:
INSTITUTIONAL SHARES:
Shares outstanding at beginning of year .......................................... 870,086 852,071
------------ ------------
Shares sold ...................................................................... 487,546 173,237
Shares issued to shareholders from reinvestment of distributions ................. 72,432 86,767
Shares repurchased ............................................................... (82,205) (241,989)
------------ ------------
Net increase (decrease) .......................................................... 477,773 18,015
------------ ------------
Shares outstanding at end of year ................................................ 1,347,859 870,086
============ ============
OPEN SHARES:
Shares outstanding at beginning of period ........................................ 192,168 --
------------ ------------
Shares sold ...................................................................... 233,011 233,628
Shares issued to shareholders from reinvestment of distributions ................. 15,814 11,953
Shares repurchased ............................................................... (74,465) (53,413)
------------ ------------
Net increase (decrease) .......................................................... 174,360 192,168
------------ ------------
Shares outstanding at end of period year ......................................... 366,528 192,168
============ ============
* Includes undistributed (distributions in excess of) investment Income--net ..... $ (9,939) $ (30,476)
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
LAZARD INTERNATIONAL EQUITY LAZARD INTERNATIONAL SMALL CAP LAZARD EMERGING MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------- ----------------------------------- -------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997 1998 1997
- ------------------- ------------------- ---------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 35,324,118 $ 23,690,976 $ 1,368,388 $ 1,030,350 $ 5,108,200 $ 3,029,620
136,266,402 135,333,682 12,681,814 4,797,715 (48,799,388) 9,698,759
178,170,268 57,416,855 (4,953,609) (6,500,094) (28,009,620) (56,098,361)
--------------- --------------- ------------- ------------- -------------- --------------
349,760,788 216,441,513 9,096,593 (672,029) (71,700,808) (43,369,982)
--------------- --------------- ------------- ------------- -------------- --------------
(25,534,748) (23,615,628) (752,862) (779,553) (4,058,419) (2,195,662)
(250,536) (75,348) (5,976) (2,605) (121,120) (50,943)
(144,495,716) (132,849,456) (15,715,143) (2,420,014) -- (12,058,986)
(2,219,617) (407,971) (221,751) (20,012) -- (403,361)
-- (19,997,743) -- -- -- --
-- (49,197) -- -- -- --
-- -- -- -- -- (6,127,590)
-- -- -- -- -- (163,296)
--------------- --------------- ------------- ------------- -------------- --------------
(172,500,617) (176,995,343) (16,695,732) (3,222,184) (4,179,539) (20,999,838)
--------------- --------------- ------------- ------------- -------------- --------------
1,265,219,569 540,108,125 105,522,613 33,547,354 223,793,607 224,014,461
140,707,664 14,105,912 7,946,853 3,051,529 42,143,524 17,560,383
168,928,556 165,563,968 15,939,095 2,967,819 6,418,310 16,809,709
2,243,315 496,902 221,922 21,902 39,672 582,273
(829,574,309) (461,972,317) (77,988,431) (17,963,195) (95,979,356) (88,595,351)
(108,710,913) (3,403,545) (7,184,846) (1,136,469) (38,420,599) (7,220,528)
--------------- --------------- ------------- ------------- -------------- --------------
638,813,882 254,899,045 44,457,206 20,488,940 137,995,158 163,150,947
--------------- --------------- ------------- ------------- -------------- --------------
816,074,053 294,345,215 36,858,067 16,594,727 62,114,811 98,781,127
2,110,518,383 1,816,173,168 143,567,264 126,972,537 244,109,087 145,327,960
--------------- --------------- ------------- ------------- -------------- --------------
$ 2,926,592,436 $ 2,110,518,383 $ 180,425,331 $ 143,567,264 $ 306,223,898 $ 244,109,087
=============== =============== ============= ============= ============== ==============
150,349,803 133,302,794 12,122,940 10,640,540 25,697,597 12,969,409
--------------- --------------- ------------- ------------- -------------- --------------
81,842,532 36,635,849 7,901,725 2,689,836 28,909,650 18,858,547
11,354,528 11,731,335 1,379,036 253,037 845,770 1,776,539
(54,467,695) (31,320,175) (5,813,173) (1,460,473) (12,502,788) (7,906,898)
--------------- --------------- ------------- ------------- -------------- --------------
38,729,365 17,047,009 3,467,588 1,482,400 17,252,632 12,728,188
--------------- --------------- ------------- ------------- -------------- --------------
189,079,168 150,349,803 15,590,528 12,122,940 42,950,229 25,697,597
=============== =============== ============= ============= ============== ==============
773,878 -- 160,229 -- 844,049 --
--------------- --------------- ------------- ------------- -------------- --------------
9,132,813 967,597 571,256 251,402 5,261,508 1,447,155
150,724 35,205 19,069 1,866 7,814 62,861
(6,950,733) (228,924) (518,105) (93,039) (4,937,323) (665,967)
--------------- --------------- ------------- ------------- -------------- --------------
2,332,804 773,878 72,220 160,229 331,999 844,049
--------------- --------------- ------------- ------------- -------------- --------------
3,106,682 773,878 232,449 160,229 1,176,048 844,049
=============== =============== ============= ============= ============== ==============
$ (20,141,111) $ (21,193,548) $ (35,422) $ (18,014) $ 220,015 $ 48,851
=============== =============== ============= ============= ============== ==============
</TABLE>
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD BOND
PORTFOLIO
------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31
1998 1997
------------------ ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment income--net .......................................................... $ 5,668,900 $ 4,977,490
Realized gain (loss) on investments and foreign currency--net ................... 1,363,055 1,191,253
Change in unrealized appreciation (depreciation)--net ........................... (1,212,836) 976,970
------------- -------------
Net increase (decrease) in net assets resulting from operations .................. 5,819,119 7,145,713
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From investment income--net
Institutional Shares ........................................................... (5,116,501) (4,784,961)
Open Shares .................................................................... (589,199) (218,630)
From realized gains--net
Institutional Shares ........................................................... (1,325,439) (622,871)
Open Shares .................................................................... (200,980) (47,549)
In excess of investment income--net
Institutional Shares ........................................................... (70) (103,346)
Open Shares .................................................................... (9) (6,061)
In excess of realized gains--net
Institutional Shares ........................................................... (150,643) --
Open Shares .................................................................... (18,525) --
From Capital--Net
Institutional Shares ........................................................... -- --
Open Shares .................................................................... -- --
-------------- -------------
Net decrease in net assets resulting from distributions .......................... (7,401,366) (5,783,418)
-------------- -------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from sales
Institutional Shares ........................................................... 30,642,538 30,149,655
Open Shares .................................................................... 10,295,197 7,728,016
Net proceeds from reinvestment of distributions
Institutional Shares ........................................................... 6,003,999 5,018,654
Open Shares .................................................................... 714,757 248,171
Cost of shares redeemed
Institutional Shares ........................................................... (27,312,623) (13,915,433)
Open Shares .................................................................... (2,849,142) (786,886)
-------------- -------------
Net increase (decrease) in net assets from capital stock transactions ............ 17,494,726 28,442,177
-------------- -------------
Total increase in net assets ..................................................... 15,912,479 29,804,472
Net assets at beginning of year .................................................. 99,710,624 69,906,152
-------------- -------------
Net assets at end of year* ....................................................... $115,623,103 $ 99,710,624
============== =============
SHARES ISSUED AND REPURCHASED:
INSTITUTIONAL SHARES:
Shares outstanding at beginning of year ......................................... 9,217,915 7,073,035
-------------- -------------
Shares sold ..................................................................... 3,060,161 3,039,325
Shares issued to shareholders from reinvestment of distributions ................ 599,942 503,472
Shares repurchased .............................................................. (2,723,276) (1,397,917)
-------------- -------------
Net increase .................................................................... 936,827 2,144,880
-------------- -------------
Shares outstanding at end of year ............................................... 10,154,742 9,217,915
============== =============
OPEN SHARES:
Shares outstanding at beginning of period ....................................... 726,613 --
-------------- -------------
Shares sold ..................................................................... 1,025,899 779,924
Shares issued to shareholders from reinvestment of distributions ................ 71,508 24,775
Shares repurchased .............................................................. (283,520) (78,086)
-------------- -------------
Net increase .................................................................... 813,887 726,613
-------------- -------------
Shares outstanding at end of period ............................................. 1,540,500 726,613
============== =============
* Includes undistributed (distributions in excess of) investment Income--net ..... $ (180,445) $ (136,318)
============== =============
</TABLE>
** Commenced operations on January 2, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
LAZARD INTERNATIONAL
LAZARD HIGH YIELD FIXED-INCOME LAZARD STRATEGIC YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------- ------------------------------- -------------------------------------
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998** 1998 1997 1998 1997
- ------------------- ---------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
$ 2,666,797 $ 4,875,222 $ 5,281,736 $ 31,621,200 $ 24,177,268
(2,212,117) (139,509) (4,062,403) (30,022,479) 4,985,365
(1,145,661) 9,605,472 (6,930,080) (3,041,073) (15,784,090)
------------- ------------- ------------- --------------- ---------------
(690,981) 14,341,185 (5,710,747) (1,442,352) 13,378,543
------------- ------------- ------------- --------------- ---------------
(2,646,121) (1,954,550) (856,065) (19,465,202) (24,262,314)
(20,676) (62,023) (4,392) (791,250) (625,698)
-- -- (162,035) -- (1,819,161)
-- -- -- -- (77,090)
(78,525) -- (561,048) (794,218) (2,563,969)
(705) -- (8,622) (35,597) (73,087)
-- -- (1,193,276) -- --
-- -- (18,323) -- --
-- -- (2,677,113) (13,228,346) --
-- -- (41,142) (592,897) --
------------- ------------- ------------- --------------- ---------------
(2,746,027) (2,016,573) (5,522,016) (34,907,510) (29,421,319)
------------- ------------- ------------- --------------- ---------------
52,193,575 30,541,436 62,994,956 476,144,319 420,086,629
984,032 2,380,537 2,930,820 154,324,729 18,214,057
2,664,900 2,276,718 4,103,522 21,895,133 22,349,566
21,381 72,083 57,737 1,174,776 692,322
(9,518,672) (39,431,530) (34,229,843) (465,223,430) (226,654,290)
(24,645) (870,320) (97,029) (146,658,525) (2,976,085)
------------- ------------- ------------- --------------- ---------------
46,320,571 (5,031,076) 35,760,163 41,657,002 231,712,199
------------- ------------- ------------- --------------- ---------------
42,883,563 7,293,536 24,527,400 5,307,140 215,669,423
-- 112,957,238 88,429,838 414,752,221 199,082,798
------------- ------------- ------------- --------------- ---------------
$ 42,883,563 $ 120,250,774 $ 112,957,238 $ 420,059,361 $ 414,752,221
============== ============= ============= =============== ===============
-- 11,439,832 8,201,037 41,370,616 19,892,579
-------------- ------------- ------------- --------------- ---------------
5,125,438 3,069,726 6,263,605 50,232,451 41,987,849
270,082 232,609 410,505 2,318,882 2,253,081
(942,285) (3,959,845) (3,435,315) (49,814,646) (22,762,893)
-------------- ------------- ------------- --------------- ---------------
4,453,235 (657,510) 3,238,795 2,736,687 21,478,037
-------------- ------------- ------------- --------------- ---------------
4,453,235 10,782,322 11,439,832 44,107,303 41,370,616
============== ============= ============= =============== ===============
-- 287,789 -- 1,584,672 --
-------------- ------------- ------------- --------------- ---------------
101,097 239,066 291,721 16,328,778 1,813,716
1,997 7,344 5,813 124,369 70,193
(2,365) (89,906) (9,745) (15,548,315) (299,237)
-------------- ------------- ------------- --------------- ---------------
100,729 156,504 287,789 904,832 1,584,672
-------------- ------------- ------------- --------------- ---------------
100,729 444,293 287,789 2,489,504 1,584,672
============== ============= ============= =============== ===============
$ (21,463) $ (282,389) $ (1,450,070) $ 1,046,593 $ (574,424)
============== ============= ============= =============== ===============
</TABLE>
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD EQUITY PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------------------------
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
INSTITUTIONAL SHARES ------------ ------------ ------------ ------------ -----------
<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
12/31/98 12/31/97
OPEN SHARES ------------ ---------------
<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 gain ............................... (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%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD MID CAP PORTFOLIO
YEAR FOR THE PERIOD
ENDED 11/4/97* TO
12/31/98 12/31/97
INSTITUTIONAL SHARES ------------ ---------------
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%
YEAR FOR THE PERIOD
ENDED 11/4/97* TO
12/31/98 12/31/97
OPEN SHARES ------------ ---------------
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%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD SMALL CAP PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------------------------
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
INSTITUTIONAL SHARES --------------- --------------- ------------ ------------ -------------
<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
12/31/98 12/31/97
OPEN SHARES ------------ ---------------
<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%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD BANTAM VALUE PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
--------------------------- 3/1/96* TO
12/31/98 12/31/97 12/31/96
INSTITUTIONAL SHARES ------------ ------------ ---------------
<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
12/31/98 12/31/97
OPEN SHARES ------------- ---------------
<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 gain ............................... (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)%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
83
<PAGE>
================================================================================
THE LAZARD FUNDS, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD GLOBAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
--------------------------- 1/4/96* TO
12/31/98 12/31/97 12/31/96
INSTITUTIONAL SHARES ------------ ------------ ---------------
<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
12/31/98 12/31/97
OPEN SHARES ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period ............. $ 11.92 $ 11.31
------- -------
Income (loss) from investment operations:
Net investment income ........................... 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%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------------------------------
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
INSTITUTIONAL SHARES --------------- --------------- --------------- --------------- -------------
<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
12/31/98 12/31/97
OPEN SHARES ------------ ---------------
<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%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------------------------
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
INSTITUTIONAL SHARES ------------ ------------ ------------ ------------ -------------
<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)%
RATIOS AND SUPPLEMENTAL DATA:
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 2/13/97* TO
12/31/98 12/31/97
OPEN SHARES ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period ............. $ 11.69 $ 12.32
------- --------
Income (loss) from investment operations:
Net investment income ........................... 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 gain ............................... (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%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
------------------------------------------------------ 7/15/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
INSTITUTIONAL SHARES ------------ -------------- ------------ ------------- ---------------
<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
12/31/98 12/31/97
OPEN SHARES ------------- ---------------
<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%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------------------------
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
INSTITUTIONAL SHARES ------------ ------------ ------------ ------------ -------------
<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
12/31/98 12/31/97
OPEN SHARES ------------ ---------------
<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%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD HIGH YIELD PORTFOLIO
<TABLE>
<CAPTION>
FOR THE PERIOD
1/2/98* TO
12/31/98
INSTITUTIONAL SHARES ---------------
<S> <C>
Net asset value, beginning of period ............. $ 10.00
-------
Income (loss) from investment operations:
Net investment income ........................... 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%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
2/24/98* TO
12/31/98
OPEN SHARES ---------------
<S> <C>
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.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------------------------
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
INSTITUTIONAL SHARES ------------ -------------- ------------ ------------ -----------
<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 FOR THE PERIOD
ENDED 1/8/97* TO
12/31/98 12/31/97
OPEN SHARES ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period ............. $ 9.63 $ 10.64
------- --------
Income (loss) from investment operations:
Net investment income ........................... 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 gain ............................... -- (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%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------------------------
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
INSTITUTIONAL SHARES ------------ ------------ ------------ ------------ -------------
<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
12/31/98 12/31/97
OPEN SHARES ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period ............. $ 9.66 $ 10.08
------- -------
Income (loss) from investment operations:
Net investment income ........................... 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%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
* Commencement of operations
(a) Total Returns are historical and assume changes in share price,
reinvestments of 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Lazard Funds, Inc. (the "Fund") was incorporated in Maryland on May 17,
1991 and is registered under the Investment Company Act of 1940 (the "Act"), as
amended, as a no-load, open-end management investment company. The Fund is
comprised of twelve portfolios (each referred to as a "Portfolio"), as follows:
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, Lazard Bond Portfolio, Lazard High Yield
Portfolio, Lazard International Fixed-Income Portfolio and Lazard Strategic
Yield Portfolio. Effective November 1, 1996, the Board of Directors of the Fund
approved the offering of two different classes of shares for the
Portfolios--Institutional Shares and Retail ("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 of
shares. The Equity Portfolio is operated as a "diversified" fund as defined in
the Act. The remaining Portfolios are "non-diversified".
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies:
(A) VALUATION OF INVESTMENTS--Market values for equity securities listed on the
New York Stock Exchange ("NYSE"), other U.S. exchanges or NASDAQ are based on
the last quoted sales prices on the principal exchange on which the security is
traded as of the close of regular trading on the NYSE (normally 4:00 p.m.
Eastern Time) on each valuation date; securities not traded on the valuation
date are valued at the closing bid price. Any securities not listed, for which
current over-the-counter market quotations or bids are readily available, are
valued at the last quoted bid price, or, if available, the mean of two such
prices. Securities listed on foreign exchanges are valued at the last quoted
sales price; securities not traded on the valuation date are valued at the
closing bid price.
Bonds and other fixed-income securities are valued on the basis of prices
provided by a pricing service which are based primarily on institutional size
trading in similar groups of securities, or using brokers' quotations.
Mortgage-backed securities issued by certain government-related organizations
are valued using pricing services or brokers' quotations based on a matrix
system which considers such factors as other security prices, yields and
maturities. Debt securities maturing in sixty days or less are valued at
amortized cost except where to do so would not accurately reflect their fair
value, in which case such securities are valued at fair value as determined in
good faith in accordance with procedures adopted by the Board of Directors.
Options on stocks 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. Eastern Time). Securities for which market quotations are not readily
available are valued at fair value as determined in good faith using methods
approved by the Board of Directors.
(B) PORTFOLIO SECURITY TRANSACTIONS AND INVESTMENT INCOME--Portfolio security
transactions are accounted for on the trade date. Realized gains and losses on
sales of investments are recorded on a specific identification basis and
dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. The Portfolios amortize premiums and accrete discounts on
fixed-income securities using the effective yield method.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(C) FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS--The
accounting records of the Portfolios are maintained in U.S. dollars. Portfolio
securities and other assets and liabilities denominated in a foreign currency
are translated into U.S. dollars at the prevailing rates of exchange at period
end. Purchases and sales of securities, income receipts and expense payments
are translated into U.S. dollars at the prevailing exchange rate on the
respective dates of transactions.
The Portfolios do not isolate the portion of operations resulting from changes
in foreign exchange rates on investments from the fluctuations arising from
changes in their market prices. Such fluctuations are included in net realized
and unrealized gain or loss from investments. Net realized exchange gains
(losses) from foreign currency transactions represent net foreign exchange
gains (losses) from forward foreign currency contracts, disposition of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, and the difference between the amount of net
investment income recorded on the Portfolio's accounting records and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities, other than investments in securities, as a result of changes in
exchange rates.
A forward foreign currency contract is an agreement between two parties to buy
or sell currency at a set price on a future date. Certain Portfolios may enter
into forward foreign currency contracts for risk management. Risk management
includes hedging strategies which serve to reduce a Portfolio's exposure to
foreign currency fluctuations. Such exposure may exist during the period that a
foreign denominated investment is held, or during the period between the trade
date and settlement date of an investment which is purchased or sold. Upon
entering into these contracts risks may arise from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of the foreign currency relative to the U.S. dollar.
The U.S. dollar value of forward foreign currency contracts is determined using
forward exchange rates provided by a quotation service. Daily fluctuations in
the value of such contracts are recorded as unrealized gains or losses. When
the contract is closed, the Portfolio records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. Such gains and losses are disclosed in the realized or
unrealized gain (loss) on foreign currency in the accompanying Statements of
Operations.
(D) FEDERAL INCOME TAXES--The Fund's policy is to continue to have each
Portfolio qualify as a regulated investment company under the Internal Revenue
Code and to distribute all of its taxable income, including any realized net
capital gains to shareholders. Therefore, no federal income tax provision is
required.
At December 31, 1998, the following Portfolios had available for federal income
tax purposes unused realized capital losses which can be used to offset future
realized capital gains. The capital loss carryforwards will expire on December
31, 2006, as follows:
PORTFOLIO AMOUNT
- ------------------ -------------
Small Cap $6,880,893
Emerging Markets 50,767,177
High Yield 1,150,441
Strategic Yield 14,900,897
Under current tax law, certain capital and net foreign currency losses realized
after October 31 within the taxable year may be deferred and treated as
occurring on the first
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
day of the following tax year. For the tax year ended December 31, 1998, the
following Portfolios elected to defer net capital and currency losses arising
between November 1, 1998 and December 31, 1998 as follows:
PORTFOLIO AMOUNT
- ------------------------- ------------
Global Equity $ 9,036
International Equity 2,186,212
International Small Cap 77,804
Emerging Markets 2,332,238
Bond 147,945
High Yield 916,890
Strategic Yield 6,526,143
(E) DIVIDENDS AND DISTRIBUTIONS--The Fund intends to declare dividends from net
investment income daily on shares of Bond Portfolio, High Yield Portfolio,
International Fixed-Income Portfolio, and Strategic Yield Portfolio and to pay
such dividends monthly. Dividends from net investment income on shares of
Equity Portfolio will, beginning in 1999, be declared and paid annually, as is
already the policy on shares of Mid Cap Portfolio, Small Cap Portfolio, Bantam
Value Portfolio, Global Equity Portfolio, International Equity Portfolio,
International Small Cap Portfolio and Emerging Markets Portfolio. During any
particular year, net realized gains from investment transactions in excess of
available capital loss carryforwards would be taxable to the Portfolio if not
distributed. The Portfolios intend to declare and distribute these amounts
annually to shareholders; however, to avoid taxation, a second distribution may
be required.
Income dividends and capital gain distributions are determined in accordance
with federal income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments of foreign
currency transactions. Book and tax differ-ences relating to shareholder
distributions will result in reclassifications and may affect the allocation
between investment income--net, realized gains--net, and paid in capital.
As a result of these book-tax differences, the Portfolios made the following
reclassifications to the capital accounts for the period ended December 31,
1998:
INCREASE (DECREASE)
------------------------------------------------
UNDISTRIBUTED ACCUMULATED
INVESTMENT REALIZED
PAID IN INCOME GAIN
PORTFOLIO CAPITAL (LOSS)-NET (LOSS)-NET
- ---------------------- ---------------- --------------- ------------
Equity $ (3,896) $ -- $ 3,896
Mid Cap (34,733) 34,733 --
Small Cap -- (11,267) 11,267
Bantam Value (331,086) 331,086 --
Global Equity -- (15,993) 15,993
International Equity -- (8,486,397) 8,486,397
International
Small Cap -- (626,958) 626,958
Emerging Markets -- (757,497) 757,497
Bond -- (7,258) 7,258
High Yield (40,186) 57,767 (17,581)
International Fixed-
Income 862,859 (1,690,968) 828,109
Strategic Yield (13,821,243) 4,907,327 8,913,916
(F) ORGANIZATIONAL EXPENSES--Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight line basis
over a five-year period from the date of commencement of operations of each
Portfolio, with the exception of the initial registration costs for Mid Cap
Portfolio and High Yield Portfolio, which are being amortized over a one year
period. In the event that any of the initial shares of any of the Portfolios are
redeemed during such period, the appropriate Portfolio will be reimbursed by
such holder for any unamortized organizational expenses in the same proportion
as the number of shares redeemed bears to the number of initial shares held at
the time of redemption.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(G) ALLOCATION OF EXPENSES--Expenses not directly chargeable to a specific
Portfolio are allocated primarily on the basis of relative net assets. The
Portfolios will accrue distribution fees and shareholders' services fees to the
respective class. Each Portfolio's income, expenses (other than the fees
mentioned above) and realized and unrealized gains and losses are allocated
proportionally each day between the classes based upon the relative net assets
of each class.
(H) EXPENSE REDUCTIONS--Portfolios leaving excess cash in demand deposit
accounts may receive credits which are available to offset custody expenses.
The Statements of Operations report gross custody expenses, and report the
amount of such credits separately as an expense reduction.
(I) STRUCTURED INVESTMENTS--Certain Portfolios may invest in structured
investments whose values are linked either directly or inversely to changes in
foreign currencies, interest rates, commodities, indices, or other underlying
instruments. A Portfolio uses these securities to increase or decrease its
exposure to different underlying instruments and to gain exposure to markets
that might be difficult to invest in through conventional securities.
Structured investments may be more volatile than their underlying instruments,
but any loss is limited to the amount of the original investment.
(J) DELAYED DELIVERY COMMITMENTS--Each Portfolio may purchase or sell
securities on a when-issued or forward commitment basis. Payment and delivery
may take place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. Collateral
consisting of liquid securities or cash is maintained at the custodian in a
segregated account in an amount at least equal to these commitments.
(K) ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires the Fund to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expense during the reporting period. Actual results could differ from those
estimates.
3. INVESTMENT MANAGEMENT, ADMINISTRATIVE AND DISTRIBUTION AGREEMENTS
The Fund has entered into investment management agreements (the "Management
Agreements") with Lazard Asset Management (the "Manager"), a division of Lazard
Freres & Co. LLC, on behalf of each Portfolio. Pursuant to the Management
Agreements, the Manager will regularly provide the Portfolios with investment
research, advice and supervision and furnish continuously an investment program
for each Portfolio consistent with its investment objectives and policies,
including the purchase, retention and disposition of securities. Each of the
Portfolios pays the Manager an investment management fee at the annual rate set
forth below as a percentage of the average daily net assets of the relevant
Portfolio: Equity Portfolio, 0.75%; Mid Cap Portfolio, 0.75%; Small Cap
Portfolio, 0.75%; Bantam Value Portfolio, 0.75%; Global Equity Portfolio,
0.75%; International Equity Portfolio, 0.75%; International Small Cap
Portfolio, 0.75%; Emerging Markets Portfolio, 1.00%; Bond Portfolio, 0.50%;
High Yield Portfolio, 0.75%; International Fixed-Income Portfolio, 0.75%; and
Strategic Yield Portfolio, 0.75%. The investment management fees are accrued
daily and payable monthly.
The Manager has voluntarily agreed to reduce its fees and, if necessary,
reimburse the following Portfolios if annualized operating expenses exceed the
following percentages of average daily net assets for the respective shares:
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
INSTITUTIONAL OPEN
SHARES SHARES
ANNUAL ANNUAL
OPERATING OPERATING
PORTFOLIO EXPENSES EXPENSES
- ---------------------------- -------------- ----------
Mid Cap 1.05% 1.35%
Bantam Value 1.05 1.35
Global Equity 1.05 1.35
International Equity -- 1.25
International Small Cap -- 1.43
Emerging Markets -- 1.60
Bond 0.80 1.10
High Yield 1.05 1.35
International Fixed-Income -- 1.35
Strategic Yield -- 1.39
For the period ended December 31, 1998, the Manager did not impose all or part
of its management fee, resulting in waivers of: $92,050 for the Mid Cap
Portfolio--Institutional, $27,631 for the Mid Cap Portfolio--Open, $19,868 for
Bantam Value Portfolio--Institutional, $20,864 for Bantam Value Portfolio--Open,
$92,237 for Global Equity Portfolio--Institutional, $27,748 for Global Equity
Portfolio--Open, $16,356 for International Small Cap Portfolio--Open, $17,870
for Emerging Markets Portfolio--Open, $11,309 for Bond Portfolio--Open,
$106,214 for High Yield Portfolio--Institutional, $1,725 for High Yield
Portfolio--Open and $21,538 for International Fixed-Income Portfolio--Open. For
the same period, the Manager has agreed to reimburse expenses amounting to
$46,680 for Global Equity Portfolio--Institutional, $27,913 for Global Equity
Portfolio--Open, and $17,352 for High Yield Portfolio--Open.
The Fund has engaged State Street Bank and Trust Company ("State Street") to
provide certain administrative services. Each Portfolio bears the cost of such
expenses at the annual rate of $37,500 plus $7,500 per additional class, and
0.02% of average assets up to $1 billion plus 0.01% of average assets over $1
billion. State Street has agreed to waive the $37,500 fee for the Mid Cap
Portfolio and the High Yield Portfolio for one year or until each Portfolio
reaches net assets of $50 million, if sooner than one year.
The Fund has a distribution agreement with Lazard Freres & Co. LLC ( the
"Distributor"). The Distributor acts as distributor for shares of each of the
Portfolios and bears the cost of printing and mailing prospectuses to potential
investors and of any advertising expenses incurred in connection with
distribution of shares.
The Distributor provides the Open Shares of each Portfolio with distribution
services pursuant to a separate Distribution Plan ( the "Plan") in accordance
with Rule 12b-1 under the Act. Under the Plan, the Distributor is entitled to
distribution fees from the Open Shares. The distribution fee is an asset-based
fee to support distribution efforts and/or servicing of accounts. The Open
Shares will pay a monthly distribution fee at an annual rate of 0.25% of the
average daily net assets of the Portfolio's Open Shares for such services under
the 12b-1 plan adopted by the Fund. The distribution fee may be retained by the
Distributor if an Open Shares shareholder invests directly through the
Distributor. Usually the fees are paid to external organizations such as 401(k)
alliance sponsors, discount brokers and bank trust departments who distribute
the Fund to the public.
Certain Directors of the Fund are Managing Directors of the Manager. The Fund
pays each director who is not an officer of the Manager or an interested
Director its allocable share of a fixed fee of $20,000 per year, plus $1,000
per meeting attended for the Fund and Lazard Retirement Series, Inc., a related
party, and reimburses them for travel and out of pocket expenses.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. SECURITIES TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales of portfolio securities (excluding short-term securities),
for the period ended December 31, 1998 were as follows:
PORTFOLIO PURCHASES SALES
- --------- --------- -----
Equity $ 376,717,969 $ 322,976,016
Mid Cap 71,077,865 49,548,865
Small Cap 920,425,918 666,023,146
Bantam Value 68,145,410 70,382,975
Global Equity 14,478,497 7,475,625
International
Equity 1,476,601,503 1,016,242,686
International
Small Cap 118,808,775 95,428,959
Emerging Markets 225,355,228 91,141,160
Bond (1) 359,513,537 347,301,971
High Yield 155,743,204 111,954,902
International
Fixed-Income (2) 196,053,754 206,224,048
Strategic Yield (3) 1,174,069,468 1,103,003,518
(1) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $297,283,221
AND $290,790,971, RESPECTIVELY.
(2) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $18,533,747
AND $19,557,196, RESPECTIVELY.
(3) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $479,341,480
AND $412,931,475, RESPECTIVELY.
For the year ended December 31, 1998, Equity Portfolio, Mid Cap Portfolio,
Bantam Value Portfolio, Small Cap Portfolio, Global Equity Portfolio, and
Emerging Markets Portfolio paid brokerage commissions of $51,625, $5,270,
$3,635, $61,090, $2,734 and $812, respectively, to Lazard Freres & Co. LLC for
portfolio transactions executed on behalf of the Portfolios.
5. LINE OF CREDIT
The Fund has entered into a $50 million Line of Credit Agreement (the
"Agreement") with State Street Bank and Trust Company effective April 24, 1996,
primarily for temporary or emergency purposes, including the meeting of
redemption requests that otherwise might require the untimely disposition of
securities. Interest on borrowings is payable at the bank's Cost of Funds plus
0.50%, on an annualized basis. Under this Agreement, the Fund has agreed to pay
a 0.08% per annum fee on the unused portion of the commitment, payable
quarterly in arrears. During the year ended December 31, 1998, the Fund had no
borrowings under this Agreement.
<PAGE>
================================================================================
THE LAZARD FUNDS, INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
The Lazard Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolio investments, of The Lazard Funds, Inc.
(comprised of 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, Lazard Bond Portfolio, Lazard
High Yield Portfolio, Lazard International Fixed-Income Portfolio and Lazard
Strategic Yield Portfolio) as of December 31, 1998 and the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended and the financial highlights
for each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights as stated
above, present fairly, in all material respects, the financial position of each
of the respective portfolios constituting The Lazard Funds, Inc. as of December
31, 1998, the results of their operations for the year then ended and changes
in their net assets for each of the two years in the period then ended and the
financial highlights for the periods presented in conformity with generally
accepted accounting principles.
ANCHIN, BLOCK & ANCHIN LLP
New York, New York
February 4, 1999
<PAGE>
TAX INFORMATION (UNAUDITED)
THE LAZARD FUNDS, INC.
YEAR ENDED DECEMBER 31, 1998
The following tax information represents year end disclosures of various tax
benefits passed through to shareholders for 1998.
The amount of long-term capital gain paid was as follows:
PORTFOLIO AMOUNT
-------- ------
Equity $27,923,199
Mid Cap --
Small Cap 5,615,464
Bantam Value 329,477
Global Equity 818,097
International Equity 122,836,110
International Small Cap 13,581,815
Emerging Markets --
Bond 114,254
High Yield --
International Fixed-Income --
Strategic Yield --
Of the distributions made by the following Portfolios, the corresponding
percentage representing the amount of each distribution which qualifies for the
dividends received deduction available to corporate shareholders, is as
follows:
PORTFOLIO PERCENTAGE
-------- -----------
Equity 100.00%
Mid Cap 42.12
Small Cap 100.00
Bantam Value --
Global Equity 37.94
International Equity 0.30
International Small Cap --
Emerging Markets 1.10
Bond --
High Yield --
International Fixed-Income --
Strategic Yield 2.60
The above figures may differ from those cited elsewhere in this report due to
differences in the calculations of income and capital gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax)
purposes.
<PAGE>
THE LAZARD FUNDS, INC.
30 Rockefeller Plaza
New York, New York 10112
TELEPHONE
(800) 823-6300
INVESTMENT MANAGER
Lazard Asset Management
30 Rockefeller Plaza
New York, New York 10112
Telephone: (212) 632-6400
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.
2 Heritage Drive
North Quincy, Massachusetts 02171
Telephone: (800) 986-3455
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
<PAGE>
LAZARDFunds
30 Rockefeller Plaza
New York, NY 10112
Telephone (800) 823-6300
http://www.lazardfunds.com
This report is for the information of the stockholders of The Lazard Funds, Inc.
Its use in connection with any offering of the Fund's shares is authorized only
in the case of a concurrent or prior delivery of the Fund's current prospectus.
<PAGE>
THE LAZARD FUNDS, INC.
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
The response to this item is incorporated by reference to Item 25 of
Part C of Post-Effective Amendment No. 17 to the Registrant's Registration
Statement on Form N-1A, filed on February 26, 1999.
ITEM 16. Exhibits - All references are to Post-Effective Amendment No. 10 to
the Registrant's Registration Statement on Form N-1A, filed on August
15, 1996 (File No. 33-40682) (the "Registration Statement") unless
otherwise noted.
(1)(a) Registrant's Articles of Incorporation are incorporated by
reference to Exhibit (1) of the Registration Statement on
Form N-1A, filed on May 20, 1991.
(1)(b) Articles of Amendment to Articles of Incorporation are
incorporated by reference to Exhibit (1)(b) of the
Registration Statement.
(1)(c) Articles Supplementary to Articles of Incorporation are
incorporated by reference to Exhibit (1)(c) of the
Registration Statement.
(2) Registrant's Bylaws are incorporated by reference to Exhibit
(2) of the Registration Statement on Form N-1A, filed on May
20, 1991.
(3) Not Applicable.
*(4) Form of Agreement and Plan of Reorganization.
(5) Not Applicable.
(6)(a) Investment Management Agreement between Registrant, on
behalf of its Lazard Small Cap Portfolio, and Lazard Asset
Management is incorporated by reference to Exhibit (5)(e) of
Post-Effective Amendment No. 6 of the Registration Statement
on Form N1-A, filed on March 31, 1994.
- --------
* Filed herewith as Exhibit A to the Prospectus/Proxy Statement.
<PAGE>
(6)(b) Investment Management Agreement between Registrant, on
behalf of its Lazard Bantam Value Portfolio, and Lazard
Asset Management is incorporated by reference to Exhibit
(5)(j) of Post-Effective Amendment No. 8 of the Registration
Statement on Form N1-A, filed on October 13, 1995.
(7) Distribution Agreement, as revised, is incorporated by
reference to Exhibit (6) of Post-Effective Amendment No. 10
to the Registration Statement.
(8) Not Applicable.
(9) Custodian Agreement is incorporated by reference to Exhibit
(8) of Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A, filed on July 23, 1991.
(10)(a) Distribution and Servicing Plan is incorporated by reference
to Exhibit (15) of Post-Effective Amendment No. 15 to the
Registration Statement on Form N1-A, filed on October 31,
1997.
(10)(b) Rule 18f-3 Plan is incorporated by reference to Exhibit (18)
of the Registration Statement.
(11)(a) Opinion and consent of Registrant's counsel is incorporated
by reference to Exhibit (10) of Post-Effective Amendment No.
9 to the Registration Statement on Form N-1A, filed on
December 27, 1995.
(11)(b) Consent of Stroock & Stroock & Lavan LLP.
(12) Opinion and consent of Stroock & Stroock & Lavan LLP
regarding tax matters.
<PAGE>
(13) Not Applicable.
(14) Consent of Independent Auditors.
(15) Not Applicable.
(16) Powers of Attorney.***
(17)(a) Form of Proxy.****
(17)(b) Registrant's Prospectus dated May 1, 1999.****
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by
any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) of the Securities Act of
1933, as amended, the reoffering prospectus will contain the
information called for by the applicable registration form
for reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items
of the applicable form.
(2) The undersigned registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part
of an amendment to the registration statement and will not
be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933,
as amended, each post-effective amendment shall be deemed to
be a new registration statement for the securities offered
therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of
them.
- ------------------------
*** Incorporated by reference to the signature page hereto.
**** Filed herewith as part of the Prospectus/Proxy Statement.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Amendment to
Registration Statement has been signed on behalf of the Registrant, in the City
of New York, State of New York, on the 28th day of May, 1999.
THE LAZARD FUNDS, INC.
(Registrant)
By: /S/ HERBERT W. GULLQUIST*
-------------------------------
Herbert W. Gullquist, President
Each person whose signature appears below on this Registration
Statement hereby constitutes and appoints William G. Butterly, III and James
Giallanza, and each of them, with full power to act without the other, his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (until revoked in writing) to sign any and all amendments to this
Registration Statement (including post-effective amendments and amendments
thereto), and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/S/ HERBERT W. GULLQUIST* President (Principal
- ------------------------- Executive Officer)
Herbert W. Gullquist and Director May 28, 1999
/S/ JAMES GIALLANZA* Treasurer (Principal
- ------------------------- Accounting and
James Giallanza Financial Officer) May 28, 1999
/S/ NORMAN EIG* Chairman of the Board
- ------------------------- of Directors May 28, 1999
Norman Eig
/S/JOHN J. BURKE* Director May 28, 1999
- -------------------------
John J. Burke
/S/ KENNETH S. DAVIDSON* Director May 28, 1999
- -------------------------
Kenneth S. Davidson
/S/ CARL FRISCHLING*
- ------------------------- Director May 28, 1999
Carl Frishling
/S/ LESTER Z. LIEBERMAN* Director May 28, 1999
- -------------------------
Lester Z. Lieberman
/S/ RICHARD REISS, JR.* Director May 28, 1999
- -------------------------
Richard Reiss, Jr.
/S/ JOHN RUTLEDGE* Director May 28, 1999
- -------------------------
John Rutledge
/S/ WILLIAM KATZ* Director May 28, 1999
- -------------------------
William Katz
By: /S/ WILLIAM G. BUTTERLY, III
----------------------------
William G. Butterly, III
Attorney-in-fact
<PAGE>
INDEX OF EXHIBITS
(11)(b) Consent of Stroock & Stroock & Lavan LLP
(12) Opinion and consent of Stroock & Stroock & Lavan LLP regarding
tax matters
(14) Consent of Independent Auditors
EXHIBIT (11)(b)
STROOCK & STROOCK & LAVAN LLP
180 MAIDEN LANE
NEW YORK, NEW YORK 100038
We hereby consent to the use of our legal opinion regarding the legality of
issuance of shares and other matters filed as Exhibit (10) of Post-Effective
Amendment No. 9 to the Registrant's Registration Statement on Form N-1A filed on
December 27, 1995, which opinion is incorporated by reference as an exhibit to
this Registration Statement on Form N-14. In giving such permission, we do not
admit hereby that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
STROOCK & STROOCK & LAVAN LLP
EXHIBIT (12)
July 30, 1999
Lazard Small Cap Portfolio
c/o The Lazard Funds, Inc.
30 Rockefeller Plaza
New York, New York 10112
Lazard Bantam Value Portfolio
c/o The Lazard Funds, Inc.
30 Rockefeller Plaza
New York, New York 10112
Re: Registration Statement on Form N-14
(REGISTRATION NO. 333-77493)
Ladies and Gentlemen:
You have requested our opinion as to certain Federal income tax consequences of
the reorganization contemplated by the Agreement and Plan of Reorganization,
substantially in the form included as Exhibit A to the Registration Statement on
Form N-14 of The Lazard Funds, Inc., a Maryland corporation (the "Company")(Reg.
No. 333-77493) (the "Registration Statement"), between the Company, on behalf of
its Lazard Bantam Value Portfolio (the "Acquired Fund"), and the Company, on
behalf of its Lazard Small Cap Portfolio (the "Acquiring Fund"). You have
advised us that each Fund has qualified and will qualify as a "regulated
investment company" within the meaning of Subchapter M of Chapter 1 of the
Internal Revenue Code of 1986, as amended (the "Code"), for each of its taxable
years ending on or before or including the Closing Date.
In rendering this opinion, we have examined the Agreement and Plan of
Reorganization, the Registration Statement, the Company's Articles of
Incorporation, as amended from time to time (the "Company's Charter"), the
Company's Prospectus and Statement of Additional Information, incorporated by
reference in the Registration Statement, and such other documents as we have
deemed necessary or relevant for the purpose of this opinion. In issuing our
opinion, we have relied upon the representation of the Company, on behalf of the
Acquired Fund, that the Company's Charter is the document pursuant to which it
has operated to date and that it has operated in accordance with all laws
applicable to such entity and the statements and representations made herein and
in the Registration Statement. We also have relied upon the representation of
the Company, on behalf of the Acquiring Fund, that the Company's Charter is the
document pursuant to which it has operated to date and will operate following
the reorganization and that it has operated and will operate following the
reorganization in accordance with all laws applicable to such entity and the
statements and representations made herein and in the Registration Statement. As
to various questions of fact material to this opinion, where relevant facts were
not independently established by us, we have relied upon statements of, and
written information provided by, representatives of the Company. We also have
examined such matters of law as we have deemed necessary or appropriate for the
purpose of this opinion. We note that our opinion is based on our examination of
such law, our review of the documents described above, the statements and
representations referred to above and in the Registration Statement and the
Agreement and Plan of Reorganization, the provisions of the Code, the
regulations, published rulings and announcements thereunder, and the judicial
interpretations thereof currently in effect. Any change in applicable law or any
of the facts and circumstances described in the Registration Statement, or
inaccuracy of any statements or representations on which we have relied, may
affect the continuing validity of our opinion.
Capitalized terms not defined herein have the respective meanings given such
terms in the Agreement and Plan of Reorganization.
Based on the foregoing, it is our opinion that for Federal income tax purposes:
a) The transfer of all of the Acquired Fund's assets in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
identified liabilities of the Acquired Fund will constitute a "reorganization"
within the meaning of Section 368(a)(1)(C) of the Code;
b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the Acquiring
Fund Shares and the assumption by the Acquiring Fund of certain identified
liabilities of the Acquired Fund;
c) No gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund's assets to the Acquiring Fund in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
identified liabilities of the Acquired Fund or upon the distribution of the
Acquiring Fund Shares to Acquired Fund Shareholders in exchange for their shares
of the Acquired Fund;
d) No gain or loss will be recognized by Acquired Fund Shareholders upon
the exchange of their Acquired Fund shares for the Acquiring Fund Shares;
e) The aggregate tax basis for the Acquiring Fund Shares received by an
Acquired Fund Shareholder pursuant to the reorganization will be the same as the
aggregate tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the reorganization, and the holding period of the Acquiring
Fund Shares to be received by the Acquired Fund Shareholder will include the
period during which the Acquired Fund shares exchanged therefor were held by
such shareholder (provided the Acquired Fund shares were held as capital assets
on the date of the reorganization); and
f) The tax basis of the Acquired Fund's assets acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the reorganization, and the holding period of the assets of
the Acquired Fund in the hands of the Acquiring Fund will include the period
during which those assets were held by the Acquired Fund.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus/Proxy
Statement included in the Registration Statement, and to the filing of this
opinion as an exhibit to the Registration Statement, and to the filing of this
opinion as an exhibit to any application made by or on behalf of the Company or
any distributor or dealer in connection with the registration and qualification
of the Company, on behalf of the Acquiring Fund, or the Acquiring Fund Shares
under the securities laws of any state or jurisdiction. In giving such
permission, we do not admit hereby that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933 or the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
STROOCK & STROOCK & LAVAN LLP
EXHIBIT 14
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in the registrant's Amendment to Registration Statement on
Form N-14, to be filed on May 28, 1999, to the reference to our firm under the
caption "Financial Statements and Experts" in the Prospectus/Proxy Statement and
to the incorporation by reference of our report on the financial statements of
The Lazard Funds, Inc., in respect of its Lazard Bantam Value Portfolio and
Lazard Small Cap Portfolio, dated February 4, 1999 in this Registration
Statement (Form N-14) of the Lazard Funds, Inc.
ANCHIN, BLOCK & ANCHIN LLP
New York, New York
May 28, 1999
