-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WEnGskxhFqa7A8sq6gQBHAzyvLGvmxWqF92XYzIiuYq/PQuDoG48GsOUGwBXqfW8 Kb28OP5xrcMUfFjoZA9hNw== 0000930413-99-000295.txt : 19990308 0000930413-99-000295.hdr.sgml : 19990308 ACCESSION NUMBER: 0000930413-99-000295 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990305 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAZARD FUNDS INC CENTRAL INDEX KEY: 0000874964 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06312 FILM NUMBER: 99558451 BUSINESS ADDRESS: STREET 1: STATE STREET BANK & TRUST CO STREET 2: PO BOX 9110 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 2126326000 MAIL ADDRESS: STREET 1: STATE STREET BANK & TRUST CO STREET 2: PO BOX 9110 CITY: BOSTON STATE: MA ZIP: 02109 N-30D 1 ANNUAL REPORT LAZARDFunds ANNUAL REPORT DECEMBER 31, 1998 ================================================================================ 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 ================================================================================ 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 1 ================================================================================ 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 2 ================================================================================ 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 3 ================================================================================ THE LAZARD FUNDS, INC. OVERVIEW (CONTINUED) - -------------------------------------------------------------------------------- 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 pro- jected 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. 4 ================================================================================ 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. 5 ================================================================================ 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. 6 ================================================================================ 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. 7 ================================================================================ 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. 8 ================================================================================ 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. 9 ================================================================================ 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. 10 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE TABLE - --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1998 ---------------------------------------------------------------- INSTITUTIONAL SHARES --------------------------------------------------------------- ONE THREE FIVE TEN SINCE YEAR YEAR YEAR YEAR INCEPTION* ------------- ------------- ----------- ----------- ----------- 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%
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. 11 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE TABLE (CONTINUED) - --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1998 --------------------------------------------------------------------------------- INSTITUTIONAL SHARES --------------------------------------------------------------------------------- ONE THREE FIVE TEN SINCE YTD YEAR YEAR YEAR YEAR INCEPTION* ------------- ------------- ------------- ------------ ------------ ------------- 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%
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. 12 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE TABLE (CONTINUED) - --------------------------------------------------------------------------------
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* ------------- ------------ ------------- ------------- ------------- 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%
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. 13 ================================================================================ 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. 14 ================================================================================ 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. 15 ================================================================================ 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. 16 ================================================================================ 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. 17 ================================================================================ 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. 18 ================================================================================ 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. 19 ================================================================================ 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. 20 ================================================================================ 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. 21 ================================================================================ 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. 22 - -------------------------------------------------------------------------------- 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. 23 - -------------------------------------------------------------------------------- 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 -----------
PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - --------------------------------- ------------ ------------- 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 ======= ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 24 - -------------------------------------------------------------------------------- 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. 25 - -------------------------------------------------------------------------------- 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. 26 ================================================================================ 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. 27 ================================================================================ 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. 28 ================================================================================ 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. 29 ================================================================================ 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. 30 ================================================================================ 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. 31 ================================================================================ 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. 32 ================================================================================ 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. 33 ================================================================================ 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. 34 ================================================================================ 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. 35 =============================================================================== 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. 36 ================================================================================ 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 ================================================================================ 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 ================================================================================ 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 ===============================================================================- 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. 40 ================================================================================ 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 - -------------------------------------------------------------------------------- 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 ================================================================================ 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 ================================================================================ 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. 44 ================================================================================ 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. 45 ================================================================================ 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. 46 ================================================================================ 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. 47 ================================================================================ 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. 48 ================================================================================ 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. 49 ================================================================================ 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. 50 ================================================================================ 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:
U.S. $ Cost U.S. $ Unrealized Foreign Currency Expiration Foreign on Origination Current Appreciation Purchase Contracts Date Currency Date Value (Depreciation) - -------------------- ------------ ---------------- ---------------- ------------- --------------- 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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 51 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
U.S. $ Cost U.S. $ Unrealized Foreign Currency Expiration Foreign on Origination Current Appreciation Purchase Contracts Date Currency Date Value (Depreciation) - -------------------- ------------ ---------------- ---------------- ------------- --------------- 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 ------------ ----------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 52 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
U.S. $ Cost U.S. $ Unrealized Foreign Currency Expiration Foreign on Origination Current Appreciation Sale Contracts Date Currency Date Value (Depreciation) - ------------------ ------------ ---------------- ---------------- -------------- --------------- 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) ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 53 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - --------------------------------- -------------------- --------------------- 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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 54 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - ------------------------------------------------------------------------- -------------------- --------------------- 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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 55 ================================================================================ 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. 56 ================================================================================ 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. 57 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - ----------------------------------------------------------------------------------------------------------------- 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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 58 ================================================================================ 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. 59 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - --------------------------------------------------------------------------------------------------------------- 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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 60 ================================================================================ 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. 61 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - ----------------------------------------------------------------------- -------------------- --------------------- 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 ========== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 62 ================================================================================ 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:
U.S. $ Cost U.S. $ Unrealized Foreign Currency Expiration Foreign on Origination Current Appreciation Purchase Contracts Date Currency Date Value (Depreciation) - -------------------- ------------ ---------------- ---------------- ------------- --------------- 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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 63 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
U.S. $ Cost U.S. $ Unrealized Foreign Currency Expiration Foreign on Origination Current Appreciation Purchase Contracts Date Currency Date Value (Depreciation) - -------------------- ------------ ---------------- ---------------- ------------- --------------- 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 ----------- ----------- ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 64 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
U.S. $ Cost U.S. $ Unrealized Foreign Currency Expiration Foreign on Origination Current Appreciation Sale Contracts Date Currency Date Value (Depreciation) - ------------------ ------------ ---------------- ---------------- --------------- ----------------- 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 ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 65 ===============================================================================- 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:
AGGREGATE AGGREGATE NET GROSS GROSS UNREALIZED AGGREGATE UNREALIZED UNREALIZED APPRECIATION PORTFOLIO COST APPRECIATION DEPRECIATION (DEPRECIATION) - ------------------------------ ---------------- -------------- -------------- --------------- 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)
(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:
ACQUISITION ACQUISITION SECURITY DATE COST - ------------------------------------------------------------- ------------- ------------ 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 ==========
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. 66 ================================================================================ 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. 67 - -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 - -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS BY INDUSTRY, FOR THOSE PORTFOLIOS PREVIOUSLY PRESENTED BY COUNTRY:
LAZARD LAZARD LAZARD LAZARD GLOBAL INTERNATIONAL INTERNATIONAL EMERGING EQUITY EQUITY SMALL CAP MARKETS PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------- --------------- --------------- ------------ 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%
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 68 ================================================================================ 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% 69 ================================================================================ 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
LAZARD LAZARD LAZARD BANTAM MID CAP SMALL CAP VALUE PORTFOLIO PORTFOLIO 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) ................ $ 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
* $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. 70 ===============================================================================- - -------------------------------------------------------------------------------- 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 71 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 - --------------------------------------------------------------------------------
LAZARD LAZARD EQUITY MID CAP PORTFOLIO PORTFOLIO --------------- -------------- 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 =========== ============ LAZARD LAZARD SMALL CAP BANTAM VALUE PORTFOLIO PORTFOLIO ----------------- ----------------- 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 $ -- ============== ===============
** Commenced operations on January 2, 1998. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 72 ================================================================================ - -------------------------------------------------------------------------------- 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 $ -- ============= =============== ============ ============= 73 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
LAZARD EQUITY PORTFOLIO ------------------------------------ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1998 1997 ---------------- ----------------- 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 ============== ==============
** Commenced operations on November 4, 1997. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 74 ================================================================================ - --------------------------------------------------------------------------------
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 - ----------------- ----------------- ------------------ ------------------ ------------------ ------------------ $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 $ -- $ -- ============== ============= ============== ============== =============== ===============
75 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) - --------------------------------------------------------------------------------
LAZARD GLOBAL EQUITY PORTFOLIO --------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1998 1997 --------------- --------------- 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) ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 76 ================================================================================ - --------------------------------------------------------------------------------
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 - ------------------- ------------------- ---------------- ---------------- ----------------- ----------------- $ 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 =============== =============== ============= ============= ============== ==============
77 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) - --------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO ------------------------------------ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31 1998 1997 ------------------ --------------- 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) ============== =============
** Commenced operations on January 2, 1998. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 78 ================================================================================ - --------------------------------------------------------------------------------
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 - ------------------- ---------------- ---------------- ----------------- ----------------- $ 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) ============== ============= ============= =============== ===============
79 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO
YEAR ENDED ----------------------------------------------------------------------- 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 INSTITUTIONAL SHARES ------------ ------------ ------------ ------------ ----------- 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%
YEAR FOR THE PERIOD ENDED 2/5/97* TO 12/31/98 12/31/97 OPEN SHARES ------------ --------------- 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 80 ================================================================================ 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. 81 ================================================================================ THE LAZARD FUNDS, INC FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO
YEAR ENDED ----------------------------------------------------------------------- 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 INSTITUTIONAL SHARES --------------- --------------- ------------ ------------ ------------- 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%
YEAR FOR THE PERIOD ENDED 1/30/97* TO 12/31/98 12/31/97 OPEN SHARES ------------ --------------- 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 82 ================================================================================ THE LAZARD FUNDS, INC FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD BANTAM VALUE PORTFOLIO
YEAR ENDED FOR THE PERIOD --------------------------- 3/1/96* TO 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------ ------------ --------------- 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%
YEAR FOR THE PERIOD ENDED 1/23/97* TO 12/31/98 12/31/97 OPEN SHARES ------------- --------------- 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 83 ================================================================================ THE LAZARD FUNDS, INC FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD GLOBAL EQUITY PORTFOLIO
YEAR ENDED FOR THE PERIOD --------------------------- 1/4/96* TO 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------ ------------ --------------- 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%
YEAR FOR THE PERIOD ENDED 1/30/97* TO 12/31/98 12/31/97 OPEN SHARES ------------ --------------- 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 84 ================================================================================ THE LAZARD FUNDS, INC FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY PORTFOLIO
YEAR ENDED ----------------------------------------------------------------------------- 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 INSTITUTIONAL SHARES --------------- --------------- --------------- --------------- ------------- 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%
YEAR FOR THE PERIOD ENDED 1/23/97* TO 12/31/98 12/31/97 OPEN SHARES ------------ --------------- 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 85 ================================================================================ THE LAZARD FUNDS, INC FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
YEAR ENDED ------------------------------------------------------------------------- 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 INSTITUTIONAL SHARES ------------ ------------ ------------ ------------ ------------- 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%
YEAR FOR THE PERIOD ENDED 2/13/97* TO 12/31/98 12/31/97 OPEN SHARES ------------ --------------- 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 86 ================================================================================ THE LAZARD FUNDS, INC FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO
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 ------------ -------------- ------------ ------------- --------------- 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%
YEAR FOR THE PERIOD ENDED 1/8/97* TO 12/31/98 12/31/97 OPEN SHARES ------------- --------------- 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 87 ================================================================================ THE LAZARD FUNDS, INC FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO
YEAR ENDED ------------------------------------------------------------------------- 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 INSTITUTIONAL SHARES ------------ ------------ ------------ ------------ ------------- 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%
YEAR FOR THE PERIOD ENDED 3/5/97* TO 12/31/98 12/31/97 OPEN SHARES ------------ --------------- 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 88 ================================================================================ THE LAZARD FUNDS, INC FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO
FOR THE PERIOD 1/2/98* TO 12/31/98 INSTITUTIONAL SHARES --------------- 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%
FOR THE PERIOD 2/24/98* TO 12/31/98 OPEN SHARES --------------- 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 89 ================================================================================ THE LAZARD FUNDS, INC FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO
YEAR ENDED ------------------------------------------------------------------------- 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 INSTITUTIONAL SHARES ------------ -------------- ------------ ------------ ----------- 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%
YEAR FOR THE PERIOD ENDED 1/8/97* TO 12/31/98 12/31/97 OPEN SHARES ------------ --------------- 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 90 ================================================================================ THE LAZARD FUNDS, INC FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO
YEAR ENDED ------------------------------------------------------------------------- 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 INSTITUTIONAL SHARES ------------ ------------ ------------ ------------ ------------- 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%
YEAR FOR THE PERIOD ENDED 1/23/97* TO 12/31/98 12/31/97 OPEN SHARES ------------ --------------- 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 91 ================================================================================ 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. 92 ================================================================================ 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. 93 ================================================================================ 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 94 ================================================================================ 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. 95 ================================================================================ 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: 96 ================================================================================ 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. 97 ================================================================================ 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. 98 ================================================================================ 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 99 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. 100 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 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. -----END PRIVACY-ENHANCED MESSAGE-----