-----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, LKIksW5rTacTOuFqdOfDK+cxykrQ5vJM9hJF18YKue4vaKx9NZbN2/GopVPdzFxh W2DCg+1YOH4C4AA+cb96+w== 0000930413-02-000798.txt : 20020415 0000930413-02-000798.hdr.sgml : 20020415 ACCESSION NUMBER: 0000930413-02-000798 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020306 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAZARD FUNDS INC CENTRAL INDEX KEY: 0000874964 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06312 FILM NUMBER: 02568554 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 c22877_n30d-.txt ANNUAL REPORT LAZARD FUNDS ANNUAL REPORT DECEMBER 31, 2001 ================================================================================ THE LAZARD FUNDS, INC. - -------------------------------------------------------------------------------- Table of Contents Page Investment Overviews ....................................................... 2 Performance Overviews ...................................................... 10 Portfolios of Investments Lazard Equity Portfolio ................................................ 22 Lazard Mid Cap Portfolio ............................................... 24 Lazard Small Cap Portfolio ............................................. 26 Lazard International Equity Portfolio .................................. 28 Lazard International Small Cap Portfolio ............................... 30 Lazard Emerging Markets Portfolio ...................................... 32 Lazard International Equity Select Portfolio ........................... 34 Lazard Bond Portfolio .................................................. 35 Lazard High Yield Portfolio ............................................ 40 Lazard International Fixed-Income Portfolio ............................ 44 Lazard Strategic Yield Portfolio ....................................... 54 Lazard Mortgage Portfolio .............................................. 65 Notes to Portfolios of Investments ......................................... 67 Statements of Assets and Liabilities ................................................. 72 Operations ............................................................. 74 Changes in Net Assets .................................................. 76 Financial Highlights ....................................................... 82 Notes to Financial Statements .............................................. 94 Report of Independent Auditors ............................................. 100 Board of Directors and Officers Information (unaudited) .................... 101 Tax Information (unaudited) ................................................ 103 THE VIEWS OF THE FUND'S MANAGEMENT AND THE PORTFOLIO HOLDINGS DESCRIBED IN THIS REPORT ARE AS OF DECEMBER 31, 2001; THESE VIEWS AND PORTFOLIO HOLDINGS MAY HAVE CHANGED SUBSEQUENT TO THIS DATE. INFORMATION PROVIDED IN THIS REPORT SHOULD NOT BE CONSIDERED A RECOMMENDATION TO PURCHASE OR SELL SECURITIES. ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS - -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO Lazard Equity Portfolio Institutional Shares posted a total return of (5.90)%, while Open Shares posted a total return of (6.23)%, both exceeding the (11.88)% return of the S&P 500(R) Index for the year. The acceleration of the economic downturn hurt corporate earnings and weighed on U.S. equity markets throughout 2001. With the S&P 500 Index falling more than 10%, its second consecutive year of decline, 2000 - 2001 marked the first two-year drop for the S&P 500 since the energy crisis of the early 1970s. While 2000's market weakness was concentrated in the highly valued technology and telecommunications sectors, the decline in 2001 was more broad-based. The negative economic outlook was a primary focus of investors throughout the year, and their level of concern rose dramatically following the September 11th terrorist attacks. Stock markets reached their lows for the year in the aftermath of the attacks. Companies more directly affected by the economic cycle bore the brunt of the selling. However, just as negative market sentiment reached its peak, stocks bottomed before staging a strong rally in the final months of 2001. The upswing was based on renewed confidence that the combination of aggressive monetary and fiscal stimuli may trigger an economic rebound during 2002. The Portfolio's technology holdings defended well during both the fourth quarter and throughout 2001 due to their solid valuation support and proven business models. For instance, the diversified nature of IBM's business and the growing importance of its services business enabled it to maintain profitability amid a dramatic decline in demand for information technology. Microsoft rebounded from last year's weakness as earnings held up remarkably well in light of the dramatic fall in PC demand. In business services and supplies, First Data rose strongly as its transaction processing and money-transfer businesses proved highly resilient to the economy's weakness. However, in the consumer discretionary sector, our media holdings (such as The News Corp., AOL Time Warner and Viacom) were hurt as demand for advertising fell amid the economic downturn. However, we feel the longer-term outlook for these companies is very positive due to their strong cash flow generation and the high barriers to entry in the industry. In addition, this is one of the few industries that possesses pricing flexibility in these times of low inflation. In recent years there have been dramatic swings in the returns of different investment styles. During 1998 and 1999, high-momentum growth stocks dominated the market; in 2000, investors flocked to the safety of financials and utilities with little regard to the companies' sustainable profitability. However, during 2001 investors' focus returned to individual company fundamentals, which is the environment most conducive to our relative value style. We will continue to adhere to our discipline of assessing valuation in the context of sustainable financial productivity and are confident the market's current focus on fundamentals will persist. LAZARD MID CAP PORTFOLIO Lazard Mid Cap Portfolio Institutional Shares posted a total return of 12.85%, while Open Shares posted a total return of 12.50%, both exceeding the (5.62)% return of the Russell Midcap(R) Index for the year. U.S. mid cap stocks were one of the few bright spots in an otherwise gloomy year for investors, managing modest gains amid the weakness in larger U.S. stocks. This is the second consecutive calendar year that mid caps have outperformed larger stocks, a fact that highlights the benefits of portfolio diversification. The negative economic outlook was a primary focus of investors throughout the year, and their level of concern rose dramatically following the September 11th terrorist attacks. Stock markets reached their lows for the year in the aftermath of the attacks. Companies more directly affected by the economic cycle bore the brunt of the selling. However, just as negative market sentiment reached its peak, stocks bottomed before staging a strong rally in the final months of 2001. The upswing was based on renewed confidence that the combination of aggressive monetary and fiscal stimuli may trigger an economic rebound during 2002. Within the Portfolio, technology holdings performed well due to their solid valuation support, managing gains amid the significant weakness in the sector. For instance, electronics manufacturing powerhouse Celestica was helped by improved pricing. Consumer discretionary holdings also performed well during the year, as consumer spending was remarkably resilient in light of the economic weakness. Ross Stores' off-price format proved very resistant to the economic slowdown, as cautious consumers looked for ways to make their dollars go farther. In contrast, our holdings in the finance sector modestly lagged those in the index. 2 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- Lazard's outlook for U.S. mid cap stocks is positive, as valuations relative to larger stocks remain attractive even after their outperformance of larger stocks in recent years. We continue to focus on valuation in the context of financial productivity, implementing our relative value style. This is currently being rewarded in the marketplace. Lazard remains confident in the Portfolio's holdings over the long-term, and that long-term financial productivity remains the key to successful investing. LAZARD SMALL CAP PORTFOLIO Lazard Small Cap Portfolio Institutional Shares posted a total return of 18.06%, while Open Shares posted a total return of 17.69%, both exceeding the 2.49% return of the Russell 2000(R) Index for the year. U.S. small cap stocks were one of the few bright spots in an otherwise gloomy year for investors, managing gains amid the weakness in larger U.S. stocks. This is the second consecutive year that small caps have outperformed larger stocks, a fact that highlights the benefits of portfolio diversification. The negative economic outlook was a primary focus of investors throughout the year, and their level of concern rose dramatically following the September 11th terrorist attacks. Stock markets reached their lows for the year in the aftermath of the attacks. Companies more directly affected by the economic cycle bore the brunt of the selling. However, just as negative market sentiment reached its peak, stocks bottomed before staging a strong rally in the final months of 2001. The upswing was based on renewed confidence that the combination of aggressive monetary and fiscal stimuli may trigger an economic rebound during 2002. Within the Portfolio, technology holdings performed well due to their solid valuation support and proven business models. For instance, defense electronics manufacturer Mercury Computer Systems, whose business is very much geared toward intelligence, surveillance, and reconnaissance, was helped by an increased budget for defense spending and the greater focus on the digitalization of the battlefield and homeland security. Consumer discretionary holdings also performed well throughout the year, as consumer spending has been remarkably resilient despite the economy's weakness. Ross Stores' off-price format proved resistant to the economic slowdown as cautious consumers looked for ways to make their dollars go farther. The Portfolio was also helped by merger activity, as a few of its holdings were acquired by strategic investors attracted by strong cash flows and reasonable valuations. However, our relatively high weight in the energy sector hurt returns due to the decline in oil and natural gas prices and the expectation that this will lead to lower-than-expected drilling activity going forward. Lazard's outlook for U.S. small cap stocks is positive, as valuations relative to larger stocks remain attractive even after their outperformance of larger stocks in recent years. We continue to focus on valuation in the context of financial productivity, implementing our relative value style. This is currently being rewarded in the marketplace. Lazard remains confident in the Portfolio's holdings over the long-term, and that long-term financial productivity remains the key to successful investing. LAZARD INTERNATIONAL EQUITY PORTFOLIO Lazard International Equity Portfolio Institutional Shares posted a total return of (24.85)%, while Open Shares posted a total return of (25.02)%, each trailing the (21.44)% return of the Morgan Stanley Capital International ("MSCI"(R)) Europe, Australasia and Far East ("EAFE"(R)) Index for the year. The acceleration of the global economic downturn hurt corporate earnings and weighed on non-U.S. markets throughout 2001. While 2000's market weakness was concentrated in the highly valued technology and telecommunications sectors, the decline in 2001 saw all of the sectors in the MSCI EAFE Index experience significant losses. The negative economic outlook had been a primary focus of investors throughout the year, and their level of concern rose dramatically following the September 11th terrorist attacks. Stock markets reached their lows for the year in the aftermath of the attacks. Companies more directly affected by the economic cycle bore the brunt of the selling. However, just as negative market sentiment reached its peak, stocks bottomed before staging a strong rally in the final months of 2001. The upswing was based on renewed confidence that the global economy may experience a strong recovery during 2002. Within the Portfolio, holdings in the technology and telecommunications sectors outperformed other sectors in the MSCI EAFE Index due to their solid valuation support and proven business models. In late September, the Portfolio initiated a position in 3 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- Telecom Italia because of its dominant wireless franchise and the favorable regulatory environment with respect to its fixed line business. However, the economic downturn did have a detrimental effect on several companies in the Portfolio which are aggressively restructuring to improve their financial productivity. Companies with low current profitability but the potential to improve through restructuring have always played a role in our relative value strategy, and have been some of our best performers over the years. The key is to identify companies with viable products but bloated cost structures, where management is truly committed to taking the difficult steps to improve profitability. However, an economic downturn makes it much more difficult to implement a major restructuring initiative successfully. For instance, at HVB Group, the product of a number of recent mergers, management has a credible plan to significantly increase returns through cost reduction and revenue synergies. However, capital markets weakness and deterioration in credit quality (as a result of the slowing of the German economy) have effectively postponed the realization of the benefits of restructuring. Japanese holdings, many of which are also engaged in restructuring, have been particularly impacted. The global slowdown has driven the already weak Japanese economy into a severe recession. In the case of some of the Japanese financials, the effects of the economic slowdown have been exacerbated by management's lack of resolve in following through on their cost reduction plans. As a result, we sold certain Japanese holdings, such as Mizuho. In recent months, the Portfolio shifted capital out of companies engaged in major restructuring into companies with a more consistent history of financial productivity in a variety of environments. For instance, a recent addition to the Portfolio was GlaxoSmithKline, the U.K. pharmaceutical company. GlaxoSmithKline is a premier research organization with a long history of profitability through bringing innovative drugs to market. We believe that its valuation relative to its peers and the overall market is attractive. UBS, the Swiss bank, was also added to the Portfolio. The company has a history of consistent returns driven by its private banking business, and its acquisition of PaineWebber will strengthen its position in U.S. investment banking. We feel changes such as these position the Portfolio well going forward. We expect a return to an environment that is more conducive to our relative value style. LAZARD INTERNATIONAL SMALL CAP PORTFOLIO For the year, Lazard International Small Cap Portfolio Institutional Shares posted a total return of (6.77)%, while Open Shares posted a total return of (7.33)%, both exceeding the (14.29)% return of the MSCI EAFE Small Cap(R) Index. After the tragic events of September 11th, equity markets sold off strongly, reaching a bottom in late September. From that point onward stocks rebounded sharply, making the fourth quarter of 2001 the best performing quarter since before the technology bubble burst in the first quarter of 2000. Central banks around the world have continued to ease interest rates in an attempt to revive economic growth. While there are no clear signs that the economic downturn is behind us, there have been indications that the rate of decline has slowed and that some areas of the global economy have stabilized. The perceived success of the war in Afghanistan has reduced some of the political risk that has been hanging over the markets since the attacks. Investors have reacted very positively to these factors, as they feel that the worst is now behind them and a recovery is in sight. Technology stocks, having been hit the hardest in the first part of the year, have rebounded the most strongly. The Portfolio's holdings in industries highly exposed to an economic rebound (such as telecommunications equipment, basic materials, and manufacturing) bounced back during the fourth quarter and performed well. Defensive industries such as pharmaceuticals and utilities showed the worst performance. Overall, international small caps as an asset class outperformed larger international stocks for the second year in a row. The Portfolio benefited from its underweight position in Japan, as the Japanese economy continued to weaken and the Yen began to slide versus the other major currencies. An overweight position in consumer discretionaries also benefited performance. However, the Portfolio was hurt by the underweight positions in the technology sector and basic materials sector. The Portfolio's top performers were dominated by companies from the U.K. as the U.K.'s economy has proven to be more resistant to the economic slowdown than other countries. By sector, the best performers came mostly from those areas that would 4 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- benefit from an economic upturn, particularly media and luxury goods. Top performers included Edipresse, the Swiss-based publisher of newspapers and magazines. The company benefits from a monopolistic position in the French-speaking Swiss market, and distributes its magazines internationally. Its shares rallied, as investors believed that the worst of the economic downturn is over. As economic growth picks up, companies should begin to spend more on advertising and help-wanted ads, benefiting publishers. In addition, Edipresse has been able to lock in lower newsprint prices for 2002. The company has also trimmed its cost base by reducing staff and scaling back its loss-making online operations. These actions should lead to better profitability in 2002. Another top performer was Waterford Wedgewood, the Irish manufacturer and marketer of crystalware and fine china. After a stable stock performance for most of the year, the shares sold off sharply post-September 11th, as investors believed that consumers would cut back spending on luxury items. As sentiment improved and consumers proved to be more resilient than first expected through the holiday season, its shares rebounded. Although there has been some slowdown in demand, the company has reduced its fixed cost base to adjust to the new level. We believe the low valuation and high financial productivity of the company should underpin the share price going forward. Performance was hurt by holdings in the energy sector. Although the fundamentals in companies such as Fugro and IHC Caland remain strong, the market associates their performance with the price of oil. As oil prices declined due to OPEC's negotiations on production quotas, the shares of these oil-service stocks came down in sympathy. At the current oil price, demand for these companies' services is still very strong, and we are confident that their shares will re-rate as the fundamental performance continues to come through. While we are cautious about an economic recovery and are still trying to ascertain the effects of the terrorist attacks, we remain confident in our current portfolio. High financial productivity, underpinned by cheap valuations, should allow the Portfolio to defend in the current environment and benefit when the economic recovery truly arrives. LAZARD EMERGING MARKETS PORTFOLIO Lazard Emerging Markets Portfolio Institutional Shares posted a total return of (3.16)%, while Open Shares posted a total return of (3.54)%, each trailing the (2.37)% return of the MSCI Emerging Markets Free ("EMF"(R)) Index for the year. Emerging markets stocks fell modestly during 2001 as the global economic downturn and Argentina's financial crisis weighed on investor sentiment. However, they significantly outperformed most developed markets throughout the world as the MSCI EMF Index fell just over 2% while the MSCI World Index of developed markets fell more than 16%. It was encouraging to see that the economic turmoil in Argentina and, to a lesser extent, Turkey did not lead to the same contagion effect that occurred in 1998. The negative economic outlook had been a primary focus of investors throughout the year, and their level of concern rose dramatically following the September 11th terrorist attacks. Emerging markets reached their lows for the year in the aftermath of the attacks as hopes of an economic recovery faded. However, just as negative market sentiment reached its peak, stocks bottomed before staging a strong rally in the final months of 2001. The emerging markets, led by beaten down technology shares, performed particularly well during this fourth quarter rally. The upswing was based on renewed confidence that the combination of aggressive monetary and fiscal stimuli may trigger an economic rebound during 2002. The Portfolio generated gains in the finance sector during the year. In South Korea, Kookmin Bank rose strongly as its recent merger with Housing and Commercial Bank strengthened its competitive position in the fast growing consumer market. In Taiwan, Fubon Financial Holding Co. performed well after it received a major investment from Citigroup. These transactions illustrate that strategic investors are finding attractive opportunities in emerging markets companies. Our Portfolio holdings in Latin American telecommunications companies detracted from returns. While we are concerned about the continuing swings in market sentiment, we believe the Portfolio is well positioned for the long-term. Our relative value style leads us to invest in well-managed businesses with strong cash flow and modest debt levels. The Portfolio contains stocks with relatively consis- 5 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- tent earnings streams and lower valuations that should help enable it to better weather these fluctuations in market sentiment. LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO Lazard International Equity Select Portfolio Institutional Shares posted a total return of (8.43)%, while Open Shares posted a total return of (8.40)%, both exceeding the (11.76)% return of the MSCI EAFE Index since the Portfolio's inception, May 31, 2001. While 2000's market weakness was concentrated in the highly valued technology and telecommunications sectors, the decline in 2001 saw all of the sectors in the MSCI EAFE Index experience significant losses. The economic outlook had been a primary focus of investors throughout the year, and their level of concern rose dramatically following the September 11th terrorist attacks. Stock markets reached their lows for the year in the aftermath of the attacks. Companies more directly affected by the economic cycle bore the brunt of the selling. However, just as negative market sentiment reached its peak, stocks bottomed before staging a strong rally in the final months of 2001. The upswing was based on renewed confidence that the combination of aggressive monetary and fiscal stimuli will trigger an economic rebound during 2002. Within the Portfolio, holdings in the consumer staples and energy sectors held up well, generally due to their ability to remain profitable in adverse economic environments. The Portfolio also benefited from a relatively low exposure to technology and telecommunications, sectors that continued to be weak. Nevertheless, the Portfolio's technology and telecommunications holdings were not spared in the general sell-off of these sectors. The Portfolio's financial holdings were hurt by weak capital markets. In addition, certain of the Portfolio's holdings had direct insurance exposure to the September 11th tragedy. We still have confidence in these companies' long-term ability to generate strong returns-on-capital, and were heartened to see many of them rebound during the fourth quarter. Stock prices whipsawed as investors' views of the global economic outlook constantly shifted in this eventful year. This state of flux underscored the difficulty of predicting such a volatile market. It is precisely the difficulty of predicting the economic cycle that gives us added confidence in our philosophy of investing in companies that have demonstrated the ability to sustain high levels of financial productivity in a variety of economic environments. Lazard's outlook for non-U.S. stocks is positive, as valuations have compressed after two years of declines while profitability appears to remain fairly strong. In addition, the MSCI EAFE Index has never declined for three consecutive years since its inception in 1970. Lazard remains confident that the companies in the Portfolio can continue to generate strong returns-on-capital over the long-term, and that long-term financial productivity remains the key to successful investing. LAZARD BOND PORTFOLIO For the year, Lazard Bond Portfolio Institutional Shares posted a total return of 7.68%, while Open Shares posted a total return of 7.49%, each trailing the 8.96% return of the Lehman Intermediate Government/Corporate Bond(R) Index. As a result of higher short-term rates and the Treasury Department's announcement that it would retire a substantial portion of its outstanding long-term debt, the yield curve had assumed a somewhat inverted shape in late 2000, with short-term rates significantly higher than intermediate-term rates. The Federal Reserve did not waste much time in reversing course in 2001, enacting its first interest rate cut on January 3rd. The Fed continued to cut rates throughout the year, reducing short-term rates eleven times. Eventually, investors perceived a bottom to the economy and began to add risk back to their portfolios. U.S. corporate bonds started the year with a surge, as investors became more optimistic about an eventual economic recovery. Momentum carried the corporate sector through late summer, as investors embraced not only corporate credit risk, but lower-quality issuers. The September 11th terrorist attacks cast a chill over financial markets, but the sector quickly recovered and closed the year strongly. The high yield market had a more fitful year. The market started strongly, but negative earnings announcements acted to quell any sustained momentum, and severe pressure fell on the fixed wire-line telecom sector. September's events drove risk premiums sharply upward. A year-end rally turned the market around, but high yield bonds lagged investment-grade corporates for the year. U.S. mortgage pass-through securi- 6 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- ties posted solid performance in the first half of the year, but interest rate volatility and a record wave of mortgage prepayments took their toll in the second half. For the year, the mortgage market posted solid performance overall, but trailed all other investment grade non-government asset classes. The Portfolio's allocation to the high yield corporate bond market was a negative, as was security selection in the investment-grade corporate energy sector. The Portfolio's exposure to Enron (which we sold prior to its bankruptcy filing), albeit small, had a negative impact on performance. A significant allocation to the mortgage pass-through market in the second half of the year also hurt performance. On the positive side, allocations to high quality structured assets, such as asset-backed securities and commercial mortgages, added value and a substantial increase in the allocation to investment-grade corporate bonds in April increased the Portfolio's exposure to a strong sector. LAZARD HIGH YIELD PORTFOLIO Lazard High Yield Portfolio Institutional Shares posted a total return of 2.03%, while Open Shares posted a total return of 1.72%, each trailing the 4.48% return of the Merrill Lynch High Yield Master II(R) Index for the year. U.S. high yield corporate bonds endured a fitful year, as the market seemed to alternate between optimism over an economic turnaround and the reality of disappointing corporate earnings releases. The market rallied more than 6% in January, buoyed by the initial Federal Reserve interest rate cuts and significant improvements in market liquidity. By mid-first quarter, the market gave back much of the ground it had gained, and negative earnings announcements continued to quell any sustained momentum. An additional factor in the market's poor performance was severe pressure on the fixed wire-line telecom sector, which suffered from an excess of supply, shrinking demand, and highly leveraged balance sheets. The low point came when the September terrorist attacks in the United States drove investors to seek high ground, leaving high yield bonds with little support and driving risk premiums sharply upward. By the end of the third quarter, the high yield market was in negative ground. However, the final three months saw a renewed wave of optimism that brought investors back to the market. High yield bonds posted a return of nearly 6% for the final quarter to finish 2001 well into positive territory. The telecom sector endured a very difficult year, with fixed wire-line issuers in a particularly vulnerable state. The telecom sector declined nearly 29% for the year, despite a fourth quarter rally that saw the market return nearly 7%. The Portfolio's cautious approach to the telecom sector included the avoidance of risky fixed wire-line telecom issuers while maintaining its long-term emphasis on less cyclical industries, such as health services. Both of these strategies were rewarded in 2001. The Portfolio also avoided exposure to the airline sector, which fell nearly 26% in September, and was overweight the broadcasting sector, which performed well. Security selection was also a positive contributor, with positions in the building materials industry providing a bright spot. Negative factors were positions in the chemicals and cable television sectors. LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO Lazard International Fixed-Income Portfolio Institutional Shares posted a total return of (4.40)%, while Open Shares posted a total return of (4.65)%, each trailing the (3.55)% return of the Salomon World Government Bond Index Ex-U.S.(R) for the year. International bond market performance was solid in 2001, as concern over economic prospects led investors to pursue fixed income opportunities for much of the year. Monetary policy easing by the European Central Bank and Bank of England reduced short-term rates, providing further momentum. By year-end, the bond market had begun to fall off, as an economic rebound became more likely and investors began to look to other alternatives. In Japan, where the economy remained in a protracted slump, short-term rates hovered near zero and bond returns were much more modest. Most major market currencies lost ground versus the U.S. Dollar, which had a pronounced negative impact on non-U.S. bond strategies. The Japanese Yen was particularly weak, declining by nearly 15%. European corporate bonds performed particularly well. Euro-zone issuers outperformed comparable government bonds by nearly 1.5%, while U.K. corporate bonds, courtesy of strong relative demand for 7 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- long-term securities, outperformed both the U.S. and Euro-zone corporate markets. Investment-grade European telecom issuers fared far better than did their high yield counterparts. Danish mortgages recorded strong performance, outpacing Danish government bonds. European asset-backed securities saw yield spreads decline significantly, spurring the sector to surpass government security performance. The European high yield bond market tumbled sharply in 2001, as investors proved less willing to assume below-investment-grade risk in 2001. Emerging market bonds were highlighted again by several "headline" crises, including Argentina's financial crisis, although a diversified local currency debt strategy could have weathered individual storm clouds. Significant allocations to high quality non-government assets in Europe provided support to the Portfolio's relative performance in 2001. In addition to significant allocations to asset-backed securities and Danish mortgages, the Portfolio also included an allocation to investment-grade European corporate bonds, including telecom issuers, which performed well. An allocation to European high yield corporate bonds did not fare as well, although a rather defensive positioning averted some of the fallout. The Portfolio avoided emerging market trouble spots such as Argentina, and an overweight of Eastern Europe capitalized on strengthening currencies. An overweight of South Africa, where the Rand depreciated due to investors' lack of confidence in central bank policies, was a slight negative. LAZARD STRATEGIC YIELD PORTFOLIO Lazard Strategic Yield Portfolio Institutional Shares posted a total return of 4.09%, while Open Shares posted a total return of 3.53%, compared to the 3.89% return of the One Month London Interbank Offered Rate ("LIBOR") USD Fixed Index for the year. High yield corporate bonds endured a fitful year, with both the U.S. and European markets seeming to alternate between optimism and disappointing corporate earnings. Both markets rallied at the outset, but quickly tumbled downward, with cumulative performance through mid-year ending up a mild disappointment. High yield bonds reached their low points when the September terrorist attacks in the United States eroded support and drove risk premiums sharply upward. However, by year-end, hopes of an economic turnaround had solidified, mutual fund investments were flowing into the markets and a steeper yield curve had augmented market liquidity. The U.S. high yield market recovered to post respectable performance for the year, while Europe, although remaining negative for the year, erased much of its mid-year fade. Emerging market bonds endured several "headline" events, as Turkey was forced to devalue its currency and Argentina felt the impact of a financial crisis that would linger throughout the year. Strong performance from Eastern European markets, which were relatively insulated from spillover from Argentina, provided a boost to the sector during a strong mid-year rally. The Portfolio gained momentum from a sharp decline in short-term interest rates, to which the Portfolio has significant exposure. While exposure to European high yield corporate bonds was a negative, the Portfolio did benefit from effective security selection in both high yield regions, as well as in emerging markets. Overweights of the broadcasting and health services industries, as well as avoidance of riskier telecom issuers, were positives. Security selection in the cable TV and energy sectors had a negative impact. The Portfolio had a small amount of exposure to Osprey, an Enron Trust, which had a negative impact on performance. European high yield positions were relatively defensive in nature, which hurt in the fourth quarter but was a positive overall. Diversification in emerging markets was also a positive contributor to performance. An overweight to Brazil was a negative early in the year, as the currency declined, and an underweight at year-end left the Portfolio unable to capitalize on a rebound. However, the Portfolio avoided Argentina, and an overweight in Eastern Europe capitalized on strengthening currencies. Asset-backed securities provided a buffer against market volatility while providing a modest level of incremental performance, but a modest allocation to mortgage pass-throughs during a market sell-off in November was a negative. 8 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONCLUDED) - -------------------------------------------------------------------------------- LAZARD MORTGAGE PORTFOLIO For the year, Lazard Mortgage Portfolio posted a total return of 7.44%, trailing the 8.22% return of the Lehman Fixed-Rate Mortgage-Backed Securities ("MBS")(R) Index. The U.S. mortgage pass-through market performed well in 2001, despite the negative impact of several market factors. Persistent weakness in the U.S. economy spurred the Federal Reserve to embark on an aggressive program of rate reduction. This activity, in addition to changing expectations for an economic recovery, caused the bond market to remain volatile throughout the year. Intermediate-term interest rates declined for the first nine months of the year, then rose sharply toward year-end, as investors perceived a greater chance of recovery. Mortgage rates dropped to all-time lows late in the year, triggering a record wave of mortgage prepayments as homeowners attempted to take advantage of the opportunity. As economic prospects improved in the fourth quarter, interest rates rose sharply. Mortgages, which are particularly sensitive during these periods, were buffeted during the last two months of the year. Despite a challenging year, overall mortgage market performance was strong. Other structured asset classes registered strong performance in 2001 and, in fact, offered attractive risk-adjusted alternatives to the mortgage market. Strong demand for securities in the U.S. commercial mortgage market allowed the sector to absorb a significant level of new issuance. The strong investor support allowed the market to weather several obstacles, not the least of which were doubts about the ability of the economy to rebound. High-quality asset-backed bonds also provided a solid year, overcoming some negative sentiment with respect to consumer credit fundamentals. Investors were attracted to the sector's extremely high liquidity and defensive nature. The Portfolio was hurt by an underweight of GNMA mortgages, which outperformed mortgages originated through the two other primary agencies, FHLMC and FNMA. The Portfolio was also more sensitive to volatile interest rates during the first half of the year, which negatively impacted performance. An emphasis on lower coupon mortgages was a positive factor, as these issues exhibited less sensitivity to prepayment risk. The Portfolio also maintained modest allocations to asset-backed securities and commercial mortgages as both sectors provided better risk-adjusted performance relative to mortgages in the fourth quarter. NOTES TO INVESTMENT OVERVIEWS: All returns are for the year ended December 31, 2001 and assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolios have been waived and/or reimbursed by the Fund's Investment Manager and/or Administrator; without such waiver/reimbursement of expenses, the Portfolios' returns would have been lower. 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, have no fees or costs and are not available for investment. Past performance is not indicative, nor a guarantee, of future results. 9 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS - -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD EQUITY PORTFOLIO, S&P 500(R)INDEX, S&P/BARRA VALUE(R)INDEX AND RUSSELL 1000(R)VALUE INDEX* [The table below represents a line chart in the printed report.] EQUITY PORTFOLIO INSTITUTIONAL S&P 500 S&P/BARRA RUSSELL 1000 SHARES INDEX VALUE INDEX VALUE INDEX Dec-91 10000 10000 10000 10000 10105.3 9813.7 10000 10015.8 10372.8 9940.79 10203 10261 10056.7 9747.44 10042.8 10112.2 10010.9 10033.6 10532.9 10547.6 9994.64 10082.8 10562.4 10600.3 9596.48 9932.76 10475.8 10534.2 9870.11 10338.5 10854 10941.1 9593.22 10126.9 10539.2 10606.4 9739.81 10245.9 10655.1 10753.2 9903.64 10281.2 10569.9 10763.2 10377.6 10631.3 10856.3 11116.3 Dec-92 10525.8 10761.7 11052.8 11381.1 10724 10851.7 11357.9 11711.6 10848 10999.6 11749.7 12124.1 11318.9 11231.7 12074 12481.4 11088.8 10960.2 12025.7 12321.5 11378.7 11253.4 12250.6 12569.2 11444.9 11286.4 12412.3 12846.3 11467.5 11241 12566.2 12989.9 11893.5 11667.5 13058.8 13459 11876.5 11578 13053.6 13480.4 12358.4 11817.6 13124.5 13471.1 12264.3 11705 12889.7 13193 Dec-93 12485.4 11846.5 13109.1 13443.7 13114.6 12249.2 13720.2 13952.4 12943.8 11916.8 13223.8 13475.2 12377.5 11397.2 12679.9 12974 12584.3 11543.3 12947 13222.8 12733.5 11732.8 13161.2 13375.1 12436.5 11445.2 12797.2 13054.8 12874.3 11821 13229.7 13460.9 13452.1 12305.7 13603.7 13847.7 13235.4 12004.8 13124.9 13388.1 13421.7 12274.6 13410.6 13574.7 12942 11827.5 12867.2 13026.3 Dec-94 13013.4 12003 13025.2 13176.3 13231.1 12314.2 13378 13581.9 13808.4 12794.1 13897.4 14118.9 14196.4 13171.6 14280.6 14428.7 14592.1 13559.5 14750.7 14884.7 15199.7 14101.5 15407 15511.2 15674.4 14429.1 15523.9 15721.3 16269.5 14907.6 16058.7 16268.6 16517.2 14945 16195.8 16498.5 17088.7 15575.7 16759.1 17095.1 16974.3 15520 16498.2 16925.3 17758.5 16201.4 17362.8 17782.6 Dec-95 17917.9 16513.4 17844.1 18229.4 18535.5 17075.5 18378.4 18797.5 19060.3 17233.8 18550.8 18939.6 19214.7 17399.8 18985.1 19261.6 19626.9 17656.2 19178.3 19335.5 19860.8 18111.6 19467.3 19577.2 19658.8 18180.6 19373.3 19593.3 18589.3 17377.4 18556 18852.8 19218.6 17743.9 19068.1 19392 19911.8 18742.5 19884.8 20162.9 20389.3 19259.4 20558.9 20942.3 21765.1 20715.2 22131.6 22460.9 Dec-96 21485.7 20304.9 21768.7 22174.3 22513.1 21573.5 22772.2 23249.3 22781.1 21742.7 22938.4 23590.8 21932.4 20849.3 22154 22742.5 22591.2 22094 22984.7 23697.9 24178 23439 24426.3 25021.7 24971.9 24489.1 25359.4 26095.1 26843.1 26437.7 27388.2 28058.2 25904.9 24956.7 26150.2 27058.5 27030.7 26323.5 27682.6 28693.9 25484.1 25444.3 26665.3 27892.2 26344.1 26622.2 27681.8 29125.3 Dec-97 26884.1 27079.3 28296.3 29975.5 26843.8 27378.8 27947.4 29551.4 28767.9 29353.3 30043.8 31540.8 30463.3 30856.5 31565.5 33469.8 30692 31166.9 31939.2 33693.7 29884.8 30630.8 31489.8 33194 30425.7 31875.1 31728.8 33619.6 29640.8 31534 31040.3 33026.2 24948.6 26968.5 26049 28111.2 25856.8 28698.5 27631.8 29724.8 28620.8 31036 29796.2 32027.3 30366.7 32918.4 31348.2 33519.4 Dec-98 31537 34818.4 32449.2 34660.5 32262.4 36268.6 33104.7 34937.4 31175.1 35142.4 32391.9 34444.4 31929.3 36549.9 33373.7 35157.1 33901.9 37966.2 36250.9 38440.8 33480.5 37069.8 35610.3 38018.3 34974.4 39127.2 36978.1 39122 34002.1 37905.6 35841 37976.5 32757.6 37716.1 34934.3 36567.2 31162.3 36681.9 33567.3 35289.1 32654.4 39003.6 35462.2 37320.4 32625 39796.5 35254.4 37028.5 Dec-99 32869.7 42140.5 36578.9 37207.4 31778.7 40023.4 35414.9 35993.7 30328.3 39265.8 33202.2 33319.4 32839.2 43107.1 36664.2 37384.6 32215.3 41807.6 36418.9 36949.5 32386.7 40949.7 36532.5 37338.9 31747.7 41959.1 35089.5 35632.5 31419.7 41304.2 35791.6 36078.7 33145.6 43866.7 38191.1 38086.1 31582.8 41552.7 38181.9 38434.9 33001.8 41377 38895.2 39378.9 31087.7 38114.9 36904.9 37917.2 Dec-00 32001.7 38300.9 38804 39816.8 33915.4 39660.1 40442.3 39970.1 32441.8 36044.3 37761.4 38858.5 30968.9 33760.9 36271.4 37485.3 32844.4 36384.5 38732 39323.6 33628.4 36627.5 39137.1 40206.4 32481.6 35736 37869.5 39313.8 32078.9 35384.4 37214.7 39230.1 30487.1 33170.4 35063.7 37658.9 27562.1 30491.9 31733 35008.5 28220.9 31073 31733 34707.4 29869 33457.6 33748.1 36723.9 Dec-01 30113 33753 34253 37587 - -------------------------------------------------------------------------------- Equity Portfolio Institutional Shares ....... $30,113 S&P 500 Index ............................... 33,753 S&P/BARRA Value Index ....................... 34,253 Russell 1000 Value Index .................... 37,587 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED DECEMBER 31, 2001 INSTITUTIONAL SHARES OPEN SHARES ------------------------ ------------------ ONE FIVE TEN ONE SINCE YEAR YEARS YEARS YEAR INCEPTION+ ----- ---- ----- ----- ---------- Equity Portfolio** ......... (5.90)% 6.98% 11.65% (6.23)% 5.76% S&P 500 Index .............. (11.88) 10.70 12.94 (11.88) 10.33 S&P/BARRA Value Index ...... (11.71) 8.80 13.86 (11.71) 8.62 Russell 1000 Value Index ... (5.59) 11.13 14.16 (5.59) 10.18 - -------------------------------------------------------------------------------- - ---------- * All returns assume reinvestment of all dividends and distributions, if any. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. 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, have no fees or costs and are not available for investment. The S&P 500 Index is a market capitalization-weighted index of 500 common stocks, designed to measure performance of the broad domestic economy through changes in the aggregate market value of these stocks, which represent all major industries. The S&P/BARRA Value Index is a capitalization-weighted index of all the stocks in the S&P 500 Index that have low price-to-book ratios. The Russell 1000 Value Index measures the performance of those companies in the Russell 1000 Index (consisting of the 1,000 largest U.S. companies by capitalization) with lower price-to-book ratios and lower forecasted growth values. ** The performance of Institutional Shares may be greater than or less than the performance of Open Shares, based on the differences in fees borne by shareholders investing in different classes. + The inception date for Open Shares was February 5, 1997. 10 THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS (CONTINUED) LAZARD MID CAP PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD MID CAP PORTFOLIO, RUSSELL MIDCAP(R)INDEX AND RUSSELL MIDCAP VALUE INDEX* [The table below represents a line chart in the printed report.] MID CAP PORTFOLIO RUSSELL MIDCAP RUSSELL MIDCAP INSTITUTIONAL SHARES INDEX VALUE INDEX -------------------- -------------- -------------- 11-4-97 10000 10000 10000 9990 10033.3 10166.9 Dec-97 10274.7 10309.2 10555.9 10284.7 10115.4 10350.8 11145.9 10906.4 11042.3 11656.6 11423.4 11610.8 11696.7 11452 11546 11115.9 11097.5 11276.3 Jun-98 10915.8 11251.2 11312.2 10174.6 10714.6 10738.7 8674.86 9000.83 9228.75 9095.59 9583.37 9767.24 9536.73 10236.9 10399.8 10128 10721.6 10765.2 Dec-98 10650.1 11350.4 11092.4 10538.3 11330.9 10833.9 10222.1 10954 10595.7 10425.5 11297.2 10747 11342 12131.7 11764.9 11474.7 12096.9 11814 Jun-99 11739.2 12523.9 11948.7 11199.2 12179.5 11649.6 10476.2 11864.8 11247 10026.3 11447.7 10677.7 10445.8 11990.3 10992.8 10722 12335.2 10791.2 Dec-99 11116.5 13420.2 11080.3 10219.5 12976 10417.5 10642.6 13973.3 9981.89 11797.7 14773.5 11192 11643.1 14074.3 11236.8 11838.7 13701.6 11429.9 Jun-00 11674.2 14106.9 11003.9 11612.3 13948.6 11261.1 12732.3 15285.4 11951.5 12876.2 15067.6 12065.9 13258.6 14835 12295.2 12769.4 13499.8 12134.9 Dec-00 13612.2 14527.2 13205.2 13983.4 14761.2 13157.3 13899.4 13862.7 13101.6 13419.9 13002.6 12738.8 14282.8 14114.6 13439.1 15001.8 14377.6 13820.6 Jun-01 14857.8 14242.1 13636 14582.3 13834.4 13581.2 14718 13302.5 13332.7 12913.5 11698.3 12060.7 13697.6 12161.6 12124.6 14639.3 13180.7 12973.8 Dec-01 15361 13708 13512.5 - -------------------------------------------------------------------------------- Mid Cap Portfolio Institutional Shares ...... $15,361 Russell Mid Cap Index ....................... 13,708 Russell Midcap Value Index .................. 13,513 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED DECEMBER 31, 2001 ONE SINCE YEAR INCEPTION+ ---- ---------- Mid Cap Portfolio** Institutional Shares ................................. 12.85% 10.87% Open Shares .......................................... 12.50 10.51 Russell Midcap Index .................................. (5.62) 7.88 Russell Midcap Value Index ............................ 2.33 7.51 - -------------------------------------------------------------------------------- - ---------- * All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived and/or reimbursed by the Portfolio's Investment Manager and/or Administrator; without such waiver/reimbursement of expenses, the Portfolio's returns would have been lower. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. 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, have no fees or costs and are not available for investment. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index. The Russell Midcap Value Index measures performance of those companies in the Russell Midcap Index with lower price-to-book ratios and lower forecasted growth values. ** The performance of Institutional Shares may be greater than or less than the performance of Open Shares, based on the differences in fees borne by shareholders investing in different classes. + The inception date for the Portfolio was November 4, 1997. 11 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD SMALL CAP PORTFOLIO, RUSSELL 2000(R)INDEX AND RUSSELL 2000 VALUE INDEX* [Data below represents line chart in printed piece.] SMALL CAP PORTFOLIO RUSSELL 2000 RUSSELL 2000 INSTITUTIONAL SHARES INDEX VALUE INDEX -------------------- ------------ ------------ Dec-91 10000 10000 10000 10825.3 10811 10836.5 11314.8 11126.6 11353.4 11314.8 10750 11229.9 11046.1 10372.7 11074.3 11055.7 10510.7 11375.5 10479.8 10016.8 11007.1 10767.8 10365 11421.8 10460.7 10071.8 11199.1 10537.4 10303.8 11410.6 11046.1 10629 11676.9 12015.4 11443 12399.4 Dec-92 12475.5 11841.3 12913.6 12859.9 12241.8 13598.8 12975.3 11959.5 13653.2 13600 12347.4 14171 13282.8 12008 13830.5 13898 12539.1 14265.4 14272.8 12617 14400 14392.9 12791.2 14647.2 15234.9 13343.5 15219.6 15528.6 13720.1 15584.4 15675.5 14073.4 15941.3 15469.9 13614.9 15535.6 Dec-93 16229.5 14080.1 15992.7 16825.1 14521.2 16562.3 16835.7 14468.5 16513.8 16038.1 13706.5 15774.8 16016.8 13787.7 15929.9 16059.4 13632.6 15907.1 15878.6 13172.7 15494.3 16212.4 13389.2 15780.7 17148.8 14135 16401.3 17148.8 14087.1 16226.8 16876.6 14030.2 15929.2 16027.3 13463.2 15286.1 Dec-94 16559.4 13823.6 15744.9 16490.1 13649 15668.7 17194 14217.2 16248.9 17609.5 14460.9 16328 17978.7 14782.2 16813.6 18509.6 15036.3 17174.1 19340.4 15816.4 17760.9 20229.5 16727.5 18409 20333.5 17073.6 18956 20345 17378.5 19239 19178.2 16601.3 18470.6 19986.9 17298.8 19204.6 Dec-95 20123.7 17755.1 19799.5 20300.4 17735.9 19930.8 21057.4 18288.7 20243.1 21435.9 18660.9 20668 22273.3 19658.7 21231.9 23019.1 20433.5 21769.4 22361.8 19594.5 21512.3 20756.4 17883.1 20368.8 22096.3 18921.4 21252.6 22892.7 19660.8 21832.8 23094.9 19357.8 22086 24472.8 20155.4 23274.5 Dec-96 24939.4 20683.7 24029.9 25656.2 21096.9 24399.3 25561.5 20585.3 24630.8 24628.3 19613.9 23970.2 25345.1 19668.6 24322.6 27821.5 21856.8 26258.9 29106.2 22793.5 27587.9 30556.7 23854.1 28745.8 31205.9 24399.9 29202.2 32628.8 26185.7 31144.2 31344.1 25035.4 30297.4 31205.9 24873.4 30629.4 Dec-97 31936.6 25308.7 31667.8 31633.5 24909.3 31094.9 33898.8 26751.1 32974.6 35111.1 27854.3 34312 35206.9 28008.4 34481.5 33356.4 26499.8 33260.9 32319 26555.5 33073 30037.3 24405.8 30482.4 24053.8 19666.7 25708.5 24712.9 21205.8 27160.3 26141.3 22070.6 27966.7 27215.7 23226.9 28723.7 Dec-98 27907 24664.2 29624.5 27697.7 24991.9 28952 25709 22967.8 26975.5 25725.5 23326.4 26752.9 28501.2 25416.7 29195.2 29880.7 25787.7 30092.7 30969.9 26953.3 31182.3 30520.8 26213.7 30442.3 28799.4 25243.8 29329.7 28283.9 25248.9 28743.4 26879.6 25352.7 28168.2 27412.9 26865.2 28314.1 Dec-99 28399.8 29906.3 29183.9 27439.9 29426.3 28420.8 27063.9 34285.8 30157.9 29514.8 32025.3 30299.3 29771.6 30098.1 30478.7 29325.7 28343.9 30013.6 29565.2 30814.7 30890.6 29787.9 29823.3 31919.8 31391.3 32098.8 33347.6 31044.8 31155.1 33157.5 31409.2 29764.6 33039.8 30212.6 26709.3 32367.5 Dec-00 32914.5 29003.6 35845.4 34007.2 30513.6 36834.7 33096.9 28511.6 36783.9 31894.8 27116.8 36193.8 33387.4 29238.1 37869.3 35227.1 29956.5 38842.9 35992.2 30990.6 40405.5 35646.7 29313.1 39499.6 35911.6 28366.8 39362.2 32284.5 24548.4 35017.2 33669.5 25984.5 35932.2 36422 27995.7 38514.6 Dec-01 38858.6 29737 40883 - -------------------------------------------------------------------------------- Small Cap Portfolio Institutional Shares .... $38,859 Russell 2000 Index .......................... 29,737 Russell 2000 Value Index .................... 40,883 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED DECEMBER 31, 2001 INSTITUTIONAL SHARES OPEN SHARES ------------------------- ------------------ ONE FIVE TEN ONE SINCE YEAR YEARS YEARS YEAR INCEPTION+ ----- ---- ----- ----- ---------- Small Cap Portfolio** ...... 18.06% 9.27% 14.54% 17.69% 8.75% Russell 2000 Index ......... 2.49 7.52 11.51 2.49 7.28 Russell 2000 Value Index ... 14.03 11.21 15.12 14.03 11.09 - -------------------------------------------------------------------------------- - ---------- * ALL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, IF ANY. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. 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, have no fees or costs and are not available for investment. The Russell 2000 Index is comprised of the 2,000 smallest U.S. companies included in the Russell 3000(R) Index (consisting of the 3,000 largest U.S. companies by capitalization). The Russell 2000 Value Index measures the performance of those companies in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth values. ** The performance of Institutional Shares may be greater than or less than the performance of Open Shares, based on the differences in fees borne by shareholders investing in different classes. + The inception date for Open Shares was January 30, 1997. 12 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS (CONTINUED) LAZARD INTERNATIONAL EQUITY PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD INTERNATIONAL EQUITY PORTFOLIO AND MORGAN STANLEY CAPITAL INTERNATIONAL ("MSCI"(R)) EUROPE, AUSTRALASIA AND FAR EAST ("EAFE"(R)) INDEX* [Data below represents line chart in printed piece.] INTERNATIONAL EQUITY PORTFOLIO INSTITUTIONAL SHARES MSCI EAFE INDEX Dec-91 10000 10000 10135.9 9786.59 10242.7 9436.3 10000 8813.3 10213.6 8854.76 10689.3 9447.45 10485.4 8999.64 9883.5 8769.31 9766.99 9319.33 9330.1 9135.3 9165.05 8656.12 9126.21 8737.57 Dec-92 9337.86 8782.76 9259.06 8781.64 9465.91 9046.96 9731.87 9835.55 9948.57 10769 10224.4 10996.4 10106.2 10824.8 10412.5 11203.8 11182.3 11808.6 10856.6 11542.8 11429.1 11898.5 11212 10858.5 Dec-93 12237 11642.5 13399.2 12626.8 12982 12591.9 12445.6 12049.5 12912.5 12560.8 12833 12488.6 12554.9 12665.1 13177.9 12786.9 13777.3 13089.7 13107.9 12677.3 13337.7 13099.5 12538.5 12469.9 Dec-94 12265.9 12548 11676.1 12065.9 11752.6 12031.3 11905.5 12781.7 12418.9 13262.4 12528.1 13104.3 12735.6 12874.5 13543.9 13676 13303.6 13154.3 13598.5 13411.2 13380 13050.7 13511.1 13413.8 Dec-95 13877.7 13954.2 13955.4 14011.5 14155.2 14058.9 14499.4 14357.5 14859.7 14774.9 14759.3 14503 15038.2 14584.7 14624.6 14158.4 14646.9 14189.4 14992.7 14566.4 15059.7 14417.4 15851.7 14991 Dec-96 16047.7 14798.3 15635.2 14280.3 16024.1 14514 16412.9 14566.5 16294.7 14643.8 16978.2 15596.7 18034.2 16456.9 18449.4 16723.1 17286.7 15474.2 18746 16341.1 17583.3 15085.1 17702 14931.3 Dec-97 17947.6 15061.5 18371.6 15749.8 19425.1 16760.4 20632.7 17276.5 20966.7 17413.2 21532.8 17328.7 21302.4 17460.4 21560.2 17637.4 18600 15452.4 17657 14978.6 18998.9 16540 20083.7 17387.4 Dec-98 20828.4 18073.1 20747.2 18019.7 20199.5 17590.3 20870.1 18324.6 21840.5 19067.1 21047.7 18085.2 21950.7 18790.4 22648.7 19349 23085.8 19419.7 23072 19615.2 23704.2 20350 24130.8 21056.8 Dec-99 25844.1 22946.7 23780.7 21488.7 23915.1 22067.2 25036 22923.4 24019.5 21717.1 23795.4 21186.7 24678.2 22015.3 24109.5 21092.3 24114.3 21275.4 23079.8 20239.4 22756.7 19761.3 22216.7 19020.3 Dec-00 23116.5 19696.3 22944.9 19686.2 21742.2 18210.3 20007.1 16996.8 21089.5 18177.9 20557.2 17536.3 19922 16819.2 19131.1 16513.2 18880.5 16095 16659.8 14464.8 16850.7 14834.4 17284.4 15381.9 Dec-01 17370.8 15472.4 - -------------------------------------------------------------------------------- International Equity Portfolio Institutional Shares ....... $17,371 MSCI EAFE Index ........................................... 15,472 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED DECEMBER 31, 2001 INSTITUTIONAL SHARES OPEN SHARES ------------------------ ------------------ ONE FIVE TEN ONE SINCE YEAR YEARS YEARS YEAR INCEPTION+ ------ ----- ----- ---- ---------- International Equity Portfolio** .................. (24.85)% 1.60% 5.68% (25.02)% 1.78% MSCI EAFE Index ................ (21.44) 0.89 4.46 (21.44) 1.60 - -------------------------------------------------------------------------------- - ---------- * All returns assume reinvestment of all dividends and distributions, if any. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. The performance data of the index has been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to its accuracy. The index is unmanaged, has no fees or costs and is not available for investment. The MSCI EAFE Index is a broadly diversified international index comprised of equity securities of approximately 1,000 companies located outside the United States. ** The performance of Institutional Shares may be greater than or less than the performance of Open Shares, based on the differences in fees borne by shareholders investing in different classes. + The inception date for Open Shares was January 23, 1997. 13 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS (CONTINUED) LAZARD INTERNATIONAL SMALL CAP PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD INTERNATIONAL SMALL CAP PORTFOLIO AND MSCI EAFE SMALL CAP(R)INDEX* [Data below represents line chart in printed piece.] INTERNATIONAL SMALL CAP PORTFOLIO MSCI EAFE INSTITUTIONAL SHARES SMALL CAP INDEX -------------------- --------------- 12-1-93 10000 10000 Dec-93 10872.5 10854.3 12082.8 12056.9 11882.7 12286.4 11162.6 12009.5 11042.6 12515.7 10992.5 12357.5 10712.5 12610.7 10912.5 12634.4 11352.6 12761 11002.5 12302.1 11092.6 12476.1 10612.5 11605.9 Dec-94 10382.4 11756.3 10072.3 11305.3 10012.3 11155 9782.3 11384.4 10002.3 11637.6 10272.4 11368.6 10362.4 11115.4 10752.5 11827.5 10652.5 11495.1 10962.5 11463.5 10532.4 11004.7 10502.4 11139.1 Dec-95 10567.7 11519 10738.7 11867 10829.1 11977.8 10969.9 12215.1 11412.3 12856 11492.8 12594.8 11533 12579.1 11130.8 11882.8 11482.7 11922.4 11553.1 11977.8 11643.6 11764.2 12186.6 11914.4 Dec-96 12221.4 11503.1 12385.4 11271 12621 11481.2 12426.3 11191.5 11985.8 10818.4 12556.1 11638 13124 11847.6 13010.4 11430.7 12618 10701.2 13351.2 10475.4 12711 9895.2 12308.2 9205.2 Dec-97 12254.2 8668.5 12526.7 9210.4 13679.8 10035.7 14780.5 10257.6 15440.9 10237.9 15786.8 10271.2 15314.8 9862.5 15115.7 9727.8 13341.1 8433.4 12315.2 8045.6 12657.5 8690.1 12753.7 9105.3 Dec-98 13179.7 9140.2 12949.1 9025.2 12787.2 8911.3 12996 9393.9 13642.6 10092.2 13399.8 9726.3 14047 10243.4 14601.8 10556.7 14853.7 10781 15017.1 10747.1 14866.2 10599.8 15412.4 10657.3 Dec-99 16616.1 10755.8 16662.6 10768.6 17204.8 11033.2 17534.5 11294.6 16734.4 10446 16510.1 10424.6 16804.7 11341.4 16440 10627.9 16786.9 11130.1 16442.2 10490.3 15871.7 9760.7 15480.5 9731.2 Dec-00 15878.3 9762.5 15891 10049.8 16131 9842.8 14842.1 9055.1 15372.6 9805.1 15436 9747.8 15423.4 9442.5 15196.2 9045 15361.8 9134.5 13303.4 7886.3 13985.2 8278.2 14680.2 8590.3 Dec-01 14803.2 8367 - -------------------------------------------------------------------------------- International Small Cap Portfolio Institutional Shares ....... $14,803 MSCI EAFE Small Cap Index .................................... 8,367 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED DECEMBER 31, 2001 INSTITUTIONAL SHARES OPEN SHARES --------------------------- ------------------- ONE FIVE SINCE ONE SINCE YEAR YEARS INCEPTION+ YEAR INCEPTION+ ------ ----- ---------- ------ ---------- International Small Cap Portfolio** ...... (6.77) 3.91% 4.97% (7.33) 2.88% MSCI EAFE Small Cap Index ... (14.29) (6.17) (2.18) (14.29) (5.81) ------ ----- ----- ------ ----- - -------------------------------------------------------------------------------- - ---------- * All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived and/or reimbursed by the Portfolio's Investment Manager and/or Administrator; without such waiver/reimbursement of expenses, the Portfolio's returns would have been lower. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. The performance data of the index has been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to its accuracy. The index is unmanaged, has no fees or costs and is not available for investment. The MSCI EAFE Small Cap Index is an arithmetic, market value-weighted average of the performance of securities of small cap companies listed on the stock exchanges of EAFE Index countries. ** The performance of Institutional Shares may be greater than or less than the performance of Open Shares, based on the differences in fees borne by shareholders investing in different classes. + The inception date for Institutional Shares was December 1, 1993 and for Open Shares was February 13, 1997. 14 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD EMERGING MARKETS PORTFOLIO AND MSCI EMERGING MARKETS FREE ("EMF"(R)) INDEX* [Data below represents line chart in printed piece.] EMERGING MARKETS PORTFOLIO INSTITUTIONAL SHARES MSCI EMF INDEX -------------------------- -------------- 7-15-94 10000 10000 10210 10280 11300 11555.7 11660 11687.5 11580 11477.1 11320 10880.3 Dec-94 9860 10006.6 8640 8941.91 8420 8712.99 8400 8768.76 8650 9162.48 9160 9649.92 9140 9678.87 9490 9896.16 9370 9663.01 9460 9617.11 9040 9248.96 8920 9084.05 Dec-95 9280.04 9486.93 10163.9 10161.3 10244.2 9999.7 10244.2 10077.6 10897.5 10480.5 11269.1 10433.7 11168.7 10498.8 10676.6 9781.27 10867.4 10031.7 11168.7 10118.5 11048.2 9848.69 11369.6 10013.7 Dec-96 11472.7 10059 12240.3 10745.1 12762.2 11205.4 12639.4 10911 12772.4 10930.3 13189.1 11243.1 14164.6 11844.9 14143.8 12021.7 12597.6 10491.9 13178.8 10782.6 10770 9013.36 10252.4 8684.48 Dec-97 10343.9 8893.76 9781.73 8196.22 10625 9051.71 11243.4 9444.52 11175.9 9341.64 9837.95 8061.45 9276.2 7215.84 9535.01 7444.62 6649.72 5292.08 7088.6 5627.79 7684.75 6220.4 8247.27 6737.74 Dec-98 7914.91 6640.1 7356.11 6532.97 7344.34 6596.51 8404.5 7465.87 9293.28 8389.55 9020.05 8340.75 10103.4 9287.36 9818.45 9034.74 9640.73 9116.94 9286.73 8808.79 9446.27 8996.35 10657.3 9803.01 Dec-99 12330.5 11049.8 12007.5 11115.6 12100 11262.3 12158.1 11317.3 10902.2 10244.4 10418.1 9820.9 11282.3 10166.8 10659.7 9643.96 10820.7 9691.38 9898.76 8845.16 9253.56 8203.86 8331.9 7486.57 Dec-00 8689.34 7667.31 9867.44 8723.1 8885.44 8040.08 8030.39 7250.39 8585.29 7608.64 8828.25 7699.46 8724.08 7541.41 8215.47 7064.86 8119.35 6994.92 6928.24 5912.25 7263.56 6279.58 8015.34 6935.16 Dec-01 8414.43 7485.82 - -------------------------------------------------------------------------------- Emerging Markets Portfolio Institutional Shares ........... $8,414 MSCI EMF Index ............................................ 7,486 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED DECEMBER 31, 2001 INSTITUTIONAL SHARES OPEN SHARES --------------------------- ------------------- ONE FIVE SINCE ONE SINCE YEAR YEARS INCEPTION+ YEAR INCEPTION+ ------ ----- ---------- ------ ---------- Emerging Markets Portfolio** .............. (3.16)% (6.01)% (2.29)% (3.54)% (6.65)% MSCI EMF Index ............. (2.37) (5.74) (3.81) (2.37) (5.99) - -------------------------------------------------------------------------------- - ---------- * All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived and/or reimbursed by the Portfolio's Investment Manager and/or Administrator; without such waiver/reimbursement of expenses, the Portfolio's returns would have been lower. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. The performance data of the index has been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to its accuracy. The index is unmanaged, has no fees or costs and is not available for investment. The MSCI EMF Index is comprised of emerging market securities in countries open to non-local investors. ** The performance of Institutional Shares may be greater than or less than the performance of Open Shares, based on the differences in fees borne by shareholders investing in different classes. + The inception date for Institutional Shares was July 15, 1994 and for Open Shares was January 8, 1997. 15 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO AND MSCI EAFE INDEX* [The table below represents a line chart in the printed report.] INTERNATIONAL EQUITY SELECT PORTFOLIO INSTITUTIONAL SHARES MSCI EAFE INDEX 5-31-01 10000 10000 Jun-01 9700 9591 Jul-01 9330.43 9416.49 Aug-01 9090.36 9178.25 Sep-01 8210.41 8248.4 Oct-01 8460.42 8459.15 Nov-01 8890.21 8771.63 Dec-01 9157.89 8823.65 - -------------------------------------------------------------------------------- International Equity Select Portfolio Institutional Shares ....... $9,157 MSCI EAFE Index .................................................. 8,824 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL RETURNS* PERIOD ENDED DECEMBER 31, 2001 SINCE INCEPTION+ ---------- International Equity Select Portfolio** Institutional Shares ............................................ (8.43)% Open Shares ..................................................... (8.40) MSCI EAFE Index ................................................... (11.76) - -------------------------------------------------------------------------------- - ---------- * Returns for period of less than one year are not annualized. All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived and/or reimbursed by the Portfolio's Investment Manager and/or Administrator; without such waiver/reimbursement of expenses, the Portfolio's returns would have been lower. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. The performance data of the index has been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to its accuracy. The index is unmanaged, has no fees or costs and is not available for investment. The MSCI EAFE Index is a broadly diversified international index comprised of equity securities of approximately 1,000 companies located outside the United States. ** The performance of Institutional Shares may be greater than or less than the performance of Open Shares, based on the differences in fees borne by shareholders investing in different classes. + The inception date for the Portfolio was May 31, 2001. 16 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD BOND PORTFOLIO AND LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND(R)INDEX* [The table below represents a line chart in the printed report.] BOND PORTFOLIO LEHMAN INTERMEDIATE INSTITUTIONAL SHARES GOV'T/CORP BOND INDEX Dec-91 10000 10000 9889.76 9909.45 9915.86 9948.58 9856.04 9909.46 9933.65 9996.54 10071.9 10151.5 10199.6 10301.8 10402.9 10506.6 10501 10611.7 10620.7 10755.7 10480.3 10616.2 10434.3 10575.9 Dec-92 10568.8 10717.5 10758.9 10925.9 10931.7 11098.2 10953.6 11142.4 11031.9 11232 10979.1 11207.1 11187.2 11383 11271.2 11410.9 11462.4 11591.8 11452.5 11640 11488.7 11671.1 11454 11606 Dec-93 11476.2 11659.2 11660.5 11788.7 11460.6 11614.3 11201.3 11422.7 11060.8 11344.9 11010 11352.5 11002.9 11354.1 11196.2 11517.5 11208.6 11553.6 10966.6 11447.3 10975.3 11445.7 10940.7 11393.8 Dec-94 10990.2 11434.1 11170.3 11626.8 11394.3 11868 11460.8 11935.8 11615.2 12083.2 12076.5 12448.5 12165.8 12532 12098.7 12533.7 12224.4 12647.8 12358.4 12739.4 12530.7 12881.3 12670.2 13050.7 Dec-95 12770.6 13187.4 12882 13301.2 12739.4 13145 12655.3 13077.3 12624.6 13031.1 12613.4 13021.2 12723.7 13159.6 12761.9 13198.7 12801.4 13209.1 12994.8 13393.1 13195.4 13629.8 13391 13809.5 Dec-96 13327.8 13721 13423 13774.4 13456.5 13800.7 13352.4 13705.5 13518 13866.5 13651.9 13981.6 13778.4 14109.2 14027.9 14396.3 13983.3 14323.9 14162 14490.5 14304.7 14651 14332.3 14683.3 Dec-97 14469.1 14800.7 14653.2 14994.6 14648.5 14983.1 14658.3 15031.2 14725.9 15106.6 14823.3 15217.3 14919.6 15314.7 14956.9 15368.5 15037.7 15609.8 15270.8 16001.6 15125.7 15985.8 15210.4 15984.5 Dec-98 15304.7 16048.5 15421 16136.6 15151.2 15899.4 15284.5 16018.1 15340.3 16067.2 15191.5 15943.5 15167.2 15955.3 15127.7 15940.5 15111.8 15953.3 15230.3 16101.6 15224.3 16143.5 15257.8 16163.5 Dec-99 15235.5 16110.5 15145 16051.7 15271.5 16183.9 15349.3 16352.9 15332.5 16315.3 15316.7 16341.4 15602 16629.7 15702.6 16756.2 15809.4 16954.2 15912.5 17108.4 15948.5 17186.4 16106.4 17419.8 Dec-00 16382.3 17740.8 16638.8 18032 16787.9 18202.5 16881.9 18341.9 16834.1 18293.5 16930.6 18396.7 16973.9 18465.4 17340.2 18848.9 17491.1 19037.4 17673 19315 17950.5 19635.6 17799.8 19439.3 Dec-01 17640.5 19331.6 - -------------------------------------------------------------------------------- Bond Portfolio Institutional Shares ............ $17,641 Lehman Intermediate Gov't/Corp Bond Index ...... 19,331 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED DECEMBER 31, 2001 INSTITUTIONAL SHARES OPEN SHARES ---------------------- ---------------- ONE FIVE TEN ONE SINCE YEAR YEARS YEARS YEAR INCEPTION+ ---- ---- ---- ---- ---------- Bond Portfolio** ................. 7.68% 5.77% 5.84% 7.49% 5.47% Lehman Intermediate Gov't/Corp Bond Index ..................... 8.96 7.10 6.81 8.96 7.25 - -------------------------------------------------------------------------------- - ---------- * All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived and/or reimbursed by the Portfolio's Investment Manager and/or Administrator; without such waiver/reimbursement of expenses, the Portfolio's returns would have been lower. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. The performance data of the index has been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to its accuracy. The index is unmanaged, has no fees or costs and is not available for investment. The Lehman Intermediate Government/Corporate Bond Index is comprised of U.S. Government and corporate bonds in the intermediate maturity range calculated by Lehman Brothers. ** The performance of Institutional Shares may be greater than or less than the performance of Open Shares, based on the differences in fees borne by shareholders investing in different classes. + The inception date for Open Shares was March 5, 1997. 17 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD HIGH YIELD PORTFOLIO AND MERRILL LYNCH HIGH YIELD MASTER II(R)INDEX* [The table below represents a line chart in the printed report.] MERRILL LYNCH HIGH YIELD PORTFOLIO HIGH YIELD INSTITUTIONAL SHARES MASTER II INDEX -------------------- --------------- 1-2-98 10000 10000 10222.3 10159.4 10473.7 10200.5 10715.9 10297.5 10848.1 10341.6 10849.7 10403.8 Jun-98 10879 10457.6 10969.3 10524.2 10353.9 9992.92 10147.8 10018.9 9801.8 9805 10227.2 10313.7 Dec-98 10290 10295.2 10421.1 10434.1 10484 10363.2 10604.1 10483.6 10774.3 10675.4 10661.8 10577.7 Jun-99 10652.2 10551.6 10624.5 10565.3 10448.2 10453.3 10377.1 10411.5 10311.4 10355.3 10522.8 10490.2 Dec-99 10592.8 10553.6 10550 10513.2 10593.3 10535.7 10370.8 10381 10273.3 10381.1 10122.8 10250.6 Jun-00 10234.2 10448.8 10259.4 10505 10224.6 10608.1 9988.37 10516.4 9444 10181.4 8848.08 9790.97 Dec-00 8984.34 10013.8 9767.42 10647.7 9886.39 10809.4 9487.97 10592.9 9322.4 10449.1 9455.71 10632.4 Jun-01 9242.96 10352.4 9117.62 10520.6 9288.49 10603.4 8663.19 9870.93 8886.26 10186.8 9209.28 10545.4 Dec-01 9166.92 10462.1 - -------------------------------------------------------------------------------- High Yield Portfolio Institutional Shares ................. $ 9,167 Merrill Lynch High Yield Master II Index................... 10,462 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED DECEMBER 31, 2001 INSTITUTIONAL SHARES OPEN SHARES -------------------- ------------------ ONE SINCE ONE SINCE YEAR INCEPTION+ YEAR INCEPTION+ ---- ---------- ---- ---------- High Yield Portfolio** ........... 2.03% (2.15)% 1.72% (3.77)% Merrill Lynch High Yield Master II Index ................ 4.48 1.14 4.48 0.63 - ---------- * All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived and/or reimbursed by the Portfolio's Investment Manager and/or Administrator; without such waiver/reimbursement of expenses, the Portfolio's returns would have been lower. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. The performance data of the index has been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to its accuracy. The index is unmanaged, has no fees or costs and is not available for investment. 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 performance of Institutional Shares may be greater than or less than the performance of Open Shares, based on the differences in fees borne by shareholders investing in different classes. + The inception date for Institutional Shares was January 2, 1998 and for Open Shares was February 24, 1998. 18 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO AND SALOMON WORLD GOVERNMENT BOND INDEX EX-U.S.(R)* [The table below represents a line chart in the printed report.] INTERNATIONAL SALOMON FIXED-INCOME PORTFOLIO WORLD GOVERNMENT BOND INSTITUTIONAL SHARES INDEX EX-U.S. Dec-91 10000 10000 9709.96 9823 9722.8 9767.99 9588.47 9664.45 9647.37 9733.07 9920.56 10031.9 10108.2 10312.8 10259.7 10553.1 10557.6 10848.5 10542.9 10957 10305.8 10659 10136.2 10489.5 Dec-92 10203.5 10552.5 10371.2 10697 10568.5 10909.9 10760.1 11180.5 11112.5 11515.9 11300.8 11725.5 11184.1 11506.2 11215.4 11514.2 11588.3 11924.2 11764.8 12125.7 11748.7 12069.9 11671.7 12014.4 Dec-93 11801.9 12147.7 11885 12200 11855.9 12234.1 11941.5 12383.4 11919.4 12463.9 11842.1 12295.6 12135.1 12593.2 12124.9 12625.9 12030.5 12552.7 12265.1 12801.2 12572.7 13131.5 12351.3 12867.6 Dec-94 12294.1 12874 12474.2 13154.6 12867 13526.9 13916.5 14732.4 14307.7 15047.7 14648.4 15376.4 14730.3 15452.8 14734.8 15534.6 13958 14646.4 14328.9 15078.5 14429.6 15126.7 14535.4 15259 Dec-95 14676.6 15391.6 14417.5 15051.4 14441.1 15094.6 14444.7 15131.7 14464.9 15101.4 14517.7 15109.7 14600.4 15194.4 14978.5 15613.7 15065.5 15718.3 15089.3 15688.5 15330.9 15953.6 15519.9 16136.4 Dec-96 15486.3 16022.2 14869.8 15371.1 14755.2 15192.8 14614.3 15095.5 14321.4 14789.1 14803.1 15333.3 14989 15521.9 14626.8 15116.8 14599.1 15184.8 14959.9 15553.8 15132.1 15902.2 14821.2 15495.1 Dec-97 14622.9 15338.6 14687.9 15442.9 14925.4 15660.7 14689.7 15402.3 15011.4 15741.1 14904.1 15715.9 14872.8 15659.4 14918.9 15678.1 14857.7 16107.7 15719.4 17164.4 16305.8 17938.5 16105.2 17573 Dec-98 16552.9 18067.9 16428.8 17784.5 15857.2 17160.8 15903.2 17193.8 15887.5 17167.9 15577.7 16821.8 15251.6 16421.4 15748.8 16997.8 15817.7 17106.6 16069.2 17425.4 16115.8 17406.3 15943.3 17167.8 Dec-99 16069.6 17151.3 15438.1 16634.6 15248.2 16375.5 15722.4 16951.9 15026.7 16211.1 15184.5 16376.5 15517.5 16817.2 15184.6 16365.6 14946.2 16106.9 14882.7 16057.7 14500.5 15718.9 14707.9 16027 Dec-00 15313.8 16699.9 15361.6 16625.1 15314 16545.4 14545.8 15880.8 14642.4 15875 14546.4 15791.2 14288.9 15567.7 14674.7 15962.9 15335.1 16700.4 15141.8 16775.6 15254.6 16802.4 15238 16624 Dec-01 14640.3 16098 - -------------------------------------------------------------------------------- International Fixed-Income Portfolio Institutional Shares ..... $14,640 Salomon World Government Bond Index Ex-U.S..................... 16,098 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED DECEMBER 31, 2001 INSTITUTIONAL SHARES OPEN SHARES ------------------------ ----------------- ONE FIVE TEN ONE SINCE YEAR YEARS YEARS YEAR INCEPTION+ ---- ----- ----- ---- ---------- International Fixed-Income Portfolio** .................. (4.40)% (1.12)% 3.89% (4.65)% (1.17)% Salomon World Government Bond Index Ex-U.S.++ .............. (3.55) 0.10 4.88 (3.55) 0.10 - -------------------------------------------------------------------------------- - ---------- * All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived and/or reimbursed by the Portfolio's Investment Manager and/or Administrator; without such waiver/reimbursement of expenses, the Portfolio's returns would have been lower. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. The performance data of the index has been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to its accuracy. The index is unmanaged, has no fees or costs and is not available for investment. The Salomon World Government Bond Index Ex-U.S. is a market capitalization-weighted index of institutionally traded fixed rate non-U.S. dollar government bonds, fully hedged into U.S. dollars. ** The performance of Institutional Shares may be greater than or less than the performance of Open Shares, based on the differences in fees borne by shareholders investing in different classes. + The inception date for Open Shares was January 8, 1997. ++ "Since Inception" index performance consists of the index returns "including U.S." prior to January 1, 1993. 19 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS (CONTINUED) - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD STRATEGIC YIELD PORTFOLIO AND ONE MONTH LONDON INTERBANK OFFERED RATE ("LIBOR") USD FIXED INDEX* [The table below represents a line chart in the printed report.] Strategic Yield One Month Portfolio LIBOR USD Institutional Shares Fixed Index Dec-91 10000 10000 9922.62 10034.2 10084 10069 10204.2 10104 10202.9 10136.5 10316.8 10169.7 10418.5 10202.4 10615.5 10230.6 10727.4 10259.9 10840.6 10286.7 10375.7 10314.1 10373.2 10349.9 Dec-92 10595.6 10378.1 10875 10404.7 11086.2 10431.8 11266.2 10459.1 11276.1 10485.9 11375.1 10513.9 11679.4 10541.4 11834.1 10568.9 11930.6 10596.5 11918.7 10624.3 12096.9 10652.1 12133.2 10683.2 Dec-93 12248.1 10711.7 12493.9 10739.3 12312.2 10770.6 12065.2 10803.2 11898 10838.5 11893.8 10877.3 11805.7 10917.8 11937.6 10958 12100.2 11001.5 12032.4 11046.8 12003.1 11092.3 12059.2 11146.9 Dec-94 11961.9 11201.1 11952.1 11256.4 12012.1 11312.4 12072.7 11368.6 12350.9 11424.5 12689.4 11480.6 12761.8 11537.7 12861.7 11592.8 13000.1 11648.1 13120.5 11703.7 13211.5 11759.1 13379.1 11816.1 Dec-95 13584.1 11870.8 13860.5 11923.3 13808.6 11974.8 13909.8 12027.8 14041.4 12080.4 14176.3 12133.8 14337.8 12187.7 14425.3 12241.6 14581.1 12295.8 14899.6 12350.1 15066.3 12404.1 15294 12460.2 Dec-96 15451.7 12515.9 15644.1 12571.3 15799 12626.9 15717.6 12685.2 15804.2 12743.8 15998.4 12802.7 16155.3 12861.8 16265.2 12920.6 16182.4 12980 16354 13039.7 16143.8 13099.3 16236.8 13162.7 Dec-97 16272 13223.8 16411.8 13284.3 16573.3 13345.7 16788.5 13407.3 16882.2 13468.9 16875 13530.8 16841.2 13593 17060.2 13655.5 16205.5 13718.3 16205.5 13777.9 15986 13836.8 16297.8 13900 Dec-98 16393.1 13957.3 16548.8 14013.4 16589.2 14069.8 16755.9 14126.4 16979.6 14182.8 16833.6 14239.8 16940.8 14298.2 16890 14358.3 16803 14421 16765.2 14484.4 16821.2 14548.5 17009.3 14624.6 Dec-99 17198.1 14694 17184.3 14764 17354.4 14834 17390.2 14908.2 17368.6 14983 17277.6 15063.7 17420.5 15144.2 17582.5 15225.3 17645.8 15306.7 17539.9 15388.8 17374.4 15471.3 17223.2 15556.7 Dec-00 17390.6 15639.3 17777.2 15710 17910 15776.7 17721.4 15842.2 17789.6 15899.6 17956.9 15952.5 18007.1 16003 18010.4 16052.2 18012 16098.7 17751.7 16133.6 18038.4 16164.3 18105.2 16191.7 Dec-01 18101.6 16250 - -------------------------------------------------------------------------------- Strategic Yield Portfolio Institutional Shares ....... $18,102 One Month LIBOR USD Fixed Index....................... 16,250 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED DECEMBER 31, 2001 INSTITUTIONAL SHARES OPEN SHARES --------------------- ---------------- ONE FIVE TEN ONE SINCE YEAR YEARS YEARS YEAR INCEPTION+ ---- ----- ----- ---- ---------- Strategic Yield Portfolio** ....... 4.09% 3.22% 6.11% 3.53% 2.57% One Month LIBOR USD Fixed Index ... 3.89 5.36 4.98 3.89 5.36 - -------------------------------------------------------------------------------- - ---------- * All returns assume reinvestment of all dividends and distributions, if any. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. The performance data of the index has been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to its accuracy. The index is unmanaged, has no fees or costs and is not available for investment. The One Month LIBOR USD Fixed Index is an average derived from sixteen quotations of the rate that banks dealing in Eurodollars charge each other for large loans, as provided by banks determined by the British Bankers Association. ** The performance of Institutional Shares may be greater than or less than the performance of Open Shares, based on the differences in fees borne by shareholders investing in different classes. + The inception date for Open Shares was January 23, 1997. 20 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE OVERVIEWS (CONCLUDED) - -------------------------------------------------------------------------------- LAZARD MORTGAGE PORTFOLIO COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD MORTGAGE PORTFOLIO AND LEHMAN FIXED-RATE MORTGAGE-BACKED SECURITIES ("MBS")(R)INDEX* [The table below represents a line chart in the printed report.] MORTGAGE LEHMAN PORTFOLIO FIXED-RATE INSTITUTIONAL SHARES MBS INDEX 12-29-00 10000 10000 Dec-00 10004 10012 Jan-01 10153.6 10167.9 Feb-01 10210.4 10225.8 Mar-01 10264.5 10285.2 Apr-01 10273.4 10299.9 May-01 10320.6 10367.9 Jun-01 10324.5 10390 Jul-01 10502.5 10574.5 Aug-01 10597.1 10667.6 Sep-01 10758.1 10827.5 Oct-01 10905 10976.9 Nov-01 10794.8 10876 Dec-01 10747.6 10834.6 - -------------------------------------------------------------------------------- Mortgage Portfolio Institutional Shares ....... $10,748 Lehman Fixed-Rate MBS Index.................... 10,835 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED DECEMBER 31, 2001 INSTITUTIONAL SHARES -------------------- ONE SINCE YEAR INCEPTION** ---- ----------- Mortgage Portfolio ........................... 7.44% 7.41% Lehman Fixed-Rate MBS Index .................. 8.22 8.28 - -------------------------------------------------------------------------------- - ---------- * All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived and/or reimbursed by the Portfolio's Investment Manager and/or Administrator; without such waiver/reimbursement of expenses, the Portfolio's returns would have been lower. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of the Portfolio will fluctuate, so that an investor's shares in the 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 graph and table above do not reflect the deduction of taxes that a shareholder would pay on the Portfolio's distributions or the redemption of Portfolio shares. The performance data of the index has been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to its accuracy. The index is unmanaged, has no fees or costs and is not available for investment. The Lehman Fixed-Rate MBS Index is an index of U.S. mortgage-backed securities in the intermediate maturity range calculated by Lehman Brothers. ** The inception date for the Portfolio was December 29, 2000. 21 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS DECEMBER 31, 2001 DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO COMMON STOCKS--96.0% AEROSPACE & DEFENSE--4.3% Honeywell International, Inc. ....................... 50,500 $ 1,707,910 Lockheed Martin Corp. ............................... 38,500 1,796,795 United Technologies Corp. ........................... 64,300 4,155,709 ------------ 7,660,414 ------------ AUTOMOTIVE--1.3% Delphi Automotive Systems Corp. ..................... 165,900 2,266,194 ------------ BANKING & FINANCIAL SERVICES--11.5% Bank of America Corp. ............................... 55,550 3,496,872 Bank of New York Co., Inc. .......................... 81,800 3,337,440 Citigroup, Inc. ..................................... 111,297 5,618,273 FleetBoston Financial Corp. ......................... 84,100 3,069,650 Merrill Lynch & Co., Inc. ........................... 39,400 2,053,528 PNC Financial Services Group ........................ 53,100 2,984,220 ------------ 20,559,983 ------------ BREWERY--1.2% Anheuser-Busch Cos., Inc. ........................... 45,700 2,066,097 ------------ BROADCASTING--1.8% Comcast Corp., Class A (a) .......................... 87,900 3,164,400 ------------ BUSINESS SERVICES & SUPPLIES--1.8% Accenture, Ltd., Class A, Bermuda (a) ............... 56,100 1,510,212 First Data Corp. .................................... 20,700 1,623,915 ------------ 3,134,127 ------------ CHEMICALS & PLASTICS--1.0% Du Pont (E.I.) de Nemours & Co. ..................... 42,700 1,815,177 ------------ COMPUTER SOFTWARE--2.4% Microsoft Corp. (a) ................................. 40,300 2,669,875 Oracle Corp. (a) .................................... 112,500 1,553,625 ------------ 4,223,500 ------------ COMPUTERS & BUSINESS EQUIPMENT--2.3% International Business Machines Corp. ..................................... 33,500 4,052,160 ------------ COSMETICS & TOILETRIES--1.3% The Gillette Co. .................................... 69,600 2,324,640 ------------ DIVERSIFIED--4.2% Minnesota Mining & Manufacturing Co. .................................. 25,700 3,037,997 Newell Rubbermaid, Inc. ............................. 66,600 1,836,162 PPG Industries, Inc. ................................ 49,700 2,570,484 ------------ 7,444,643 ------------ - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- DRUGS & HEALTH CARE--11.1% American Home Products Corp. ........................ 70,800 $ 4,344,288 Bristol-Myers Squibb Co. ............................ 39,200 1,999,200 Eli Lilly & Co. ..................................... 44,800 3,518,592 Merck & Co., Inc. ................................... 51,000 2,998,800 Pfizer, Inc. ........................................ 88,200 3,514,770 Pharmacia Corp. ..................................... 79,500 3,390,675 ------------ 19,766,325 ------------ ELECTRONICS--1.0% Texas Instruments, Inc. ............................. 64,500 1,806,000 ------------ FOOD & BEVERAGES--6.7% H.J. Heinz Co. ...................................... 82,200 3,380,064 PepsiCo, Inc. ....................................... 59,640 2,903,872 The Coca-Cola Co. ................................... 44,200 2,084,030 The Kroger Co. (a) .................................. 176,400 3,681,468 ------------ 12,049,434 ------------ INSURANCE--7.2% American International Group, Inc. .................. 23,669 1,879,318 Aon Corp. ........................................... 46,300 1,644,576 MetLife, Inc. ....................................... 84,500 2,676,960 The Hartford Financial Services Group, Inc. ......... 44,700 2,808,501 The Principal Financial Group, Inc. (a) ............. 78,100 1,874,400 The St. Paul Cos., Inc. ............................. 44,900 1,974,253 ------------ 12,858,008 ------------ MANUFACTURING--2.1% General Electric Co. ................................ 95,500 3,827,640 ------------ MULTIMEDIA--6.3% AOL Time Warner, Inc. (a) ........................... 80,850 2,595,285 The News Corp., Ltd., ADR ........................... 196,200 5,191,452 Viacom, Inc., Class B (a) ........................... 79,200 3,496,680 ------------ 11,283,417 ------------ OIL & GAS--9.7% Baker Hughes, Inc. .................................. 61,100 2,228,317 Burlington Resources, Inc. .......................... 50,200 1,884,508 ChevronTexaco Corp. ................................. 42,429 3,802,063 Conoco, Inc. ........................................ 108,474 3,069,814 El Paso Corp. ....................................... 47,088 2,100,596 Exxon Mobil Corp. ................................... 55,728 2,190,110 Royal Dutch Petroleum Co. NY Shares ................. 42,100 2,063,742 ------------ 17,339,150 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 22 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO (CONCLUDED) PAPER PRODUCTS--1.3% International Paper Co. ............................. 57,500 $ 2,320,125 ------------ REAL ESTATE--1.1% Equity Office Properties Trust ...................... 68,100 2,048,448 ------------ RETAIL--3.2% Target Corp. ........................................ 94,200 3,866,910 Wal-Mart Stores, Inc. ............................... 33,500 1,927,925 ------------ 5,794,835 ------------ SEMICONDUCTORS & COMPONENTS--2.8% Agere Systems, Inc., Class A (a) .................... 233,800 1,330,322 Intel Corp. ......................................... 115,000 3,616,750 ------------ 4,947,072 ------------ TELECOMMUNICATIONS--5.5% AT&T Wireless Services, Inc. (a) .................... 161,100 2,315,007 SBC Communications, Inc. ............................ 91,179 3,571,481 Verizon Communications, Inc. ........................ 82,300 3,905,958 ------------ 9,792,446 ------------ TOBACCO--2.2% Philip Morris Cos., Inc. ............................ 87,800 4,025,630 ------------ UTILITIES--2.7% Entergy Corp. ....................................... 62,400 2,440,464 Public Service Enterprise Group, Inc. ............... 55,400 2,337,326 ------------ 4,777,790 ------------ TOTAL COMMON STOCKS (Identified cost $173,469,778) ...................... 171,347,655 ------------ CONVERTIBLE PREFERRED STOCK--0.5% TELECOMMUNICATIONS--0.5% Motorola, Inc., (Identified cost $901,620) ......................... 18,000 841,320 ------------ - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- CONVERTIBLE BONDS--3.2% BROADCASTING--0.3% Charter Communications, Inc., 4.75%, 06/01/06 (m) ................................ $ 673 $ 614,113 ------------ BUSINESS SERVICES & SUPPLIES--1.2% First Data Corp., 2.00%, 03/01/08 (m) ................................ 1,825 2,117,000 ------------ COMPUTERS & BUSINESS EQUIPMENT--1.7% Hewlett-Packard Co., 0.00%, 10/14/17 (l), (m) ........................... 6,387 2,961,971 ------------ TOTAL CONVERTIBLE BONDS (Identified cost $6,113,734) ........................ 5,693,084 ------------ REPURCHASE AGREEMENT--0.0% State Street Corp., 1.55%, 01/02/02 (Dated 12/31/01, collateralized by $80,000 United States Treasury Note, 5.875%, 09/30/02, with a value of $83,500) (Identified cost $81,000) .......................... 81 81,000 ------------ TOTAL INVESTMENTS (Identified cost $180,566,132) (b) .................. 99.7% $177,963,059 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 0.3 448,295 ----- ------------ NET ASSETS ........................................... 100.0% $178,411,354 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 23 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD MID CAP PORTFOLIO COMMON STOCKS--96.3% AEROSPACE & DEFENSE--1.6% Rockwell Collins, Inc. .............................. 24,000 $ 468,000 ------------ APPAREL & TEXTILES--0.7% Polo Ralph Lauren Corp. (a) ......................... 8,100 216,756 ------------ AUTOMOTIVE--2.2% Delphi Automotive Systems Corp. ..................... 48,000 655,680 ------------ BANKING & FINANCIAL SERVICES--10.1% Allied Capital Corp. ................................ 14,900 387,400 Investment Technology Group, Inc. (a) ............... 8,050 314,513 Mercantile Bankshares Corp. ......................... 14,800 636,992 North Fork Bancorporation, Inc. ..................... 14,900 476,651 SouthTrust Corp. .................................... 11,900 293,573 TCF Financial Corp. ................................. 11,000 527,780 Union Planters Corp. ................................ 7,400 333,962 ------------ 2,970,871 ------------ BUSINESS SERVICES & SUPPLIES--4.5% ARAMARK Corp., Class B (a) .......................... 22,600 607,940 Convergys Corp. (a) ................................. 11,000 412,390 Gartner, Inc., Class A (a) .......................... 25,900 302,771 ------------ 1,323,101 ------------ CABLE TELEVISION--1.0% Cablevision Systems New York Group, Class A (a) ........................................ 6,200 294,190 ------------ COMPUTER SERVICES--1.2% Acxiom Corp. (a) .................................... 20,700 361,629 ------------ COMPUTER SOFTWARE--1.9% Adobe Systems, Inc. ................................. 9,300 288,765 Intuit, Inc. (a) .................................... 6,300 269,514 ------------ 558,279 ------------ COMPUTERS & BUSINESS EQUIPMENT--3.1% Maxtor Corp. (a) .................................... 71,628 454,122 NCR Corp. (a) ....................................... 12,400 457,064 ------------ 911,186 ------------ DIVERSIFIED--10.5% Navistar International Corp. (a) .................... 7,400 292,300 Newell Rubbermaid, Inc. ............................. 28,100 774,717 PPG Industries, Inc. ................................ 6,800 351,696 SPX Corp. (a) ....................................... 2,300 314,870 UST, Inc. ........................................... 19,900 696,500 Viad Corp. .......................................... 27,300 646,464 ------------ 3,076,547 ------------ - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- DRUGS & HEALTH CARE--9.1% Apogent Technologies, Inc. (a) ...................... 20,700 $ 534,060 Biogen, Inc. (a) .................................... 6,300 361,305 IMS Health, Inc. .................................... 17,600 343,376 King Pharmaceuticals, Inc. (a) ...................... 9,633 405,838 MedImmune, Inc. (a) ................................. 7,500 347,625 Watson Pharmaceuticals, Inc. (a) .................... 13,000 408,070 Zimmer Holdings, Inc. (a) ........................... 8,400 256,536 ------------ 2,656,810 ------------ EDUCATION--1.5% DeVry, Inc. (a) ..................................... 15,000 426,750 ------------ ELECTRONICS--4.6% Celestica, Inc. (a) ................................. 3,500 141,365 Millipore Corp. ..................................... 9,700 588,790 PerkinElmer, Inc. ................................... 17,600 616,352 ------------ 1,346,507 ------------ FOOD & BEVERAGES--2.8% Hershey Foods Corp. ................................. 6,500 440,050 PepsiAmericas, Inc. ................................. 26,400 364,320 ------------ 804,370 ------------ INSURANCE--4.3% Ambac Financial Group, Inc. ......................... 12,650 731,929 Aon Corp. ........................................... 9,600 340,992 The St. Paul Cos., Inc. ............................. 4,500 197,865 ------------ 1,270,786 ------------ LEISURE & ENTERTAINMENT--2.9% Brunswick Corp. ..................................... 16,700 363,392 International Game Technology (a) ................... 7,000 478,100 ------------ 841,492 ------------ MEDICAL SERVICES--2.1% Anthem, Inc. (a) .................................... 6,500 321,750 DaVita, Inc. (a) .................................... 12,500 305,625 ------------ 627,375 ------------ OIL & GAS--6.4% Baker Hughes, Inc. .................................. 11,500 419,405 Cooper Cameron Corp. (a) ............................ 14,400 581,184 ENSCO International, Inc. ........................... 11,900 295,715 USX-Marathon Group .................................. 18,900 567,000 ------------ 1,863,304 ------------ PAPER PRODUCTS--2.4% Bowater, Inc. ....................................... 14,400 686,880 ------------ REAL ESTATE--5.0% Archstone-Smith Trust ............................... 12,700 334,010 Equity Office Properties Trust ...................... 15,300 460,224 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 24 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD MID CAP PORTFOLIO (CONCLUDED) Health Care Property Investors, Inc. ................ 9,700 $ 351,237 iStar Financial, Inc. ............................... 13,300 331,835 ------------ 1,477,306 ------------ RETAIL--7.9% Foot Locker, Inc. (a) ............................... 16,200 253,530 NIKE, Inc., Class B ................................. 10,600 596,144 Ross Stores, Inc. ................................... 9,000 288,720 The Gap, Inc. ....................................... 32,900 458,626 The Limited, Inc. ................................... 48,400 712,448 ------------ 2,309,468 ------------ SEMICONDUCTORS & COMPONENTS--1.2% Agere Systems, Inc., Class A (a) .................... 63,900 363,591 ------------ TELECOMMUNICATIONS--3.0% Avaya, Inc. (a) ..................................... 26,400 320,760 Harris Corp. ........................................ 17,900 546,129 ------------ 866,889 ------------ UTILITIES--6.3% Entergy Corp. ....................................... 16,800 657,048 FirstEnergy Corp. ................................... 17,000 594,660 UtiliCorp United, Inc. .............................. 23,000 578,911 ------------ 1,830,619 ------------ TOTAL COMMON STOCKS (Identified cost $25,554,584) ....................... 28,208,386 ------------ PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- REPURCHASE AGREEMENT--6.1% State Street Corp., 1.55%, 01/02/02 (Dated 12/31/01, collateralized by $1,850,000 United States Treasury Bill, 3.04%, 06/20/02, with a value of $1,834,275) (Identified cost $1,797,000) ....................... $ 1,797 $ 1,797,000 ------------ TOTAL INVESTMENTS (Identified cost $27,351,584) (b) ................... 102.4% $ 30,005,386 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ........................................ (2.4) (692,378) ----- ------------ NET ASSETS ........................................... 100.0% $ 29,313,008 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 25 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO COMMON STOCKS--95.4% AEROSPACE & DEFENSE--1.7% DRS Technologies, Inc. (a) .......................... 70,500 $ 2,513,325 Moog, Inc., Class A (a) ............................. 196,700 4,288,060 United Defense Industries, Inc. (a) ................. 204,700 4,308,935 ------------ 11,110,320 ------------ AIRLINES--0.9% Alaska Air Group, Inc. (a) .......................... 137,800 4,009,980 Atlantic Coast Airlines Holdings, Inc. (a) ................................. 89,400 2,082,126 ------------ 6,092,106 ------------ BANKING & FINANCIAL SERVICES--8.4% Allied Capital Corp. ................................ 271,800 7,066,800 Chittenden Corp. .................................... 186,200 5,139,120 East West Bancorp, Inc. ............................. 231,200 5,953,400 Financial Federal Corp. (a) ......................... 108,300 3,384,375 Greater Bay Bancorp ................................. 270,800 7,739,464 IndyMac Bancorp, Inc. (a) ........................... 228,400 5,339,992 Investment Technology Group, Inc. (a) ............... 166,750 6,514,923 New York Community Bancorp, Inc. .................... 428,950 9,810,086 Westamerica Bancorporation .......................... 82,600 3,268,482 ------------ 54,216,642 ------------ BUILDING & CONSTRUCTION--0.8% Granite Construction, Inc. .......................... 215,500 5,189,240 ------------ BUSINESS SERVICES & SUPPLIES--8.7% American Management Systems, Inc. (a) .................................. 396,000 7,159,680 Answerthink, Inc. (a) ............................... 1,163,100 7,595,043 Dendrite International, Inc. (a) .................... 439,000 6,159,170 Gartner, Inc., Class A (a) .......................... 711,400 8,316,266 MAXIMUS, Inc. (a) ................................... 240,200 10,102,812 The Profit Recovery Group International, Inc. (a) ............................ 557,700 4,545,255 United Stationers, Inc. (a) ......................... 207,800 6,992,470 West Corp. (a) ...................................... 203,900 5,085,266 ------------ 55,955,962 ------------ CHEMICALS & PLASTICS--0.6% Ferro Corp. ......................................... 147,900 3,815,820 ------------ COMPUTER SERVICES--1.5% Acxiom Corp. (a) .................................... 289,300 5,054,071 The Titan Corp. (a) ................................. 177,300 4,423,635 ------------ 9,477,706 ------------ COMPUTER SOFTWARE--2.5% HNC Software, Inc. (a) .............................. 330,700 6,812,420 Mentor Graphics Corp. (a) ........................... 392,200 9,244,154 ------------ 16,056,574 ------------ - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- COMPUTERS & BUSINESS EQUIPMENT--4.9% Avocent Corp. (a) ................................... 376,100 $ 9,120,425 Black Box Corp. (a) ................................. 132,800 7,022,464 Foundry Networks, Inc. (a) .......................... 353,000 2,876,950 Maxtor Corp. (a) .................................... 1,791,000 11,354,940 Mercury Computer Systems, Inc. (a) .................. 36,900 1,443,159 ------------ 31,817,938 ------------ CONSTRUCTION MATERIALS--0.6% Dal-Tile International, Inc. (a) .................... 154,100 3,582,825 ------------ CONTAINERS--0.8% Packaging Corp. of America (a) ...................... 288,900 5,243,535 ------------ DIVERSIFIED--0.7% The Liberty Corp. ................................... 102,500 4,217,875 ------------ DRUGS & HEALTH CARE--7.0% Apria Healthcare Group, Inc. (a) .................... 270,900 6,769,791 Celgene Corp. (a) ................................... 185,900 5,933,928 Kindred Healthcare, Inc. (a) ........................ 115,900 6,026,800 Manor Care, Inc. (a) ................................ 512,400 12,149,004 MIM Corp. (a) ....................................... 212,000 3,773,600 Owens & Minor, Inc. ................................. 295,600 5,468,600 Pharmacopeia, Inc. (a) .............................. 371,300 5,157,357 ------------ 45,279,080 ------------ EDUCATION--0.9% Learning Tree International, Inc. (a) ............... 211,600 5,903,640 ------------ ELECTRICAL EQUIPMENT--2.7% Axcelis Technologies, Inc. (a) ...................... 543,600 7,007,004 LTX Corp. (a) ....................................... 506,000 10,595,640 ------------ 17,602,644 ------------ ELECTRONICS--0.4% Pixelworks, Inc. (a) ................................ 174,000 2,794,440 ------------ FOOD & BEVERAGES--1.5% PepsiAmericas, Inc. ................................. 713,700 9,849,060 ------------ HOMEBUILDERS--0.7% Toll Brothers, Inc. (a) ............................. 102,700 4,508,530 ------------ HOUSEHOLD APPLIANCES & HOME FURNISHINGS--1.9% Furniture Brands International, Inc. (a) ............ 180,500 5,779,610 Harman International Industries, Inc. ............... 141,100 6,363,610 ------------ 12,143,220 ------------ INDUSTRIAL & MACHINERY--1.1% AMETEK, Inc. ........................................ 130,800 4,171,212 Esterline Technologies Corp. ........................ 165,000 2,641,650 ------------ 6,812,862 ------------ INSURANCE--5.9% AmerUs Group Co. .................................... 219,700 7,874,048 Arthur J. Gallagher & Co. ........................... 96,200 3,317,938 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 26 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO (CONCLUDED) Everest Re Group, Ltd. .............................. 136,000 $ 9,615,200 HCC Insurance Holdings, Inc. ........................ 134,400 3,702,720 Radian Group, Inc. .................................. 222,842 9,571,064 W.R. Berkley Corp. .................................. 79,400 4,263,780 ------------ 38,344,750 ------------ LEISURE & ENTERTAINMENT--2.8% Bally Total Fitness Holding Corp. (a) ............... 366,000 7,890,960 Brunswick Corp. ..................................... 464,800 10,114,048 ------------ 18,005,008 ------------ MANUFACTURING--2.5% Crane Co. ........................................... 102,510 2,628,356 Federal Signal Corp. ................................ 167,800 3,736,906 Navistar International Corp. ........................ 112,700 4,451,650 York International Corp. ............................ 144,200 5,498,346 ------------ 16,315,258 ------------ MEDICAL PRODUCTS--3.9% American Medical Systems Holdings, Inc. (a) ................................. 399,200 8,259,448 INAMED Corp. (a) .................................... 172,500 5,187,075 Invacare Corp. ...................................... 141,200 4,759,852 Varian, Inc. (a) .................................... 211,700 6,867,548 ------------ 25,073,923 ------------ MEDICAL SERVICES--3.8% Albany Molecular Research, Inc. (a) ................. 268,100 7,101,969 Charles River Laboratories International, Inc. (a) ............................ 116,000 3,883,680 DaVita, Inc. (a) .................................... 92,000 2,249,400 Gene Logic, Inc. (a) ................................ 411,700 7,756,428 Unilab Corp. (a) .................................... 152,000 3,815,200 ------------ 24,806,677 ------------ MEDICAL SUPPLIES--1.1% DENTSPLY International, Inc. ........................ 141,200 7,088,240 ------------ OIL & GAS--5.0% Chiles Offshore, Inc. (a) ........................... 209,300 4,162,977 Helmerich & Payne, Inc. ............................. 289,020 9,647,487 Horizon Offshore, Inc. (a) .......................... 524,500 3,954,730 Hydril Co. (a) ...................................... 122,600 2,161,438 Kinder Morgan Management, LLC (a) ................... 324,383 12,294,116 ------------ 32,220,748 ------------ PUBLISHING--2.9% Journal Register Co. (a) ............................ 311,200 6,547,648 Pulitzer, Inc. ...................................... 78,300 3,993,300 R. H. Donnelley Corp. (a) ........................... 274,700 7,980,035 ------------ 18,520,983 ------------ - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- REAL ESTATE--6.2% Alexandria Real Estate Equities, Inc. ............... 192,600 $ 7,915,860 Annaly Mortgage Management, Inc. .................... 469,400 7,510,400 Capital Automotive REIT ............................. 329,900 6,561,711 Catellus Development Corp. (a) ...................... 160,200 2,947,680 Chelsea Property Group, Inc. ........................ 91,700 4,502,470 Health Care Property Investors, Inc. ................ 216,900 7,853,949 Kilroy Realty Corp. ................................. 99,600 2,616,492 ------------ 39,908,562 ------------ RETAIL--7.9% AnnTaylor Stores Corp. (a) .......................... 221,700 7,759,500 Genesco, Inc. (a) ................................... 358,200 7,436,232 Linens 'n Things, Inc. (a) .......................... 261,900 6,678,450 Oakley, Inc. (a) .................................... 495,400 8,055,204 Pacific Sunwear of California, Inc. (a) ............. 430,900 8,798,978 Payless ShoeSource, Inc. (a) ........................ 99,700 5,598,155 Ross Stores, Inc. ................................... 195,800 6,281,264 ------------ 50,607,783 ------------ TELECOMMUNICATIONS EQUIPMENT--0.6% CommScope, Inc. (a) ................................. 190,700 4,056,189 ------------ TRANSPORTATION--1.6% Genesee & Wyoming, Inc., Class A (a) ........................................ 187,000 6,105,550 Ryder System, Inc. .................................. 62,000 1,373,300 Swift Transportation Co., Inc. (a) .................. 117,300 2,523,123 ------------ 10,001,973 ------------ UTILITIES--2.9% Orion Power Holdings, Inc. (a) ...................... 326,600 8,524,260 Sierra Pacific Resources ............................ 668,592 10,062,310 ------------ 18,586,570 ------------ TOTAL COMMON STOCKS (Identified cost $554,804,062) ...................... 615,206,683 ------------ PRINCIPAL AMOUNT (000) ---------- REPURCHASE AGREEMENT--3.7% State Street Corp., 1.55%, 01/02/02 (Dated 12/31/01, collateralized by $24,490,000 United States Treasury Bill, 3.04%, 06/20/02, with a value of $24,281,835) (Identified cost $23,802,000) ...................... $ 23,802 23,802,000 ------------ TOTAL INVESTMENTS (Identified cost $578,606,062) (b) .................. 99.1% $639,008,683 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 0.9 5,598,610 ----- ------------ NET ASSETS ........................................... 100.0% $644,607,293 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 27 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY PORTFOLIO COMMON STOCKS--98.3% AUSTRALIA--2.1% BHP Billiton, Ltd. .................................. 9,037,300 $ 48,570,300 ------------ BELGIUM--2.4% Fortis .............................................. 2,148,760 55,660,123 ------------ FINLAND--0.5% UPM-Kymmene Oyj ..................................... 341,480 11,322,825 ------------ FRANCE--15.9% Alcatel SA .......................................... 2,965,600 50,684,721 Axa ................................................. 2,002,480 41,835,459 BNP Paribas SA ...................................... 662,022 59,224,547 Compagnie de Saint-Gobain ........................... 171,400 25,860,909 Lagardere SCA ....................................... 821,430 34,366,213 Suez SA ............................................. 1,609,450 48,710,172 TotalFinaElf SA ..................................... 438,285 62,578,368 Vivendi Universal SA ................................ 876,779 47,998,594 ------------ TOTAL FRANCE ........................................ 371,258,983 ------------ GERMANY--4.3% Allianz AG .......................................... 97,816 23,160,866 HVB Group ........................................... 767,455 23,445,714 E.On AG ............................................. 714,310 36,993,354 Metro AG ............................................ 475,710 16,874,615 ------------ TOTAL GERMANY ....................................... 100,474,549 ------------ HONG KONG--1.1% Hutchison Whampoa, Ltd. ............................. 2,723,000 26,364,849 ------------ IRELAND--1.9% Allied Irish Banks PLC .............................. 1,652,000 19,116,864 CRH PLC ............................................. 1,357,900 23,969,213 ------------ TOTAL IRELAND ....................................... 43,086,077 ------------ ITALY--7.9% Alleanza Assicurazioni .............................. 2,395,233 26,331,645 ENI SpA ............................................. 5,229,700 65,545,472 Sanpaolo IMI SpA .................................... 3,571,900 38,313,303 Telecom Italia SpA .................................. 6,481,300 55,385,568 ------------ TOTAL ITALY ......................................... 185,575,988 ------------ JAPAN--15.9% ACOM Co., Ltd. ...................................... 220,900 16,102,550 Canon, Inc. ......................................... 1,045,000 35,973,973 East Japan Railway Co. .............................. 6,867 33,179,232 Hitachi, Ltd. ....................................... 5,446,000 39,906,573 Nikko Cordial Corp. ................................. 7,898,000 35,267,004 Nissan Motor Co., Ltd. .............................. 6,215,000 32,970,194 NTT DoCoMo, Inc. .................................... 2,173 25,543,242 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- Orix Corp. .......................................... 304,660 $ 27,301,034 Sony Corp. .......................................... 852,200 38,964,035 The Sumitomo Trust & Banking Co., Ltd. .......................................... 5,472,000 22,220,473 Toyota Motor Corp. .................................. 2,550,600 64,636,229 ------------ TOTAL JAPAN ......................................... 372,064,539 ------------ NETHERLANDS--16.1% ABN AMRO Holding NV ................................. 3,726,660 60,009,720 Akzo Nobel NV ....................................... 1,016,900 45,395,463 Heineken NV ......................................... 1,050,250 39,816,547 ING Groep NV ........................................ 1,516,300 38,656,400 Koninklijke (Royal) KPN NV (a) ...................... 9,173,400 46,626,165 Koninklijke (Royal) Philips Electronics NV ..................................... 2,476,281 73,578,261 Royal Dutch Petroleum Co. ........................... 928,466 47,026,378 Wolters Kluwer NV ................................... 1,160,545 26,446,318 ------------ TOTAL NETHERLANDS ................................... 377,555,252 ------------ PORTUGAL--1.4% Portugal Telecom SGPS SA, Registered Shares (a) .............................. 4,318,050 33,632,487 ------------ SINGAPORE--2.0% Oversea-Chinese Banking Corp., Ltd. ........................................ 3,949,850 23,530,111 United Overseas Bank, Ltd. .......................... 3,427,897 23,576,654 ------------ TOTAL SINGAPORE ..................................... 47,106,765 ------------ SPAIN--3.1% Altadis SA .......................................... 1,022,100 17,377,609 Endesa SA ........................................... 2,211,100 34,581,466 Telefonica SA (a) ................................... 1,590,274 21,276,207 ------------ TOTAL SPAIN ......................................... 73,235,282 ------------ SWEDEN--1.9% Investor AB, B Shares ............................... 4,123,900 45,172,348 ------------ SWITZERLAND--5.7% Novartis AG, Registered Shares ...................... 1,833,770 66,296,818 Roche Holding AG .................................... 442,780 31,615,709 UBS AG, Registered Shares (a) ....................... 691,896 34,936,662 ------------ TOTAL SWITZERLAND ................................... 132,849,189 ------------ UNITED KINGDOM--16.1% BAE Systems PLC ..................................... 5,417,448 24,375,850 BP PLC .............................................. 6,543,000 50,795,185 BT Group PLC (a) .................................... 6,533,450 24,030,757 Cadbury Schweppes PLC ............................... 5,468,626 34,822,240 Diageo PLC .......................................... 4,999,742 57,058,666 GlaxoSmithKline PLC ................................. 1,348,700 33,783,528 HSBC Holdings PLC ................................... 6,077,762 71,216,905 Imperial Tobacco Group PLC .......................... 949,500 12,506,262 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 28 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY PORTFOLIO (CONCLUDED) mmO2 PLC (a) ........................................ 17,627,850 $ 22,167,658 National Grid Group PLC ............................. 3,478,020 21,641,144 Tesco PLC ........................................... 6,879,600 24,903,873 ------------- TOTAL UNITED KINGDOM ................................ 377,302,068 ------------- TOTAL COMMON STOCKS (Identified cost $2,528,757,011) .................... 2,301,231,624 ------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- REPURCHASE AGREEMENT--2.4% State Street Corp., 1.55%, 01/02/02 (Dated 12/31/01, collateralized by $32,330,000 United States Treasury Bill, 3.04%, 06/20/02, with a value of $32,055,195, and $24,435,000 United States Treasury Note, 5.875%, 09/30/02, with a value of $25,504,031) (Identified cost $56,421,000) ...................... $56,421 $ 56,421,000 -------------- TOTAL INVESTMENTS (Identified cost $2,585,178,011) (b) ................ 100.7% $2,357,652,624 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .................................... (0.7) (17,097,001) ------ -------------- NET ASSETS ........................................... 100.0% $2,340,555,623 ====== ============== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 29 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL SMALL CAP PORTFOLIO COMMON STOCKS--97.4% AUSTRALIA--0.9% TABCORP Holdings, Ltd. .............................. 714,400 $ 3,598,151 ------------ BELGIUM--1.3% Creyf's SA .......................................... 289,103 5,198,370 Creyf's SA STRIP (a) ................................ 15,381 137 ------------ TOTAL BELGIUM ....................................... 5,198,507 ------------ CANADA--1.0% Intrawest Corp. ..................................... 220,550 3,809,034 ------------ FINLAND--4.7% Amer Group Ltd. ..................................... 335,500 8,810,038 Hartwall Oyj Abp .................................... 206,500 4,209,387 Sampo Oyj, A Shares ................................. 690,100 5,405,775 ------------ TOTAL FINLAND ....................................... 18,425,200 ------------ FRANCE--7.3% Carbone Lorraine SA ................................. 160,800 4,294,084 CNP Assurances ...................................... 133,800 4,251,944 Gemplus International SA (a) ........................ 1,483,700 3,750,833 Neopost SA (a), (c) ................................. 140,500 4,092,163 Pernod-Ricard SA .................................... 79,300 6,141,235 Societe BIC SA ...................................... 184,500 6,299,966 ------------ TOTAL FRANCE ........................................ 28,830,225 ------------ GERMANY--4.2% Fielmann AG ......................................... 176,300 5,759,458 Kamps AG ............................................ 314,400 2,518,769 SCS Standard Computersysteme (a) .................... 16,070 0 Software AG ......................................... 101,300 3,877,405 Techem AG (a) ....................................... 199,446 4,305,270 ------------ TOTAL GERMANY ....................................... 16,460,902 ------------ HONG KONG--2.1% Esprit Holdings, Ltd. ............................... 5,171,065 5,835,705 Shaw Brothers (Hong Kong), Ltd. ..................... 2,812,500 2,596,903 ------------ TOTAL HONG KONG ..................................... 8,432,608 ------------ IRELAND--2.0% Waterford Wedgwood PLC .............................. 10,256,613 8,034,334 ------------ ITALY--3.9% Davide Campari-Milano SpA (a) ....................... 149,800 3,533,629 Industrie Natuzzi SpA ADR ........................... 343,100 5,022,984 Interpump Group SpA ................................. 719,700 2,786,788 Permasteelisa SpA ................................... 282,400 3,946,641 ------------ TOTAL ITALY ......................................... 15,290,042 ------------ DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- JAPAN--10.2% ADERANS Co., Ltd. ................................... 64,800 $ 1,914,175 Diamond Lease Co., Ltd. ............................. 327,000 3,893,749 Hitachi Medical Corp. ............................... 474,000 4,323,563 Hokuto Corp. ........................................ 133,800 4,636,684 IMPACT 21 Co., Ltd. ................................. 292,600 2,697,968 Japan Digital Laboratory Co., Ltd. .................. 468,900 3,682,911 Kawasumi Laboratories, Inc. ......................... 75,000 744,218 Maruichi Steel Tube, Ltd. ........................... 201,000 2,051,271 Meitec Corp. ........................................ 75,500 1,844,134 Ministop Co., Ltd. .................................. 216,100 2,969,087 Nippon Shinyaku Co., Ltd. ........................... 1,017,000 5,006,984 Secom Techno Service Co., Ltd. ...................... 99,000 2,335,013 Yoshinoya D&C Co., Ltd. ............................. 2,877 3,974,788 ------------ TOTAL JAPAN ......................................... 40,074,545 ------------ NETHERLANDS--13.2% CSM NV .............................................. 368,000 7,632,503 Fugro NV ............................................ 172,231 7,680,904 Hunter Douglas NV ................................... 355,376 9,531,264 IHC Caland NV ....................................... 125,000 5,841,610 Koninklijke Boskalis Westminster NV ................. 135,600 3,633,201 PinkRoccade NV (c) .................................. 159,633 3,381,917 Telegraaf Holdings MIJ NV ........................... 453,400 6,897,423 Wolters Kluwer NV ................................... 327,200 7,456,182 ------------ TOTAL NETHERLANDS ................................... 52,055,004 ------------ NORWAY--1.7% DnB Holding ASA ..................................... 869,500 3,913,264 Merkantildata ASA (a) ............................... 917,500 1,083,428 P4 Radio Hele Norge ASA ............................. 724,800 1,614,865 ------------ TOTAL NORWAY ........................................ 6,611,557 ------------ SINGAPORE--2.7% Fraser & Neave, Ltd. ................................ 1,616,000 6,651,286 Want Want Holdings, Ltd. ............................ 2,172,000 4,126,800 ------------ TOTAL SINGAPORE ..................................... 10,778,086 ------------ SPAIN--8.0% Abengoa SA .......................................... 638,000 3,924,298 Aldeasa SA .......................................... 268,500 4,091,771 Altadis SA .......................................... 397,300 6,754,842 Banco Pastor SA ..................................... 392,900 5,277,577 Corporacion Mapfre SA ............................... 863,400 5,003,297 Prosegur, Compania de Seguridad SA, Registered Shares .............................. 477,800 6,439,250 ------------ TOTAL SPAIN ......................................... 31,491,035 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 30 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL SMALL CAP PORTFOLIO (CONCLUDED) SWEDEN--7.8% D. Carnegie & Co. AB (a) ............................ 390,700 $ 4,896,365 Elanders AB, B Shares ............................... 166,150 1,446,441 Nobel Biocare AB .................................... 275,200 11,518,224 Swedish Match AB .................................... 2,404,400 12,766,115 ------------ TOTAL SWEDEN ........................................ 30,627,145 ------------ SWITZERLAND--3.5% Bank Sarasin & Cie, Registered B Shares ........................................... 3,146 6,113,431 Edipresse SA ........................................ 21,860 7,639,672 ------------ TOTAL SWITZERLAND ................................... 13,753,103 ------------ UNITED KINGDOM--22.9% Ashtead Group PLC ................................... 5,208,800 5,906,588 Collins Stewart Holdings PLC ........................ 120,000 671,655 Euromoney Institutional Investor PLC ....................................... 244,676 1,310,790 FKI PLC ............................................. 2,147,153 5,774,828 Kidde PLC ........................................... 6,751,700 6,576,462 Luminar PLC ......................................... 535,100 6,511,256 Man Group PLC ....................................... 761,027 13,188,053 Misys PLC ........................................... 1,174,600 5,549,805 Northgate PLC ....................................... 843,400 5,946,750 Reckitt Benckiser PLC ............................... 493,708 7,177,522 Signet Group PLC ADR ................................ 339,312 13,742,136 Singer & Friedlander Group PLC ...................... 1,362,916 4,507,699 SSL International PLC ............................... 1,163,023 9,172,599 Trinity Mirror PLC .................................. 687,700 4,091,590 ------------ TOTAL UNITED KINGDOM ................................ 90,127,733 ------------ TOTAL COMMON STOCKS (Identified cost $400,242,198) ...................... 383,597,211 ------------ PREFERRED STOCK--0.4% GERMANY--0.4% ProSiebenSat.1 Media AG (Identified cost $1,405,983) ....................... 313,200 $ 1,603,071 ------------ WARRANT--0.0% SINGAPORE--0.0% Want Want Holdings, Ltd. 10/24/04 (a), (h) (Identified cost $7,760) ........................... 155,200 107,088 ------------ PRINCIPAL AMOUNT (000) ---------- REPURCHASE AGREEMENT--3.8% State Street Corp., 1.55%, 01/02/02 (Dated 12/31/01, collateralized by $15,305,000 United States Treasury Bill, 3.04%, 06/20/02, with a value of $15,174,908) (Identified cost $14,876,000) ...................... $14,876 14,876,000 ------------ TOTAL INVESTMENTS (Identified cost $416,531,941) (b) .................. 101.6% $400,183,370 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .................................... (1.6) (6,464,249) ----- ------------ NET ASSETS ........................................... 100.0% $393,719,121 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 31 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO COMMON STOCKS--86.6% BRAZIL--2.4% Petroleo Brasileiro SA ADR .......................... 164,400 $ 3,830,520 Souza Cruz SA ....................................... 586,600 3,605,159 ------------ TOTAL BRAZIL ........................................ 7,435,679 ------------ CHILE--2.7% Administradora de Fondos de Pensiones Provida SA ADR ........................... 310,000 8,525,000 ------------ CROATIA--0.8% Pliva d.d. GDR (c) .................................. 251,500 2,510,699 ------------ CZECH REPUBLIC--0.1% Ceska Sporitelna AS (a) ............................. 24,500 202,327 ------------ EGYPT--1.5% Commercial International Bank ....................... 463,200 2,822,736 MobiNil (a) ......................................... 268,793 1,955,873 ------------ TOTAL EGYPT ......................................... 4,778,609 ------------ HONG KONG--5.7% China Mobile (Hong Kong), Ltd. ADR (a) ............................................ 484,100 8,462,068 CNOOC, Ltd. ADR ..................................... 282,100 5,444,530 Yue Yuen Industrial (Holdings), Ltd. ................ 2,135,300 4,011,689 ------------ TOTAL HONG KONG ..................................... 17,918,287 ------------ HUNGARY--2.6% Gedeon Richter Rt ................................... 107,690 5,897,010 Magyar Tavkozlesi Rt. ADR ........................... 145,300 2,468,647 ------------ TOTAL HUNGARY ....................................... 8,365,657 ------------ INDIA--6.7% Hindalco Industries, Ltd. ........................... 208,400 2,765,125 Hindustan Lever, Ltd. ............................... 761,400 3,531,462 ITC, Ltd. ........................................... 133,400 1,872,358 Larsen & Toubro, Ltd. ............................... 736,100 2,921,807 Reliance Industries, Ltd. ........................... 621,800 3,934,929 State Bank of India ................................. 1,653,400 6,259,398 ------------ TOTAL INDIA ......................................... 21,285,079 ------------ INDONESIA--3.0% PT Hanjaya Mandala Sampoerna Tbk ...................................... 17,752,500 5,462,307 PT Telekomunikasi Indonesia ......................... 2,789,500 858,308 PT Telekomunikasi Indonesia ADR ..................... 546,200 3,167,960 ------------ TOTAL INDONESIA ..................................... 9,488,575 ------------ ISRAEL--1.9% Bank Hapoalim, Ltd. ................................. 1,925,900 4,146,883 DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- Teva Pharmaceutical Industries, Ltd. ADR ................................................ 28,900 $ 1,781,107 ------------ TOTAL ISRAEL ........................................ 5,927,990 ------------ MEXICO--12.3% Carso Global Telecom, Series A1 (a) ................. 2,883,100 6,234,751 Cemex SA de CV ADR .................................. 143,085 3,534,199 Fomento Economico Mexicano SA de CV ADR .......................................... 140,700 4,861,185 Grupo Financiero Banorte SA de CV, Series O (a) ....................................... 1,932,300 4,049,895 Grupo Iusacell SA de CV, Series V ADR (a) ............................................ 443,836 1,762,029 Grupo Televisa SA ADR (a) ........................... 119,400 5,155,692 Kimberly-Clark de Mexico SA de CV, Series A ........................................... 1,320,200 3,965,214 Telefonos de Mexico SA de CV, Series L ADR ....................................... 111,100 3,890,722 Tubos de Acero de Mexico SA ADR ..................... 248,000 2,217,120 Wal-Mart de Mexico SA de CV, Series C ........................................... 1,302,200 3,057,809 ------------ TOTAL MEXICO ........................................ 38,728,616 ------------ PANAMA--0.7% Panamerican Beverages, Inc., Class A ............... 157,000 2,333,020 ------------ PERU--0.9% Credicorp, Ltd. ..................................... 338,200 2,959,250 ------------ PHILIPPINES--1.8% Philippine Long Distance Telephone Co. ADR ............................................ 340,400 2,804,896 San Miguel Corp., Class B ........................... 2,918,300 2,969,201 ------------ TOTAL PHILIPPINES ................................... 5,774,097 ------------ RUSSIA--3.0% LUKOIL ADR .......................................... 134,700 6,599,438 Mobile Telesystems ADR .............................. 76,200 2,717,292 ------------ TOTAL RUSSIA ........................................ 9,316,730 ------------ SOUTH AFRICA--10.4% ABSA Group, Ltd. .................................... 1,605,923 4,699,283 Anglo American Platinum Corp., Ltd. ................. 48,000 1,776,740 Iscor, Ltd. (a) ..................................... 2,232,200 2,112,169 Kumba Resources, Ltd. (a) ........................... 2,122,200 5,502,328 Old Mutual PLC ...................................... 2,028,300 2,580,148 Sanlam, Ltd. ........................................ 4,872,400 3,737,064 Sappi, Ltd. ......................................... 310,900 3,110,296 Sasol, Ltd. ......................................... 454,900 3,997,204 South African Breweries PLC ......................... 690,500 4,547,686 South African Breweries PLC (U.K.) ................. 130,600 888,574 ------------ TOTAL SOUTH AFRICA .................................. 32,951,492 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 32 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO (CONCLUDED) SOUTH KOREA--16.7% Hite Brewery Co., Ltd. .............................. 76,600 $ 3,149,469 Kookmin Bank ........................................ 325,583 12,391,313 Korea Electric Power Corp. .......................... 240,900 3,995,055 Korea Telecom Corp. ADR ............................. 279,936 5,691,099 Pohang Iron & Steel Co., Ltd. ....................... 37,900 3,533,665 Pohang Iron & Steel Co., Ltd. ADR ................... 107,300 2,467,900 Samsung Electronics Co., Ltd. ....................... 47,681 10,166,602 Samsung Fire & Marine Insurance Co., Ltd. .......................................... 116,738 4,996,047 SK Telecom Co., Ltd. ................................ 30,630 6,273,474 ------------ TOTAL SOUTH KOREA ................................... 52,664,624 ------------ TAIWAN--9.8% China Steel Corp. GDR ............................... 323,671 2,557,001 Chinatrust Commercial Bank .......................... 3,990,284 2,397,596 Compal Electronics, Inc. GDR ........................ 362,998 2,232,438 Far Eastern Textile Ltd. ............................ 541 201 Fubon Financial Holding Co., Ltd.(a) ................ 8,500,000 7,393,419 Quanta Computer, Inc. ............................... 705,000 2,299,571 Taiwan Cellular Corp. (a) ........................... 2,419,095 3,239,303 Taiwan Semiconductor Manufacturing Co., Ltd. (a) ........................ 2,205,600 5,521,888 United Microelectronics Corp. ADR (a) ............................................ 537,769 5,162,582 ------------ TOTAL TAIWAN ........................................ 30,803,999 ------------ THAILAND--0.4% PTT Public Co., Ltd. (a) ............................ 1,429,000 1,114,640 ------------ TURKEY--2.3% Turkcell Iletisim Hizmetleri AS (a) ................. 138,516,503 1,187,963 Turkcell Iletisim Hizmetleri AS ADR (a) ............................................ 74,664 1,532,852 Turkiye Garanti Bankasi AS ADR (a), (c) ....................................... 1,016,537 1,851,419 Yapi ve Kredi Bankasi AS (a) ........................ 843,979,367 2,576,815 ------------ TOTAL TURKEY ........................................ 7,149,049 ------------ VENEZUELA--0.9% Compania Anonima Nacional Telefonos de Venezuela ADR ......................... 202,473 2,844,746 ------------ TOTAL COMMON STOCKS (Identified cost $297,313,628) ...................... 273,078,165 ------------ DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- PREFERRED STOCKS--10.5% BRAZIL--10.5% Banco Bradesco SA ................................... 774,571,208 4,190,496 Banco Itau SA ....................................... 82,750,400 6,303,070 Companhia Brasileira de Distri- buicao Grupo Pao de Acucar ADR ..................... 145,400 3,198,800 Companhia de Bebidas das Americas ................... 30,957,700 6,377,782 Companhia Paranaense de Energia-Copel ...................................... 138,499,000 1,007,047 Companhia Paranaense de Energia-Copel ADR .................................. 871,800 6,843,630 Tele Norte Leste Participacoes SA ADR ................................................ 332,283 5,193,582 ------------ TOTAL BRAZIL ........................................ 33,114,407 ------------ TOTAL PREFERRED STOCKS (Identified cost $33,379,056) ....................... 33,114,407 ------------ PRINCIPAL AMOUNT (000) ---------- REPURCHASE AGREEMENT--3.8% State Street Corp., 1.55%, 01/02/02 (Dated 12/31/01, collateralized by $11,265,000 United States Treasury Note, 6.75%, 05/15/05, with a value of $12,335,175) (Identified cost $12,092,000) ...................... $12,092 12,092,000 ------------ TOTAL INVESTMENTS (Identified cost $342,784,684) (b) .................. 100.9% $318,284,572 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ........................................ (0.9) (2,965,063) ----- ------------ NET ASSETS ........................................... 100.0% $315,319,509 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 33 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO COMMON STOCKS--91.1% DENMARK--2.0% Danske Bank A/S ADR ................................. 11,300 $ 181,332 ------------ FINLAND--3.0% Nokia Oyj ADR ....................................... 11,100 272,283 ------------ FRANCE--18.4% Alcatel SA ADR ...................................... 16,400 271,420 Aventis SA ADR ...................................... 4,000 284,000 Axa ADR ............................................. 13,200 277,464 Societe Generale ADR ................................ 24,500 274,202 TotalFinaElf SA ADR ................................. 3,900 273,936 Vivendi Universal SA ADR ............................ 5,100 274,329 ------------ TOTAL FRANCE ........................................ 1,655,351 ------------ GERMANY--6.1% Deutsche Bank AG, Registered Shares (a) ......................................... 3,900 273,585 Siemens AG ADR ...................................... 4,200 275,016 ------------ TOTAL GERMANY ....................................... 548,601 ------------ ITALY--5.1% ENI SpA ADR ......................................... 4,400 272,624 Sanpaolo IMI SpA ADR ................................ 8,300 181,687 ------------ TOTAL ITALY ......................................... 454,311 ------------ JAPAN--4.5% Canon, Inc. ADR ..................................... 5,300 185,818 Kao Corp. ADR ....................................... 1,000 207,920 Sony Corp. .......................................... 325 14,658 ------------ TOTAL JAPAN ......................................... 408,396 ------------ NETHERLANDS--14.3% ABN AMRO Holding NV ADR ............................. 16,600 270,248 Aegon NV ARS ........................................ 10,300 275,731 Heineken NV ADR ..................................... 4,900 185,812 ING Groep NV ADR .................................... 11,100 282,495 Royal Dutch Petroleum Co. NY Shares ................. 5,600 274,512 ------------ TOTAL NETHERLANDS ................................... 1,288,798 ------------ DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- SPAIN--3.0% Endesa SA ADR ....................................... 17,200 $ 269,524 ------------ SWEDEN--0.1% Electrolux AB, Series B ADR ......................... 260 7,623 ------------ SWITZERLAND--12.1% Nestle SA ADR ....................................... 5,200 277,179 Novartis AG ADR ..................................... 7,600 277,400 UBS AG, Registered Shares (a) ....................... 5,400 270,000 Zurich Financial Services AG ADR .................... 11,400 267,439 ------------ TOTAL SWITZERLAND ................................... 1,092,018 ------------ UNITED KINGDOM--22.5% AstraZeneca PLC ADR ................................. 6,000 279,600 Barclays PLC ADR .................................... 1,500 201,825 BP PLC ADR .......................................... 5,900 274,409 Cadbury Schweppes PLC ADR ........................... 10,500 270,060 Diageo PLC ADR ...................................... 6,000 277,620 GlaxoSmithKline PLC ADR ............................ 5,400 269,028 HSBC Holdings PLC ADR ............................... 3,200 191,072 Unilever PLC ADR .................................... 8,000 266,160 ------------ TOTAL UNITED KINGDOM ................................ 2,029,774 ------------ TOTAL COMMON STOCKS (Identified cost $8,067,362) ........................ 8,208,011 ------------ PRINCIPAL AMOUNT (000) ---------- REPURCHASE AGREEMENT--10.5% State Street Corp., 1.55%, 01/02/02 (Dated 12/31/01, collateralized by $980,000 United States Treasury Bill, 3.02%, 06/20/02, with a value of $971,670) (Identified cost $948,000) ......................... $948 948,000 ------------ TOTAL INVESTMENTS (Identified cost $9,015,362) (b) .................... 101.6% $ 9,156,011 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ........................................ (1.6) (141,704) ----- ------------ NET ASSETS ........................................... 100.0% $ 9,014,307 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 34 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO ASSET-BACKED SECURITIES--9.7% Associates Automobile Receivables Trust, Series 2000-1, Class M, 7.51%, 05/15/05 .................................... $ 400 $ 421,631 Chevy Chase Auto Receivables Trust, Series 2001-1, Class A4, 5.41%, 08/15/06 .................................... 195 201,211 CIT Equipment Collateral Trust, Series 2001-1, Class A3, 5.23%, 10/20/04 .................................... 400 409,307 Citibank Credit Card Master Trust I: Series 1999-1, Class B, 5.75%, 02/15/06 .................................... 1,145 1,177,552 Series 1999-2, Class B, 6.15%, 03/10/11 .................................... 550 554,983 First USA Credit Card Master Trust, Series 1999-1, Class C, 6.42%, 10/19/06 (c) ................................ 400 412,500 Ford Credit Auto Owner Trust, Series 2000-G, Class B, 6.92%, 04/15/05 .................................... 690 728,682 MBNA Credit Card Master Note Trust, Series 2001-C3, Class C3, 6.55%, 12/15/08 .................................... 600 620,703 Sears Credit Account Master Trust, Series 2000-1, Class A, 7.25%, 11/15/07 .................................... 590 622,329 ------------ TOTAL ASSET-BACKED SECURITIES (Identified cost $5,026,241) ........................ 5,148,898 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS--3.7% Asset Securitization Corp.: Series 1996-D2, Class ACS2, 1.5877%, 02/14/29 (d), (i) ......................... 2,125 122,167 Series 1996-D3, Class A1A, 7.01%, 10/13/26 .................................... 10 10,360 Bear Stearns Commercial Mortgage Securities, Series 1999-WF2, Class D, 7.1804%, 10/15/10 (d) .............................. 625 646,820 Federal Home Loan Mortgage Corp., Series 2130, Class SA, 24.7189%, 06/15/28 (d) ............................. 125 127,924 Merrill Lynch Mortgage Investors, Inc.: Series 1996-C1, Class IO, 0.6756%, 04/25/28 (c), (d), (i) .................... 2,876 62,333 Series 1998-C3, Class A1, 5.65%, 12/15/30 .................................... 781 800,072 Morgan Stanley Capital I, Inc., Series 1996-WF1, Class X, 1.3812%, 11/15/28 (c), (d), (i) .................... 2,272 99,608 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- Structured Asset Securities Corp.: Series 1996-CFL, Class X2, 0.9146%, 02/25/28 (d), (i) ......................... $ 357 $ 4,814 Series 1996-CFL, Class X1, 1.6804%, 02/25/28 (d), (i) ......................... 824 50,320 ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Identified cost $1,991,521) ........................ 1,924,418 ------------ CORPORATE BONDS--53.0% AUTOMOTIVE & EQUIPMENT RENTAL--0.7% CSK Auto, Inc., 12.00%, 06/15/06 (c) ............................... 100 100,750 Dura Operating Corp., Series D, 9.00%, 05/01/09 .................................... 50 47,000 Renters Choice, Inc., 11.00%, 08/15/08 ................................... 100 101,500 United Rentals, Inc., Series B, 10.75%, 04/15/08 ................................... 60 64,500 Williams Scotsman, Inc., 9.875%, 06/01/07 ................................... 45 44,325 ------------ 358,075 ------------ BANKING & FINANCIAL SERVICES--17.1% AT&T Capital Corp., 6.60%, 05/15/05 .................................... 902 940,119 Bank of America Corp., 5.875%, 02/15/09 ................................... 900 890,370 Bank One Corp., 6.00%, 08/01/08 .................................... 550 551,754 Citigroup, Inc., 5.50%, 08/09/06 .................................... 625 633,905 Countrywide Home Loans, Inc., 5.50%, 08/01/06 .................................... 540 538,881 FleetBoston Financial Corp., 7.25%, 09/15/05 .................................... 520 559,671 Ford Motor Credit Co., 7.50%, 03/15/05 .................................... 645 659,854 General Motors Acceptance Corp., 7.50%, 07/15/05 .................................... 600 630,763 Household Finance Corp., 8.00%, 07/15/10 .................................... 500 542,965 MBNA America Bank NA, 6.75%, 03/15/08 .................................... 429 414,342 Morgan Stanley Dean Witter & Co., 6.10%, 04/15/06 .................................... 560 577,089 National Rural Utilities Cooperative Finance Corp., 7.30%, 09/15/06 .................................... 510 546,766 PaineWebber Group, Inc., 6.55%, 04/15/08 .................................... 520 542,630 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 35 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO (CONTINUED) Wachovia Corp., 4.95%, 11/01/06 .................................... $ 525 $ 515,629 Washington Mutual, Inc., 7.50%, 08/15/06 .................................... 470 506,951 ------------ 9,051,689 ------------ BREWERY--1.6% Anheuser-Busch Cos., Inc., 7.10%, 06/15/07 .................................... 799 850,552 ------------ BROADCASTING--0.3% EchoStar Broadband Corp., 10.375%, 10/01/07 .................................. 45 47,137 EchoStar DBS Corp., 9.125%, 01/15/09 (c) ............................... 25 25,063 Sinclair Broadcast Group, Inc., 8.75%, 12/15/07 .................................... 75 74,813 ------------ 147,013 ------------ BUILDING & CONSTRUCTION--0.5% Atrium Cos., Inc., Series B, 10.50%, 05/01/09 ................................... 45 41,400 Building Materials Corp., Series B, 7.75%, 07/15/05 .................................... 15 12,600 Nortek, Inc., Series B, 9.875%, 06/15/11 ................................... 15 14,850 Penhall International Corp., 12.00%, 08/01/06 ................................... 90 91,800 Toll Corp., 8.25%, 12/01/11 .................................... 80 79,200 ------------ 239,850 ------------ CABLE TELEVISION--0.6% Adelphia Communications Corp., 10.875%, 10/01/10 .................................. 80 81,700 Charter Communications Holdings LLC: 0.00%, 01/15/10 (f) ................................ 100 71,000 8.625%, 04/01/09 ................................... 50 47,750 LodgeNet Entertainment Corp., 10.25%, 12/15/06 ................................... 110 110,000 ------------ 310,450 ------------ CHEMICALS--0.4% Ferro Corp., 9.125%, 01/01/09 ................................... 75 77,115 Geo Specialty Chemicals, Inc., 10.125%, 08/01/08 .................................. 40 34,600 OM Group, Inc., 9.25%, 12/15/11 (c) ................................ 60 61,200 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- Terra Capital, Inc., 12.875%, 10/15/08 (c) .............................. $ 30 $ 29,700 ------------ 202,615 ------------ COMMERCIAL SERVICES--1.1% Computer Sciences Corp., 6.75%, 06/15/06 .................................... 570 593,712 ------------ CONTAINERS--0.2% Silgan Holdings, Inc., 9.00%, 06/01/09 .................................... 85 86,700 U.S. Can Corp., Series B, 12.375%, 10/01/10 .................................. 75 39,750 ------------ 126,450 ------------ ENERGY--0.9% Calpine Canada Energy Finance, 8.50%, 05/01/08 .................................... 25 22,865 Midamerican Energy Co., 6.375%, 06/15/06 ................................... 454 457,345 ------------ 480,210 ------------ FOOD & BEVERAGES--2.6% Agrilink Foods, Inc., 11.875%, 11/01/08 .................................. 25 23,125 ConAgra Foods, Inc., 6.75%, 09/15/11 .................................... 625 638,531 Fleming Cos., Inc., Series B, 10.625%, 07/31/07 .................................. 65 62,075 Land O' Lakes, Inc., 8.75%, 11/15/11 (c) ................................ 50 48,250 Michael Foods, Inc., Series B, 11.75%, 04/01/11 ................................... 80 86,400 Nabisco, Inc., 7.05%, 07/15/07 .................................... 500 527,485 ------------ 1,385,866 ------------ FUNERAL SERVICES--0.6% Alderwoods Group, Inc.: 11.00%, 01/02/07 ................................... 75 75,750 12.25%, 01/02/09 ................................... 90 98,100 Service Corp. International: 6.875%, 10/01/07 ................................... 55 47,850 7.70%, 04/15/09 .................................... 85 74,800 ------------ 296,500 ------------ HEALTHCARE--0.9% Dynacare, Inc., 10.75%, 01/15/06 ................................... 115 119,025 Fresenius Medical Capital Trust: 7.875%, 02/01/08 ................................... 87 87,000 9.00%, 12/01/06 .................................... 75 76,875 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 36 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO (CONTINUED) HEALTHSOUTH Corp., 10.75%, 10/01/08 ................................... $ 70 $ 77,000 Res-Care, Inc., 10.625%, 11/15/08 (c) .............................. 65 64,675 United Surgical Partners International, Inc., 10.00%, 12/15/11 (c) ............................... 50 49,250 ------------ 473,825 ------------ INDUSTRIAL & MACHINERY--1.4% Unilever Capital Corp., 7.125%, 11/01/10 ................................... 560 605,324 URS Corp., Series B, 12.25%, 05/01/09 ................................... 105 107,494 ------------ 712,818 ------------ INSURANCE--0.8% American Financial Group, 7.125%, 04/15/09 ................................... 459 418,424 ------------ LODGING & ENTERTAINMENT--1.0% Ameristar Casinos, Inc., 10.75%, 02/15/09 ................................... 30 32,400 Herbst Gaming, Inc., 10.75%, 09/01/08 (c) ............................... 40 41,550 John Q. Hammons Hotels, Inc., 8.875%, 02/15/04 ................................... 80 78,000 La Quinta Inn, Inc.: 7.00%, 08/15/07 .................................... 60 55,500 7.40%, 09/15/05 .................................... 65 62,887 Mandalay Resort Group: 9.375%, 02/15/10 (c) ............................... 15 14,944 9.50%, 08/01/08 .................................... 90 94,275 Meristar Hospitality, 10.50%, 06/15/09 (c) ............................... 40 40,050 Park Place Entertainment Corp., 8.125%, 05/15/11 ................................... 75 73,219 Wheeling Island Gaming, Inc., 10.125%, 12/15/09 (c) .............................. 20 20,300 ------------ 513,125 ------------ MANUFACTURING--1.1% Tyco International Group SA, 6.75%, 02/15/11 .................................... 590 594,289 ------------ MULTIMEDIA--1.6% AOL Time Warner, Inc., 6.125%, 04/15/06 ................................... 630 644,540 Nextmedia Operating, Inc., 10.75%, 07/01/11 (c) ............................... 25 25,813 PRIMEDIA, Inc., 7.625%, 04/01/08 ................................... 90 77,850 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- Quebecor Media, Inc., 11.125%, 07/15/11 .................................. $ 70 $ 74,725 ------------ 822,928 ------------ OIL & GAS--4.6% Chesapeake Energy Corp., 8.125%, 04/01/11 ................................... 45 43,650 Comstock Resources, Inc., 11.25%, 05/01/07 ................................... 30 29,700 Eott Energy Partners, 11.00%, 10/01/09 ................................... 100 99,000 KeySpan Corp., 7.25%, 11/15/05 .................................... 480 509,937 ONEOK, Inc., 7.75%, 08/15/06 .................................... 436 469,345 Plains Resources, Inc., Series F, 10.25%, 03/15/06 ................................... 40 40,700 Texaco Capital, Inc., 6.00%, 06/15/05 .................................... 637 668,735 USX-Marathon Group, 6.65%, 02/01/06 .................................... 570 591,318 ------------ 2,452,385 ------------ PAPER PRODUCTS--0.3% Appleton Papers, Inc., 12.50%, 12/15/08 (c) ............................... 75 72,000 Buckeye Technologies, Inc., 9.25%, 09/15/08 .................................... 80 78,800 Caraustar Industries, Inc., 9.875%, 04/01/11 ................................... 20 20,900 ------------ 171,700 ------------ PRINTING--0.3% Hollinger Participation Trust, 12.125%, 11/15/10 (c), (f) ......................... 150 124,688 Phoenix Color Corp., 10.375%, 02/01/09 .................................. 45 31,500 ------------ 156,188 ------------ PUBLISHING--0.2% Transwestern Publishing, Series F, 9.625%, 11/15/07 ................................... 70 71,750 WRC Media Corp., 12.75%, 11/15/09 ................................... 60 60,150 ------------ 131,900 ------------ TELECOMMUNICATIONS--3.9% American Cellular Corp., 9.50%, 10/15/09 .................................... 90 87,300 Cox Communications, Inc., 6.15%, 08/01/03 (d) ................................ 988 1,013,916 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 37 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO (CONTINUED) Crown Castle International Corp.: 9.375%, 08/01/11 ................................... $ 45 $ 41,288 10.75%, 08/01/11 ................................... 45 43,987 Nextel Communications, Inc., 9.375%, 11/15/09 ................................... 135 104,625 US West Communications, Inc., 5.625%, 11/15/08 ................................... 836 761,437 ------------ 2,052,553 ------------ TELEPHONE--3.0% GTE Corp., 9.10%, 06/01/03 .................................... 395 423,211 Sprint Capital Corp., 7.125%, 01/30/06 ................................... 500 521,250 WorldCom, Inc., 7.75%, 04/01/07 .................................... 600 635,964 ------------ 1,580,425 ------------ TRANSPORTATION--1.2% CSX Corp., 6.75%, 03/15/11 .................................... 510 519,522 Interpool, Inc.: 6.625%, 03/01/03 ................................... 70 62,300 7.35%, 08/01/07 .................................... 30 27,284 North American Van Lines, Inc., 13.375%, 12/01/09 (c) .............................. 30 28,837 ------------ 637,943 ------------ UTILITIES--5.9% American Electric Power, Inc., Series A, 6.125%, 05/15/06 ................................... 430 424,991 Calpine Corp., 8.50%, 02/15/11 .................................... 10 9,100 Dominion Resources, Inc., Series B, 7.625%, 07/15/05 ................................... 545 581,060 Orion Power Holdings, Inc., 12.00%, 05/01/10 ................................... 70 84,000 Progress Energy, Inc., 6.75%, 03/01/06 .................................... 485 504,060 Texas Utilities Co., Series B, 6.375%, 10/01/04 ................................... 821 858,030 Wisconsin Energy Corp., 5.875%, 04/01/06 ................................... 650 659,285 ------------ 3,120,526 ------------ WASTE MANAGEMENT--0.2% Allied Waste North America, Inc., Series B, 8.875%, 04/01/08 ................................... 120 123,600 ------------ TOTAL CORPORATE BONDS (Identified cost $27,455,698) ....................... 28,005,611 ------------ PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- MORTGAGE PASS-THROUGH SECURITIES--15.8% Federal Home Loan Mortgage Corp.: Pool#E00961, 6.00%, 04/01/16 .................................... $ 1,140 $ 1,144,848 Pool#410425, 6.434%, 09/01/26 (d) ............................... 27 26,632 Pool#W10002, 6.775%, 11/01/03 ................................... 283 298,119 Pool#E80607, 7.00%, 06/01/15 .................................... 595 616,163 6.00%, TBA ......................................... 655 657,659 6.50%, TBA ......................................... 1,445 1,446,806 7.50%, TBA ......................................... 1,235 1,275,138 Federal National Mortgage Association: Pool#303824, 6.63%, 07/01/25 (d) ................................ 57 57,579 Pool#342042, 7.082%, 06/01/25 (d) ............................... 44 44,318 7.00%, TBA ......................................... 835 850,656 Government National Mortgage Association: Pool#80208, 6.375%, 06/20/28 (d) ............................... 369 376,051 Pool#551120, 6.50%, 08/15/31 .................................... 894 896,661 Pool#80093, 6.75%, 07/20/27 (d) ................................ 38 38,818 Pool#555110, 7.00%, 08/15/31 .................................... 450 459,609 Pool#80120, 7.625%, 10/20/27 (d) ............................... 164 168,011 ------------ TOTAL MORTGAGE PASS-THROUGH SECURITIES (Identified cost $8,205,725) ........................ 8,357,068 ------------ U.S. GOVERNMENT SECURITIES--10.1% Federal Home Loan Bank, 1.65%, 01/14/02 .................................... 2,010 2,008,801 Federal Home Loan Mortgage Corp.: 1.69%, 02/05/02 .................................... 890 888,538 5.25%, 02/15/04 .................................... 250 259,140 5.50%, 07/15/06 .................................... 800 822,248 Federal National Mortgage Association: 1.73%, 01/17/02 .................................... 620 619,523 6.00%, 12/15/05 .................................... 375 394,102 6.625%, 09/15/09 ................................... 325 346,379 ------------ TOTAL U.S. GOVERNMENT SECURITIES (Identified cost $5,332,937) ........................ 5,338,731 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 38 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO (CONCLUDED) U.S. TREASURY SECURITIES--12.2% United States Treasury Notes: 4.25%, 11/15/03 (e) ................................ $ 1,450 $ 1,484,551 4.625%, 05/15/06 ................................... 1,575 1,596,963 5.00%, 02/15/11 (e) ................................ 1,000 996,953 6.00%, 08/15/09 (e) ................................ 2,200 2,343,682 United States Treasury STRIP, 0.00%, 11/15/09 (l) ................................ 39 25,567 ------------ TOTAL U.S. TREASURY SECURITIES (Identified cost $6,480,022) ........................ 6,447,716 ------------ COMMERCIAL PAPER--2.5% ChevronTexaco Corp., 1.76%, 01/14/02 (Identified cost $1,299,174) ....................... $ 1,300 $ 1,299,174 ------------ TOTAL INVESTMENTS (Identified cost $55,791,318) (b) ................... 107.0% $ 56,521,616 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ........................................ (7.0) (3,701,858) ----- ------------ NET ASSETS ........................................... 100.0% $ 52,819,758 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 39 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO CORPORATE BONDS--85.9% AUTOMOTIVE & EQUIPMENT RENTAL--7.5% CSK Auto, Inc., 12.00%, 06/15/06 (c) ............................... $ 1,545 $ 1,556,587 Dura Operating Corp., Series D, 9.00%, 05/01/09 .................................... 540 507,600 National Equipment Services, Inc.: Series B, 10.00%, 11/30/04 ................................... 810 688,500 Series D, 10.00%, 11/30/04 ................................... 545 463,250 Renters Choice, Inc., 11.00%, 08/15/08 ................................... 440 446,600 United Rentals, Inc., Series B: 9.00%, 04/01/09 .................................... 970 945,750 10.75%, 04/15/08 ................................... 970 1,042,750 Williams Scotsman, Inc., 9.875%, 06/01/07 ................................... 680 669,800 ------------ 6,320,837 ------------ BROADCASTING--2.6% EchoStar Broadband Corp., 10.375%, 10/01/07 .................................. 670 701,825 EchoStar DBS Corp., 9.125%, 01/15/09 (c) ............................... 545 546,363 Emmis Communications Corp., 0.00%, 03/15/11 (f) ................................ 1,575 952,875 ------------ 2,201,063 ------------ BUILDING & CONSTRUCTION--4.1% Atrium Cos., Inc., Series B, 10.50%, 05/01/09 ................................... 720 662,400 Building Materials Corp., Series B, 7.75%, 07/15/05 .................................... 280 235,200 Nortek, Inc., Series B, 9.875%, 06/15/11 ................................... 690 683,100 Penhall International Corp., 12.00%, 08/01/06 ................................... 675 688,500 Toll Corp., 8.25%, 12/01/11 .................................... 1,150 1,138,500 ------------ 3,407,700 ------------ CABLE TELEVISION--8.8% Adelphia Communications Corp.: Series B, 8.375%, 02/01/08 ................................... 270 250,088 10.875%, 10/01/10 .................................. 1,770 1,807,612 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- Charter Communications Holdings LLC: 0.00%, 01/15/10 (f) ................................ $ 1,605 $ 1,139,550 8.625%, 04/01/09 ................................... 1,190 1,136,450 LodgeNet Entertainment Corp., 10.25%, 12/15/06 ................................... 985 985,000 Ono Finance PLC: 13.00%, 05/01/09 ................................... 305 231,419 14.00%, 02/15/11 ................................... 195 153,806 Pegasus Communications Corp., Series B, 12.50%, 08/01/07 ................................... 805 813,050 Pegasus Satellite, 0.00%, 03/01/07 (f) ................................ 1,060 646,600 Telewest PLC, 9.875%, 02/01/10 ................................... 270 189,000 ------------ 7,352,575 ------------ CHEMICALS--5.9% Ferro Corp., 9.125%, 01/01/09 ................................... 1,210 1,244,126 Geo Specialty Chemicals, Inc., 10.125%, 08/01/08 .................................. 565 488,725 Lyondell Chemical Co., 9.50%, 12/15/08 (c) ................................ 1,000 990,000 Noveon, Inc., Series B, 11.00%, 02/28/11 ................................... 255 267,750 OM Group, Inc., 9.25%, 12/15/11 (c) ................................ 935 953,700 Terra Capital, Inc., 12.875%, 10/15/08 (c) .............................. 460 455,400 Terra Industries, Inc., Series B, 10.50%, 06/15/05 ................................... 690 541,650 ------------ 4,941,351 ------------ COMMERCIAL SERVICES--0.9% APCOA, Inc., 9.25%, 03/15/08 .................................... 545 272,500 Integrated Electrical Services, Inc., Series C, 9.375%, 02/01/09 ................................... 545 482,325 ------------ 754,825 ------------ CONTAINERS--0.4% U.S. Can Corp., Series B, 12.375%, 10/01/10 .................................. 635 336,550 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 40 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO (CONTINUED) FOOD & BEVERAGES--5.4% Agrilink Foods, Inc., 11.875%, 11/01/08 .................................. $ 705 $ 652,125 Fleming Cos., Inc., Series B: 10.625%, 07/31/07 .................................. 50 47,750 10.625%, 07/31/07 (c) .............................. 1,010 964,550 Land O' Lakes, Inc., 8.75%, 11/15/11 (c) ................................ 770 743,050 Michael Foods, Inc., Series B, 11.75%, 04/01/11 ................................... 490 529,200 New World Pasta Co., 9.25%, 02/15/09 .................................... 505 459,550 Pilgrim's Pride Corp., 9.625%, 09/15/11 ................................... 815 867,975 Travelcenters of America, Inc., 12.75%, 05/01/09 ................................... 245 259,700 ------------ 4,523,900 ------------ FUNERAL SERVICES--5.4% Alderwoods Group, Inc.: 11.00%, 01/02/07 ................................... 1,225 1,237,250 12.25%, 01/02/09 ................................... 1,335 1,455,150 Service Corp. International: 6.00%, 12/15/05 .................................... 265 228,894 6.875%, 10/01/07 ................................... 1,360 1,183,200 7.70%, 04/15/09 .................................... 470 413,600 ------------ 4,518,094 ------------ HEALTHCARE--5.7% Alliance Imaging, Inc., 10.375%, 04/15/11 .................................. 435 461,100 Dynacare, Inc., 10.75%, 01/15/06 ................................... 995 1,029,825 Fresenius Medical Capital Trust, 7.875%, 02/01/08 ................................... 280 280,000 Icon Health & Fitness, Inc., 12.00%, 09/27/05 (c) ............................... 1,415 1,248,737 Res-Care, Inc., 10.625%, 11/15/08 (c) .............................. 945 940,275 United Surgical Partners International, Inc., 10.00%, 12/15/11 (c) ............................... 810 797,850 ------------ 4,757,787 ------------ INDUSTRIAL & MACHINERY--2.9% Interpool Capital Trust, Series B, 9.875%, 02/15/27 ................................... 1,600 1,146,149 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- URS Corp., Series B, 12.25%, 05/01/09 ................................... $ 1,270 $ 1,300,162 ------------ 2,446,311 ------------ LODGING & ENTERTAINMENT--9.2% Ameristar Casinos, Inc., 10.75%, 02/15/09 ................................... 65 70,200 Herbst Gaming, Inc., 10.75%, 09/01/08 (c) ............................... 1,020 1,059,525 John Q. Hammons Hotels, Inc., 8.875%, 02/15/04 ................................... 1,215 1,184,625 La Quinta Inn, Inc., 7.00%, 08/15/07 .................................... 1,745 1,614,125 Mandalay Resort Group: 9.375%, 02/15/10 (c) ............................... 200 199,250 9.50%, 08/01/08 .................................... 1,400 1,466,500 Meristar Hospitality, 10.50%, 06/15/09 (c) ............................... 650 650,813 Park Place Entertainment Corp., 8.125%, 05/15/11 ................................... 1,095 1,070,362 Wheeling Island Gaming, Inc., 10.125%, 12/15/09 (c) .............................. 335 340,025 ------------ 7,655,425 ------------ MULTIMEDIA--1.9% Nextmedia Operating, Inc., 10.75%, 07/01/11 (c) ............................... 470 485,275 Quebecor Media, Inc., 11.125%, 07/15/11 .................................. 1,040 1,110,200 ------------ 1,595,475 ------------ OIL & GAS--3.7% Chesapeake Energy Corp., 8.125%, 04/01/11 ................................... 650 630,500 Comstock Resources, Inc., 11.25%, 05/01/07 ................................... 450 445,500 Denbury Resources, Inc., Series B, 9.00%, 03/01/08 .................................... 195 182,812 Eott Energy Partners, 11.00%, 10/01/09 ................................... 1,585 1,569,150 Plains Resources, Inc., Series F, 10.25%, 03/15/06 ................................... 300 305,250 ------------ 3,133,212 ------------ PAPER PRODUCTS--3.1% Appleton Papers, Inc., 12.50%, 12/15/08 (c) ............................... 1,405 1,348,800 Buckeye Technologies, Inc., 8.50%, 12/15/05 .................................... 940 907,100 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 41 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO (CONTINUED) Caraustar Industries, Inc., 9.875%, 04/01/11 ................................... $ 305 $ 318,725 ------------ 2,574,625 ------------ PRINTING--3.3% Hollinger Participation Trust, 12.125%, 11/15/10 (c), (f) ......................... 2,190 1,820,438 Phoenix Color Corp., 10.375%, 02/01/09 .................................. 1,345 941,500 ------------ 2,761,938 ------------ PUBLISHING--1.1% WRC Media Corp., 12.75%, 11/15/09 ................................... 900 902,250 ------------ RETAIL--2.3% Advance Stores Co., Inc., 10.25%, 04/15/08 (c) ............................... 540 548,100 Petro Stopping Centers, 10.50%, 02/01/07 ................................... 1,040 863,200 Sola International, Inc., 6.875%, 03/15/08 ................................... 585 560,283 ------------ 1,971,583 ------------ TELECOMMUNICATIONS--6.8% Crown Castle International Corp.: 9.375%, 08/01/11 ................................... 740 678,950 10.75%, 08/01/11 ................................... 870 850,425 GT Group Telecom, Inc., 0.00%, 02/01/10 (f) ................................ 1,450 188,500 Horizon PCS, Inc., 0.00%, 10/01/10 (f) ................................ 1,730 890,950 Nextel Communications, Inc., 9.375%, 11/15/09 ................................... 2,040 1,581,000 Nextel Partners, Inc., 12.50%, 11/15/09 (c) ............................... 1,250 1,093,750 Ubiquitel Operating Co., 0.00%, 04/15/10 (f) ................................ 704 376,640 ------------ 5,660,215 ------------ TRANSPORTATION--2.3% North American Van Lines, Inc., 13.375%, 12/01/09 (c) .............................. 530 509,463 Railamerica Transportation Corp., 12.875%, 08/15/10 .................................. 1,360 1,388,900 ------------ 1,898,363 ------------ UTILITIES--0.5% Calpine Corp., 8.50%, 02/15/11 .................................... 485 441,334 ------------ PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- WASTE MANAGEMENT--2.1% Allied Waste North America, Inc., Series B, 8.875%, 04/01/08 ................................... $ 1,735 $ 1,787,050 ------------ TOTAL CORPORATE BONDS (Identified cost $72,353,042) ....................... 71,942,463 ------------ CONVERTIBLE BOND--0.6% FINANCIAL SERVICES--0.6% Telewest Finance Ltd., 6.00%, 06/22/05 (c), (m) (Identified cost $521,366) ......................... 730 458,075 ------------ SHARES ------ PREFERRED STOCKS--6.0% BROADCASTING--3.9% Granite Broadcasting Corp. (a) ...................... 1,368 492,480 Paxson Communications Corp. (a) ..................... 163 1,385,500 Sinclair Capital .................................... 13,550 1,368,550 ------------ 3,246,530 ------------ CABLE TELEVISION--1.9% Adelphia Communications Corp., Series B ........................................... 15,550 1,570,550 ------------ MANUFACTURING--0.2% High Voltage Engineering Corp., Series A (a) ....................................... 1,119 167,850 ------------ RESTAURANTS--0.0% American Restaurant Group, Inc., Series B (a) ....................................... 5 500 ------------ TOTAL PREFERRED STOCKS (Identified cost $5,310,820) ........................ 4,985,430 ------------ WARRANTS--0.2% CABLE TELEVISION--0.0% Ono Finance PLC: 05/31/09 (a), (c), (h) ............................. 500 2,500 03/16/11 (a), (c), (h) ............................. 470 4,700 ------------ 7,200 ------------ COMPUTER SERVICES--0.0% Verado Holdings, Inc., 04/15/08 (a), (c), (h) ............................. 365 730 ------------ FOOD & BEVERAGES--0.0% Travelcenters of America, Inc., 05/01/09 (a), (c), (h) ............................. 810 8,100 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 42 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO (CONCLUDED) TELECOMMUNICATIONS--0.2% GT Group Telecom, Inc., 02/01/10 (a), (c), (h) ............................. 1,450 $ 7,250 Horizon PCS, Inc., 10/01/10 (a), (c), (h) ............................. 1,730 69,200 Motient Corp., 04/01/08 (a), (c), (h) ............................. 1,345 20 Ubiquitel Operating Co., 04/15/10 (a), (c), (h) ............................. 1,259 62,950 ------------ 139,420 ------------ TOTAL WARRANTS (Identified cost $389,174) .......................... 155,450 ------------ REPURCHASE AGREEMENT--7.8% State Street Corp., 1.55%, 01/02/02 (Dated 12/31/01, collateralized by $6,745,000 United States Treasury Bill, 3.04%, 06/20/02, with a value of $6,687,668) (Identified cost $6,552,000) ....................... $ 6,552 $ 6,552,000 ------------ TOTAL INVESTMENTS (Identified cost $85,126,402) (b) ................... 100.5% $ 84,093,418 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ........................................ (0.5) (377,259) ----- ------------ NET ASSETS ........................................... 100.0% $ 83,716,159 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 43 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO CURRENCY DENOMINATED BONDS--84.7% AUSTRALIA--1.0% Australia Government, 7.50%, 09/15/09 (e) ............................. 370 $ 207,782 ----------- AUSTRIA--10.0% Pfandbriefstelle Der Oesterr Landeshypobank, 1.60%, 02/15/11 ..............................JPY 254,000 1,988,829 ----------- CANADA--6.2% Molson Breweries Co., Ltd., Series A, 6.00%, 06/02/08 (e) ............................. 340 215,212 North American Capital Corp., 8.25%, 11/17/03 (e) ..........................GBP 246 370,939 Province of Quebec, 5.125%, 01/04/09 (e) .........................EUR 400 352,678 Quebec Housing Corp., Series N, 8.95%, 05/13/13 (e) ............................. 391 301,391 ----------- TOTAL CANADA ..................................... 1,240,220 ----------- CAYMAN ISLANDS--2.4% Toyo Trust Bank Finance Cayman, Ltd., 2.845%, 03/18/07 (c), (d) ....................USD 486 471,420 ----------- COSTA RICA--0.2% Costa Rica Treasury Bill (B.E.M.), 15.25%, 04/10/02 (e) ............................ 15,000 41,982 ----------- EGYPT--0.2% Arab Republic of Egypt, 8.75%, 07/11/11 ..............................USD 40 39,046 ----------- GERMANY--12.9% Callahan Nordrhein Westfalen, 14.125%, 07/15/11 (e) ........................EUR 60 34,716 DSL Bank AG, 7.25%, 08/07/07 ..............................GBP 270 420,871 Land Hessen, 6.00%, 11/29/13 (e), (f) .....................EUR 511 504,584 Landesbank Hessen-Thueringen Girozentrale, 9.00%, 09/06/04 (e) ...........................GBP 230 362,080 Landesbank Schleswig-Holstein, 8.00%, 12/28/06 ...............................GBP 250 393,834 Landwirtschaftliche Rentenbank, 6.375%, 03/09/05 ..............................GBP 270 402,143 Messer Griesheim Holding AG, 10.375%, 06/01/11 (c), (e) ...................EUR 55 50,917 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- WestLB Finance Curacao NV: 8.125%, 01/24/07 .............................GBP 130 $ 206,043 8.50%, 06/02/03 (e) ..........................GBP 120 181,923 ----------- TOTAL GERMANY .................................... 2,557,111 ----------- GREECE--0.0% Republic of Hellenic, 8.90%, 04/01/03 ..............................EUR 0.1 91 ----------- HUNGARY--0.8% Government of Hungary, 9.00%, 11/24/02 ................................. 41,520 150,961 ----------- ITALY--1.3% Films PLC, 4.656%, 03/31/05 (d), (e) ....................... 1,152,000 264,803 ----------- JAPAN--4.5% Spires, Ltd., Series 43, 2.48%, 01/23/02 ................................. 117,989 900,521 ----------- LUXEMBOURG--0.5% PTC International Finance II SA, 11.25%, 12/01/09 (e) .........................EUR 80 72,721 Vantico Group SA, 12.00%, 08/01/10 (e) .........................EUR 35 25,236 ----------- TOTAL LUXEMBOURG ................................. 97,957 ----------- MEXICO--0.9% United Mexican States, 9.875%, 01/15/07 .............................USD 165 185,872 ----------- NAMIBIA--0.2% Government of Namibia: 12.00%, 04/15/02 ................................ 210 17,628 12.00%, 04/15/05 ................................ 210 17,763 ----------- TOTAL NAMIBIA .................................... 35,391 ----------- NETHERLANDS--4.3% Euro Mortgage Securities, Series C, 7.375%, 09/29/49 (d), (e) ....................EUR 500 470,110 IFCO Systems NV, Series B, 10.625%, 03/15/10 (e) ........................EUR 60 20,829 Kappa Beheer BV: 0.00%, 07/15/09 (f) ..........................EUR 15 11,350 12.50%, 07/15/09 (e) .........................EUR 140 131,475 KPNQwest BV: 7.125%, 06/01/09 (e) .........................EUR 50 27,617 8.875%, 02/01/08 (e) .........................EUR 35 21,030 Tele1 Europe BV, 12.375%, 02/01/08 (e) ........................EUR 60 17,625 Wolters Kluwer NV, 5.50%, 09/22/06 (e) ..........................EUR 180 162,497 ----------- TOTAL NETHERLANDS ................................ 862,533 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 44 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) NORWAY--0.1% Findexa II AS, 10.25%, 12/01/11 (c), (e) ....................EUR 15 $ 13,753 ----------- POLAND--0.8% Government of Poland, 0.00%, 08/21/03 (l) ............................. 690 148,528 ----------- SOUTH AFRICA--0.8% Lesotho Highlands Water: 12.00%, 12/01/05 ................................ 740 63,168 13.00%, 09/15/10 ................................ 430 37,999 Republic of South Africa, 12.50%, 12/21/06 ................................ 300 25,923 South African Roads Board, 11.50%, 09/30/05 ................................ 270 22,694 ----------- TOTAL SOUTH AFRICA ............................... 149,784 ----------- SPAIN--2.0% Generalitat de Catalunya, 9.30%, 11/24/03 (e) ..........................EUR 403 393,602 ----------- SUPRANATIONAL--5.0% European Investment Bank, 3.00%, 09/20/06 ..............................JPY 117,000 998,889 ----------- SWEDEN--2.2% Preem Holdings AB, 10.625%, 03/31/11 (e) ........................EUR 10 8,296 Swedish Match AB, 6.125%, 10/01/06 (e) .........................EUR 460 420,730 ----------- TOTAL SWEDEN ..................................... 429,026 ----------- UNITED KINGDOM--11.5% BAE Systems PLC, 7.45%, 11/29/03 (e) ............................. 310 247,846 Birmingham Midshires Building Society, 9.125%, 01/05/06 (e) ............................ 100 160,957 Coca-Cola Enterprises PLC, 6.75%, 03/12/08 ................................. 158 234,420 COLT Telecom Group PLC, 10.125%, 11/30/07 ............................... 55 67,965 Coral Group Holdings PLC, Series B, 13.50%, 09/30/09 ................................ 74 100,145 Diamond Holdings PLC, 10.00%, 02/01/08 ................................ 60 61,059 Energis PLC, 9.50%, 06/15/09 ................................. 55 59,969 Focus Retail Group PLC: 11.00%, 11/01/10 (c) ............................ 30 44,486 13.00%, 11/01/10 (c) ............................ 10 14,684 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- Gala Group Holdings PLC, 12.00%, 06/01/10 ................................ 10 $ 15,803 HMV Media Group PLC, Series B, 10.875%, 05/15/08 ............................... 30 37,399 INEOS Acrylics Finance PLC, 10.25%, 05/15/10 (e) .........................EUR 50 41,837 Luxfer Holdings PLC, 10.125%, 05/01/09 ............................... 110 115,141 Marconi Corp. PLC, 5.625%, 03/30/05 (e) .........................EUR 30 14,167 Ono Finance PLC, 14.00%, 02/15/11 (e) .........................EUR 205 129,379 Premier International Foods PLC, 12.25%, 09/01/09 (e) ............................ 60 92,462 Regional Independent Media: 0.00%, 07/01/08 (e), (f) ........................ 120 148,287 10.50%, 07/01/08 .............................USD 170 174,250 Telewest PLC, 9.875%, 02/01/10 (e) ............................ 55 56,771 Telewest Communications PLC, 0.00%, 04/15/09 (f) ............................. 55 33,583 TM Group Holdings PLC, 11.00%, 05/15/08 .............................USD 70 72,800 West Coast Train Finance, 6.00%, 03/31/15 ................................. 230 312,573 Woolworths Group PLC, 8.75%, 11/15/06 (c) ............................. 35 52,409 ----------- TOTAL UNITED KINGDOM ............................. 2,288,392 ----------- UNITED STATES--16.9% Baxter International, Inc., 5.75%, 03/06/06 (e) ..........................EUR 550 497,342 Chesapeake Corp., 10.375%, 11/15/11 (c) ........................GBP 10 15,047 Citicorp, 6.25%, 09/19/09 (e) ..........................EUR 430 202,227 Corning, Inc., 5.625%, 02/18/05 (c), (e) ....................EUR 140 101,815 Huntsman International LLC, 10.125%, 07/01/09 (c), (e) ...................EUR 55 43,744 Merrill Lynch & Co., Inc., 5.375%, 01/04/09 (e) .........................EUR 350 154,277 Pfizer, Inc., 0.80%, 03/18/08 ..............................JPY 283,000 2,155,820 Sola International, Inc., 11.00%, 03/15/08 (e) .........................EUR 115 106,769 The Manitowoc Co., Inc., 10.375%, 05/15/11 (e) ........................EUR 85 76,420 ----------- TOTAL UNITED STATES .............................. 3,353,461 ----------- TOTAL CURRENCY DENOMINATED BONDS (Identified cost $18,787,083) .................... 16,819,954 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 45 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) PREFERRED STOCK--0.2% UNITED KINGDOM--0.2% Avecia Group PLC (Identified cost $50,388) (a) ......................... 1,840 $ 43,240 ------------ WARRANTS--0.0% MEXICO--0.0% United Mexican States, Series A, Rights, 06/30/03 (a), (h) ..................................... 1,000 1 ------------ NORWAY--0.0% Enitel ASA, 04/03/05 (a), (h) ..................................... 65 1 ------------ UNITED KINGDOM--0.0% Ono Finance PLC, 03/16/11 (a), (c), (e), (h) ........................... 305 $ 5,430 ------------ TOTAL WARRANTS (Identified cost $38,075) .............................. 5,432 ------------ TOTAL INVESTMENTS (Identified cost $18,875,546) (b) ...................... 84.9% $ 16,868,626 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ......................................... 15.1 2,990,537 ----- ------------ NET ASSETS .............................................. 100.0% $ 19,859,163 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 46 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) Forward Foreign Currency Contracts open at December 31, 2001:
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- AUD 1/31/02 230,551 $ 116,428 $ 117,759 $ 1,331 $ -- AUD 1/31/02 409,017 206,144 208,915 2,771 -- BRL 1/4/02 109,968 48,000 47,384 -- 616 BRL 1/4/02 110,352 48,000 47,549 -- 451 BRL 2/8/02 390,509 141,335 164,321 22,986 -- CAD 1/31/02 1,600,373 1,011,988 1,004,846 -- 7,142 CAD 1/31/02 2,356,199 1,489,898 1,479,416 -- 10,482 CAD 1/31/02 266,722 166,800 167,470 670 -- CAD 1/31/02 1,470,109 927,368 923,056 -- 4,312 CHF 1/31/02 626,310 377,750 377,421 -- 329 CHF 1/31/02 86,465 51,900 52,105 205 -- CLP 2/27/02 32,312,500 55,000 48,470 -- 6,530 CNY 1/7/02 380,756 46,000 45,995 -- 5 COP 2/22/02 58,750,000 25,000 25,368 368 -- COP 3/20/02 322,635,000 137,000 138,248 1,248 -- CRC 1/23/02 35,126,760 102,000 101,648 -- 352 CZK 2/13/02 8,436,782 221,560 235,808 14,248 -- CZK 3/18/02 2,510,000 69,055 69,984 929 -- CZK 12/10/02 1,571,939 42,494 43,270 776 -- DKK 1/31/02 5,470,860 653,198 654,034 836 -- DKK 1/31/02 308,020 36,300 36,823 523 -- DKK 1/31/02 1,063,860 125,300 127,183 1,883 -- DKK 1/31/02 2,929,511 354,826 350,219 -- 4,607 DKK 1/31/02 3,356,867 406,588 401,309 -- 5,279 DKK 1/31/02 1,009,602 122,284 120,696 -- 1,588 DKK 1/31/02 4,625,981 560,304 553,030 -- 7,274 EGP 1/17/02 120,000 26,519 25,839 -- 680 EGP 1/24/02 49,800 10,969 10,679 -- 290 EUR 2/13/02 215,000 190,124 191,043 919 -- EUR 3/21/02 45,266 40,028 40,168 140 -- EUR 6/18/02 84,167 74,429 74,485 56 -- EUR 1/31/02 44,777 40,344 39,808 -- 536 EUR 1/31/02 7,478,358 6,651,999 6,648,410 -- 3,589 EUR 1/31/02 1,069,166 950,200 950,510 310 -- EUR 1/31/02 6,780 6,020 6,027 7 -- EUR 1/31/02 33,158 29,529 29,478 -- 51 EUR 1/31/02 6,897 6,131 6,131 -- -- EUR 1/31/02 70,408 63,413 62,594 -- 819 EUR 1/31/02 47,417 42,706 42,154 -- 552 EUR 1/31/02 6,832 6,153 6,073 -- 80 EUR 1/31/02 92,554 83,299 82,283 -- 1,016 EUR 1/31/02 793,041 713,737 705,029 -- 8,708 EUR 1/31/02 681,802 610,213 606,136 -- 4,077 EUR 1/31/02 799,453 714,711 710,730 -- 3,981 EUR 1/31/02 1,708,108 1,528,500 1,518,542 -- 9,958 EUR 1/31/02 23,502 20,652 20,894 242 -- EUR 1/31/02 440,418 386,700 391,540 4,840 -- EUR 1/31/02 8,567 7,564 7,616 52 --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 47 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- EUR 1/31/02 12,608 $ 11,115 $ 11,209 $ 94 $ -- EUR 1/31/02 28,660 25,650 25,479 -- 171 EUR 1/31/02 22,075 19,713 19,625 -- 88 EUR 1/31/02 2,116 1,879 1,881 2 -- EUR 1/31/02 20,720 18,462 18,421 -- 41 EUR 1/31/02 207,844 185,397 184,778 -- 619 EUR 1/31/02 24,632 22,194 21,898 -- 296 EUR 1/31/02 16,484 14,835 14,654 -- 181 EUR 1/31/02 16,095 14,470 14,309 -- 161 EUR 1/31/02 45,964 40,795 40,863 68 -- EUR 1/31/02 54,585 48,447 48,527 80 -- EUR 1/31/02 494,658 438,267 439,761 1,494 -- EUR 1/31/02 557,360 493,821 495,504 1,683 -- EUR 1/31/02 2,130,173 1,887,333 1,893,766 6,433 -- EUR 1/31/02 427,791 379,023 380,315 1,292 -- EUR 1/31/02 393,811 348,917 350,106 1,189 -- EUR 1/31/02 117,855 104,420 104,776 356 -- EUR 1/31/02 313,839 278,062 279,010 948 -- EUR 1/31/02 354,511 314,097 315,168 1,071 -- EUR 1/31/02 320,733 284,169 285,138 969 -- EUR 1/31/02 400,208 354,584 355,793 1,209 -- EUR 1/31/02 1,460,944 1,294,397 1,298,809 4,412 -- EUR 1/31/02 389,130 344,769 345,944 1,175 -- EUR 1/31/02 1,234,995 1,094,205 1,097,935 3,730 -- EUR 1/31/02 1,742,321 1,543,696 1,548,958 5,262 -- EUR 1/31/02 150,643 133,214 133,925 711 -- EUR 1/31/02 206,892 182,644 183,931 1,287 -- EUR 1/31/02 407,229 359,502 362,035 2,533 -- EUR 1/31/02 240,550 212,093 213,854 1,761 -- EUR 1/31/02 122,236 108,790 108,670 -- 120 EUR 6/10/02 2,080,000 1,772,056 1,841,172 69,116 -- GBP 1/31/02 337,519 478,940 489,765 10,825 -- GBP 1/31/02 70,590 100,000 102,431 2,431 -- GBP 1/31/02 15,153 21,458 21,988 530 -- GBP 1/31/02 151,886 220,538 220,397 -- 141 GBP 1/31/02 132,977 193,800 192,959 -- 841 GBP 1/31/02 66,457 95,400 96,434 1,034 -- GBP 1/31/02 9,181 13,102 13,323 221 -- GBP 1/31/02 46,933 66,457 68,103 1,646 -- GBP 1/31/02 59,182 83,625 85,878 2,253 -- GBP 1/31/02 679,434 975,668 985,910 10,242 -- GBP 1/31/02 245,916 356,579 356,843 264 -- ILS 1/22/02 209,034 49,000 47,255 -- 1,745 INR 1/7/02 777,920 16,000 16,072 72 -- INR 1/7/02 2,917,800 60,000 60,283 283 -- INR 2/6/02 580,200 12,000 11,877 -- 123 INR 2/11/02 726,900 15,000 14,860 -- 140 INR 2/19/02 966,000 20,000 19,707 -- 293
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 48 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- INR 3/20/02 5,629,480 $ 116,000 $ 113,981 $ -- $ 2,019 JPY 1/31/02 87,911,516 722,600 672,076 -- 50,524 JPY 1/31/02 563,139,137 4,627,273 4,305,148 -- 322,125 JPY 1/31/02 9,768,251 80,196 74,677 -- 5,519 JPY 1/31/02 54,636,915 450,800 417,694 -- 33,106 JPY 1/31/02 190,928,734 1,585,800 1,459,633 -- 126,167 JPY 1/31/02 43,733,916 365,668 334,342 -- 31,326 JPY 1/31/02 14,307,579 118,100 109,380 -- 8,720 JPY 1/31/02 9,132,167 73,700 69,815 -- 3,885 JPY 1/31/02 266,714,824 2,061,166 2,039,011 -- 22,155 JPY 1/31/02 229,595,852 1,774,311 1,755,240 -- 19,071 JPY 1/31/02 158,185,256 1,222,452 1,209,312 -- 13,140 JPY 1/31/02 229,605,075 1,774,382 1,755,310 -- 19,072 JPY 1/31/02 112,770,000 857,567 862,116 4,549 -- KES 1/10/02 795,400 10,000 10,078 78 -- KES 1/10/02 794,700 10,000 10,069 69 -- KES 1/17/02 2,206,000 27,847 27,908 61 -- KRW 1/14/02 79,794,000 62,000 60,648 -- 1,352 KRW 1/28/02 186,484,500 145,000 141,455 -- 3,545 KRW 3/14/02 73,216,500 57,000 55,300 -- 1,700 KRW 3/18/02 29,606,750 23,000 22,354 -- 646 MXN 1/17/02 427,000 46,708 46,300 -- 408 MXN 3/12/02 1,166,766 108,222 125,308 17,086 -- MXN 4/18/02 1,900,000 183,309 202,511 19,202 -- MXN 6/11/02 370,000 37,091 38,960 1,869 -- MXN 6/11/02 35,000 3,557 3,686 129 -- MXN 8/5/02 231,150 23,000 24,030 1,030 -- MXN 12/19/02 433,500 43,999 43,753 -- 246 NZD 1/31/02 4,237,538 1,750,654 1,759,595 8,941 -- PEN 1/4/02 34,348 10,000 9,972 -- 28 PEN 6/17/02 83,000 23,841 23,767 -- 74 PEN 6/19/02 472,396 136,000 135,241 -- 759 PHP 1/14/02 2,378,340 45,000 45,798 798 -- PHP 1/14/02 2,544,000 48,000 48,988 988 -- PHP 2/4/02 632,040 12,000 12,094 94 -- PHP 2/5/02 1,742,400 33,000 33,331 331 -- PHP 3/11/02 3,290,340 62,000 62,309 309 -- PHP 3/11/02 1,913,400 36,000 36,234 234 -- PLN 2/5/02 172,000 38,057 42,868 4,811 -- PLN 2/20/02 408,000 95,955 101,273 5,318 -- RUB 1/9/02 4,112,613 135,000 133,329 -- 1,671 RUB 1/18/02 1,880,291 60,951 60,641 -- 310 RUB 1/22/02 1,220,080 40,000 39,289 -- 711 RUB 1/23/02 610,626 20,000 19,656 -- 344 RUB 1/24/02 1,284,570 42,000 41,334 -- 666 RUB 1/29/02 582,521 19,000 18,709 -- 291 RUB 2/8/02 675,950 22,000 21,586 -- 414 SEK 1/31/02 6,184,617 577,098 590,592 13,494 --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 49 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- SEK 1/31/02 3,892,456 $ 363,713 $ 371,705 $ 7,992 $ -- SEK 1/31/02 3,957,222 369,765 377,890 8,125 -- SKK 2/13/02 876,979 18,115 18,119 4 -- SKK 3/21/02 1,960,000 40,988 40,257 -- 731 SKK 5/9/02 3,318,300 69,008 67,661 -- 1,347 SKK 5/23/02 997,000 20,548 20,285 -- 263 SKK 5/28/02 708,000 14,388 14,394 6 -- SKK 6/18/02 3,685,000 77,259 74,691 -- 2,568 SKK 12/10/02 1,173,750 24,256 23,275 -- 981 TRL 1/18/02 22,932,000,000 156,000 152,270 -- 3,730 VEB 1/10/02 100,584,000 132,000 130,959 -- 1,041 VEB 1/15/02 74,970,000 98,000 97,025 -- 975 VEB 1/16/02 15,320,000 20,000 19,801 -- 199 VEB 1/24/02 48,752,550 63,000 62,360 -- 640 ZAR 1/22/02 736,000 59,881 61,041 1,160 -- ----------- ----------- -------- -------- Total Forward Foreign Currency Purchase Contracts $56,199,268 $55,717,229 $288,694 $770,733 =========== =========== -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 50 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- AUD 1/31/02 142,642 $ 72,367 $ 72,858 $ -- $ 491 AUD 1/31/02 424,712 214,055 216,932 -- 2,877 AUD 1/31/02 284,326 143,400 145,227 -- 1,827 BRL 1/4/02 109,968 47,116 47,384 -- 268 BRL 1/4/02 110,352 47,280 47,549 -- 269 BRL 2/8/02 282,576 116,000 118,904 -- 2,904 BRL 2/8/02 107,933 41,000 45,417 -- 4,417 CAD 1/31/02 3,946,008 2,495,894 2,477,629 18,265 -- CAD 1/31/02 100,679 63,900 63,214 686 -- CAD 1/31/02 1,355,662 857,200 851,196 6,004 -- CHF 1/31/02 36,925 22,279 22,251 28 -- CHF 1/31/02 98,001 59,108 59,056 52 -- CHF 1/31/02 63,537 38,900 38,288 612 -- CHF 1/31/02 293,246 178,300 176,714 1,586 -- CLP 2/27/02 17,337,500 25,000 26,007 -- 1,007 CLP 2/27/02 14,975,000 21,823 22,463 -- 640 COP 3/20/02 236,100,000 100,000 101,168 -- 1,168 CZK 2/13/02 6,928,633 190,124 193,656 -- 3,532 DKK 1/31/02 1,231,755 147,316 147,255 61 -- DKK 1/31/02 11,574,071 1,383,705 1,383,664 41 -- DKK 1/31/02 1,098,265 131,900 131,296 604 -- DKK 1/31/02 692,511 83,900 82,789 1,111 -- DKK 1/31/02 2,907,934 347,100 347,639 -- 539 EUR 2/13/02 247,150 221,560 219,611 1,949 -- EUR 3/18/02 76,763 69,055 68,126 929 -- EUR 12/10/02 47,000 42,494 41,472 1,022 -- EUR 2/13/02 20,140 18,115 17,895 220 -- EUR 3/21/02 45,089 40,988 40,011 977 -- EUR 5/9/02 75,000 69,008 66,452 2,556 -- EUR 5/23/02 22,789 20,548 20,183 365 -- EUR 5/28/02 16,060 14,388 14,222 166 -- EUR 6/18/02 83,668 77,258 74,044 3,214 -- EUR 12/10/02 26,109 24,256 23,039 1,217 -- EUR 1/31/02 4,617 4,160 4,105 55 -- EUR 1/31/02 2,154,756 1,916,213 1,915,621 592 -- EUR 1/31/02 20,165 17,919 17,927 -- 8 EUR 1/31/02 24,430 21,694 21,719 -- 25 EUR 1/31/02 1,191,556 1,061,200 1,059,317 1,883 -- EUR 1/31/02 32,257 28,727 28,677 50 -- EUR 1/31/02 19,213 17,110 17,081 29 -- EUR 1/31/02 10,416 9,260 9,260 -- -- EUR 1/31/02 21,430 19,308 19,052 256 -- EUR 1/31/02 21,172 18,991 18,822 169 -- EUR 1/31/02 23,572 21,144 20,956 188 -- EUR 1/31/02 1,793,077 1,613,770 1,594,082 19,688 -- EUR 1/31/02 1,646,923 1,482,231 1,464,148 18,083 -- EUR 1/31/02 491,913 439,770 437,321 2,449 -- EUR 1/31/02 62,253 54,703 55,344 -- 641
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 51 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- EUR 1/31/02 37,769 $ 33,321 $ 33,577 $ -- $ 256 EUR 1/31/02 23,248 20,505 20,668 -- 163 EUR 1/31/02 26,351 23,242 23,427 -- 185 EUR 1/31/02 9,524 8,390 8,467 -- 77 EUR 1/31/02 43,614 38,418 38,774 -- 356 EUR 1/31/02 221,261 198,000 196,706 1,294 -- EUR 1/31/02 8,113 7,213 7,213 -- -- EUR 1/31/02 67,113 59,931 59,664 267 -- EUR 1/31/02 1,055,425 940,700 938,294 2,406 -- EUR 1/31/02 18,279 16,470 16,251 219 -- EUR 1/31/02 380,247 342,800 338,047 4,753 -- EUR 1/31/02 13,188,766 11,726,000 11,725,078 922 -- GBP 1/31/02 8,277 11,803 12,011 -- 208 GBP 1/31/02 965,953 1,369,528 1,401,669 -- 32,141 GBP 1/31/02 1,116,864 1,582,943 1,620,653 -- 37,710 GBP 1/31/02 107,671 153,000 156,238 -- 3,238 GBP 1/31/02 29,616 42,884 42,975 -- 91 GBP 1/31/02 9,700 14,007 14,075 -- 68 GBP 1/31/02 60,996 88,750 88,510 240 -- GBP 1/31/02 630,152 916,871 914,397 2,474 -- GBP 1/31/02 16,767 23,775 24,330 -- 555 GBP 1/31/02 35,000 50,680 50,788 -- 108 GBP 1/31/02 32,522 46,718 47,191 -- 473 GBP 1/31/02 35,000 49,945 50,788 -- 843 GBP 1/31/02 90,675 130,200 131,576 -- 1,376 GBP 1/31/02 1,044,677 1,504,000 1,515,903 -- 11,903 INR 3/20/02 5,629,480 114,653 113,981 672 -- JPY 1/31/02 258,768,254 2,130,516 1,978,260 152,256 -- JPY 1/31/02 17,036,481 139,873 130,242 9,631 -- JPY 1/31/02 100,859,255 825,700 771,060 54,640 -- JPY 1/31/02 214,421,327 1,772,077 1,639,232 132,845 -- JPY 1/31/02 90,249,651 745,865 689,950 55,915 -- JPY 1/31/02 2,420,643 20,100 18,506 1,594 -- JPY 1/31/02 24,475,063 198,800 187,110 11,690 -- JPY 1/31/02 91,059,196 724,100 696,139 27,961 -- JPY 1/31/02 4,294,665 34,200 32,832 1,368 -- JPY 1/31/02 9,820,965 77,000 75,080 1,920 -- JPY 1/31/02 1,106,122,496 8,550,400 8,456,206 94,194 -- KRW 1/28/02 186,484,500 141,867 141,455 412 -- MXN 3/12/02 837,000 87,456 89,892 -- 2,436 MXN 4/18/02 154,912 16,000 16,511 -- 511 MXN 4/18/02 1,900,000 203,620 202,511 1,109 -- MXN 6/11/02 160,512 16,271 16,901 -- 630 NZD 6/10/02 4,295,000 1,748,065 1,765,698 -- 17,633 PEN 6/19/02 348,950 100,000 99,900 100 -- PHP 1/14/02 4,922,340 94,751 94,786 -- 35 PHP 2/5/02 1,742,400 33,347 33,331 16 -- PLN 2/5/02 172,000 40,749 42,868 -- 2,119
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 52 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONCLUDED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- PLN 2/20/02 408,000 $ 101,329 $ 101,273 $ 56 $-- RUB 1/9/02 4,112,613 135,286 133,329 1,957 -- RUB 1/18/02 1,543,006 50,462 49,763 699 -- SEK 1/31/02 2,903,664 270,958 277,281 -- 6,323 SEK 1/31/02 6,376,794 594,900 608,943 -- 14,043 SEK 1/31/02 2,607,413 245,000 248,991 -- 3,991 SKK 3/21/02 1,960,000 40,028 40,257 -- 229 SKK 6/18/02 3,685,000 74,429 74,691 -- 262 VEB 1/10/02 100,584,000 131,199 130,959 240 -- VEB 1/16/02 15,320,000 19,922 19,801 121 -- ZAR 1/22/02 736,000 60,922 61,041 -- 119 ----------- ----------- -------- -------- Total Forward Foreign Currency Sale Contracts $53,091,476 $52,603,093 $647,078 $158,695 =========== =========== -------- -------- Gross unrealized appreciation/depreciation from Forward Foreign Currency Contracts $935,772 $929,428 ======== ========
As of December 31, 2001, the Portfolio had the following interest rate swap agreement outstanding:
Swap Notional Rate Rate Termination Unrealized Counterparty Amount Received Paid Date Gain - ----------------- ------------ -------- -------- ---------- ---------- Deutsche Bank AG 423,000 MXN 12.75% Variable+ 8/27/03 $1,401 ======
+ The Portfolio pays interest based on the Mexican TIIE which fluctuates daily. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 53 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO CURRENCY DENOMINATED BONDS--64.7% BAHAMAS--0.2% Sun International Hotels, Ltd., 8.875%, 08/15/11 .............................USD 330 $ 311,025 ----------- CANADA--1.8% Calpine Canada Energy Finance, 8.50%, 05/01/08 (e) ..........................USD 505 461,885 Dynacare, Inc., 10.75%, 01/15/06 (e) .........................USD 1,290 1,335,150 GT Group Telecom, Inc., 0.00%, 02/01/10 (f) ..........................USD 775 100,750 Hollinger Participation Trust, 12.125%, 11/15/10 (c), (f) ..................USD 1,300 1,080,625 Quebecor Media, Inc., 11.125%, 07/15/11 ............................USD 235 250,863 ----------- TOTAL CANADA ..................................... 3,229,273 ----------- CAYMAN ISLANDS--0.7% Prime Capital Calquake & Eurowind, Ltd., 9.9813%, 01/07/04 (c), (d) ...................USD 840 825,737 Redwood Capital I, Ltd., 7.4088%, 01/01/03 (c), (d) ...................USD 435 435,000 ----------- TOTAL CAYMAN ISLANDS ............................. 1,260,737 ----------- COSTA RICA--0.4% Costa Rica Treasury Bill (B.E.M.), 15.25%, 04/10/02 ................................ 247,000 691,306 ----------- EGYPT--0.2% Arab Republic of Egypt, 8.75%, 07/11/11 ..............................USD 300 292,845 ----------- FRANCE--0.3% Government of France, 3.50%, 07/12/04 ..............................EUR 690 609,729 ----------- GERMANY--1.4% Callahan Nordrhein Westfalen, 14.125%, 07/15/11 ............................EUR 235 135,970 Core, Series 1998-1A, Class B3, 6.4321%, 01/16/06 (c), (d) ...................EUR 2,400 1,092,085 European Credit Card Offerings, Series 1, Class B, 5.50%, 02/18/11 ................................. 2,570 1,162,676 Messer Griesheim Holding AG, 10.375%, 06/01/11 (c) ........................EUR 190 175,894 ----------- TOTAL GERMANY .................................... 2,566,625 ----------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- GREECE--0.0% Republic of Hellenic, 5.58%, 08/14/03 (d) ..........................EUR 0.2 $ 178 ----------- HUNGARY--2.9% Government of Hungary: 9.00%, 11/24/02 ................................. 115,910 421,432 9.50%, 01/12/02 ................................. 1,186,920 4,317,721 9.50%, 06/12/02 ................................. 104,560 380,135 9.50%, 06/12/03 ................................. 14,220 52,335 ----------- TOTAL HUNGARY .................................... 5,171,623 ----------- INDONESIA--0.0% Polysindo, 0.00%, 04/26/03 (a), (j) ........................ 5,000,000 4,807 PT Polysindo Eka Perkasa, 0.00%, 03/16/02 (a), (j) .....................USD 194 1,942 ----------- TOTAL INDONESIA .................................. 6,749 ----------- ITALY--0.5% Films PLC, 4.656%, 03/31/05 (d) ............................ 3,744,000 860,609 ----------- JAPAN--1.2% Spires, Ltd., Series 43, 2.48%, 01/23/02 ................................. 286,282 2,184,973 ----------- LUXEMBOURG--0.4% PTC International Finance II SA, 11.25%, 12/01/09 .............................EUR 345 313,612 Scandinavian Broadcasting SA, 12.00%, 06/15/08 (c) .........................EUR 280 196,901 Vantico Group SA, 12.00%, 08/01/10 .............................EUR 200 144,205 ----------- TOTAL LUXEMBOURG ................................. 654,718 ----------- MEXICO--0.4% United Mexican States: 9.875%, 01/15/07 .............................USD 160 180,240 Series D, 2.8325%, 12/31/19 (d) ........................USD 450 446,085 ----------- TOTAL MEXICO ..................................... 626,325 ----------- NAMIBIA--0.1% Government of Namibia: 12.00%, 04/15/02 ................................ 1,460 122,556 12.00%, 04/15/05 ................................ 1,460 123,494 ----------- TOTAL NAMIBIA .................................... 246,050 ----------- NETHERLANDS--1.3% IFCO Systems NV, Series B, 10.625%, 03/15/10 ............................EUR 130 45,131 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 54 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Kappa Beheer BV: 0.00%, 07/15/09 (f) ..........................EUR 35 $ 26,482 10.625%, 07/15/09 ............................EUR 65 63,646 12.50%, 07/15/09 .............................EUR 335 314,601 KPN NV, 6.05%, 06/13/03 ..............................EUR 1,610 1,441,024 KPNQwest BV: 7.125%, 06/01/09 .............................EUR 50 27,617 8.875%, 02/01/08 .............................EUR 225 135,191 Tele1 Europe BV, 12.375%, 02/01/08 ............................EUR 140 41,125 Yell Finance BV, 10.75%, 08/01/11 .............................GBP 100 152,649 ----------- TOTAL NETHERLANDS ................................ 2,247,466 ----------- NORWAY--0.2% Findexa II AS, 10.25%, 12/01/11 (c) .........................EUR 350 320,899 ----------- POLAND--1.5% Government of Poland: 0.00%, 12/21/02 (l) ............................. 2,563 583,940 0.00%, 04/21/03 (l) ............................. 3,520 779,904 0.00%, 08/21/03 (l) ............................. 820 176,512 10.00%, 06/12/04 ................................ 4,440 1,113,079 ----------- TOTAL POLAND ..................................... 2,653,435 ----------- SOUTH AFRICA--1.3% Lesotho Highlands Water: 12.00%, 12/01/05 ................................ 5,700 486,564 13.00%, 09/15/10 ................................ 6,080 537,291 Republic of South Africa: 12.00%, 02/28/05 ................................ 1,710 146,575 12.50%, 12/21/06 ................................ 11,790 1,018,786 South African Roads Board, 11.50%, 09/30/05 ................................ 415 34,881 ----------- TOTAL SOUTH AFRICA ............................... 2,224,097 ----------- SWEDEN--0.0% Preem Holdings AB, 10.625%, 03/31/11 ............................EUR 30 24,889 ----------- THAILAND--0.0% Finance One PLC: 0.00%, 01/03/05 (a), (k) ........................ 20,000 0 Morgan Guarantee Trust, 0.00%, 07/31/02 (a), (k) ........................ 10,569 0 ----------- TOTAL THAILAND ................................... 0 ----------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- UNITED KINGDOM--2.0% COLT Telecom Group PLC: 10.125%, 11/30/07 ............................... 250 $ 308,932 12.00%, 12/15/06 (e), (f) ....................USD 100 88,000 Coral Group Holdings PLC, Series B, 13.50%, 09/30/09 ............................. 74 100,145 Diamond Holdings PLC, 10.00%, 02/01/08 ................................ 65 66,148 Energis PLC, 9.50%, 06/15/09 ................................. 330 359,815 Focus Retail Group PLC: 11.00%, 11/01/10 (c) ............................ 75 111,216 13.00%, 11/01/10 (c) ............................ 35 51,392 Gala Group Holdings PLC, 12.00%, 06/01/10 ................................ 7 11,062 HMV Media Group PLC, Series B: 10.25%, 05/15/08 .............................USD 205 178,350 10.875%, 05/15/08 ............................... 75 93,498 Ineos Acrylics Finance PLC, 10.25%, 05/15/10 .............................EUR 130 108,776 Ineos Group Holdings PLC, 10.50%, 08/01/10 (c) .........................EUR 160 144,204 Luxfer Holdings PLC, 10.125%, 05/01/09 ............................... 110 115,141 Marconi Corp. PLC, 5.625%, 03/30/05 .............................EUR 165 77,917 Ono Finance PLC, 14.00%, 02/15/11 .............................EUR 540 340,803 Premier International Foods PLC, 12.25%, 09/01/09 ................................ 100 154,103 Regional Independent Media: 0.00%, 07/01/08 (f) ............................. 150 185,359 10.50%, 07/01/08 .............................USD 205 210,125 Telewest PLC: 9.875%, 02/01/10 ................................ 290 299,337 9.875%, 02/01/10 .............................USD 100 70,000 Telewest Communications PLC, 0.00%, 04/15/09 (f) ............................. 105 64,113 TM Group Holdings PLC, 11.00%, 05/15/08 .............................USD 180 187,200 Woolworths Group PLC, 8.75%, 11/15/06 (c) ............................. 80 119,793 ----------- TOTAL UNITED KINGDOM ............................. 3,445,429 ----------- UNITED STATES--47.9% Adelphia Communications Corp.: 6.00%, 02/14/06 (m) ............................. 460 399,625 Series B, 8.375%, 02/01/08 ................................ 190 175,987 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 55 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Agrilink Foods, Inc., 11.875%, 11/01/08 .................................. 255 $ 235,875 Alderwoods Group, Inc.: 11.00%, 01/02/07 ................................... 355 358,550 12.25%, 01/02/09 ................................... 1,015 1,106,350 Alliance Imaging, Inc., 10.375%, 04/15/11 .................................. 125 132,500 Allied Waste North America, Inc., Series B, 10.00%, 08/01/09 ................................... 945 973,350 American Cellular Corp., 9.50%, 10/15/09 .................................... 745 722,650 American Express Master Trust, Series 1996-1, Class A, 2.0456%, 08/15/04 (d) .............................. 5,000 5,007,800 Appleton Papers, Inc., 12.50%, 12/15/08 (c), (e) .......................... 665 638,400 Asset Securitization Corp., Series 1996-D2, Class ACS2, 1.5877%, 02/14/29 (d), (e), (i) .................... 7,035 404,445 Atrium Cos., Inc., Series B, 10.50%, 05/01/09 (e) ............................... 560 515,200 BA Master Credit Card Trust, Series 1997-A, Class A, 2.0056%, 07/15/04 (d), (e) ......................... 2,395 2,395,742 Banc of America Large Loan, Series 2000-WSFA, Class A, 2.3913%, 05/12/11 (c), (d), (e) .................... 727 709,419 BPC Holdings Corp., Series B, 12.50%, 06/15/06 (e) ............................... 540 475,200 Buckeye Technologies, Inc., 9.25%, 09/15/08 (e) ................................ 795 783,075 Building Materials Corp., Series B, 7.75%, 07/15/05 (e) ................................ 160 134,400 Calpine Corp., 8.50%, 02/15/11 (e) ................................ 295 268,441 Caraustar Industries, Inc., 9.875%, 04/01/11 (e) ............................... 230 240,350 Carco Auto Loan Master Trust: Series 1999-2, Class A1, 1.9656%, 05/17/04 (d), (e) ......................... 2,175 2,174,776 Series 2000-A, Class A, 1.9956%, 03/15/05 (d), (e) ......................... 5,400 5,401,352 Charter Communications Holdings LLC: 0.00%, 01/15/10 (e), (f) ........................... 850 603,500 8.625%, 04/01/09 (e) ............................... 345 329,475 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- Chase Credit Card Master Trust, Series 2000-2, Class A, 1.9956%, 07/15/05 (d), (e) ..................... 2,250 $ 2,250,563 Chesapeake Corp., 10.375%, 11/15/11 (c) ........................GBP 80 120,375 Chesapeake Energy Corp., 8.125%, 04/01/11 (e) ............................ 315 305,550 Corning, Inc., 5.625%, 02/18/05 (c) .........................EUR 680 494,532 Crown Castle International Corp.: 9.375%, 08/01/11 (e) ............................ 530 486,275 9.50%, 08/01/11 (e) ............................. 145 133,037 Discover Card Master Trust I, Series 1997-1, Class A, 1.9856%, 02/16/05 (d), (e) ...................... 1,300 1,300,403 Dura Operating Corp., Series D, 9.00%, 05/01/09 (e) ............................. 430 404,200 EchoStar Broadband Corp., 10.375%, 10/01/07 (e) ........................... 320 335,200 EchoStar DBS Corp., 9.125%, 01/15/09 (c), (e) ....................... 825 827,062 Emmis Communications Corp., 0.00%, 03/15/11 (e), (f) ........................ 865 523,325 Eott Energy Partners, 11.00%, 10/01/09 (e) ............................ 435 430,650 Federal Home Loan Mortgage Corp.: Series 30, Class J, 7.50%, 02/25/23 (e), (i) ........................ 1,531 149,347 Series 2130, Class SA, 24.7189%, 06/15/28 (d), (e) ..................... 434 445,672 6.50%, TBA ...................................... 4,765 4,770,956 Federal National Mortgage Association, 6.50%, TBA ...................................... 1,215 1,238,547 Ford Motor Credit Co., 6.125%, 04/28/03 (e) ............................ 2,140 2,171,501 Fresenius Medical Capital Trust: 7.375%, 06/15/11 .............................EUR 255 222,449 9.00%, 12/01/06 (e) ............................. 1,630 1,670,750 GEO Specialty Chemicals, Inc., 10.125%, 08/01/08 ............................... 345 298,425 Government National Mortgage Association, Pool#555140, 7.00%, 10/15/31 (e) ............................. 1,996 2,038,800 HEALTHSOUTH Corp., 10.75%, 10/01/08 ................................ 605 665,500 Herbst Gaming, Inc., 10.75%, 09/01/08 (c) ............................ 445 462,244 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 56 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Hexcel Corp., 9.75%, 01/15/09 ................................. 510 $ 285,600 Horizon PCS, Inc.: 0.00%, 10/01/10 (f) ............................. 75 38,625 13.75%, 06/15/11 (c) ............................ 395 393,025 Huntsman International LLC, 10.125%, 07/01/09 (c) ........................EUR 335 266,442 Icon Health & Fitness, Inc., 12.00%, 09/27/05 (c) ............................ 225 198,563 Interpool Capital Trust, Series B, 9.875%, 02/15/27 ................................ 1,915 1,371,797 John Q. Hammons Hotels, Inc., 8.875%, 02/15/04 ................................ 695 677,625 La Quinta Inns, Inc.: 7.25%, 03/15/04 ................................. 410 394,625 7.40%, 09/15/05 ................................. 515 498,262 LodgeNet Entertainment Corp., 10.25%, 12/15/06 ................................ 810 810,000 Mandalay Resort Group: 9.375%, 02/15/10 (c) ............................ 315 313,819 Series B, 10.25%, 08/01/07 ................................ 520 539,500 MBNA Master Credit Card Trust, Series 1996-K, Class A, 2.0256%, 03/15/06 (d) ........................... 3,230 3,233,478 Meristar Hospitality, 10.50%, 06/15/09 (c) ............................ 385 385,481 Merrill Lynch Mortgage Investors, Inc., Series 1996-C1, Class IO, 0.6756%, 04/25/28 (c), (d), (i) ................. 11,503 249,307 Michael Foods, Inc., Series B, 11.75%, 04/01/11 ................................ 145 156,600 MJD Communications, Inc., Series B, 9.50%, 05/01/08 ................................. 185 157,250 Morgan Stanley Capital I, Inc., Series 1996-WF1, Class X, 1.3812%, 11/15/28 (c), (d), (i) ................. 5,322 233,314 Namazu Re, Ltd., 6.5813%, 12/02/04 (c), (d) ...................... 1,000 976,940 National Equipment Services, Inc., Series B, 10.00%, 11/30/04 ................................ 425 361,250 New World Pasta Co., 9.25%, 02/15/09 ................................. 605 550,550 Nextel Communications, Inc., 9.375%, 11/15/09 ................................ 775 600,625 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- Nextel Partners, Inc., 12.50%, 11/15/09 (c) ............................ 485 $ 424,375 Nextmedia Operating, Inc., 10.75%, 07/01/11 (c) ............................ 265 273,612 Nortek, Inc., Series B, 9.875%, 06/15/11 ................................ 170 168,300 North American Van Lines, Inc., 13.375%, 12/01/09 (c) ........................... 280 269,150 Noveon, Inc., Series B, 11.00%, 02/28/11 ................................ 195 204,750 Orion Power Holdings, Inc., 12.00%, 05/01/10 ................................ 480 576,000 Pegasus Communications Corp., Series B, 9.625%, 10/15/05 ................................ 530 477,000 Pegasus Satellite, 0.00%, 03/01/07 (f) ............................. 590 359,900 Penhall International Corp., 12.00%, 08/01/06 ................................ 195 198,900 Penn National Gaming, Inc., Series B, 11.125%, 03/01/08 ............................... 545 574,975 Petro Stopping Centers, 10.50%, 02/01/07 ................................ 429 356,070 Phoenix Color Corp., 10.375%, 02/01/09 ............................... 870 609,000 Plains Resources, Inc., Series F, 10.25%, 03/15/06 ................................ 350 356,125 Railamerica Transportation Corp., 12.875%, 08/15/10 ............................... 650 663,812 Renters Choice, Inc., 11.00%, 08/15/08 ................................ 655 664,825 Res-Care, Inc., 10.625%, 11/15/08 (c) ........................... 590 587,050 Service Corp. International: 6.875%, 10/01/07 ................................ 645 561,150 7.70%, 04/15/09 ................................. 170 149,600 Sinclair Broadcast Group, Inc., 10.00%, 09/30/05 ................................ 105 108,500 SLM Student Loan Trust, Series 2001-4, Class A1, 1.9875%, 01/25/11 (d) ........................... 5,500 5,500,000 Sola International, Inc., 11.00%, 03/15/08 .............................EUR 290 269,244 Structured Asset Securities Corp.: Series 1996-CFL, Class X2, 0.9146%, 02/25/28 (d), (i) ...................... 749 10,085 Series 1996-CFL, Class X1, 1.6804%, 02/25/28 (d), (i) ...................... 2,224 135,775 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 57 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Telewest Finance Ltd., 6.00%, 06/22/05 (c), (m) ........................ 115 $ 72,163 Terra Capital, Inc., 12.875%, 10/15/08 (c) ........................... 275 272,250 Terra Industries, Inc., Series B, 10.50%, 06/15/05 ................................ 410 321,850 The Manitowoc Co., Inc., 10.375%, 05/15/11 ............................EUR 450 404,573 Toll Corp., 8.25%, 12/01/11 ................................. 730 722,700 Transwestern Publishing, Series F, 9.625%, 11/15/07 ................................ 545 558,625 Travelcenters of America, Inc., 12.75%, 05/01/09 ................................ 105 111,300 U.S. Can Corp., Series B, 12.375%, 10/01/10 ............................... 500 265,000 Ubiquitel Operating Co., 0.00%, 04/15/10 (f) ............................. 592 316,720 United Rentals, Inc., Series B: 9.00%, 04/01/09 ................................. 25 24,375 9.25%, 01/15/09 ................................. 795 787,050 United States Treasury Note, 5.00%, 02/15/11 ................................. 3,236 3,226,140 United Surgical Partners International, Inc., 10.00%, 12/15/11 (c) ............................ 475 467,875 URS Corp., Series B, 12.25%, 05/01/09 ................................ 1,175 1,202,906 Wheeling Islands Gaming, Inc., 10.125%, 12/15/09 (c) ........................... 200 203,000 Williams Scotsman, Inc., 9.875%, 06/01/07 ................................ 490 482,650 WRC Media Corp., 12.75%, 11/15/09 ................................ 755 756,887 Yamaha Motor Master Trust, Series 2000-1, Class B, 2.5956%, 05/15/08 (d) ........................... 2,575 2,600,647 ----------- TOTAL UNITED STATES .............................. 84,919,412 ----------- TOTAL CURRENCY DENOMINATED BONDS (Identified cost $120,432,089) ................... 114,548,392 ----------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- PREFERRED STOCKS--1.8% UNITED KINGDOM--0.1% Avecia Group PLC (a), (e) ........................ 4,985 $ 117,147 ----------- UNITED STATES--1.7% Adelphia Communications Corp., Series B ........................................ 11,800 1,191,800 American Restaurant Group, Inc., Series B (a) .................................... 4 400 High Voltage Engineering Corp., Series A (a) .................................... 2,110 316,500 Paxson Communications Corp. (a) .................. 100 850,000 Sinclair Capital ................................. 7,300 737,300 ----------- TOTAL UNITED STATES .............................. 3,096,000 ----------- TOTAL PREFERRED STOCKS (Identified cost $4,828,150) ..................... 3,213,147 ----------- WARRANTS--0.0% CANADA--0.0% GT Group Telecom, Inc., 02/01/10 (a), (c), (h) .......................... 775 3,875 ----------- MEXICO--0.0% United Mexican States, Series A, Rights, 06/30/03 (a), (h) ............................... 698,000 907 ----------- NORWAY--0.0% Enitel ASA, 04/03/05 (a), (h) ............................... 100 1 ----------- UNITED KINGDOM--0.0% Ono Finance PLC: 05/31/09 (a), (h) ............................... 350 3,115 05/31/09 (a), (c), (h) .......................... 90 6,053 03/16/11 (a), (c), (h) .......................... 540 9,614 ----------- TOTAL UNITED KINGDOM ............................. 18,782 ----------- UNITED STATES--0.0% Motient Corp., 04/01/08 (a), (c), (h) .......................... 1,385 21 Ubiquitel Operating Co., 04/15/10 (a), (c), (h) .......................... 922 46,100 ----------- TOTAL UNITED STATES .............................. 46,121 ----------- TOTAL WARRANTS (Identified cost $109,720) ....................... 69,686 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 58 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) U.S. GOVERNMENT SECURITIES--29.3% Federal Home Loan Bank: 1.63%, 03/13/02 (e) ................................ $ 2,403 $ 2,395,275 1.65%, 01/14/02 (e) ................................ 100 99,941 1.65%, 03/26/02 (e) ................................ 215 214,182 1.67%, 03/11/02 (e) ................................ 432 430,617 1.68%, 03/18/02 (e) ................................ 470 468,333 1.68%, 03/19/02 (e) ................................ 960 956,550 1.68%, 03/20/02 (e) ................................ 1,230 1,225,523 1.70%, 06/26/02 (e) ................................ 1,400 1,388,431 1.74%, 01/16/02 (e) ................................ 850 849,384 1.76%, 01/17/02 (e) ................................ 4,285 4,281,648 1.76%, 01/23/02 (e) ................................ 3,200 3,196,558 1.96%, 01/02/02 (e) ................................ 1,632 1,631,880 1.96%, 01/07/02 (e) ................................ 930 929,696 2.10%, 01/22/02 (e) ................................ 1,895 1,892,679 2.12%, 12/13/02 (e) ................................ 812 795,455 2.15%, 12/02/02 (e) ................................ 740 725,195 3.32%, 02/13/02 (e) ................................ 2,615 2,604,630 3.34%, 02/08/02 (e) ................................ 5,200 5,181,667 3.69%, 06/04/02 (e) ................................ 67 65,942 3.98%, 04/18/02 (e) ................................ 863 852,791 Federal Home Loan Mortgage Corp.: 1.69%, 01/08/02 (e) ................................ 450 449,852 1.70%, 01/28/02 (e) ................................ 100 99,872 1.96%, 01/24/02 (e) ................................ 1,000 998,748 1.97%, 04/25/02 (e) ................................ 190 188,815 4.75%, 01/31/02 (e) ................................ 750 747,031 Federal National Mortgage Association: 1.65%, 01/14/02 (e) ................................ 1,170 1,169,303 1.67%, 01/16/02 (e) ................................ 382 381,734 1.67%, 02/08/02 (e) ................................ 960 958,308 1.67%, 03/14/02 (e) ................................ 300 298,998 1.69%, 02/04/02 (e) ................................ 1,700 1,697,367 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- 1.69%, 06/13/02 (e) ................................ $ 350 $ 347,179 1.71%, 02/19/02 (e) ................................ 149 148,653 1.72%, 02/22/02 (e) ................................ 746 744,147 1.73%, 01/17/02 (e) ................................ 1,170 1,169,100 1.78%, 06/13/02 (e) ................................ 586 581,516 1.81%, 01/04/02 (e) ................................ 775 774,883 1.85%, 01/07/02 (e) ................................ 790 789,757 1.85%, 01/14/02 (e) ................................ 3,068 3,065,950 1.86%, 01/25/02 (e) ................................ 1,057 1,055,689 1.92%, 01/03/02 (e) ................................ 1,700 1,699,819 1.92%, 01/14/02 (e) ................................ 1,700 1,698,821 1.98%, 01/31/02 (e) ................................ 1,000 998,350 2.02%, 05/23/02 (e) ................................ 200 198,407 2.35%, 09/20/02 (e) ................................ 200 196,579 4.41%, 03/08/02 (e) ................................ 1,038 1,029,608 6.00%, 12/15/05 (e) ................................ 300 315,282 ------------ TOTAL U.S. GOVERNMENT SECURITIES (Identified cost $51,980,759) ....................... 51,990,145 ------------ COMMERCIAL PAPER--2.5% ChevronTexaco Corp., 1.76%, 01/14/02 (Identified cost $4,397,204) (e) ................... 4,400 4,397,204 ------------ REPURCHASE AGREEMENT--1.6% State Street Corp., 1.55%, 01/02/02 (Dated 12/31/01, collateralized by $2,960,000 United States Treasury Bill, 3.04%, 06/20/02, with a value of $2,934,840) (Identified cost $2,876,000) (e) ................... 2,876 2,876,000 ------------ TOTAL INVESTMENTS (Identified cost $184,623,922) (b) .................. 99.9% $177,094,574 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 0.1 111,494 ----- ------------ NET ASSETS ........................................... 100.0% $177,206,068 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 59 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Forward Foreign Currency Contracts open at December 31, 2001:
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- BRL 1/4/02 1,647,229 $ 719,000 $ 709,768 $ -- $ 9,232 BRL 1/4/02 1,652,981 719,000 712,246 -- 6,754 BRL 2/8/02 4,325,100 1,466,136 1,819,946 353,810 -- CAD 1/31/02 836,976 529,246 525,522 -- 3,724 CLP 2/27/02 200,925,000 342,000 301,396 -- 40,604 CNY 1/15/02 5,206,359 629,000 628,696 -- 304 CNY 1/16/02 5,371,903 649,000 648,663 -- 337 COP 2/22/02 1,753,100,000 746,000 756,970 10,970 -- COP 3/19/02 2,265,720,000 956,000 971,141 15,141 -- COP 3/20/02 1,229,310,000 522,000 526,754 4,754 -- COP 3/27/02 503,679,600 214,514 215,375 861 -- CRC 1/16/02 368,779,370 1,073,000 1,070,241 -- 2,759 CRC 1/23/02 108,479,700 315,000 313,914 -- 1,086 CZK 2/13/02 119,331,409 3,133,785 3,335,320 201,535 -- CZK 3/18/02 17,045,000 468,939 475,248 6,309 -- CZK 6/13/02 21,740,000 590,296 602,910 12,614 -- CZK 12/10/02 27,759,765 750,426 764,128 13,702 -- DKK 1/31/02 41,560,622 4,970,593 4,968,514 -- 2,079 DKK 1/31/02 3,515,413 425,791 420,263 -- 5,528 DKK 1/31/02 12,096,898 1,465,190 1,446,167 -- 19,023 EGP 1/10/02 810,000 178,808 175,082 -- 3,726 EGP 1/17/02 375,000 82,873 80,748 -- 2,125 EGP 1/24/02 1,027,600 226,344 220,368 -- 5,976 EUR 1/31/02 53,508 48,211 47,570 -- 641 EUR 1/31/02 59,702 53,792 53,077 -- 715 EUR 1/31/02 20,339 18,061 18,082 21 -- EUR 1/31/02 75,790 67,496 67,379 -- 117 EUR 1/31/02 340,880 303,400 303,049 -- 351 EUR 1/31/02 6,897 6,131 6,131 -- -- EUR 1/31/02 54,160 48,779 48,149 -- 630 EUR 1/31/02 68,491 61,686 60,890 -- 796 EUR 1/31/02 20,495 18,459 18,221 -- 238 EUR 1/31/02 183,258 164,932 162,920 -- 2,012 EUR 1/31/02 353,779 310,972 314,517 3,545 -- EUR 1/31/02 58,754 51,629 52,234 605 -- EUR 1/31/02 586,492 517,838 521,404 3,566 -- EUR 1/31/02 131,157 116,441 116,601 160 -- EUR 1/31/02 188,072 168,300 167,200 -- 1,100 EUR 1/31/02 98,548 88,200 87,611 -- 589 EUR 1/31/02 55,350 49,400 49,207 -- 193 EUR 1/31/02 49,669 44,354 44,156 -- 198 EUR 1/31/02 226,209 201,100 201,105 5 -- EUR 1/31/02 24,807 22,029 22,054 25 -- EUR 1/31/02 112,987 100,333 100,448 115 -- EUR 1/31/02 51,801 46,155 46,052 -- 103 EUR 1/31/02 15,315 13,814 13,615 -- 199 EUR 1/31/02 94,782 85,304 84,263 -- 1,041
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 60 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- EUR 1/31/02 127,677 $ 113,319 $ 113,507 $ 188 $ -- EUR 1/31/02 59,548 52,851 52,939 88 -- GBP 1/31/02 801,961 1,137,982 1,163,704 25,722 -- GBP 1/31/02 2,498,467 3,542,327 3,625,461 83,134 -- GBP 1/31/02 39,419 55,821 57,199 1,378 -- GBP 1/31/02 15,849 23,091 22,998 -- 93 GBP 1/31/02 13,772 19,653 19,985 332 -- GBP 1/31/02 57,431 81,984 83,337 1,353 -- GBP 1/31/02 59,182 83,625 85,878 2,253 -- ILS 1/23/02 4,838,244 1,136,271 1,093,685 -- 42,586 INR 1/7/02 12,981,540 267,000 268,202 1,202 -- INR 1/7/02 38,514,960 792,000 795,729 3,729 -- INR 2/6/02 37,422,900 774,000 766,050 -- 7,950 INR 2/11/02 46,521,600 960,000 951,053 -- 8,947 INR 2/19/02 7,196,700 149,000 146,817 -- 2,183 INR 2/19/02 3,329,250 69,000 67,918 -- 1,082 INR 3/20/02 24,750,300 510,000 501,123 -- 8,877 JPY 1/31/02 221,220,472 1,817,752 1,691,210 -- 126,542 JPY 1/31/02 120,695,570 990,892 922,707 -- 68,185 JPY 1/31/02 28,253,920 236,000 215,999 -- 20,001 JPY 1/31/02 7,803,005 63,827 59,653 -- 4,174 JPY 1/31/02 8,162,608 65,600 62,402 -- 3,198 JPY 1/31/02 11,405,978 90,700 87,198 -- 3,502 KES 1/10/02 11,135,600 140,000 141,088 1,088 -- KES 1/10/02 10,331,100 130,000 130,895 895 -- KES 1/17/02 8,608,000 108,662 108,901 239 -- KES 1/22/02 26,725,000 338,334 337,720 -- 614 KRW 1/14/02 1,451,736,000 1,128,000 1,103,407 -- 24,593 KRW 1/15/02 1,451,736,000 1,128,000 1,103,249 -- 24,751 KRW 1/28/02 510,581,700 397,000 387,293 -- 9,707 KRW 3/12/02 554,040,000 432,000 418,533 -- 13,467 KRW 3/14/02 1,513,141,000 1,178,000 1,142,862 -- 35,138 MXN 1/17/02 1,847,000 202,034 200,271 -- 1,763 MXN 1/23/02 5,038,000 551,143 545,687 -- 5,456 MXN 2/4/02 7,153,500 600,000 773,201 173,201 -- MXN 3/12/02 11,187,227 1,037,661 1,201,481 163,820 -- MXN 4/18/02 20,340,000 1,962,373 2,167,935 205,562 -- MXN 6/11/02 1,667,000 167,109 175,531 8,422 -- MXN 6/11/02 137,000 13,923 14,426 503 -- MXN 12/19/02 8,000,000 811,977 807,436 -- 4,541 PEN 1/4/02 2,661,970 775,000 772,818 -- 2,182 PEN 6/17/02 1,218,600 350,032 348,939 -- 1,093 PEN 6/27/02 4,881,520 1,400,000 1,396,436 -- 3,564 PHP 1/14/02 42,915,824 812,000 826,404 14,404 -- PHP 1/14/02 56,127,000 1,059,000 1,080,804 21,804 -- PHP 2/5/02 6,124,800 116,000 117,162 1,162 -- PHP 3/11/02 17,964,700 338,000 340,199 2,199 -- PHP 3/13/02 65,390,500 1,225,000 1,237,540 12,540 --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 61 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- PLN 2/5/02 9,269,110 $ 2,050,915 $ 2,310,174 $ 259,259 $ -- PLN 6/3/02 4,659,018 1,092,000 1,128,693 36,693 -- PLN 9/30/02 955,300 205,419 226,589 21,170 -- RUB 1/9/02 20,106,108 660,000 651,829 -- 8,171 RUB 1/18/02 16,504,621 535,006 532,285 -- 2,721 RUB 1/22/02 20,283,830 665,000 653,177 -- 11,823 RUB 1/23/02 20,791,815 681,000 669,281 -- 11,719 RUB 1/24/02 20,339,025 665,000 654,459 -- 10,541 RUB 1/25/02 28,073,800 920,000 903,002 -- 16,998 RUB 1/29/02 8,584,520 280,000 275,706 -- 4,294 RUB 1/30/02 19,361,826 632,000 621,603 -- 10,397 SKK 1/28/02 40,167,200 834,539 832,091 -- 2,448 SKK 2/13/02 87,746,650 1,812,554 1,812,899 345 -- SKK 2/14/02 49,805,474 1,039,476 1,028,841 -- 10,635 SKK 2/15/02 37,576,264 786,649 776,093 -- 10,556 SKK 3/21/02 9,602,200 200,803 197,221 -- 3,582 SKK 4/30/02 9,451,342 195,650 192,987 -- 2,663 SKK 5/28/02 11,146,000 226,510 226,597 87 -- TRL 1/18/02 347,508,000,000 2,364,000 2,307,477 -- 56,523 TRL 1/18/02 182,020,740,000 1,185,000 1,208,630 23,630 -- VEB 1/3/02 1,289,875,000 1,700,000 1,695,105 -- 4,895 VEB 1/17/02 208,572,000 273,000 269,225 -- 3,775 VEB 1/22/02 43,804,500 57,000 56,176 -- 824 VEB 1/24/02 937,132,350 1,211,000 1,198,691 -- 12,309 VEB 1/25/02 729,764,000 938,000 932,239 -- 5,761 VEB 1/31/02 600,621,000 777,000 761,359 -- 15,641 VEB 2/4/02 1,349,800,000 1,700,000 1,701,555 1,555 -- VND 1/22/02 4,469,715,000 293,000 295,099 2,099 -- ZAR 1/18/02 6,668,000 535,024 553,522 18,498 -- ZAR 1/22/02 3,910,000 318,119 324,279 6,160 -- ----------- ----------- ---------- -------- Total Forward Foreign Currency Purchase Contracts $78,047,364 $79,027,171 $1,722,452 $742,645 =========== =========== ---------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 62 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- BRL 1/4/02 1,652,981 $ 708,218 $ 712,246 $ -- $ 4,028 BRL 1/4/02 1,647,229 705,754 709,768 -- 4,014 BRL 2/8/02 3,166,800 1,300,000 1,332,548 -- 32,548 BRL 2/8/02 1,158,300 440,000 487,397 -- 47,397 CAD 1/31/02 835,936 528,600 524,869 3,731 -- CHF 1/31/02 324,077 197,300 195,294 2,006 -- CLP 2/27/02 200,925,000 292,808 301,396 -- 8,588 DKK 1/31/02 56,614,767 6,768,417 6,768,215 202 -- DKK 1/31/02 890,118 104,900 106,412 -- 1,512 EUR 2/13/02 3,495,734 3,133,785 3,106,219 27,566 -- EUR 3/18/02 521,286 468,939 462,630 6,309 -- EUR 6/13/02 656,798 590,296 581,331 8,965 -- EUR 12/10/02 830,000 750,426 732,384 18,042 -- EUR 1/28/02 925,000 834,539 822,445 12,094 -- EUR 2/13/02 2,015,080 1,812,554 1,790,548 22,006 -- EUR 2/14/02 1,143,770 1,039,476 1,016,285 23,191 -- EUR 2/15/02 858,945 786,649 763,177 23,472 -- EUR 3/21/02 220,893 200,803 196,016 4,787 -- EUR 4/30/02 212,000 195,650 187,888 7,762 -- EUR 5/28/02 252,836 226,510 223,892 2,618 -- EUR 1/31/02 5,918,201 5,264,240 5,261,400 2,840 -- EUR 1/31/02 6,060,327 5,389,418 5,387,752 1,666 -- EUR 1/31/02 1,310,409 1,164,600 1,164,980 -- 380 EUR 1/31/02 8,425,538 7,486,933 7,490,473 -- 3,540 EUR 1/31/02 32,447 28,813 28,846 -- 33 EUR 1/31/02 59,330 52,685 52,746 -- 61 EUR 1/31/02 1,385,462 1,228,905 1,231,704 -- 2,799 EUR 1/31/02 240,175 213,900 213,521 379 -- EUR 1/31/02 87,555 77,973 77,838 135 -- EUR 1/31/02 48,032 42,775 42,703 72 -- EUR 1/31/02 26,040 23,150 23,150 -- -- EUR 1/31/02 298,402 269,000 265,285 3,715 -- EUR 1/31/02 48,218 43,444 42,866 578 -- EUR 1/31/02 48,696 43,680 43,292 388 -- EUR 1/31/02 155,110 138,800 137,896 904 -- EUR 1/31/02 58,591 51,486 52,088 -- 602 EUR 1/31/02 118,521 104,565 105,367 -- 802 EUR 1/31/02 54,246 47,845 48,225 -- 380 EUR 1/31/02 57,094 50,357 50,758 -- 401 EUR 1/31/02 113,396 99,886 100,811 -- 925 EUR 1/31/02 209,786 184,792 186,504 -- 1,712 EUR 1/31/02 101,467 90,204 90,206 -- 2 EUR 1/31/02 361,375 322,708 321,270 1,438 -- EUR 1/31/02 105,105 94,700 93,441 1,259 -- EUR 1/31/02 53,711 48,300 47,750 550 -- EUR 1/31/02 17,934 16,123 15,944 179 -- GBP 1/31/02 28,971 41,312 42,038 -- 726 GBP 1/31/02 4,876,905 6,912,086 7,076,750 -- 164,664
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 63 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONCLUDED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation - ------------------ ---------- ---------- -------------- --------- ------------- ------------- GBP 1/31/02 113,084 $ 160,200 $ 164,094 $ -- $ 3,894 GBP 1/31/02 33,533 47,550 48,659 -- 1,109 GBP 1/31/02 74,040 107,209 107,437 -- 228 GBP 1/31/02 33,950 49,024 49,264 -- 240 GBP 1/31/02 139,420 202,856 202,309 547 -- GBP 1/31/02 80,000 115,840 116,086 -- 246 GBP 1/31/02 83,627 120,132 121,349 -- 1,217 GBP 1/31/02 80,000 114,160 116,086 -- 1,926 GBP 1/31/02 25,354 36,066 36,791 -- 725 ILS 1/23/02 1,129,788 263,446 255,389 8,057 -- JPY 1/31/02 175,314,086 1,443,413 1,340,260 103,153 -- JPY 1/31/02 863,044,779 7,085,754 6,597,899 487,855 -- JPY 1/31/02 8,231,260 67,469 62,927 4,542 -- JPY 1/31/02 11,998,076 98,200 91,724 6,476 -- JPY 1/31/02 38,007,708 315,600 290,566 25,034 -- JPY 1/31/02 3,430,840 28,078 26,228 1,850 -- JPY 1/31/02 95,022,602 756,700 726,439 30,261 -- MXN 4/18/02 4,347,218 449,000 463,347 -- 14,347 MXN 6/11/02 723,985 73,389 76,234 -- 2,845 PLN 6/3/02 4,659,018 1,100,252 1,128,693 -- 28,441 VEB 1/3/02 1,289,875,000 1,682,811 1,695,105 -- 12,294 ----------- ----------- ---------- ----------- Total Forward Foreign Currency Sale Contracts $64,935,453 $64,433,450 $ 844,629 $ 342,626 =========== =========== ---------- ----------- Gross unrealized appreciation/depreciation from Forward Foreign Currency Contracts $2,567,081 $ 1,085,271 ========== ===========
As of December 31, 2001, the Portfolio had the following interest rate swap agreements outstanding:
Swap Notional Rate Rate Termination Unrealized Counterparty Amount Received Paid Date Gain - -------------------- -------------- -------- -------- ---------- ---------- Deutsche Bank AG 1,829,000 MXN 12.75% Variable+ 8/27/03 $ 6,060 JP Morgan Chase &Co. 4,991,000 MXN 13.45 Variable+ 7/7/03 24,897 --------- $30,957 =========
+ The Portfolio pays interest based on the Mexican TIIE which fluctuates daily. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 64 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD MORTGAGE PORTFOLIO ASSET-BACKED SECURITY--1.6% Capital Auto Receivables Asset Trust, Series 2000-2, Class A4, 6.46%, 07/15/06 (Identified cost $1,212,412) (e) ................... $ 1,170 $ 1,207,651 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS--4.4% Banc of America Commercial Mortgage, Inc., Series 2000-1, Class A1A, 7.109%, 11/15/31 (e) ............................... 158 168,342 CIT Equipment Collateral Trust, Series 2001-1, Class A3, 5.23%, 10/20/04 (e) ................................ 1,220 1,248,384 First Union Commercial Mortgage Trust, Series 1999-C1, Class A2, 6.07%, 10/15/35 .................................... 1,022 1,031,025 First Union-Lehman Brothers- Bank of America, Series 1998-C2, Class A2, 6.56%, 11/18/35 .................................... 360 374,741 Morgan Stanley Dean Witter Capital I Trust: Series 2001-TOP1, Class A4, 6.66%, 02/15/33 .................................... 240 247,836 Series 2000-LIF2, Class A2, 7.20%, 10/15/33 .................................... 350 372,488 ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Identified cost $3,486,229) ........................ 3,442,816 ------------ MORTGAGE PASS-THROUGH SECURITIES--90.9% Federal Home Loan Mortgage Corp.: Pool#E77662, 6.00%, 07/01/14 (e) ................................ 85 85,814 Pool#E00763, 6.00%, 11/01/14 (e) ................................ 88 88,707 Pool#E84574, 6.00%, 07/01/16 (e) ................................ 197 198,020 Pool#E84978, 6.00%, 08/01/16 (e) ................................ 121 122,383 Pool#C24962, 6.00%, 04/01/29 (e) ................................ 301 296,401 Pool#C26047, 6.00%, 04/01/29 (e) ................................ 20 19,972 Pool#C28051, 6.00%, 06/01/29 (e) ................................ 21 20,718 Pool#C00834, 6.00%, 07/01/29 (e) ................................ 182 178,952 PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- Pool#C31323, 6.00%, 09/01/29 (e) ................................ $ 120 $ 118,190 Pool#C00891, 6.00%, 10/01/29 (e) ................................ 26 25,696 Pool#C01166, 6.00%, 04/01/31 (e) ................................ 194 190,127 Pool#C00610, 6.50%, 05/01/28 (e) ................................ 159 159,790 Pool#C00835, 6.50%, 07/01/29 (e) ................................ 137 137,925 Pool#C32962, 6.50%, 11/01/29 (e) ................................ 22 22,885 Pool#C56445, 6.50%, 08/01/31 (e) ................................ 875 876,524 Pool#C56521, 6.50%, 08/01/31 (e) ................................ 393 393,841 Pool#D77111, 7.00%, 04/01/26 (e) ................................ 11 12,026 Pool#G00815, 7.00%, 12/01/27 (e) ................................ 100 102,307 Pool#G10890, 7.50%, 12/01/13 (e) ................................ 78 82,174 Pool#E80531, 7.50%, 05/01/15 (e) ................................ 15 16,284 Pool#C00856, 7.50%, 08/01/29 (e) ................................ 28 29,492 Pool#C00882, 7.50%, 11/01/29 (e) ................................ 55 57,161 Pool#C00910, 7.50%, 01/01/30 (e) ................................ 71 73,812 Pool#G00924, 8.00%, 03/01/28 (e) ................................ 38 40,937 Pool#C32971, 8.00%, 11/01/29 (e) ................................ 10 11,400 6.00%, TBA ......................................... 7,057 7,021,501 6.50%, TBA ......................................... 14,668 14,686,335 7.00%, TBA ......................................... 4,402 4,556,070 7.50%, TBA ......................................... 9,148 9,485,360 8.00%, TBA ......................................... 7,100 7,446,125 Federal National Mortgage Association: Pool#545000, 6.50%, 06/01/15 .................................... 171 176,117 Pool#550415, 7.00%, 11/01/15 .................................... 246 255,087 Pool#355033, 7.00%, 11/01/26 .................................... 12 12,862 Pool#390065, 7.00%, 06/01/27 .................................... 33 34,374 Pool#549251, 7.00%, 11/01/30 .................................... 435 443,686 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 65 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONCLUDED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- LAZARD MORTGAGE PORTFOLIO (CONCLUDED) Pool#581846, 7.00%, 07/01/31 .................................... $ 232 $ 237,324 6.50%, TBA ......................................... 4,380 4,442,694 7.00%, TBA ......................................... 7,690 7,834,187 Government National Mortgage Association: Pool#475207, 6.50%, 08/15/28 .................................... 99 99,652 Pool#475562, 6.50%, 09/15/28 .................................... 735 738,117 Pool#486598, 6.50%, 10/15/28 .................................... 390 391,419 Pool#497216, 6.50%, 03/15/29 .................................... 119 120,308 Pool#557586, 6.50%, 07/15/31 .................................... 465 467,535 Pool#551120, 6.50%, 08/15/31 .................................... 253 254,054 Pool#781176, 7.00%, 12/15/28 .................................... 317 323,961 Pool#494837, 7.00%, 06/15/29 .................................... 218 223,208 Pool#485230, 7.00%, 02/15/31 .................................... 99 101,912 Pool#529740, 7.00%, 02/15/31 .................................... 267 274,023 Pool#520046, 7.00%, 06/15/31 .................................... 329 336,962 Pool#555110, 7.00%, 08/15/31 .................................... 175 179,248 Pool#462758, 7.50%, 05/15/28 .................................... 16 17,256 Pool#472630, 7.50%, 05/15/28 .................................... 10 10,787 Pool#531205, 8.00%, 06/15/30 .................................... 9 9,842 6.50%, TBA ......................................... 3,025 3,035,406 7.00%, TBA ......................................... 3,905 3,987,981 ------------ TOTAL MORTGAGE PASS-THROUGH SECURITIES (Identified cost $70,912,248) ....................... 70,564,931 ------------ PRINCIPAL AMOUNT DESCRIPTION (000) VALUE - -------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES--74.9% Federal Home Loan Bank, 1.65%, 01/14/02 (e) ................................ $ 43,240 $ 43,214,236 Federal Home Loan Mortgage Corp., 5.50%, 07/15/06 (e) ................................ 600 616,686 Federal National Mortgage Association, 1.73%, 01/17/02 (e) ................................ 14,300 14,289,005 ------------ TOTAL U.S. GOVERNMENT SECURITIES (Identified cost $58,130,331) ....................... 58,119,927 ------------ COMMERCIAL PAPER--2.4% ChevronTexaco Corp., 1.76%, 01/02/02 (Identified cost $1,899,851) (e) ................... 1,900 1,899,851 ------------ REPURCHASE AGREEMENT--6.4% State Street Corp., 1.55%, 01/02/02 (Dated 12/31/01, collateralized by $5,085,000 United States Treasury Bill, 3.04%, 05/02/02, with a value of $5,054,490) (Identified cost $4,955,000) (e) ................... 4,955 4,955,000 ------------ TOTAL INVESTMENTS (Identified cost $140,596,071) (b) .................. 180.6% $140,190,176 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ........................................ (80.6) (62,559,624) ----- ------------ NET ASSETS ........................................... 100.0% $ 77,630,552 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 66 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS DECEMBER 31, 2001 - -------------------------------------------------------------------------------- (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 $ 182,124,123 $10,843,162 $ 15,004,226 $ (4,161,064) Mid Cap 27,740,357 2,423,556 158,527 2,265,029 Small Cap 582,086,439 87,364,513 30,442,269 56,922,244 International Equity 2,623,467,715 64,567,112 330,382,203 (265,815,091) International Small Cap 417,054,805 41,273,905 58,145,340 (16,871,435) Emerging Markets 346,108,940 36,308,790 64,133,158 (27,824,368) International Equity Select 9,015,362 228,060 87,411 140,649 Bond 55,924,746 1,048,100 451,230 596,870 High Yield 85,196,489 1,988,042 3,091,113 (1,103,071) International Fixed-Income 18,971,601 111,554 2,214,529 (2,102,975) Strategic Yield 185,087,578 1,448,748 9,441,752 (7,993,004) Mortgage 140,641,724 17,560 469,108 (451,548)
(c) Pursuant to Rule 144A under the Securities Act of 1933, these securities may only be traded among "qualified institutional buyers." (d) Variable rate security. Interest rate shown is the rate in effect at December 31, 2001. (e) Segregated security for when-issued purchases, forward foreign currency contracts and/or forward roll transactions. (f) Step up bonds are securities which increase the interest payment rate at a specified point in time. Rate shown reflects rate in effect at December 31, 2001, which may step up at a future date. (g) Principal amount denominated in respective country's currency unless otherwise noted. (h) Date shown is the expiration date. (i) Interest-only security. The principal amount shown represents the face value of the underlying security. (j) Issue in default. (k) Bankrupt security valued at zero. (l) Zero coupon security. (m) Maturity date shown is the final conversion date. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 67 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- ABBREVIATIONS: - -------------- ADR -- American Depositary Receipt ARS -- American Registered Shares GDR -- Global Depositary Receipt TBA -- To Be Announced CURRENCY TERMS: - --------------- AUD -- Australian Dollar KES -- Kenyan Shilling BRL -- Brazilian Real KRW -- South Korean Won CAD -- Canadian Dollar MXN -- Mexican Peso CHF -- Swiss Franc NZD -- New Zealand Dollar CLP -- Chilean Peso PEN -- Peruvian Nouveau Sol CNY -- Chinese Yuan Renminbi PHP -- Philippine Peso COP -- Colombian Peso PLN -- Polish Zloty CRC -- Costa Rican Colon RUB -- New Russian Ruble CZK -- Czech Koruna SEK -- Swedish Krona DKK -- Danish Krone SKK -- Slovakian Koruna EGP -- Egyptian Pound TRL -- Turkish Lira EUR -- Euro USD -- United States Dollar GBP -- British Pound Sterling VEB -- Venezuelan Bolivar ILS -- Israeli Shekel VND -- Vietnam Dong INR -- Indian Rupee ZAR -- South African Rand JPY -- Japanese Yen THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 68 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS BY INDUSTRY, FOR THOSE PORTFOLIOS PREVIOUSLY PRESENTED BY COUNTRY:
LAZARD LAZARD LAZARD LAZARD INTERNATIONAL INTERNATIONAL EMERGING INTERNATIONAL EQUITY SMALL CAP MARKETS EQUITY SELECT PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------------------------------- INDUSTRY Advertising --% 1.9% --% --% Aerospace & Defense 1.0 -- -- -- Apparel & Textiles -- 2.2 -- -- Automotive 4.2 1.5 -- -- Banking & Financial Services 25.4 9.8 22.4 23.6 Brewery 1.7 -- 6.3 2.1 Broadcasting -- 0.4 1.6 -- Building &Construction 2.1 2.9 1.1 -- Business Services & Supplies -- 7.0 -- -- Chemicals & Plastics 1.9 0.2 1.3 -- Computer Software -- 3.1 -- -- Computers & Business Equipment -- 0.9 1.4 -- Conglomerates -- -- 0.9 -- Cosmetics & Toiletries -- -- -- 2.3 Diversified 4.7 2.2 -- -- Drugs & Health Care 5.6 3.6 3.2 12.3 Electrical Equipment -- -- 3.2 -- Electronics 8.0 3.1 1.6 2.3 Food & Beverages 3.9 11.1 1.7 12.1 Forest Products 0.5 -- -- -- Household Products & Home Furnishings -- 5.5 1.1 -- Industrial & Machinery -- 3.7 -- -- Insurance 3.9 3.7 3.6 9.1 Leisure & Entertainment -- 3.0 -- -- Manufacturing -- 1.5 -- 3.1 Medical Products -- 2.9 -- -- Medical Supplies -- 1.1 -- -- Metals & Mining 2.1 -- 3.9 -- Multimedia 2.1 -- -- 3.0 Oil & Gas 9.7 1.5 6.7 12.2 Paper Products -- -- 2.2 -- Printing -- 0.4 -- -- Publishing 1.1 5.0 -- -- Restaurants -- 1.6 -- -- Retail 1.8 9.3 3.3 -- Services -- 3.2 -- -- Semiconductor Manufacturers -- -- 1.8 -- Steel -- 0.5 3.4 -- Telecommunications 11.9 -- 19.1 6.0 Tobacco 1.3 5.0 3.5 -- Transportation 1.4 -- -- -- Utilities 4.0 -- 3.8 3.0 ----- ----- ----- ----- Subtotal 98.3 97.8 97.1 91.1 Repurchase Agreements 2.4 3.8 3.8 10.5 ----- ----- ----- ----- Total Investments 100.7% 101.6% 100.9% 101.6% ===== ===== ===== =====
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 69 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS (CONCLUDED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS BY ASSET TYPE, FOR THOSE PORTFOLIOS PREVIOUSLY PRESENTED BY COUNTRY: LAZARD LAZARD INTERNATIONAL STRATEGIC FIXED-INCOME YIELD PORTFOLIO PORTFOLIO ------------ ------------ ASSET TYPE Asset-Backed Securities ...................... --% 18.1% Collateralized Mortgage Obligations .......... -- 1.3 Commercial Paper ............................. -- 2.5 Convertible Bonds ............................ -- 0.3 Corporate Bonds .............................. 72.1 31.5 Foreign Government Obligations ............... 12.6 7.1 Mortgage Pass-Through Securities ............. -- 4.6 Preferred Stocks ............................. 0.2 1.8 Repurchase Agreements ........................ -- 1.6 U.S. Government Securities ................... -- 29.3 U.S. Treasury Securities ..................... -- 1.8 ---- ---- Total Investments ............................ 84.9% 99.9% ==== ==== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 70 ================================================================================ [THIS PAGE LEFT BLANK INTENTIONALLY.] 71 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2001 - --------------------------------------------------------------------------------
LAZARD LAZARD LAZARD LAZARD INTERNATIONAL EQUITY MID CAP SMALL CAP EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value ............................. $177,882,059 $28,208,386 $615,206,683 $2,301,231,624 Repurchase Agreements, at value ................................. 81,000 1,797,000 23,802,000 56,421,000 Cash ............................................................ 859 821 155 12,278 Foreign currency ................................................ -- -- -- 9,548,402 Receivables for: Investments sold .............................................. 1,891,394 -- 13,573,989 14,081,856 Dividends and interest ........................................ 230,446 15,718 506,415 3,023,025 Capital stock sold ............................................ 79,190 15,403 1,003,092 6,519,234 Gross appreciation on foreign currency contracts .............. -- -- -- -- Gross appreciation on swap agreements ......................... -- -- -- -- Collateral for securities on loan, at value ..................... -- 5,969,254 -- -- Deferred organizational and offering expenses ................... -- 4,055 -- -- ------------ ----------- ------------ -------------- Total assets .................................................... 180,164,948 36,010,637 654,092,334 2,390,837,419 ------------ ----------- ------------ -------------- LIABILITIES Due to Custodian: Cash .......................................................... -- -- -- -- Foreign currency .............................................. -- -- -- -- Payables for: Investments purchased ......................................... 522,980 688,002 1,080,498 11,104,264 Capital stock repurchased ..................................... 1,061,893 3,215 7,889,536 37,020,507 Dividends payable ............................................. -- -- -- -- Gross depreciation on foreign currency contracts .............. -- -- -- -- Payable upon return of securities on loan ....................... -- 5,969,254 -- -- Investment management fees payable .............................. 114,936 6,373 410,264 1,453,578 Accrued directors' fees payable ................................. 784 93 2,738 9,693 Accrued distribution fees payable ............................... 8,088 1,532 14,212 25,146 Other accrued expenses and payables ............................. 44,913 29,160 87,793 668,608 ------------ ----------- ------------ -------------- Total liabilities ............................................... 1,753,594 6,697,629 9,485,041 50,281,796 ------------ ----------- ------------ -------------- Net assets ...................................................... $178,411,354 $29,313,008 $644,607,293 $2,340,555,623 ============ =========== ============ ============== NET ASSETS Paid in capital ................................................. $190,980,669 $26,379,819 $570,099,641 $2,982,825,326 Undistributed (distributions in excess of) investment income--net ........................................ 116,764 -- 370,924 4,289,579 Unrealized appreciation (depreciation) on: Investments and swap agreements--net .......................... (2,603,073) 2,653,802 60,402,621 (227,525,387) Foreign currency--net ......................................... -- -- -- 135,944 Accumulated undistributed realized gain (loss)--net ............. (10,083,006) 279,387 13,734,107 (419,169,839) ------------ ----------- ------------ -------------- Net assets ...................................................... $178,411,354 $29,313,008 $644,607,293 $2,340,555,623 ============ =========== ============ ============== INSTITUTIONAL SHARES Net assets ...................................................... $141,328,913 $21,728,704 $575,076,754 $2,224,089,347 Shares of capital stock outstanding* ............................ 10,025,389 2,041,924 32,492,106 222,189,526 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ........ $ 14.10 $ 10.64 $ 17.70 $ 10.01 OPEN SHARES Net assets ...................................................... $ 37,082,441 $ 7,584,304 $ 69,530,539 $ 116,466,276 Shares of capital stock outstanding* ............................ 2,634,812 717,284 3,934,559 11,703,788 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ........ $ 14.07 $ 10.57 $ 17.67 $ 9.95 Cost of investments in securities and repurchase agreements ..... $180,566,132 $27,351,584 $578,606,062 $2,585,178,011 Cost of foreign currency ........................................ $ -- $ -- $ -- $ 9,513,856
*$0.001 par value, 1,750,000,000 shares authorized for the Portfolios in total. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 72 ================================================================================ - --------------------------------------------------------------------------------
LAZARD LAZARD LAZARD LAZARD LAZARD INTERNATIONAL EMERGING INTERNATIONAL LAZARD LAZARD INTERNATIONAL STRATEGIC LAZARD SMALL CAP MARKETS EQUITY SELECT BOND HIGH YIELD FIXED-INCOME YIELD MORTGAGE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------------------------------- $385,307,370 $306,192,572 $8,208,011 $56,521,616 $ 77,541,418 $16,868,626 $174,218,574 $135,235,176 14,876,000 12,092,000 948,000 -- 6,552,000 -- 2,876,000 4,955,000 200 3,333 508 -- 834 -- 847 346 1,925,142 1,479,716 -- -- -- -- 129,975 -- -- 1,218,462 -- 1,102,582 -- 3,570,343 9,462 7,007,979 368,976 597,953 3,927 720,003 1,682,429 340,708 1,838,670 364,947 914,857 145,074 25 58 329 245,715 6,287,813 12,377 -- -- -- -- -- 935,772 2,567,081 -- -- -- -- -- -- 1,401 30,957 -- 28,249,062 59,534,172 -- -- -- -- -- -- -- -- 577 -- 4,835 -- -- -- - ------------ ------------ ---------- ----------- ------------ ----------- ------------ ------------ 431,641,607 381,263,282 9,161,048 58,344,259 85,781,845 21,962,565 187,959,379 147,575,825 - ------------ ------------ ---------- ----------- ------------ ----------- ------------ ------------ -- -- -- 93,616 -- 83,929 -- -- -- -- -- -- -- 827,519 -- -- 1,925,142 4,111,197 132,479 5,339,946 1,895,817 86,505 9,423,575 69,912,432 7,401,335 1,848,401 -- 500 5,000 39,841 15,541 -- -- -- -- 27,308 24,523 200 59,432 5,474 -- -- -- -- -- 929,428 1,085,271 -- 28,249,062 59,534,172 -- -- -- -- -- -- 255,105 276,976 515 28,970 108,399 95,066 112,166 17,129 1,629 1,303 2 238 298 194 847 121 858 1,544 58 1,877 2,597 3,436 1,406 -- 89,355 170,180 13,687 32,046 29,052 37,284 55,073 10,117 - ------------ ------------ ---------- ----------- ------------ ----------- ------------ ------------ 37,922,486 65,943,773 146,741 5,524,501 2,065,686 2,103,402 10,753,311 69,945,273 - ------------ ------------ ---------- ----------- ------------ ----------- ------------ ------------ $393,719,121 $315,319,509 $9,014,307 $52,819,758 $ 83,716,159 $19,859,163 $177,206,068 $ 77,630,552 ============ ============ ========== =========== ============ =========== ============ ============ $414,194,079 $418,183,408 $8,883,720 $58,735,362 $126,534,625 $25,739,552 $250,181,284 $ 78,422,613 (81,425) (124,900) 844 (146,907) -- (1,700,946) (1,142,099) 15,937 (16,348,571) (24,500,112) 140,649 730,298 (1,032,984) (2,005,519) (7,498,391) (405,895) 22,309 (12,703) -- -- -- 10,080 1,478,985 -- (4,067,271) (78,226,184) (10,906) (6,498,995) (41,785,482) (2,184,004) (65,813,711) (402,103) - ------------ ------------ ---------- ----------- ------------ ----------- ------------ ------------ $393,719,121 $315,319,509 $9,014,307 $52,819,758 $ 83,716,159 $19,859,163 $177,206,068 $ 77,630,552 ============ ============ ========== =========== ============ =========== ============ ============ $390,277,773 $308,607,828 $8,580,086 $44,012,713 $ 71,467,390 $18,543,472 $170,589,930 $ 77,630,552 33,699,290 42,736,911 937,949 4,603,503 12,013,527 2,050,193 21,852,473 7,547,321 $ 11.58 $ 7.22 $ 9.15 $ 9.56 $ 5.95 $ 9.04 $ 7.81 $ 10.29 $ 3,441,348 $ 6,711,681 $ 434,221 $ 8,807,045 $ 12,248,769 $ 1,315,691 $ 6,616,138 N/A 298,378 927,234 47,429 921,653 2,057,861 147,227 846,806 N/A $ 11.53 $ 7.24 $ 9.16 $ 9.56 $ 5.95 $ 8.94 $ 7.81 N/A $416,531,941 $342,784,684 $9,015,362 $55,791,318 $ 85,126,402 $18,875,546 $184,623,922 $140,596,071 $ 1,921,642 $ 1,497,799 $ -- $ -- $ -- $ 819,118 $ 127,696 $ --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 73 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 - --------------------------------------------------------------------------------
LAZARD LAZARD LAZARD LAZARD INTERNATIONAL EQUITY MID CAP SMALL CAP EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Interest ...................................................... $ 256,688 $ 52,687 $ 1,304,124 $ 3,304,611 Dividends ..................................................... 3,393,535 334,018 7,215,465 44,823,729 ------------ ---------- ------------ ------------- Total investment income* ........................................ 3,650,223 386,705 8,519,589 48,128,340 ------------ ---------- ------------ ------------- EXPENSES: Management fees ............................................... 1,592,695 170,597 5,161,413 19,559,773 Administration fees ........................................... 87,469 49,548 182,632 405,785 Distribution fees (Open Shares) ............................... 120,994 17,129 171,548 343,426 Custodian fees ................................................ 85,833 65,566 171,296 2,856,335 Professional services ......................................... 41,420 34,516 59,662 128,415 Registration fees ............................................. 23,742 18,516 21,957 32,172 Shareholders' services ........................................ 66,214 50,143 87,679 137,446 Directors' fees and expenses .................................. 12,161 1,284 39,374 149,887 Shareholders' reports ......................................... 8,927 2,788 18,220 40,455 Amortization of organizational and offering expenses .......... -- 4,829 -- -- Other ......................................................... 8,947 2,316 25,115 167,932 ------------ ---------- ------------ ------------- Total expenses before fees waived and expenses reimbursed ....... 2,048,402 417,232 5,938,896 23,821,626 Management fees waived and expenses reimbursed ................ -- (157,952) -- -- Administration fees waived .................................... -- -- -- -- Expense reductions ............................................ (101) (65) (17,786) (1,952) ------------ ---------- ------------ ------------- Expenses--net ................................................... 2,048,301 259,215 5,921,110 23,819,674 ------------ ---------- ------------ ------------- INVESTMENT INCOME (LOSS)--NET ................................... 1,601,922 127,490 2,598,479 24,308,666 ------------ ---------- ------------ ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, SWAP AGREEMENTS AND FOREIGN CURRENCY--NET Realized gain (loss) on: Investments and swap agreements--net** ...................... (5,279,029) 2,685,775 125,607,248 (404,491,784) Foreign currency--net ....................................... -- -- -- (9,961,216) Change in net unrealized appreciation (depreciation) on: Investments and swap agreements--net ........................ (8,285,630) 211,688 (19,791,192) (356,998,967) Foreign currency--net ....................................... -- -- -- 537,090 ------------ ---------- ------------ ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, SWAP AGREEMENTS AND FOREIGN CURRENCY--NET ..................... (13,564,659) 2,897,463 105,816,056 (770,914,877) ------------ ---------- ------------ ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................................... $(11,962,737) $3,024,953 $108,414,535 $(746,606,211) ============ ========== ============ ============= *Net of foreign withholding taxes of ............................ $ -- $ -- $ -- $ 6,718,856 ============ ========== ============ ============= **Net of foreign capital gains taxes of ......................... $ -- $ -- $ -- $ -- ============ ========== ============ =============
***Portfolio commenced operations on May 31, 2001. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 74
=================================================================================================================================== LAZARD LAZARD LAZARD LAZARD LAZARD INTERNATIONAL EMERGING INTERNATIONAL LAZARD LAZARD INTERNATIONAL STRATEGIC LAZARD SMALL CAP MARKETS EQUITY SELECT BOND HIGH YIELD FIXED-INCOME YIELD MORTGAGE PORTFOLIO PORTFOLIO PORTFOLIO*** PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ----------------------------------------------------------------------------------------------------------------------------------- $ 699,944 $ 803,686 $ 2,705 $3,680,234 $ 8,373,118 $ 3,038,089 $ 14,971,555 $ 528,823 7,821,385 6,260,465 5,612 -- 604,407 1,765 434,048 -- - ------------ ------------ -------- ---------- ----------- ----------- ------------ --------- 8,521,329 7,064,151 8,317 3,680,234 8,977,525 3,039,854 15,405,603 528,823 - ------------ ------------ -------- ---------- ----------- ----------- ------------ --------- 2,625,167 3,203,300 5,486 290,046 534,295 471,392 1,672,222 57,387 115,001 109,064 25,754 56,604 59,246 57,569 89,693 40,930 7,185 14,199 110 24,271 30,567 56,843 20,652 -- 452,134 696,199 9,020 81,139 68,439 136,463 189,682 14,002 46,168 45,850 22,009 36,146 36,287 36,395 42,600 48,633 24,217 24,454 9,460 18,827 19,316 17,083 18,439 8,519 54,412 57,103 29,689 51,247 46,500 49,074 55,702 23,087 19,837 18,205 12 3,310 3,974 3,644 12,751 601 4,868 5,294 235 3,270 1,316 1,677 5,487 174 -- -- 799 -- 4,847 -- -- 1,364 14,441 13,460 871 3,610 4,047 3,896 8,948 1,223 - ------------ ------------ -------- ---------- ----------- ----------- ------------ --------- 3,363,430 4,187,128 103,445 568,470 808,834 834,036 2,116,176 195,920 (17,154) (22,634) (69,583) (24,254) (237,596) (89,826) -- (76,054) -- -- (25,625) -- -- -- -- (26,563) -- -- (683) -- -- -- (4,841) (50) - ------------ ------------ -------- ---------- ----------- ----------- ------------ --------- 3,346,276 4,164,494 7,554 544,216 571,238 744,210 2,111,335 93,253 - ------------ ------------ -------- ---------- ----------- ----------- ------------ --------- 5,175,053 2,899,657 763 3,136,018 8,406,287 2,295,644 13,294,268 435,570 - ------------ ------------ -------- ---------- ----------- ----------- ------------ --------- 4,161,656 (30,680,798) (10,906) 776,338 (18,818,427) (3,360,898) (17,180,759) (107,585) (647,646) (592,578) -- -- -- (813,480) 3,830,431 -- (33,115,413) 16,310,653 140,649 347,117 12,874,077 (1,456,697) 7,077,263 (472,897) 95,932 (2,002) -- -- -- (370,378) 1,860,878 -- - ------------ ------------ -------- ---------- ----------- ----------- ------------ --------- (29,505,471) (14,964,725) 129,743 1,123,455 (5,944,350) (6,001,453) (4,412,187) (580,482) - ------------ ------------ -------- ---------- ----------- ----------- ------------ --------- $(24,330,418) $(12,065,068) $130,506 $4,259,473 $ 2,461,937 $(3,705,809) $ 8,882,081 $(144,912) ============ ============ ======== ========== =========== =========== ============ ========= $ 995,605 $ 850,343 $ 944 $ -- $ -- $ -- $ 9,861 $ -- ============ ============ ======== ========== =========== =========== ============ ========= $ -- $ -- $ -- $ -- $ -- $ 2,984 $ 64,693 $ -- ============ ============ ======== ========== =========== =========== ============ =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 75 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------ LAZARD EQUITY PORTFOLIO --------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2001 2000 - ----------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income (loss)--net ........................................... $ 1,601,922 $ 2,673,847 Realized gain (loss) on investments and foreign currency--net ........... (5,279,029) 57,395,103 Change in unrealized appreciation (depreciation)--net ................... (8,285,630) (72,695,600) ------------- ------------- Net increase (decrease) in net assets resulting from operations ........... (11,962,737) (12,626,650) ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: From investment income--net Institutional Shares .................................................. (1,248,125) (2,247,859) Open Shares ........................................................... (236,944) (538,355) From realized gains--net Institutional Shares .................................................. (14,656,459) (34,523,152) Open Shares ........................................................... (4,255,190) (11,843,078) ------------- ------------- Net decrease in net assets resulting from distributions ................... (20,396,718) (49,152,444) ------------- ------------- CAPITAL STOCK TRANSACTIONS: Net proceeds from sales Institutional Shares .................................................. 26,766,243 61,385,178 Open Shares ........................................................... 14,252,473 27,266,542 Net proceeds in connection with acquisition of Global Equity Portfolio Institutional Shares .................................................. -- -- Open Shares ........................................................... -- -- Net proceeds from reinvestment of distributions Institutional Shares .................................................. 15,605,486 35,428,274 Open Shares ........................................................... 4,354,343 12,240,399 Cost of shares redeemed Institutional Shares .................................................. (63,364,605) (240,500,025) Open Shares ........................................................... (36,526,716) (84,011,522) ------------- ------------- Net increase (decrease) in net assets from capital stock transactions ..... (38,912,776) (188,191,154) ------------- ------------- Total increase (decrease) in net assets ................................... (71,272,231) (249,970,248) Net assets at beginning of year ........................................... 249,683,585 499,653,833 ------------- ------------- Net assets at end of year* ................................................ $ 178,411,354 $ 249,683,585 ============= ============= SHARES ISSUED AND REPURCHASED: INSTITUTIONAL SHARES: Shares outstanding at beginning of year ................................. 11,217,212 17,915,506 ------------- ------------- Shares sold ............................................................. 1,728,480 3,066,282 Shares issued in connection with acquisition of Global Equity Portfolio . -- -- Shares issued to shareholders from reinvestment of distributions ........ 1,048,419 2,103,844 Shares repurchased ...................................................... (3,968,722) (11,868,420) ------------- ------------- Net increase (decrease) ................................................. (1,191,823) (6,698,294) ------------- ------------- Shares outstanding at end of year ....................................... 10,025,389 11,217,212 ============= ============= OPEN SHARES: Shares outstanding at beginning of year ................................. 3,722,698 5,796,320 ------------- ------------- Shares sold ............................................................. 921,182 1,349,595 Shares issued in connection with acquisition of Global Equity Portfolio . -- -- Shares issued to shareholders from reinvestment of distributions ........ 292,381 723,431 Shares repurchased ...................................................... (2,301,449) (4,146,648) ------------- ------------- Net increase (decrease) ................................................. (1,087,886) (2,073,622) ------------- ------------- Shares outstanding at end of year ....................................... 2,634,812 3,722,698 ============= ============= *Includes undistributed (distributions in excess of) investment income--net $ 116,764 $ -- ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 76 ================================================================================
- ---------------------------------------------------------------------------------------------------------------- LAZARD MID CAP PORTFOLIO LAZARD SMALL CAP PORTFOLIO LAZARD INTERNATIONAL EQUITY 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, 2001 2000 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------------- $ 127,490 $ 33,746 $ 2,598,479 $ 4,373,558 $ 24,308,666 $ 32,069,212 2,685,775 1,926,999 125,607,248 (2,188,363) (414,453,000) 351,826,328 211,688 3,016,366 (19,791,192) 123,418,898 (356,461,877) (756,978,908) - ------------ ------------ ------------- ------------- --------------- --------------- 3,024,953 4,977,111 108,414,535 125,604,093 (746,606,211) (373,083,368) - ------------ ------------ ------------- ------------- --------------- --------------- (106,886) (45,560) (2,579,512) (10,388,013) (42,220) (34,532,302) (24,044) (708) (64,656) (532,442) -- (1,430,879) (2,749,584) (2,769,172) (97,208,960) (38,162,605) (24,111,584) (352,683,226) (1,177,061) (836,056) (10,916,659) (2,720,900) (1,340,517) (17,721,930) - ------------ ------------ ------------- ------------- --------------- --------------- (4,057,575) (3,651,496) (110,769,787) (51,803,960) (25,494,321) (406,368,337) - ------------ ------------ ------------- ------------- --------------- --------------- 7,928,457 4,440,827 190,390,940 461,592,135 1,945,027,728 2,499,587,908 4,053,520 3,970,363 91,239,379 89,818,313 634,542,979 425,016,149 -- -- -- -- 81,288,941 -- -- -- -- -- 2,952,867 -- 2,138,700 2,330,690 94,521,126 42,677,429 23,526,644 365,319,055 953,040 705,002 10,893,095 3,220,070 1,128,146 16,449,785 (2,954,225) (19,643,155) (439,301,259) (748,772,609) (2,093,454,514) (2,701,895,463) (3,459,758) (12,988,297) (98,676,422) (117,797,644) (631,516,136) (398,090,043) - ------------ ------------ ------------- ------------- --------------- --------------- 8,659,734 (21,184,570) (150,933,141) (269,262,306) (36,503,345) 206,387,391 - ------------ ------------ ------------- ------------- --------------- --------------- 7,627,112 (19,858,955) (153,288,393) (195,462,173) (808,603,877) (573,064,314) 21,685,896 41,544,851 797,895,686 993,357,859 3,149,159,500 3,722,223,814 - ------------ ------------ ------------- ------------- --------------- --------------- $ 29,313,008 $ 21,685,896 $ 644,607,293 $ 797,895,686 $ 2,340,555,623 $ 3,149,159,500 ============ ============ ============= ============= =============== =============== 1,350,976 2,553,780 40,414,908 54,749,412 223,097,242 207,337,268 - ------------ ------------ ------------- ------------- --------------- --------------- 745,763 392,767 10,326,305 27,339,672 171,818,188 161,834,339 -- -- -- -- 8,377,479 -- 199,576 229,218 5,527,335 2,550,600 2,150,297 26,927,629 (254,391) (1,824,789) (23,776,442) (44,224,776) (183,253,680) (173,001,994) - ------------ ------------ ------------- ------------- --------------- --------------- 690,948 (1,202,804) (7,922,802) (14,334,504) (907,716) 15,759,974 - ------------ ------------ ------------- ------------- --------------- --------------- 2,041,924 1,350,976 32,492,106 40,414,908 222,189,526 223,097,242 ============ ============ ============= ============= =============== =============== 561,206 1,306,121 3,753,674 5,233,657 10,976,004 7,994,053 - ------------ ------------ ------------- ------------- --------------- --------------- 367,933 372,166 4,915,338 5,305,280 56,203,294 27,888,419 -- -- -- -- 306,015 -- 89,312 69,868 638,307 193,580 103,582 1,217,140 (301,167) (1,186,949) (5,372,760) (6,978,843) (55,885,107) (26,123,608) - ------------ ------------ ------------- ------------- --------------- --------------- 156,078 (744,915) 180,885 (1,479,983) 727,784 2,981,951 - ------------ ------------ ------------- ------------- --------------- --------------- 717,284 561,206 3,934,559 3,753,674 11,703,788 10,976,004 ============ ============ ============= ============= =============== =============== $ -- $ -- $ 370,924 $ 237,513 $ 4,289,579 $ (14,949,699) ============ ============ ============= ============= =============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 77 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------- LAZARD INTERNATIONAL SMALL CAP PORTFOLIO ---------------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2001 2000 - ----------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income (loss)--net ............................................. $ 5,175,053 $ 3,311,114 Realized gain (loss) on investments and foreign currency--net ............. 3,514,010 9,285,874 Change in unrealized appreciation (depreciation)--net ..................... (33,019,481) (24,600,800) ------------- ------------- Net increase (decrease) in net assets resulting from operations ............. (24,330,418) (12,003,812) ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: From investment income--net Institutional Shares .................................................... (4,563,670) (2,695,984) Open Shares ............................................................. (30,803) (5,161) From realized gains--net Institutional Shares .................................................... -- (18,843,531) Open Shares ............................................................. -- (103,638) ------------- ------------- Net decrease in net assets resulting from distributions ..................... (4,594,473) (21,648,314) ------------- ------------- CAPITAL STOCK TRANSACTIONS: Net proceeds from sales Institutional Shares .................................................... 260,652,498 315,369,343 Open Shares ............................................................. 59,788,773 9,859,578 Net proceeds from reinvestment of distributions Institutional Shares .................................................... 4,071,244 20,585,318 Open Shares ............................................................. 160,826 106,983 Cost of shares redeemed Institutional Shares .................................................... (187,255,561) (178,275,031) Open Shares ............................................................. (58,230,864) (10,662,003) ------------- ------------- Net increase (decrease) in net assets from capital stock transactions ....... 79,186,916 156,984,188 ------------- ------------- Total increase (decrease) in net assets ..................................... 50,262,025 123,332,062 Net assets at beginning of year ............................................. 343,457,096 220,125,034 ------------- ------------- Net assets at end of year* .................................................. $ 393,719,121 $ 343,457,096 ============= ============= SHARES ISSUED AND REPURCHASED: INSTITUTIONAL SHARES: Shares outstanding at beginning of year ................................... 27,193,777 15,418,580 ------------- ------------- Shares sold ............................................................... 21,945,154 22,800,776 Shares issued to shareholders from reinvestment of distributions .......... 355,086 1,661,402 Shares repurchased ........................................................ (15,794,727) (12,686,981) ------------- ------------- Net increase (decrease) ................................................... 6,505,513 11,775,197 ------------- ------------- Shares outstanding at end of year ......................................... 33,699,290 27,193,777 ============= ============= OPEN SHARES: Shares outstanding at beginning of year ................................... 131,623 173,602 ------------- ------------- Shares sold ............................................................... 4,986,204 755,609 Shares issued to shareholders from reinvestment of distributions .......... 13,872 8,621 Shares repurchased ........................................................ (4,833,321) (806,209) ------------- ------------- Net increase (decrease) ................................................... 166,755 (41,979) ------------- ------------- Shares outstanding at end of year ......................................... 298,378 131,623 ============= ============= * Includes undistributed (distributions in excess of) investment income--net $ (81,425) $ (14,360) ============= ============= ** Portfolio commenced operations on May 31, 2001.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 78
------------------------------------------------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO LAZARD BOND PORTFOLIO - ---------------------------------- -------------------------------------------- -------------------------------- YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2001 2000 2001** 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- $ 2,899,657 $ 2,325,246 $ 763 $ 3,136,018 $ 5,125,720 (31,273,376) 6,299,970 (10,906) 776,338 (2,622,044) 16,308,651 (134,788,589) 140,649 347,117 2,696,711 - ------------- ------------- ----------- ------------ ------------- (12,065,068) (126,163,373) 130,506 4,259,473 5,200,387 - ------------- ------------- ----------- ------------ ------------- (2,665,662) (821,557) (4,765) (2,628,400) (4,471,964) (34,843) -- -- (510,688) (647,088) -- -- -- -- -- -- -- -- -- -- - ------------- ------------- ----------- ------------ ------------- (2,700,505) (821,557) (4,765) (3,139,088) (5,119,052) - ------------- ------------- ----------- ------------ ------------- 290,044,436 391,151,848 8,668,436 29,194,189 67,422,399 41,611,179 1,805,250 426,000 79,748,733 19,635,208 2,515,204 750,606 4,616 2,305,059 3,918,798 26,413 -- -- 413,275 581,833 (286,763,102) (415,547,373) (210,486) (43,319,757) (108,057,252) (40,498,793) (3,794,685) -- (82,946,538) (20,439,987) - ------------- ------------- ----------- ------------ ------------- 6,935,337 (25,634,354) 8,888,566 (14,605,039) (36,939,001) - ------------- ------------- ----------- ------------ ------------- (7,830,236) (152,619,284) 9,014,307 (13,484,654) (36,857,666) 323,149,745 475,769,029 -- 66,304,412 103,162,078 - ------------- ------------- ----------- ------------ ------------- $ 315,319,509 $ 323,149,745 $ 9,014,307 $ 52,819,758 $ 66,304,412 ============= ============= =========== ============ ============= 42,246,142 43,466,805 -- 5,852,741 9,853,933 - ------------- ------------- ----------- ------------ ------------- 39,269,503 42,815,951 960,804 3,065,623 7,296,990 350,790 98,259 515 241,107 425,174 (39,129,524) (44,134,873) (23,370 ) (4,555,968) (11,723,356) - ------------- ------------- ----------- ------------ ------------- 490,769 (1,220,663) 937,949 (1,249,238) (4,001,192) - ------------- ------------- ----------- ------------ ------------- 42,736,911 42,246,142 937,949 4,603,503 5,852,741 ============= ============= =========== ============ ============= 724,435 977,024 -- 1,222,954 1,248,705 - ------------- ------------- ----------- ------------ ------------- 5,902,193 185,304 47,429 8,411,660 2,118,772 3,689 -- -- 43,196 63,104 (5,703,083) (437,893) -- (8,756,157) (2,207,627) - ------------- ------------- ----------- ------------ ------------- 202,799 (252,589) 47,429 (301,301) (25,751) - ------------- ------------- ----------- ------------ ------------- 927,234 724,435 47,429 921,653 1,222,954 ============= ============= =========== ============ ============= $ (124,900) $ 437,094 $ 844 $ (146,907) $ (160,984) ============= ============= =========== ============ =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 80 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
LAZARD HIGH YIELD PORTFOLIO ---------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2001 2000 - -------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income (loss)--net ............................................. $ 8,406,287 $ 11,441,269 Realized gain (loss) on investments, swap agreements and foreign currency--net (18,818,427) (15,237,238) Change in unrealized appreciation (depreciation)--net ..................... 12,874,077 (11,917,431) ------------- ------------- Net increase (decrease) in net assets resulting from operations ............. 2,461,937 (15,713,400) ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: From investment income--net Institutional Shares .................................................... (6,992,230) (9,618,423) Open Shares ............................................................. (1,414,057) (1,823,113) From realized gains--net Institutional Shares .................................................... -- -- Open Shares ............................................................. -- -- From capital Institutional Shares .................................................... -- -- Open Shares ............................................................. -- -- ------------- ------------- Net decrease in net assets resulting from distributions ..................... (8,406,287) (11,441,536) ------------- ------------- CAPITAL STOCK TRANSACTIONS: Net proceeds from sales Institutional Shares .................................................... 28,754,762 25,318,514 Open Shares ............................................................. 3,072,449 18,463,169 Net proceeds from reinvestment of distributions Institutional Shares .................................................... 6,559,195 9,384,119 Open Shares ............................................................. 1,384,015 1,532,612 Cost of shares redeemed Institutional Shares .................................................... (24,709,902) (30,149,120) Open Shares ............................................................. (4,703,853) (3,060,285) ------------- ------------- Net increase (decrease) in net assets from capital stock transactions ....... 10,356,666 21,489,009 ------------- ------------- Total increase (decrease) in net assets ..................................... 4,412,316 (5,665,927) Net assets at beginning of year ............................................. 79,303,843 84,969,770 ------------- ------------- Net assets at end of year* .................................................. $ 83,716,159 $ 79,303,843 ============= ============= SHARES ISSUED AND REPURCHASED: INSTITUTIONAL SHARES: Shares outstanding at beginning of year ................................... 10,008,954 9,535,605 ------------- ------------- Shares sold ............................................................... 4,573,006 3,514,904 Shares issued to shareholders from reinvestment of distributions .......... 1,027,842 1,219,224 Shares repurchased ........................................................ (3,596,275) (4,260,779) ------------- ------------- Net increase (decrease) ................................................... 2,004,573 473,349 ------------- ------------- Shares outstanding at end of year ......................................... 12,013,527 10,008,954 ============= ============= OPEN SHARES: Shares outstanding at beginning of year ................................... 2,061,919 148,700 ------------- ------------- Shares sold ............................................................... 467,150 2,162,719 Shares issued to shareholders from reinvestment of distributions .......... 216,515 205,098 Shares repurchased ........................................................ (687,723) (454,598) ------------- ------------- Net increase (decrease) ................................................... (4,058) 1,913,219 ------------- ------------- Shares outstanding at end of year ......................................... 2,057,861 2,061,919 ============= ============= * Includes undistributed (distributions in excess of) investment income--net $ -- $ -- ============= ============= ** Portfolio commenced operations on December 29, 2000.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 80
- -------------------------------------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO LAZARD STRATEGIC YIELD PORTFOLIO LAZARD MORTGAGE PORTFOLIO - ------------------------------- --------------------------------- ------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2001 2000 2001 2000 2001 2000** - -------------------------------------------------------------------------------------------------------------- $ 2,295,644 $ 2,850,344 $ 13,294,268 $ 20,396,733 $ 435,570 $ 36 (4,174,378) (5,092,537) (13,350,328) (11,091,601) (107,585) -- (1,827,075) (1,201,237) 8,938,141 (5,130,833) (472,897) 45 - ------------ ------------ ------------- ------------- --------------- --------------- (3,705,809) (3,443,430) 8,882,081 4,174,299 (144,912) 81 - ------------ ------------ ------------- ------------- --------------- --------------- (13,502) -- (12,879,019) (30,158,141) (436,936) (36) (7,682) -- (445,881) (1,345,778) -- -- -- -- -- -- (277,226) -- -- -- -- -- -- -- (501,824) (812,428) -- -- -- -- (285,509) (143,218) -- -- -- -- - ------------ ------------ ------------- ------------- --------------- --------------- (808,517) (955,646) (13,324,900) (31,503,919) (714,162) (36) - ------------ ------------ ------------- ------------- --------------- --------------- 18,645,669 10,333,776 131,288,520 72,949,621 79,433,502 100,000 22,706,803 22,829,224 23,903,863 26,149,984 -- -- 487,858 801,686 11,949,392 27,375,427 573,732 -- 270,960 143,376 383,444 1,089,388 -- -- (60,350,688) (17,371,090) (208,533,685) (140,214,583) (1,617,653) -- (44,106,155) (3,272,741) (27,137,453) (32,376,702) -- -- - ------------ ------------ ------------- ------------- --------------- --------------- (62,345,553) 13,464,231 (68,145,919) (45,026,865) 78,389,581 100,000 - ------------ ------------ ------------- ------------- --------------- --------------- (66,859,879) 9,065,155 (72,588,738) (72,356,485) 77,530,507 100,045 86,719,042 77,653,887 249,794,806 322,151,291 100,045 -- - ------------ ------------ ------------- ------------- --------------- --------------- $ 19,859,163 $ 86,719,042 $ 177,206,068 $ 249,794,806 $ 77,630,552 $ 100,045 ============ ============ ============= ============= =============== =============== 6,606,781 7,252,221 30,161,493 34,670,734 10,000 -- - ------------ ------------ ------------- ------------- --------------- --------------- 1,990,814 1,072,625 16,591,227 8,430,468 7,641,003 10,000 52,761 84,099 1,502,386 3,278,451 56,015 -- (6,600,163) (1,802,164) (26,402,633) (16,218,160) (159,697) -- - ------------ ------------ ------------- ------------- --------------- --------------- (4,556,588) (645,440) (8,309,020) (4,509,241) 7,537,321 10,000 - ------------ ------------ ------------- ------------- --------------- --------------- 2,050,193 6,606,781 21,852,473 30,161,493 7,547,321 10,000 ============ ============ ============= ============= =============== =============== 2,444,698 372,893 1,209,528 1,816,497 -- -- - ------------ ------------ ------------- ------------- --------------- --------------- 2,482,809 2,395,420 3,035,801 3,087,124 -- -- 29,402 15,312 48,388 129,992 -- -- (4,809,682) (338,927) (3,446,911) (3,824,085) -- -- - ------------ ------------ ------------- ------------- --------------- --------------- (2,297,471) 2,071,805 (362,722) (606,969) -- -- - ------------ ------------ ------------- ------------- --------------- --------------- 147,227 2,444,698 846,806 1,209,528 -- -- ============ ============ ============= ============= =============== =============== $ (1,700,946) $ (368,689) $ (1,142,099) $ (3,812,332) $ 15,937 $ 11 ============ ============ ============= ============= =============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 81 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO
YEAR ENDED ----------------------------------------------------------------------------------- INSTITUTIONAL SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ----------------------------------------------------------------------------------- Net asset value, beginning of period .... $ 16.72 $ 21.08 $ 21.75 $ 19.98 $ 19.24 ----------- ----------- ----------- ----------- ----------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.13 0.17 0.26 0.28 0.22 Net realized and unrealized gain (loss) (1.07) (0.79) 0.66 3.10 4.54 ----------- ----------- ----------- ----------- ----------- Total from investment operations ...... (0.94) (0.62) 0.92 3.38 4.76 ----------- ----------- ----------- ----------- ----------- Less distributions from: Net investment income ................. (0.13) (0.23) (0.26) (0.26) (0.22) Net realized gains .................... (1.55) (3.51) (1.33) (1.35) (3.80) ----------- ----------- ----------- ----------- ----------- Total distributions ................... (1.68) (3.74) (1.59) (1.61) (4.02) ----------- ----------- ----------- ----------- ----------- Net asset value, end of period .......... $ 14.10 $ 16.72 $ 21.08 $ 21.75 $ 19.98 =========== =========== =========== =========== =========== TOTAL RETURN (a) ........................ (5.90)% (2.64)% 4.23% 17.31% 25.13% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 141,329 $ 187,517 $ 377,660 $ 361,126 $ 333,575 Ratios to average net assets: Net expenses .......................... 0.90% 0.86% 0.84% 0.85% 0.86% Gross expenses ........................ 0.90% 0.86% 0.84% 0.85% 0.87% Net investment income ................. 0.82% 0.85% 1.14% 1.28% 1.00% Portfolio turnover rate ................. 89% 36% 62% 76% 78%
YEAR ENDED FOR THE PERIOD --------------------------------------------------------------- 2/5/97* TO INSTITUTIONAL SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ----------- ----------- ----------- ------------ -------------- Net asset value, beginning of period .... $ 16.70 $ 21.05 $ 21.76 $ 19.99 $ 20.19 ----------- ----------- ----------- ----------- ----------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.09 0.12 0.20 0.20 0.13 Net realized and unrealized gain (loss) (1.08) (0.79) 0.65 3.12 3.62 ----------- ----------- ----------- ----------- ----------- Total from investment operations ...... (0.99) (0.67) 0.85 3.32 3.75 ----------- ----------- ----------- ----------- ----------- Less distributions from: Net investment income ................. (0.09) (0.17) (0.23) (0.20) (0.15) Net realized gains .................... (1.55) (3.51) (1.33) (1.35) (3.80) ----------- ----------- ----------- ----------- ----------- Total distributions ................... (1.64) (3.68) (1.56) (1.55) (3.95) ----------- ----------- ----------- ----------- ----------- Net asset value, end of period .......... $ 14.07 $ 16.70 $ 21.05 $ 21.76 $ 19.99 =========== =========== =========== =========== =========== TOTAL RETURN (a) ........................ (6.23)% (2.91)% 3.92% 16.98% 18.90% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 37,082 $ 62,167 $ 121,994 $ 117,624 $ 22,811 Ratios to average net assets: Net expenses (b) ...................... 1.18% 1.13% 1.10% 1.12% 1.22% Gross expenses (b) .................... 1.18% 1.13% 1.10% 1.12% 1.35% Net investment income (b) ............. 0.54% 0.57% 0.89% 0.96% 0.60% Portfolio turnover rate ................. 89% 36% 62% 76% 78%
* Commencement of operations. (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For periods after and including 12/31/99, net investment income (loss) has been computed using the average shares method. 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 MID CAP PORTFOLIO
YEAR ENDED FOR THE PERIOD ------------------------------------------------------------- 11/4/97* TO INSTITUTIONAL SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period .... $ 11.36 $ 10.78 $ 10.46 $ 10.26 $ 10.00 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.07 0.02 0.02 0.05 0.02 Net realized and unrealized gain (loss) 1.31 2.20 0.43 0.31 0.26 ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... 1.38 2.22 0.45 0.36 0.28 ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.07) (0.03) (0.03) (0.05) (0.02) Net realized gains .................... (2.03) (1.61) (0.10) (0.11) -- ---------- ---------- ---------- ---------- ---------- Total distributions ................... (2.10) (1.64) (0.13) (0.16) (0.02) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 10.64 $ 11.36 $ 10.78 $ 10.46 $ 10.26 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ 12.85% 22.44% 4.38% 3.65% 2.75% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 21,729 $ 15,344 $ 27,521 $ 55,731 $ 49,779 Ratios to average net assets: Net expenses (b) ...................... 1.05% 1.05% 1.05% 1.05% 1.05% Gross expenses (b) .................... 1.71% 1.50% 1.17% 1.23% 1.44% Net investment income (b) ............. 0.65% 0.20% 0.23% 0.48% 1.02% Portfolio turnover rate ................. 160% 152% 113% 86% 1%
YEAR ENDED FOR THE PERIOD ------------------------------------------------------------- 11/4/97* TO OPEN SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- -------------- Net asset value, beginning of period .... $ 11.30 $ 10.74 $ 10.45 $ 10.26 $ 10.00 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.04 (0.01) (0.01) 0.02 0.01 Net realized and unrealized gain (loss) 1.30 2.18 0.42 0.32 0.26 ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... 1.34 2.17 0.41 0.34 0.27 ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.04) -- (0.02) (0.04) (0.01) Net realized gains .................... (2.03) (1.61) (0.10) (0.11) -- ---------- ---------- ---------- ---------- ---------- Total distributions ................... (2.07) (1.61) (0.12) (0.15) (0.01) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 10.57 $ 11.30 $ 10.74 $ 10.45 $ 10.26 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ 12.50% 22.00% 3.96% 3.42% 2.71% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 7,584 $ 6,342 $ 14,024 $ 16,345 $ 1,806 Ratios to average net assets: Net expenses (b) ...................... 1.35% 1.35% 1.35% 1.35% 1.35% Gross expenses (b) .................... 2.13% 1.91% 1.55% 1.66% 4.97% Net investment income (loss) (b) ...... 0.35% (0.09)% (0.08)% 0.29% 0.72% Portfolio turnover rate ................. 160% 152% 113% 86% 1%
* Commencement of operations. (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For periods after and including 12/31/99, net investment income (loss) has been computed using the average shares method. 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 SMALL CAP PORTFOLIO
YEAR ENDED ------------------------------------------------------------------------------ INSTITUTIONAL SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period .... $ 18.07 $ 16.57 $ 17.39 $ 20.02 $ 18.44 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.08 0.09 0.10 0.08 0.07 Net realized and unrealized gain (loss) 3.06 2.45 0.17 (2.60) 4.92 ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... 3.14 2.54 0.27 (2.52) 4.99 ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.09) (0.23) (0.11) (0.01) (0.06) Net realized gains .................... (3.42) (0.81) (0.98) (0.10) (3.35) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (3.51) (1.04) (1.09) (0.11) (3.41) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 17.70 $ 18.07 $ 16.57 $ 17.39 $ 20.02 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ 18.06% 15.89% 1.77% (12.62)% 28.06% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 575,077 $ 730,179 $ 906,945 $1,411,503 $1,445,075 Ratios to average net assets: Net expenses .......................... 0.83% 0.83% 0.81% 0.81% 0.82% Gross expenses ........................ 0.83% 0.83% 0.81% 0.81% 0.82% Net investment income ................. 0.41% 0.52% 0.60% 0.50% 0.35% Portfolio turnover rate ................. 78% 67% 50% 46% 56%
YEAR ENDED FOR THE PERIOD ------------------------------------------------------------ 1/30/97* TO OPEN SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- -------------- Net asset value, beginning of period .... $ 18.04 $ 16.51 $ 17.35 $ 20.02 $ 18.75 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.02 0.04 0.06 0.03 0.01 Net realized and unrealized gain (loss) 3.05 2.45 0.16 (2.60) 4.61 ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... 3.07 2.49 0.22 (2.57) 4.62 ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.02) (0.15) (0.08) -- -- Net realized gains .................... (3.42) (0.81) (0.98) (0.10) (3.35) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (3.44) (0.96) (1.06) (0.10) (3.35) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 17.67 $ 18.04 $ 16.51 $ 17.35 $ 20.02 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ 17.69% 15.60% 1.47% (12.86)% 25.59% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 69,531 $ 67,717 $ 86,413 $ 93,547 $ 46,097 Ratios to average net assets: Net expenses (b) ...................... 1.13% 1.12% 1.09% 1.09% 1.14% Gross expenses (b) .................... 1.13% 1.12% 1.09% 1.09% 1.23% Net investment income (b) ............. 0.12% 0.24% 0.33% 0.21% 0.12% Portfolio turnover rate ................. 78% 67% 50% 46% 56%
* Commencement of operations. (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For periods after and including 12/31/99, net investment income (loss) has been computed using the average shares method. 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 ------------------------------------------------------------------------------ INSTITUTIONAL SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period .... $ 13.46 $ 17.29 $ 15.23 $ 13.97 $ 13.62 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.11 0.15 0.34 0.18 0.22 Net realized and unrealized gain (loss) (3.45) (2.01) 3.25 2.03 1.40 ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... (3.34) (1.86) 3.59 2.21 1.62 ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. --(d) (0.17) (0.54) (0.14) (0.34) Net realized gains .................... (0.11) (1.80) (0.99) (0.81) (0.93) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.11) (1.97) (1.53) (0.95) (1.27) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 10.01 $ 13.46 $ 17.29 $ 15.23 $ 13.97 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ (24.85)% (10.55)% 24.07% 16.04% 11.84% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $2,224,089 $3,001,933 $3,584,093 $2,879,289 $2,099,724 Ratios to average net assets: Net expenses .......................... 0.90% 0.88% 0.88% 0.90% 0.89% Gross expenses ........................ 0.90% 0.88% 0.88% 0.90% 0.89% Net investment income ................. 0.95% 0.97% 2.09% 1.37% 1.18% Portfolio turnover rate ................. 69% 51% 35% 41% 37%
YEAR ENDED FOR THE PERIOD ------------------------------------------------------------ 1/23/97* TO OPEN SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- -------------- Net asset value, beginning of period .... $ 13.41 $ 17.28 $ 15.23 $ 13.95 $ 13.29 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.08 0.10 0.31 0.18 0.16 Net realized and unrealized gain (loss) (3.43) (2.02) 3.22 2.00 1.71 ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... (3.35) (1.92) 3.53 2.18 1.87 ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. -- (0.15) (0.49) (0.09) (0.28) Net realized gains .................... (0.11) (1.80) (0.99) (0.81) (0.93) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.11) (1.95) (1.48) (0.90) (1.21) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 9.95 $ 13.41 $ 17.28 $ 15.23 $ 13.95 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ (25.02)% (10.95)% 23.67% 15.82% 14.07% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 116,466 $ 147,226 $ 138,131 $ 47,303 $ 10,794 Ratios to average net assets: Net expenses (b) ...................... 1.19% 1.15% 1.16% 1.24% 1.25% Gross expenses (b) .................... 1.19% 1.15% 1.16% 1.24% 1.61% Net investment income (b) ............. 0.70% 0.66% 1.87% 1.02% 0.37% Portfolio turnover rate ................. 69% 51% 35% 41% 37%
* Commencement of operations (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For periods after and including 12/31/99, net investment income (loss) has been computed using the average shares method. (d) Amount is less than $0.01 per share. 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 ------------------------------------------------------------------------------ INSTITUTIONAL SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period .... $ 12.57 $ 14.12 $ 11.40 $ 11.69 $ 11.93 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.18 0.16 0.14 0.05 0.07 Net realized and unrealized gain (loss) (1.03) (0.81) 2.81 0.83 (0.03) ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... (0.85) (0.65) 2.95 0.88 0.04 ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.14) (0.11) (0.12) (0.05) (0.07) Net realized gains .................... -- (0.79) (0.11) (1.12) (0.21) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.14) (0.90) (0.23) (1.17) (0.28) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 11.58 $ 12.57 $ 14.12 $ 11.40 $ 11.69 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ (6.77)% (4.44)% 26.07% 7.55% 0.27% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 390,278 $ 341,808 $ 217,684 $ 177,779 $ 141,695 Ratios to average net assets: Net expenses .......................... 0.95% 0.98% 1.01% 1.04% 1.09% Gross expenses ........................ 0.95% 0.98% 1.01% 1.04% 1.09% Net investment income ................. 1.48% 1.13% 1.17% 0.81% 0.73% Portfolio turnover rate ................. 17% 43% 50% 56% 63%
YEAR ENDED FOR THE PERIOD ------------------------------------------------------------ 2/13/97* TO OPEN SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- -------------- Net asset value, beginning of period .... $ 12.53 $ 14.06 $ 11.38 $ 11.69 $ 12.32 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.11 0.10 0.09 0.01 0.02 Net realized and unrealized gain (loss) (1.03) (0.80) 2.80 0.83 (0.42) ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... (0.92) (0.70) 2.89 0.84 (0.40) ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.08) (0.04) (0.10) (0.03) (0.02) Net realized gains .................... -- (0.79) (0.11) (1.12) (0.21) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.08) (0.83) (0.21) (1.15) (0.23) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 11.53 $ 12.53 $ 14.06 $ 11.38 $ 11.69 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ (7.33)% (4.85)% 25.55% 7.21% (3.24)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 3,441 $ 1,649 $ 2,441 $ 2,646 $ 1,873 Ratios to average net assets: Net expenses (b) ...................... 1.43% 1.43% 1.43% 1.43% 1.43% Gross expenses (b) .................... 2.03% 2.27% 2.12% 1.93% 3.39% Net investment income (b) ............. 0.91% 0.68% 0.77% 0.43% 0.34% Portfolio turnover rate ................. 17% 43% 50% 56% 63%
* Commencement of operations. (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For periods after and including 12/31/99, net investment income (loss) has been computed using the average shares method. 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 ------------------------------------------------------------------------------ INSTITUTIONAL SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period .... $ 7.52 $ 10.70 $ 6.94 $ 9.20 $ 11.21 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.07 0.06 0.09 0.10 0.10 Net realized and unrealized gain (loss) (0.31) (3.22) 3.77 (2.26) (1.18) ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... (0.24) (3.16) 3.86 (2.16) (1.08) ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.06) (0.02) (0.10) (0.10) (0.09) Net realized gains .................... -- -- -- -- (0.84) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.06) (0.02) (0.10) (0.10) (0.93) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 7.22 $ 7.52 $ 10.70 $ 6.94 $ 9.20 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ (3.16)% (29.53)% 55.81% (23.49)% (9.84)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 308,608 $ 317,691 $ 465,278 $ 298,033 $ 236,340 Ratios to average net assets: Net expenses .......................... 1.29% 1.26% 1.24% 1.28% 1.32% Gross expenses ........................ 1.29% 1.27% 1.25% 1.29% 1.33% Net investment income ................. 0.91% 0.62% 1.05% 1.84% 1.26% Portfolio turnover rate ................. 43% 72% 46% 36% 40%
YEAR ENDED FOR THE PERIOD ------------------------------------------------------------ 1/8/97* TO OPEN SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- -------------- Net asset value, beginning of period .... $ 7.54 $ 10.74 $ 6.97 $ 9.20 $ 11.45 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.05 0.03 0.06 0.11 0.07 Net realized and unrealized gain (loss) (0.32) (3.23) 3.79 (2.26) (1.42) ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... (0.27) (3.20) 3.85 (2.15) (1.35) ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.03) -- (0.08) (0.08) (0.07) Net realized gains .................... -- -- -- -- (0.83) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.03) -- (0.08) (0.08) (0.90) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 7.24 $ 7.54 $ 10.74 $ 6.97 $ 9.20 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ (3.54)% (29.80)% 55.26% (23.30)% (11.98)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 6,712 $ 5,459 $ 10,491 $ 8,191 $ 7,769 Ratios to average net assets: Net expenses (b) ...................... 1.60% 1.60% 1.60% 1.60% 1.60% Gross expenses (b) .................... 2.00% 1.80% 1.75% 1.76% 1.93% Net investment income (b) ............. 0.63% 0.30% 0.73% 1.54% 1.01% Portfolio turnover rate ................. 43% 72% 46% 36% 40%
* Commencement of operations. (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For periods after and including 12/31/99, net investment income (loss) has been computed using the average shares method. 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 THE PERIOD: - -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO FOR THE PERIOD 5/31/01* TO INSTITUTIONAL SHARES 12/31/01 ----------- Net asset value, beginning of period .... $ 10.00 --------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.01 Net realized and unrealized gain (loss) (0.85) --------- Total from investment operations ...... (0.84) --------- Less distributions from: Net investment income ................. (0.01) Net realized gains .................... -- --------- Total distributions ................... (0.01) --------- Net asset value, end of period .......... $ 9.15 ========= TOTAL RETURN (a) ........................ (8.43)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 8,580 Ratios to average net assets: Net expenses (b) ...................... 1.15% Gross expenses (b) .................... 13.75% Net investment income (b) ............. 0.15% Portfolio turnover rate ................. 1% FOR THE PERIOD 5/31/01* TO OPEN SHARES 12/31/01 ----------- Net asset value, beginning of period .... $ 10.00 ------- Income (loss) from investment operations: Net investment income (loss) (c) ...... (0.02) Net realized and unrealized gain (loss) (0.82) ------- Total from investment operations ...... (0.84) ------- Less distributions from: Net investment income ................. -- Net realized gains .................... -- ------- Total distributions ................... -- ------- Net asset value, end of period .......... $ 9.16 ======= TOTAL RETURN (a) ........................ (8.40)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 434 Ratios to average net assets: Net expenses (b) ...................... 1.45% Gross expenses (b) .................... 47.06% Net investment loss (b) ............... (0.31)% Portfolio turnover rate ................. 1% * Commencement of operations. (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) Net investment income (loss) has been computed using the average shares method. 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 BOND PORTFOLIO
YEAR ENDED ------------------------------------------------------------------------------ INSTITUTIONAL SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period .... $ 9.37 $ 9.29 $ 9.89 $ 10.03 $ 9.88 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.52 0.59 0.55 0.55 0.59 Net realized and unrealized gain (loss) 0.19 0.08 (0.60) 0.01 0.23 ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... 0.71 0.67 (0.05) 0.56 0.82 ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.52) (0.59) (0.55) (0.55) (0.60) Net realized gains .................... -- -- -- (0.15) (0.07) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.52) (0.59) (0.55) (0.70) (0.67) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 9.56 $ 9.37 $ 9.29 $ 9.89 $ 10.03 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ 7.68% 7.53% (0.46)% 5.77% 8.57% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 44,013 $ 54,847 $ 91,557 $ 100,397 $ 92,428 Ratios to average net assets: Net expenses .......................... 0.91% 0.82% 0.76% 0.78% 0.80% Gross expenses ........................ 0.91% 0.82% 0.76% 0.79% 0.81% Net investment income ................. 5.44% 6.38% 5.74% 5.45% 5.81% Portfolio turnover rate ................. 238% 355% 549% 335% 447%
FOR THE PERIOD YEAR ENDED 3/5/97* TO - ----------------------------------------------------------------------------------------------------------- -------------- OPEN SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ------------ ----------- ---------- ----------- ----------- Net asset value, beginning of period .... $ 9.37 $ 9.29 $ 9.88 $ 10.02 $ 9.86 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.50 0.57 0.51 0.52 0.46 Net realized and unrealized gain (loss) 0.19 0.08 (0.58) 0.01 0.24 ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... 0.69 0.65 (0.07) 0.53 0.70 ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.50) (0.57) (0.52) (0.52) (0.47) Net realized gains .................... -- -- -- (0.15) (0.07) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.50) (0.57) (0.52) (0.67) (0.54) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 9.56 $ 9.37 $ 9.29 $ 9.88 $ 10.02 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ 7.49% 7.25% (0.76)% 5.42% 7.22% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 8,807 $ 11,457 $ 11,605 $ 15,226 $ 7,283 Ratios to average net assets: Net expenses (b) ...................... 1.10% 1.10% 1.10% 1.10% 1.10% Gross expenses (b) .................... 1.35% 1.27% 1.15% 1.21% 1.49% Net investment income (b) ............. 5.24% 6.13% 5.37% 5.11% 5.46% Portfolio turnover rate ................. 238% 335% 549% 335% 447%
* Commencement of operations. (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For periods after and including 12/31/99, net investment income (loss) has been computed using the average shares method. 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 HIGH YIELD PORTFOLIO
YEAR ENDED FOR THE PERIOD -------------------------------------------- 1/2/98* TO INSTITUTIONAL SHARES 12/31/01 12/31/00 12/31/99 12/31/98 ---------- ---------- ---------- -------------- Net asset value, beginning of period .... $ 6.57 $ 8.77 $ 9.42 $ 10.00 ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.76 0.96 0.92 0.88 Net realized and unrealized gain (loss) (0.62) (2.20) (0.65) (0.57) ---------- ---------- ---------- ---------- Total from investment operations ...... 0.14 (1.24) 0.27 0.31 ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.76) (0.96) (0.92) (0.89) Net realized gains .................... -- -- -- -- ---------- ---------- ---------- ---------- Total distributions ................... (0.76) (0.96) (0.92) (0.89) ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 5.95 $ 6.57 $ 8.77 $ 9.42 ========== ========== ========== ========== TOTAL RETURN (a) ........................ 2.03% (15.19)% 2.94% 2.90% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 71,467 $ 65,752 $ 83,664 $ 41,935 Ratios to average net assets: Net expenses (b) ...................... 0.75% 0.75% 0.94% 1.05% Gross expenses (b) .................... 1.07% 1.00% 1.06% 1.55% Net investment income (b) ............. 11.85% 12.24% 10.08% 8.87% Portfolio turnover rate ................. 236% 148% 190% 418%
FOR THE PERIOD YEAR ENDED 2/24/98* TO -------------------------------------------- -------------- OPEN SHARES 12/31/01 12/31/00 12/31/99 12/31/98 ---------- ---------- ---------- ---------- Net asset value, beginning of period .... $ 6.57 $ 8.78 $ 9.42 $ 10.37 ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.74 0.94 0.90 0.72 Net realized and unrealized gain (loss) (0.62) (2.21) (0.65) (0.94) ---------- ---------- ---------- ---------- Total from investment operations ...... 0.12 (1.27) 0.25 (0.22) ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.74) (0.94) (0.89) (0.73) Net realized gains .................... -- -- -- -- ---------- ---------- ---------- ---------- Total distributions ................... (0.74) (0.94) (0.89) (0.73) ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 5.95 $ 6.57 $ 8.78 $ 9.42 ========== ========== ========== ========== TOTAL RETURN (a) ........................ 1.72% (15.54)% 2.68% (2.24)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 12,249 $ 13,552 $ 1,305 $ 949 Ratios to average net assets: Net expenses (b) ...................... 1.05% 1.05% 1.22% 1.35% Gross expenses (b) .................... 1.46% 1.38% 2.92% 9.77% Net investment income (b) ............. 11.57% 12.10% 9.89% 8.59% Portfolio turnover rate ................. 236% 148% 190% 418%
* Commencement of operations. (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For periods after and including 12/31/99, net investment income (loss) has been computed using the average shares method. 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 INTERNATIONAL FIXED-INCOME PORTFOLIO
YEAR ENDED ------------------------------------------------------------------------------ INSTITUTIONAL SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period .... $ 9.60 $ 10.19 $ 10.71 $ 9.63 $ 10.78 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.35 0.36 0.36 0.32 0.40 Net realized and unrealized gain (loss) (0.79) (0.83) (0.68) 0.98 (1.05) ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... (0.44) (0.47) (0.32) 1.30 (0.65) ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. --(d) -- -- (0.22) (0.13) Net realized gains .................... -- -- (0.08) -- (0.12) Capital ............................... (0.12) (0.12) (0.12) -- (0.25) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.12) (0.12) (0.20) (0.22) (0.50) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 9.04 $ 9.60 $ 10.19 $ 10.71 $ 9.63 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ (4.40)% (4.70)% (2.92)% 13.20% (5.58)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 18,543 $ 63,409 $ 73,871 $ 115,500 $ 110,185 Ratios to average net assets: Net expenses .......................... 1.09% 1.09% 1.09% 1.09% 1.06% Gross expenses ........................ 1.21% 1.19% 1.13% 1.10% 1.10% Net investment income ................. 3.76% 3.79% 3.55% 4.27% 5.13% Portfolio turnover rate ................. 99% 103% 139% 187% 166%
YEAR ENDED FOR THE PERIOD ------------------------------------------------------------- 1/8/97* TO OPEN SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- -------------- Net asset value, beginning of period .... $ 9.53 $ 10.14 $ 10.69 $ 9.63 $ 10.64 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.32 0.33 0.34 0.31 0.43 Net realized and unrealized gain (loss) (0.79) (0.82) (0.69) 0.96 (0.98) ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... (0.47) (0.49) (0.35) 1.27 (0.55) ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. --(d) -- -- (0.21) (0.08) Net realized gains .................... -- -- (0.08) -- (0.12) Capital ............................... (0.12) (0.12) (0.12) -- (0.26) ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.12) (0.12) (0.20) (0.21) (0.46) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 8.94 $ 9.53 $ 10.14 $ 10.69 $ 9.63 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ (4.65)% (4.92)% (3.21)% 12.92% (4.80)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 1,316 $ 23,310 $ 3,783 $ 4,751 $ 2,772 Ratios to average net assets: Net expenses (b) ...................... 1.35% 1.35% 1.35% 1.35% 1.35% Gross expenses (b) .................... 1.54% 1.55% 1.91% 1.92% 2.71% Net investment income (b) ............. 3.47% 3.54% 3.30% 4.01% 4.68% Portfolio turnover rate ................. 99% 103% 139% 187% 166%
* Commencement of operations. (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For periods after and including 12/31/99, net investment income (loss) has been computed using the average shares method. (d) Amount is less than $0.01 per share. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 91 ================================================================================ 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 ------------------------------------------------------------------------------ INSTITUTIONAL SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period .... $ 7.96 $ 8.83 $ 9.01 $ 9.66 $ 10.01 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.48 0.59 0.61 0.76 0.81 Net realized and unrealized gain (loss) (0.15) (0.49) (0.18) (0.69) (0.28) ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... 0.33 0.10 0.43 0.07 0.53 ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.48) (0.97) (0.61) (0.44) (0.82) Net realized gains .................... -- -- -- -- (0.06) Capital ............................... -- -- -- (0.28) -- ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.48) (0.97) (0.61) (0.72) (0.88) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 7.81 $ 7.96 $ 8.83 $ 9.01 $ 9.66 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ 4.09% 1.12% 4.91% 0.75% 5.31% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 170,590 $ 240,162 $ 306,116 $ 397,599 $ 399,452 Ratios to average net assets: Net expenses .......................... 0.93% 0.93% 0.91% 0.90% 0.94% Gross expenses ........................ 0.93% 0.93% 0.91% 0.90% 0.95% Net investment income ................. 5.99% 6.82% 6.82% 6.94% 7.42% Portfolio turnover rate ................. 292% 207% 257% 276% 161%
YEAR ENDED FOR THE PERIOD ------------------------------------------------------------- 1/23/97* TO OPEN SHARES 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 ---------- ---------- ---------- ---------- -------------- Net asset value, beginning of period .... $ 7.96 $ 8.83 $ 9.02 $ 9.66 $ 10.08 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ...... 0.43 0.55 0.58 0.73 0.72 Net realized and unrealized gain (loss) (0.15) (0.49) (0.19) (0.69) (0.35) ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... 0.28 0.06 0.39 0.04 0.37 ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (0.43) (0.93) (0.58) (0.40) (0.73) Net realized gains .................... -- -- -- -- (0.06) Capital ............................... -- -- -- (0.28) -- ---------- ---------- ---------- ---------- ---------- Total distributions ................... (0.43) (0.93) (0.58) (0.68) (0.79) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period .......... $ 7.81 $ 7.96 $ 8.83 $ 9.02 $ 9.66 ========== ========== ========== ========== ========== TOTAL RETURN (a) ........................ 3.53% 0.71% 4.40% 0.37% 3.77% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 6,616 $ 9,633 $ 16,035 $ 22,460 $ 15,300 Ratios to average net assets: Net expenses (b) ...................... 1.46% 1.34% 1.27% 1.28% 1.39% Gross expenses (b) .................... 1.46% 1.34% 1.27% 1.28% 1.44% Net investment income (b) ............. 5.38% 6.40% 6.49% 6.60% 6.92% Portfolio turnover rate ................. 292% 207% 257% 276% 161%
* Commencement of operations. (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For periods after and including 12/31/99, net investment income (loss) has been computed using the average shares method. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 92 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONCLUDED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: - -------------------------------------------------------------------------------- LAZARD MORTGAGE PORTFOLIO
FOR THE PERIOD YEAR ENDED 12/29/00* TO INSTITUTIONAL SHARES 12/31/01 12/31/00 ------------- -------------- Net asset value, beginning of period ............ $ 10.00 $ 10.00 ------------- ------------- Income (loss) from investment operations: Net investment income (loss) (c) .............. 0.40 --(d) Net realized and unrealized gain (loss) ....... 0.33 -- ------------- ------------- Total from investment operations .............. 0.73 -- ------------- ------------- Less distributions from: Net investment income ......................... (0.40) --(d) Net realized gains ............................ (0.04) -- ------------- ------------- Total distributions ........................... (0.44) -- ------------- ------------- Net asset value, end of period .................. $ 10.29 $ 10.00 ============= ============= TOTAL RETURN (a) ................................ 7.44% 0.04% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ........ $ 77,631 $ 100 Ratios to average net assets: Net expenses (b) .............................. 0.65% 0.65% Gross expenses (b) ............................ 1.37% 570.50%(e) Net investment income (b) ..................... 3.04% 4.38% Portfolio turnover rate ......................... 249% 0%
* Commencement of operations. (a) Total returns are historical and assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For the period ended 12/31/00, net investment income was computed using the average shares method. (d) Amount is less than $0.01 per share. (e) Gross expense ratio was the result of the Portfolio being in existence for three days during the period ended 12/31/00. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 93 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 - -------------------------------------------------------------------------------- 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, as amended (the "Act"), as an open-end management investment company. The Fund is comprised of twelve no-load portfolios (each referred to as a "Portfolio"), as follows: Lazard Equity Portfolio, Lazard Mid Cap Portfolio, Lazard Small Cap Portfolio, Lazard International Equity Portfolio, Lazard International Small Cap Portfolio, Lazard Emerging Markets Portfolio, Lazard International Equity Select Portfolio (which commenced operations on May 31, 2001), Lazard Bond Portfolio, Lazard High Yield Portfolio, Lazard International Fixed-Income Portfolio, Lazard Strategic Yield Portfolio and Lazard Mortgage Portfolio. The Fund offers two different classes of shares of the Portfolios - Institutional Shares and Open Shares (except for Mortgage Portfolio, which currently offers only Institutional 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. All Portfolios are operated as "diversified" funds, as defined in the Act. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies: (A) VALUATION OF INVESTMENTS--Market values for securities listed on the New York Stock Exchange ("NYSE"), NASDAQ national market or other U.S. exchanges or markets are based on the last reported sales price on the principal exchange or market on which the security is traded, generally 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 reported sales price; securities not traded on the valuation date are valued at the closing bid price. Bonds and other fixed-income securities that are not exchange-traded are valued on the basis of prices provided by pricing services which are based primarily on institutional trading in similar groups of securities, or by 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 under the supervision of the Board of Directors. 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 SECURITIES TRANSACTIONS AND INVESTMENT INCOME--Portfolio securities transactions are accounted for on trade date. Realized gains and losses on sales of investments are recorded on a specific identification basis. Dividend income is recorded on the ex-dividend date and interest income is accrued daily. The Portfolios amortize premiums and accrete discounts on fixed-income securities using the effective yield method. (C) REPURCHASE AGREEMENTS--In connection with transactions in repurchase agreements, the Fund's custodian takes possession of the underlying collateral securities, the fair value of which at all times is required to be at least equal to the principal amount, plus accrued interest, of the repurchase transaction. If the seller defaults, and the fair value of the collateral declines, realization of the collateral by a Portfolio may be delayed or limited. (D) SECURITIES LENDING--The Portfolios may lend portfolio securities to qualified borrowers in order to earn additional income. The terms of the lending agreements require that loans are secured at all times by cash, U.S. Government securities, or irrevocable letters of credit in an amount at least equal to 102% of the market value of domestic securities loaned (105% in the case of foreign securities), plus accrued interest and dividends, determined on a daily basis. Cash collateral received is invested in Navigator Securities Lending Prime Portfolio, a regulated investment company offered by State Street Corporation ("State Street"). If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Portfolios could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. At December 31, 2001, the value of the securities on loan and corresponding collateral received were as follows: SECURITIES PORTFOLIO LOANED COLLATERAL - -------- ----------- ----------- Mid Cap(2) $ 5,767,667 $ 5,969,254 International Equity(1) 11,010,025 11,600,000 International Small Cap(2) 26,856,364 28,249,062 Emerging Markets(2) 56,900,891 59,534,172 (1) COLLATERAL IS U.S. TREASURY OBLIGATIONS. (2) COLLATERAL IS CASH. In accordance with generally accepted accounting principles, the cash collateral received and the amount payable upon return of the securities on loan are shown on the accompanying Statement of Assets and Liabilities of the respective Portfolios. 94 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- During the year ended December 31, 2001, the income earned from securities lending, which is included in interest income on the Statement of Operations of the respective Portfolios, was as follows: SECURITIES LENDING PORTFOLIO INCOME - -------- ----------------- Mid Cap $ 12,523 Small Cap 41,707 International Equity 1,205,382 International Small Cap 229,672 Emerging Markets 333,672 (E) 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 daily into U.S. dollars at the prevailing rates of exchange. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rates on the respective transaction dates. 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 gains (losses) from foreign currency transactions represent net foreign currency 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 dividends, interest and foreign withholding taxes recorded on a Portfolio's accounting records and the U.S. dollar equivalent amounts actually received or paid. Net unrealized foreign currency 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 and other purposes. 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 has been 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 quotation services. 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 Statement of Operations of the respective Portfolios. (F) 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 may use these investments to increase or decrease its exposure to different underlying instruments, to gain exposure to markets that might be difficult to invest in through conventional securities and for other purposes. Structured investments may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. (G) FORWARD COMMITMENTS--Each Portfolio may purchase or sell securities on a forward commitment, when-issued or delayed delivery basis. Payment and delivery may take place a month or more after the date of the transaction. The price and yield 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 cash or liquid securities is segregated in an amount at least equal to these commitments. (H) FORWARD ROLL TRANSACTIONS--Mortgage Portfolio may engage in forward roll transactions with respect to mortgage-related securities. In a forward roll transaction, the Portfolio sells a mortgage-related security to a financial institution and, simultaneously, agrees to purchase a similar security from that institution at a later date and agreed upon price. At all times during the transaction the Portfolio will segregate cash or liquid securities at least equal to the amount of the repurchase price (including accrued interest). (I) INTEREST RATE SWAP AGREEMENTS--Each Portfolio may enter into interest rate swap agreements for investment, hedging or risk management purposes. An interest rate swap agreement involves the exchange of commitments to pay or receive interest-e.g., an exchange of floating rate payments for fixed rate payments. If forecasts of interest rates and other market factors are incorrect, investment performance will diminish compared to what performance would have been if these investment techniques were not used. Even if the forecasts are correct, there are risks that a liquid market may not always exist, the positions may correlate imperfectly with the asset and liability being hedged or a counterparty to a transaction may not perform. Interest rate swap agreements are marked-to-market daily using market quotations. The change in market value is recorded by the 95 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- Portfolio as an unrealized gain or loss. The difference between the rates received and paid by the Portfolio constitutes investment income or loss. (J) 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 its taxable income, including any realized net capital gains, to shareholders. Therefore, no federal income tax provision is required. At December 31, 2001, the following Portfolios had available for federal income tax purposes unused realized capital losses which can be used to offset future realized capital gains as follows: PORTFOLIO EXPIRING 2006 EXPIRING 2007 - -------- ------------- ------------- Emerging Markets $30,822,961 $ 3,337,906 Bond -- 3,959,791 High Yield 1,150,441 6,288,085 International Fixed-Income -- 513,432 Strategic Yield 14,900,897 22,094,886 PORTFOLIO EXPIRING 2008 EXPIRING 2009 - -------- ------------- ------------- International Equity $ -- $306,476,891 International Small Cap -- 3,580,062 Emerging Markets -- 28,250,429 Bond 2,509,149 -- International Equity Select -- 10,906 High Yield 9,656,682 20,597,062 International Fixed-Income 733,222 420,932 Strategic Yield 9,399,400 16,205,277 Of the total capital loss carryforward shown for Inter-national Equity Portfolio, $10,493,400 was acquired in the Global Equity Portfolio reorganization (see Note 6) and may be limited in any given year. 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 day of the following tax year. For the tax year ended December 31, 2001, the following Portfolios elected to defer net capital and currency losses arising between November 1, 2001 and December 31, 2001, as follows: PORTFOLIO AMOUNT - --------- -------------- Equity $ 8,525,013 International Equity 90,323,201 International Small Cap 45,768 Emerging Markets 12,615,534 Bond 16,228 High Yield 4,023,130 International Fixed-Income 2,090,034 Strategic Yield 2,814,618 Mortgage 356,450 (K) 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, Strategic Yield Portfolio and Mortgage Portfolio and to pay such dividends monthly. Dividends from net investment income on shares of Equity Portfolio, Mid Cap Portfolio, Small Cap Portfolio, International Equity Portfolio, International Small Cap Portfolio, Emerging Markets Portfolio and International Equity Select Portfolio will be declared and paid annually. 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, at least annually, to shareholders; however, to avoid taxation, a second distribution may be required. Income dividends and capital gains distributions are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These book/tax differences, which may result in distribution reclassifications, are primarily due to differing treatments of foreign currency transactions. Book/tax differences relating to shareholder distributions may result in reclassifications among certain capital accounts. The tax character of dividends and distributions paid during the periods ended December 31, other than returns of capital, was as follows: ORDINARY INCOME LONG-TERM CAPITAL GAIN --------------------- -------------------------- PORTFOLIO 2001 2000 2001 2000 - --------- ---------- ---------- ------------ ------------- Equity: Institutional $3,059,786 $8,714,073 $12,844,798 $28,056,938 Open 771,802 2,674,796 3,720,332 9,706,637 Mid Cap: Institutional 2,376,991 2,814,732 479,479 -- Open 1,001,436 836,764 199,669 -- Small Cap: Institutional 27,137,886 25,501,061 72,650,586 23,049,557 Open 2,825,201 1,609,965 8,156,114 1,643,377 International Equity: Institutional 6,109,169 92,228,897 18,044,635 294,986,631 Open 337,300 4,313,230 1,003,217 14,839,579 International Small Cap: Institutional 4,563,670 11,689,680 -- 9,849,835 Open 30,803 54,362 -- 54,437 Emerging Markets: Institutional 2,665,662 821,557 -- -- Open 34,843 -- -- -- International Equity Select: Institutional 4,765 N/A -- N/A Open -- N/A -- N/A 96 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- ORDINARY INCOME LONG-TERM CAPITAL GAIN --------------------- -------------------------- PORTFOLIO 2001 2000 2001 2000 - --------- ---------- ---------- ------------ ------------- Bond: Institutional $ 2,628,400 $ 4,471,964 $-- $-- Open 510,688 647,088 -- -- High Yield: Institutional 6,992,230 9,618,423 -- -- Open 1,414,057 1,823,113 -- -- International Fixed-Income: Institutional 13,502 -- -- -- Open 7,682 -- -- -- Strategic Yield: Institutional 12,879,019 30,158,141 -- -- Open 445,881 1,345,778 -- -- Mortgage: Institutional 664,767 36 49,395 -- As of December 31, 2001, the components of distributable earnings (excluding unrealized appreciation (depreciation)) on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED LONG-TERM PORTFOLIO ORDINARY INCOME CAPITAL GAIN - -------- ---------------- ------------- Equity $ 116,764 $ -- Mid Cap 609,936 58,224 Small Cap 6,474,117 11,111,289 International Equity 9,591,835 -- International Small Cap -- -- Emerging Markets -- -- International Equity Select 844 -- Bond -- -- High Yield -- -- International Fixed-Income -- -- Strategic Yield 236,651 -- Mortgage 15,937 -- (L) ALLOCATION OF EXPENSES--Expenses not directly chargeable to a specific Portfolio are allocated among the Portfolios primarily on the basis of relative net assets. The Portfolios will accrue distribution fees to Open Shares. 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. (M) 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. (N) 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. (O) REDEMPTION FEES--Each Portfolio may impose a 1.00% redemption fee (short-term trading fee) on Portfolio shares redeemed less than 30 days after such shares were acquired. The fees retained by each Portfolio will be included as paid in capital on its Statement of Assets and Liabilities. As of December 31, 2001 no redemption fees have been charged. 3. INVESTMENT MANAGEMENT, ADMINISTRATIVE AND DISTRIBUTION AGREEMENTS The Fund has entered into investment management agreements (the "Management Agreements") with Lazard Asset Management (the "Investment Manager"), a division of Lazard Freres & Co. LLC ("LF & Co."), on behalf of each Portfolio. Pursuant to the Management Agreements, the Investment 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 Portfolio pays the Investment Manager a management fee at the annual rate set forth below as a percentage of its average daily net assets: PORTFOLIO ANNUAL RATE - -------- ----------- Equity 0.75% Mid Cap 0.75 Small Cap 0.75 International Equity 0.75 International Small Cap 0.75 Emerging Markets 1.00 International Equity Select 0.85 Bond 0.50 High Yield 0.75 International Fixed-Income 0.75 Strategic Yield 0.75 Mortgage 0.40 The management fees are accrued daily and paid monthly. The Investment 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: INSTITUTIONAL SHARES OPEN SHARES ANNUAL ANNUAL PORTFOLIO OPERATING EXPENSES OPERATING EXPENSES - -------- ----------------- ------------------- Mid Cap 1.05% 1.35% International Small Cap N/A 1.43 Emerging Markets N/A 1.60 International Equity Select 1.15 1.45 Bond N/A 1.10 High Yield 0.75 1.05 International Fixed-Income 1.09 1.35 Mortgage 0.65 N/A 97 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- For the period ended December 31, 2001, the Investment Manager waived its management fee/reimbursed the indicated Portfolios for other expenses as follows: INSTITUTIONAL OPEN SHARES SHARES AMOUNT AMOUNT WAIVED/ WAIVED/ PORTFOLIO REIMBURSED REIMBURSED - -------- ---------------- ------------- Mid Cap $104,183 $53,769 International Small Cap -- 17,154 Emerging Markets -- 22,634 International Equity Select 51,234 18,349 Bond -- 24,254 High Yield 187,178 50,418 International Fixed-Income 47,312 42,514 Mortgage 76,054 N/A The Fund has entered into an administrative agreement with State Street to provide certain administrative services. Each Portfolio bears the cost of such services at a fixed annual rate of $37,500, plus $7,500 per additional class, and 0.02% of average daily net assets up to $1 billion plus 0.01% of average daily net assets over $1 billion. State Street agreed to waive the $37,500 base fee and the $7,500 additional class fee, if applicable, for the first six months of International Equity Select and Mortgage Portfolios' operations. Thereafter, the monthly base fee and additional class fee, if applicable, will be increased by 1/6 per month through the twelfth month of operations, after which the full monthly base fee will be in effect. These waivers will be in effect during the first 12 months of operations or until the respective Portfolio reaches $25 million in net assets, whichever comes first. The Fund has a distribution agreement with LF & Co. pursuant to which LF & Co. 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 the distribution of Portfolio shares. LF & Co. provides Open Shares with distribution services pursuant to a Distribution and Servicing Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, each Portfolio pays a monthly fee to LF & Co. at an annual rate of 0.25% of the average daily net assets of each Portfolio's Open Shares for distribution and servicing of accounts. LF & Co. may make payments to certain financial institutions, securities dealers and other industry professionals for providing these services. Certain Directors of the Fund are Managing Directors of the Investment Manager. The Fund pays each Director who is not an employee or an affiliated person of the Investment Manager its allocated portion of a fixed fee of $30,000 per year, plus $2,500 per meeting attended for the Fund and Lazard Retirement Series, Inc., another multi-portfolio fund advised by the Investment Manager, and reimburses such Directors for travel and other out of pocket expenses. In addition, the Chairman of the Audit Committee for the Fund and Lazard Retirement Series, Inc. also receives an annual fee of $5,000. 4. SECURITIES TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES Purchases and sales of portfolio securities (excluding short-term securities) for the period ended December 31, 2001 were as follows: PORTFOLIO PURCHASES SALES - --------- ----------------------------------- Equity $ 183,947,315 $ 239,786,098 Mid Cap 39,257,100 35,182,575 Small Cap 522,883,077 780,640,623 International Equity 1,762,800,360 1,850,136,245 International Small Cap 138,554,936 58,646,997 Emerging Markets 141,751,076 130,031,407 International Equity Select 8,094,552 16,285 Bond(1) 133,808,969 144,401,437 High Yield 167,534,478 161,055,705 International Fixed-Income(2) 54,964,194 110,983,703 Strategic Yield(3) 453,802,877 487,697,923 Mortgage(4) 10,140,585 11,774,128 (1) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $101,033,750 AND $119,543,603, RESPECTIVELY. (2) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $1,590,411 AND $5,808,957, RESPECTIVELY. (3) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $160,107,912 AND $165,740,107, RESPECTIVELY. (4) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $8,184,399 AND $9,093,568, RESPECTIVELY. For the year ended December 31, 2001, brokerage commissions of $1,675 were paid to LF & Co. for portfolio transactions executed on behalf of Mid Cap Portfolio. 5. LINE OF CREDIT The Fund has entered into a $50 million Line of Credit Agreement (the "Agreement") with State Street 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 State Street's Cost of Funds plus 0.50%, on an annualized basis. Under this Agreement, the Fund has agreed to pay a 0.09% per annum fee on the unused portion of the commitment, payable quarterly in arrears. During the year ended December 31, 2001, the Fund had no borrowings under this Agreement. 98 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONCLUDED) DECEMBER 31, 2001 - -------------------------------------------------------------------------------- 6. REORGANIZATION On December 14, 2001, International Equity Portfolio acquired the net assets of Global Equity Portfolio pursuant to a plan of reorganization approved by Global Equity Portfolio shareholders on December 12, 2001. The acquisition was accomplished by a tax-free exchange of 8,377,479 Institutional Shares (valued at $81,288,941) and 306,015 Open Shares (valued at $2,952,867) of International Equity Portfolio for the 8,216,298 Institutional Shares and 298,307 Open Shares of Global Equity Portfolio outstanding on December 14, 2001. Global Equity Portfolio's net assets at that date, including $10,571,996 of unrealized depreciation and $16,878,504 of accumulated realized net loss, were combined with those of International Equity Portfolio. The aggregate net assets of International Equity Portfolio and Global Equity Portfolio immediately before the acquisition were $2,135,177,883 and $84,241,808, respectively. The aggregate net assets of International Equity Portfolio immediately after the acquisition were $2,219,419,691. 7. PROXY VOTING RESULTS A special meeting of Global Equity Portfolio shareholders was held on December 12, 2001 to vote on the reorganization. The following are the results of voting: % OF # OF SHARES SHARES VOTED VOTED -------------- -------- Affirmative 8,035,159.717 99.91% Against -- -- Abstain 7,119.880 0.09 -------------- -------- Total 8,042,279.597 100.00% ============== ======== 99 ================================================================================ 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 portfolios of investments, of The Lazard Funds, Inc. (comprised of Lazard Equity Portfolio, Lazard Mid Cap Portfolio, Lazard Small Cap Portfolio, Lazard International Equity Portfolio, Lazard International Small Cap Portfolio, Lazard Emerging Markets Portfolio, Lazard International Equity Select Portfolio (commenced operations on May 31, 2001), Lazard Bond Portfolio, Lazard High Yield Portfolio, Lazard International Fixed-Income Portfolio, Lazard Strategic Yield Portfolio and Lazard Mortgage Portfolio) as of December 31, 2001 and the related statements of operations for the year or period then ended, the statements of changes in net assets for each of the two years in the period then ended, or the period from commencement of operations to December 31, 2001, 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 auditing standards generally accepted in the United States of America. 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, 2001, 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, 2001, the results of their operations for the year or period then ended and changes in their net assets for each of the two years in the period then ended or the period from commencement of operations to December 31, 2001 and the financial highlights for the periods presented in conformity with accounting principles generally accepted in the United States of America. ANCHIN, BLOCK & ANCHIN LLP New York, New York February 1, 2002 100 ================================================================================ THE LAZARD FUNDS, INC. BOARD OF DIRECTORS AND OFFICERS INFORMATION (UNAUDITED) - --------------------------------------------------------------------------------
POSITION(S) WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS THE FUND* AND OTHER DIRECTORSHIPS HELD - ----------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT DIRECTORS: John J. Burke (73) Director Retired; Former Vice Chairman and Director, Montana Power Company. 50 Burning Tree Lane since May 1991 Butte, MT 59701 Kenneth S. Davidson (56) Director President, Davidson Capital Management Corporation; Vice Chairman Davidson Capital since August 1995 and Board of Trustees, The Juilliard School; Chairman of the Board, Management Corporation Bridgehampton Chamber Music Festival; Trustee, American Friends of 500 Park Avenue the National Gallery/London. Suite 510 New York, NY 10022 William Katz (47) Director President and Chief Executive Officer of BBDO New York, an advertising BBDO Worldwide since April 1997 agency; Director of BBDO Worldwide. 1285 Avenue of the Americas New York, NY 10019 Lester Z. Lieberman (71) Director Private Investor; Director of Dowel Associates; Chairman, Healthcare 25 Lindsley Drive since May 1991 FDN of NJ; Director, Cives Steel Co.; Director, Northside Power Morristown, NJ 07960 Transmission Co.; Advisory Trustee, New Jersey Medical School; Trustee, Clarkson University; Chairman, Investment Committee, Clarkson University Board of Trustees. Richard Reiss, Jr. (57) Director Managing Partner, Georgica Advisors LLC, an investment manager. Georgica Advisors LLC since May 1991 Carnegie Hall Tower 152 West 57th Street 46th Floor New York, NY 10019 INTERESTED DIRECTORS:** Norman Eig (60) Chairman of the Vice Chairman and Managing Director, LF & Co. Lazard Asset Management Board 30 Rockefeller Plaza since May 1991 New York, NY 10112 Herbert W. Gullquist (64) President and Director Vice Chairman and Managing Director, LF & Co.; Chief Investment Officer Lazard Asset Management since May 1991 of the Investment Manager. 30 Rockefeller Plaza New York, NY 10112 John Rutledge (53) Director President, Rutledge Capital, LLC, an economics and investment advisory Rutledge Capital, LLC since May 1991 firm; Director, Strategic Optical Holdings Corp.; Director, Framed 457 Montague Road Picture Enterprise; Director, Crom Corporation; Director, Earle M. Sunderland, MA 01375 Jorgensen Corp.; Director, Amerindo Funds Inc., a family of four investment portfolios; Director, Vingage Corporation; Chairman of Advisory Board, Saugatuck Capital; Chairman, Stairmaster Sports Medical; Chairman, Adobe Corp.
* Each Director and Officer serves an indefinite term, until his successor is elected, and each Director and Officer serves in such capacity for 16 Lazard portfolios. ** Mr. Eig and Mr. Gullquist are Interested Directors because of their positions with LF & Co.; Mr. Rutledge is an Interested Director because of a family member's position with the Investment Manager. The Fund's Statement of Additional Information contains further information about the Directors and is available without charge by calling (800) 823-6300. 101 ================================================================================ THE LAZARD FUNDS, INC. BOARD OF DIRECTORS AND OFFICERS INFORMATION (UNAUDITED) (CONCLUDED) - --------------------------------------------------------------------------------
POSITION(S) WITH NAME, AGE AND ADDRESS THE FUND* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - ---------------------------------------------------------------------------------------------------------------------------- OFFICERS: David M. Goldenberg (35) Vice President Director, Legal Affairs of the Investment Manager; from April 1998 to May 2000, Lazard Asset Management and Secretary Global Director of Compliance for SSB Citi Asset Management Group; from 30 Rockefeller Plaza since May 2000 June 1996 to April 1998, Associate General Counsel of Smith Barney Asset New York, NY 10112 Management. Bernard J. Grzelak (30) Treasurer Vice President of the Investment Manager; from August 1993 to September Lazard Asset Management since October 2000 2000, a Manager with Deloitte & Touche LLP. 30 Rockefeller Plaza New York, NY 10112 Nathan A. Paul (29) Assistant Secretary Vice President, Legal Affairs of the Investment Manager; from September 1997 Lazard Asset Management since January 2001 to October 2000, an Associate at Schulte Roth & Zabel LLP, a law firm. 30 Rockefeller Plaza New York, NY 10112 Stephen St. Clair (43) Assistant Treasurer Fund Administration Manager of the Investment Manager; prior to June Lazard Asset Management since July 2000 1997, Associate Director of Mutual Fund Operations at Furman Selz and its 30 Rockefeller Plaza successor, BISYS Fund Services (financial services firms). New York, NY 10112
* Each Director and Officer serves an indefinite term, until his successor is elected, and each Director and Officer serves in such capacity for 16 Lazard portfolios. 102 - -------------------------------------------------------------------------------- TAX INFORMATION (UNAUDITED) THE LAZARD FUNDS, INC. YEAR ENDED DECEMBER 31, 2001 The following tax information represents year end disclosure of a tax benefit passed through to shareholders for 2001. Of the distributions made by the Portfolios, the corresponding percentage represents the amount of each distribution which will qualify for the dividends received deduction available to corporate shareholders. PORTFOLIO PERCENTAGE -------- ----------------- Equity 63.67% Mid Cap 12.75 Small Cap 15.17 Global Equity 72.23 International Equity -- International Small Cap 5.36 Emerging Markets -- International Equity Select -- Bond -- High Yield -- International Fixed-Income -- Strategic Yield -- Mortgage -- - -------------------------------------------------------------------------------- [THIS PAGE LEFT BLANK INTENTIONALLY] THE LAZARD FUNDS, INC. 30 Rockefeller Plaza New York, New York 10112 Telephone: (800) 823-6300 http://www.lazardnet.com INVESTMENT MANAGER Lazard Asset Management, a division of Lazard Freres & Co. LLC 30 Rockefeller Plaza New York, New York 10112 Telephone: (800) 823-6300 DISTRIBUTOR Lazard Freres & Co. LLC 30 Rockefeller Plaza New York, New York 10112 CUSTODIAN State Street Corporation 225 Franklin Street Boston, Massachusetts 02110 TRANSFER AGENT AND DIVIDEND DISBURSING AGENT Boston Financial Data Services, Inc. P.O. Box 9363 Boston, Massachusetts 02205-9363 Telephone: (800) 986-3455 INDEPENDENT PUBLIC ACCOUNTANTS Anchin, Block & Anchin LLP 1375 Broadway New York, New York 10018 http://www.anchin.com LEGAL COUNSEL Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, New York 10038-4982 http://www.stroock.com LAZARD FUNDS 30 Rockefeller Plaza New York, New York 10112 Telephone (800) 823-6300 http://www.lazardnet.com This report is for the information of the shareholders 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. MF03101 -----END PRIVACY-ENHANCED MESSAGE-----