Lazard Funds

Lazard Funds Annual Report

D E C E M B E R  3 1 ,  2 0 0 2

The Lazard Funds, Inc.

Table of Contents	Page
Investment Overviews	2
Performance Overviews	8
Portfolios of Investments
Lazard Equity Portfolio	19
Lazard Mid Cap Portfolio	21
Lazard Small Cap Portfolio	23
Lazard International Equity Portfolio	26
Lazard International Equity Select Portfolio	28
Lazard International Small Cap Portfolio	29
Lazard Emerging Markets Portfolio	31
Lazard Bond Portfolio	33
Lazard High Yield Portfolio	36
Lazard Strategic Yield Portfolio	40
Lazard Mortgage Portfolio	46
Notes to Portfolios of Investments	48
Statements of
Assets and Liabilities	52
Operations	54
Changes in Net Assets	56
Financial Highlights	62
Notes to Financial Statements	73
Report of Independent Auditors	79
Proxy Voting Results (unaudited)	80
Board of Directors and Officers Information (unaudited)	81
Tax Information (unaudited)	83

The views of the Fund’s management and the portfolio holdings described in this report are as of December 31, 2002; 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

A Message From Lazard

In looking at the 2002 economic picture, the broad market indices spiraled downward and investor sentiment grew wary as corporate governance issues seemingly refused to go away. Concerns over terrorism, talk of war and a weak economy added to the uncertainty. Global stocks retreated further into bear market territory for the third consecutive year while fixed income gained a bit of momentum as investors looked upon mortgage- and other asset-backed securities with renewed interest. Other signs of optimism appeared. Interest rates were more favorable than they had been in the past 40 years. After struggling with disappointing economic data, corporate governance issues and credit downgrades, the credit markets began to improve towards the end of the year. Sharp gains in the British pound, the euro and the Swiss franc versus the U.S. dollar mitigated the declines to the U.S. dollar-based investor in international securities, illustrating the benefits of diversification among currencies. These positive results softened the economic picture suggesting an improved outlook for 2003.

Identifying market bottoms has historically proven to be futile. Nonetheless, Lazard is hopeful that the worst of the bear market may be behind us. We believe that investors are beginning to manage their expectations, likely recognizing, as we do, that there are opportunities to be found. At this point in the market cycle, we see profit expectations and valuations beginning to stabilize. As investing becomes more rational, well-run companies with good fundamentals, and those that pay dividends, once again matter. However, Lazard believes that it is important to look beyond the myopia of the current market cycle—succumbing to neither exuberance or despair—and to maintain a diversified portfolio and a long-term investment focus. Diversification spreads the risk around different asset classes within a portfolio’s investment objective and strategy, which may help to reduce fluctuations in a portfolio’s market value regardless of economic conditions.

We are pleased to report that many of the Fund’s portfolios have outperformed their benchmarks for the year ended December 31, 2002, although absolute performance may have been negative. As bottom-up stock pickers, we remained focused on stock selection and evaluating the fundamentals of

the companies we follow, identifying and taking advantage of pricing anomalies and discovering hidden opportunities to uncover value.

We are also happy to announce additions to our fixed-income team. During the fourth quarter, Steven Blitz joined Lazard as head of Global Fixed Income. Mr. Blitz leads the team managing Lazard Bond, Lazard Strategic Yield and Lazard Mortgage Portfolios. In addition, J. William Charlton has joined the firm as head of U.S. High Yield Fixed Income and, with Steven Blitz, leads the team managing Lazard High Yield Portfolio. Both Mr. Blitz and Mr. Charlton were previously with OFFITBANK and bring with them six other fixed-income team members.

As we begin 2003, Lazard Asset Management (the Fund’s Investment Manager), formerly a division of Lazard Frères & Co. LLC, is now a direct subsidiary of Lazard Frères & Co. LLC. This change in legal structure will not affect the management of Lazard Asset Management, its investment strategy, the portfolio management services it offers, or any other services it provides.

The following Investment Overviews are intended to provide you with more detailed thoughts about the current market environment and insights on the Portfolios and their recent performance.

Equity Markets Overview

U.S. and global stocks continued their downward movement for the third consecutive year. In the U.S., the S&P 500^® Index finished the year down (22.10)%. Stocks outside the U.S., measured by the Morgan Stanley Capital International (“MSCI”^®) World^® Index, dropped (19.89)%, as declines in developed markets were offset somewhat by positive returns in emerging markets.

When the U.S. economy began to expand at the end of 2001, there was hope that this was the beginning of a positive trend for 2002. However, while real GDP rose significantly in the first quarter of 2002, it remained flat throughout the remaining quarters, with investor concern over terrorism, the possibility of war, energy prices and flagging consumer confidence weighing on the markets. Corporate scandals had investors questioning the integrity of accounting practices and the independent judgment of Wall Street’s stock analysts. The SEC helped to restore

2

The Lazard Funds, Inc.

Investment Overviews (continued)

some confidence to the markets by instituting an August deadline for company officers to certify, and thereby stand behind, the completeness and accuracy of their financial statements, resulting in a modest, but brief, rally. A second bear market rally began in mid-October, but faded in December. U.S. mid cap and small cap equities, which had held up fairly well in the first half of the year, fell by more than 15% by year-end, though they outperformed larger U.S. stocks.

The decline in developed markets outside the U.S. was broad based, both regionally and on a sector basis. For the European economy as a whole, there were no quarters of negative real growth in the euro-zone GDP, though markets suffered setbacks triggered by the August flooding and subsequent sell-offs by insurers looking to strengthen their balance sheets. European markets were buoyed by the rise in the euro. The U.K. had posted two consecutive years of economic growth for the first time since World War II. In spite of this encouraging climate, European markets made little real progress during the year. Japan experienced a strong upturn that was driven by a recovery in sales to the U.S., Europe, and its Pacific Rim neighbors. However, just as recoveries in other developed markets stumbled later in the year, Japan’s upturn slowed by the fourth quarter of 2002. Latin American shares, under pressure for most of the year, surprised on the upside by year-end, helped by a sharp recovery in Brazil’s currency and stock market following the election of a new president. Even Argentina, in the spotlight for the largest debt default in history, fully participated in the year-end rally. Nevertheless, there is concern that recovery will be slow until economic and political climates show signs of greater stability. Other emerging markets benefited from a somewhat stronger economic environment. Mid-East and South African stocks, largely down for the first three quarters, rose sharply toward the end of the year, with major gains reported in South Africa. Markets that had traditionally lagged their regional counterparts over the past year, such as Hungary, Poland and Turkey, recorded substantial gains by year-end. However, developing markets in Asia, with the exception of India and Thailand, did not generally enjoy the same recoveries as did other emerging markets in the fourth quarter.

Global markets continue to be jittery about the pace of the economic recovery, and sentiment remains cautious. Sudden price declines have been triggered by the slightest disappointing news. Our approach favors such a climate, as our investment process focuses on the trade-offs between valuation and financial productivity of the individual companies we follow. In 2003, Lazard will continue to focus on high-quality companies that we believe are capable of generating strong returns for investors in a variety of economic environments.

Fixed-Income Overview

Sub-par global growth and geopolitical tensions again led investors to fixed income markets in 2002. Yields declined in most major bond markets, with the steepest decline in the U.S. The ten-year Treasury yield fell to 3.8% from 5.1%. The yield curve remained relatively steep, with long-term bonds outpacing short-term investments in total return. The 30-year U.S. Treasury Bond returned 16.2% at December 31, 2002 compared with 6.5% for a 2-year Treasury. Bond yields in Europe and Japan also moved lower. In a reversal of previous years, the U.S. Dollar weakened, the euro gained 17% versus the Dollar, the Pound Sterling rose more than 10%, and the Yen appreciated nearly 10%. International bond investments, understandably, provide attractive returns in this environment.

In the U.S., structured assets outperformed direct debt obligation investments for the year, with much of this advantage accrued during the first three quarters, when credit markets struggled with disappointing economic data, corporate governance issues, and credit downgrades. High yield bonds labored in 2002 under similar issues and poor equity market performance. European bond markets exhibited a similar trend, although the magnitude was less pronounced. Emerging market bonds proved resilient, as strong markets in Eastern Europe allowed the sector to compensate for low yields in Asia and volatility in Latin American markets.

In the final quarter of 2002, U.S. credit markets performed well and Treasuries generally lagged. This pattern may, in fact, reflect the emerging investment theme for the coming year in fixed-income markets—that corporate bonds, especially those of lower-rated issuers, will provide investors with the most attractive returns as interest rates begin to rise in concert with improving business conditions. Making the risk/reward characteristics of corporate

3

The Lazard Funds, Inc.

Investment Overviews (continued)

debt even more attractive is the prospect of increased issuance of U.S. Treasury bonds and a diminished supply of corporate bonds.

Several factors combine to foster positive sentiment for improved business conditions in the domestic market. The Federal Reserve has been aggressive in easing monetary policy, and the fullest impact may be felt in 2003. Fiscal stimulus has also increased and may increase again in the coming year. There is, in addition, a perceived backlog of capital spending projects waiting to be unleashed if geopolitical uncertainties abate.

Fixed-income valuations do not fully reflect this domestic economic environment for several reasons. One, as noted, is the ongoing geopolitical risk regarding Iraq, North Korea, and the possibility of terrorist activity. Continued weak demand in Japan and Western Europe are also compounding market hesitancy. The disinflationary, or perhaps even deflationary, risks associated with weak global final demand have been well documented. Perhaps less understood, but still weighing on markets, is how the largely unrestricted flow of global capital changes the historic dynamic between the valuation of U.S. fixed-income assets and the underlying fundamental condition of the U.S. economy.

Lazard Equity Portfolio

For the year ended December 31, 2002, Lazard Equity Portfolio’s Institutional Shares posted a total return of (16.84)%, while Open Shares posted a total return of (17.08)%, each beating the (22.10)% return of the S&P 500 Index.

The Portfolio defended well versus the broad U.S. market during the year, partially due to strong stock selection in the producer/manufacturing sector. Lockheed Martin rose, as it is somewhat insulated from the economic cycle since its fortunes are a function of defense spending (which is expected to continue to increase going forward). 3M also held up well, as the company aggressively reduced costs to maintain profitability amid the economic weakness. Technology holdings were weak, as the anticipated rebound in demand for IT products has yet to materialize. However, our technology holdings declined less than those in the index due to our focus on companies with strong competitive positions. The Portfolio also added value in the utility sector due to its focus on traditional utilities (which had little or no involvement in energy trading). Although it sold its holdings in August, the Portfolio was negatively impacted by MeadWestvaco, which disclosed that it had been named as a defendant in asbestos-related lawsuits.

Lazard Mid Cap Portfolio

For the year ended December 31, 2002, Lazard Mid Cap Portfolio’s Institutional Shares posted a total return of (14.47)%, while Open Shares posted a total return of (14.75)%, each beating the (16.18)% return of the Russell Midcap^® Index.

The Portfolio defended well in the decline, but was unable to avoid weakness entirely. While the technology sector’s general weakness affected the Portfolio, our holdings declined less than the sector as a whole, given our strong positions and solid valuation. Returns in technology were helped by gains in printer manufacturer Lexmark. Lexmark is benefiting from strong sales of multi-functional printers, which copy and send faxes as well as print, and also use more ink cartridges (which have very high profit margins). The Portfolio’s overall technology holdings were weak, as the anticipated rebound in demand for IT products has yet to materialize. The Portfolio also was helped during the year by stock selection in the health care sector due to a relatively modest exposure to the biotechnology sector (which was particularly hard-hit in the decline). In addition, Universal Health Services, a hospital manager, performed well, as it is benefiting from favorable pricing trends. Returns in the consumer staples sector were hurt by a decline in Interstate Bakeries, the maker of Hostess Twinkies and Wonder Bread, as earnings were hurt by higher chocolate and wheat costs, as well as slowing sales of impulse-driven snack foods. As a result, the Portfolio sold its holdings in the company.

Lazard Small Cap Portfolio

For the year ended December 31, 2002, Lazard Small Cap Portfolio’s Institutional Shares posted a total return of (17.97)%, while Open Shares posted a total return of (17.82)%, each beating the (20.48)% return of the Russell 2000^® Index.

As has been the case in recent years, the Portfolio generated modest returns in the consumer discretionary sector. This was particularly true among retail stocks, where our analysts were able to identify

4

The Lazard Funds, Inc.

Investment Overviews (continued)

companies that were effectively turning around their operations. Harman International, a maker of audio and video components, has benefited from the increased use of digital technologies such as voice recognition and surround sound in luxury automobiles. Good stock selection in the energy sector was driven by gains in St. Mary Land & Exploration (the natural gas and crude oil producer), which rose on improved pricing and lower exploration expenses. While large cap consumer staples stocks held up very well, it was a challenging and volatile sector among small caps. Stock selection in consumer staples was hurt by a sharp decline in Interstate Bakeries following that company’s earnings shortfall. Since earnings are generally quite consistent in this group, even a modest shortfall can be severely punished by the market.

Lazard International Equity Portfolio

For the year ended December 31, 2002, Lazard International Equity Portfolio’s Institutional Shares posted a total return of (10.44)%, while Open Shares posted a total return of (10.57)%, each beating the (15.94)% return of the MSCI Europe, Australasia and Far East (“EAFE”^®) Index.

While the Portfolio’s technology holdings were weak, their strong competitive positions allowed them to hold up relatively better than the technology portion of the index. Since earnings have been relatively unaffected by the economic doldrums, the Portfolio’s consumer staples holdings performed well. For instance, Spanish tobacco producer Altadis rose strongly, due to its defensive qualities as well as its attractive valuation versus major global tobacco competitors. Unilever also performed well, as its restructuring initiatives have proven effective in increasing profitability. The Portfolio benefited from strong stock selection in energy, primarily driven by gains in ENI, the Italian energy company. ENI has improved returns by exiting non-core businesses and benefited from its very attractive valuation versus its larger energy peers. The Portfolio also benefited from selected investments in the hard-hit telecommunications sector. For instance, Dutch telecommunications provider KPN rose, as it has aggressively reduced capital expenditures to boost free cash flow and reduce debt. However, stock selection in utilities was hurt by weakness in Spanish utility Endesa. While utilities generally hold up well in declining markets, Endesa was hurt by the economic turmoil in Latin America (where the company has substantial investments) as well as regulatory uncertainty in their core Spanish electricity business.

Lazard International Equity Select Portfolio

For the year ended December 31, 2002, Lazard International Equity Select Portfolio’s Institutional Shares posted a total return of (14.12)%, while Open Shares posted a total return of (14.37)%, each beating the (15.94)% return of the MSCI EAFE Index.

The Portfolio defended well in the decline, falling less than the overall market for the year but still unable to avoid weakness. Consumer staples holdings, whose earnings have been relatively unaffected by the economic doldrums, performed well. For instance, Unilever has maintained its high profitability through efficiency gains related to its restructuring initiatives. In Japan, consumer products maker Kao has been able to combat the effects of deflation through cost reduction and the development of innovative products. The Portfolio’s European energy holdings (such as Italian energy producer ENI) also performed well, due to their defensive characteristics as well as their attractive valuations relative to their peers. However, our financial holdings experienced weakness due to the economic turmoil in Latin America, insurance claims arising from the World Trade Center attack and the German floods, and cap ital markets weaknesses. These situations were addressed on a case-by-case basis and positions were sold if the company’s long-term financial productivity was in doubt. Technology holdings also experienced weakness, as there has yet to be a significant rebound in demand for IT products. However, we feel our holdings are well positioned for an inevitable upturn, as companies will make investments to maintain their competitive position.

Lazard International Small Cap Portfolio

For the year ended December 31, 2002, Lazard International Small Cap Portfolio’s Institutional Shares posted a total return of (3.08)%, while Open Shares posted a total return of (3.55)%, each beating the (9.58)% return of the MSCI EAFE Small Cap^® Index.

The Portfolio benefited from strong stock selection, particularly in the industrial, financial and consumer discretionary sectors. One of the Portfolio’s best-per-

5

The Lazard Funds, Inc.

Investment Overviews (continued)

forming stocks for the year was Amer, the Finland-based manufacturer and marketer of sporting goods. Although the market for alpine skis has been difficult since last winter, Amer’s brand (Atomic) has shown excellent performance, increasing both its market share and profitability. Amer has also shown improved profitability in its Wilson Golf division, which has traditionally been a poor performing business for the group. Another solid performer was Swedish Match, a Stockholm-based producer of smokeless tobacco, pipes, matches and other tobacco-related products. Their return-on-capital focus, volume growth and price increases have resulted in another profitable year. The stock performed well, as investors were eager to participate in Swedish Match’s increased dividends and share repurchases. One of the bottom performers for the year was Luminar, the U.K. operator of restaurants and nightclubs. Although the company reported a strong set of results, their outlook statement was cautious. Heavy discounting by competitors (particularly in the prepackaged drink market) is impacting current profitability.

Lazard Emerging Markets Portfolio

For the year ended December 31, 2002, Lazard Emerging Markets Portfolio’s Institutional Shares posted a total return of (0.37)%, while Open Shares posted a total return of (0.65)%, each beating the (6.00)% return of the MSCI Emerging Markets Free (“EMF”^®) Index.

Emerging markets had a relatively good year in 2002; in fact, the asset class has recorded better performance than many of the global and regional developed markets over the four years ended December 31, 2002. The Portfolio benefited from strong share price performance in Iscor and Kumba Resources (both in South Africa), on continuing improvements in operations at both establishments since their 2001 de-merger. State Bank of India shares rallied on increases in productivity and accelerating loan growth. Underweighting in Taiwan and in information technology and overweighting in India, Indonesia and Venezuela and in health care helped performance. So did stock selection in South Africa, China, Mexico, Taiwan and Venezuela as well as in materials, financials, telecom services, energy, consumer staples and information technology. Meanwhile, poor performance was registered by Copel (Brazil) because of election concerns which could affect utilities. The Portfolio sold its holdings in TTI Telecom (Israel) and Dimension Data (South Africa) after both fell sharply on negative results (which included poor telecom equipment sales). Quanta Computer (Taiwan) shares fell significantly on concerns over flat screen pricing. In addition, poor stock selection in Brazil and Israel and in utilities companies hurt performance.

Lazard Bond Portfolio

For the year ended December 31, 2002, Lazard Bond Portfolio’s Institutional Shares posted a total return of 7.44%, while Open Shares posted a total return of 7.15%, each trailing the 9.84% return of the Lehman Intermediate Government/ Credit Bond^® Index.

The Portfolio maintained significant allocations to mortgages and asset-backed bonds throughout the year. Asset-backed positions focused on credit card and auto loan bonds. These outperformed other segments of the asset-backed securities market, which were more sensitive to consumer sector weakness. Mortgage pass-through securities held up well, despite a challenging environment characterized by volatile and falling interest rates combined with high refinancing incentives for homeowners.

The Portfolio also maintained significant exposure to investment grade corporate bonds and a modest allocation to high yield corporate bonds. The high yield allocation, though rallying in the final quarter, posted disappointing performance for the year. Investment grade corporates underperformed the index as well because of security selection, specifically among telecommunications sector.

Lazard High Yield Portfolio

For the year ended December 31, 2002, Lazard High Yield Portfolio’s Institutional Shares posted a total return of (11.14)%, while Open Shares posted a total return of (11.27)%, each trailing the (1.83)% return of the Merrill Lynch High Yield Master II^® Index.

The high yield market started 2002 with strong returns, with March highlighted by the largest investment inflow to the high yield mutual fund market in five years. However, by mid-year the market had retreated, investment flows had reversed and demand had slackened, causing yield spreads to

6

The Lazard Funds, Inc.

Investment Overviews (concluded)

widen roughly 150 basis points in the second quarter alone. High yield markets continued to soften through mid-summer in response to flagging equity markets and concern over the possibility of Middle East conflict. A fourth quarter rally restored a good deal of confidence in high yield markets as stabilizing equity valuations, declining volatility, and an increased risk appetite converged.

The Portfolio was negatively impacted by security selection in the cable television sector, as well as selected positions in the apparel/textiles sector. The Portfolio maintained a cautious approach to fixed telecommunications issuers during 2002, which helped performance. An underweight, relative to the index, of the integrated telecommunications sector helped, although underperformance in selected positions within the sector detracted somewhat from the positive impact.

Lazard Strategic Yield Portfolio

For the year ended December 31, 2002, Lazard Strategic Yield Portfolio’s Institutional Shares posted a total return of (2.00)%, while Open Shares posted a total return of (2.48)%, each trailing the 1.80% return of the One Month London Interbank Offered Rate (“LIBOR”) USD Fixed Index.

Emerging market bonds enjoyed a strong year in 2002, as a number of Eastern European markets benefited from investment inflows and convergence momentum. This allowed the sector to shake off relatively low yields in most major Asian markets and selected volatility in the Latin American region. Corporate high yield markets started 2002 with strong returns; however, slackening demand caused a mid-year retreat and pushed yield spreads wider. High yield bonds rallied in the fourth quarter and, paired with still strong momentum in emerging market bonds, provided a strong updraft.

The Portfolio was hurt by a significant allocation to high yield corporates; the fourth quarter rally was not sufficient to offset a generally disappointing year for credit. Emerging market investments added value; the Portfolio avoided certain high yielding but illiquid Latin American markets in favor of overweights to European markets and positions in Africa and the Middle East. Opportunistic exposure to structured assets also contributed to performance.

Lazard Mortgage Portfolio

For the year ended December 31, 2002, Lazard Mortgage Portfolio posted a total return of 8.38%, trailing the 8.75% return of the Lehman Fixed-Rate Mortgage-Backed Securities (“MBS”)^® Index.

The U.S. mortgage market enjoyed a strong 2002 as falling interest rates in U.S. bond markets and a demand for the high quality of U.S. agency mortgages more than offset several factors that tend to weaken mortgage markets relative to other fixed-income sectors. Interest rate volatility was relatively high, and refinancing incentives for homeowners reached levels not seen in more than 10 years. GNMA agency mortgages outperformed conventional mortgages, and 30-year mortgages led 15-year mortgages for the year.

The Portfolio was negatively impacted by an underweight of GNMA mortgages relative to conventional mortgages, but this was largely offset by strong security selection within the Portfolio’s mortgage holdings, as positions in low loan balance mortgages and well-seasoned loans provided positive contributions. Small allocations to other structured assets, such as commercial mortgages and asset-backed bonds, provided further diversification and positive performance contributions.

Notes to Investment Overviews:

All returns are for the year ended December 31, 2002 and assume reinvestment of all dividends and distributions, if any.

Certain expenses of the Portfolios have been waived or reimbursed by the Fund’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolios’ returns would have been lower.

The performance data of the indices and other market data have been prepared from sources and data that the InvestmentManager 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.

7

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 and S&P 500^® Index*

Average Annual Total Returns*
Periods Ended December 31, 2002
	InstitutionalShares						Open Shares
	One		Five		Ten		One		Five		Since
	Year		Years		Years		Year		Years		Inception†
Equity Portfolio**	(16.84	)%	(1.41	)%	9.05	%	(17.08	)%	(1.70	)%	1.49	%
S&P 500 Index	(22.10	)	(0.59	)	9.34		(22.10	)	(0.59	)	4.02

*	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 S&P 500
	Index is a market capitalization-weighted index of 500 common stocks, designed to measure performance of the broad domestic econ-
	omy through changes in the aggregate market value of these stocks, which represent all major industries.
**	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.

8

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 and Russell Midcap^® Index*

Average Annual Total Returns*
Periods Ended December 31, 2002
	One		Five		Since
	Year		Years		Inception†
Mid Cap Portfolio**
Institutional Shares	(14.47	)%	5.04	%	5.43	%
Open Shares	(14.75	)	4.70		5.09
Russell Midcap Index	(16.18	)	2.19		2.73

*	All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reim-
	bursed by the Portfolio’s Investment Manager 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 Russell
	Midcap Index measures the performance of the 800 smallest companies in the Russell 1000® Index (which consists of the 1,000 largest
	U.S. companies by capitalization).
**	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.

9

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 and Russell 2000^® Index*

Average Annual Total Returns*
Periods Ended December 31, 2002
	Institutional Shares						Open Shares
	One		Five		Ten		One		Five		Since
	Year		Years		Years		Year		Years		Inception†
Small Cap Portfolio**	(17.97	)%	(0.04	)%	9.84	%	(17.82	)%	(0.23	)%	3.72	%
Russell 2000 Index	(20.48	)	(1.36	)	7.16		(20.48	)	(1.36	)	1.94

    * 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 Russell

      2000 Index is comprised of the 2,000 smallest U.S. companies included in the Russell 3000^® Index (which consists of the 3,000 largest

      U.S. companies by capitalization).

**     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.

10

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”^®) Europe, Australasia and Far East (“EAFE”^®) Index*

Average Annual Total Returns* Periods Ended December 31, 2002

	Institutional Shares						Open Shares
	One		Five		Ten		One		Five		Since
	Year		Years		Years		Year		Years		Inception†
International Equity Portfolio**	(10.44	)%	(2.82	)%	5.24	%	(10.57	)%	(3.08	)%	(0.42	)%
MSCI EAFE Index	(15.94	)	(2.89	)	4.00		(15.94	)	(2.89	)	(1.59	)

   * 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.

11

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*

Average Annual Total Returns*
Periods Ended December 31, 2002
	One		Since
	Year		Inception†
International Equity Select Portfolio**
Institutional Shares	(14.12	)%	(14.03	)%
Open Shares	(14.37	)	(14.18	)
MSCI EAFE Index	(15.94	)	(17.17	)

*	All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reim-
	bursed by the Portfolio’s Investment Manager 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.

12

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^® Index*

Average Annual Total Returns*
Periods Ended December 31, 2002
	Institutional Shares						Open Shares
	One		Five		Since		One		Five		Since
	Year		Years		Inception†		Year		Years		Inception†
International Small Cap Portfolio**	(3.08	)%	3.20	%	4.05	%	(3.55	)%	2.74	%	1.75	%
MSCI EAFE Small Cap Index	(9.58	)	(2.68	)	(3.02	)	(9.58	)	(2.68	)	(6.46	)

*	All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reim-
	bursed by the Portfolio’s Investment Manager 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.

13

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”^®) Index*

Average Annual Total Returns*
Periods Ended December 31, 2002
	Institutional Shares						Open Shares
	One		Five		Ten		One		Five		Since
	Year		Years		Years		Year		Years		Inception†
Emerging Markets Portfolio**	(0.37	)%	(4.12	)%	(2.06	)%	(0.65	)%	(4.34	%	(5.67	)%
MSCI EMF Index	(6.00	)	(4.57	)	(4.07	)	(6.00	)	(5.57	)	(5.99	)

*	All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reim-
	bursed by the Portfolio’s Investment Manager 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.

14

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/Credit Bond^® Index*

Average Annual Total Returns*
Periods Ended December 31, 2002
	Institutional Shares						Open Shares
	One		Five		Ten		One		Five		Since
	Year		Years		Years		Year		Years		Inception†
Bond Portfolio**	7.44	%	5.55	%	6.01	%	7.15	%	5.26	%	5.76	%
Lehman Intermediate Gov’t/Credit
Bond Index	9.84		7.48		7.07		9.84		7.48		7.69

    * All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reim-

      bursed by the Portfolio’s Investment Manager 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/Credit 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.

15

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^® Index*

Average Annual Total Returns*
Periods Ended December 31, 2002
	Institutional Shares				Open Shares
	One		Since		One		Since
	Year		Inception†		Year		Inception†
High Yield Portfolio**	(11.14	)%	(4.02	)%	(11.27	)%	(5.37	)%
Merrill Lynch High Yield Master II Index	(1.83	)	0.53		(1.83	)	0.12

*	All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reim-
	bursed by the Portfolio’s Investment Manager 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.

16

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*

Average Annual Total Returns*
Periods Ended December 31, 2002
	Institutional Shares						Open Shares
	One		Five		Ten		One		Five		Since
	Year		Years		Years		Year		Years		Inception†
Strategic Yield Portfolio**	(2.00	)%	1.74	%	5.29	%	(2.48	)%	1.28	%	1.71	%
One Month LIBOR USD Fixed Index	1.80		4.61		4.77		1.80		4.61		4.78

*	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.

17

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”)^® Index*

Average Annual Total Returns*
Periods Ended December 31, 2002
	Institutional Shares
	One		Since
	Year		Inception**
Mortgage Portfolio	8.38	%	7.89	%
Lehman Fixed-Rate MBS Index	8.75		8.51

*	All returns assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reim-
	bursed by the Portfolio’s Investment Manager 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.

18

The Lazard Funds, Inc.

Portfolios of Investments

December 31, 2002

Description	Shares	Value
Lazard Equity Portfolio
Common Stocks—95.8%
Aerospace & Defense—3.2%
Lockheed Martin Corp	30,000	$	1,732,500
Rockwell Collins, Inc	30,100		700,126
United Technologies Corp	23,500	1,455,590
		3,888,216
Apparel & Textiles—1.4%
NIKE, Inc., Class B	39,700	1,765,459
Banking—10.9%
Bank of America Corp	39,550		2,751,493
Bank One Corp	72,100		2,635,255
Golden West Financial Corp	26,000		1,867,060
Northern Trust Corp	58,100		2,036,405
SouthTrust Corp	52,500		1,304,625
Wells Fargo & Co	61,400	2,877,818
		13,472,656
Brewery—1.2%
Anheuser-Busch Cos., Inc	29,700	1,437,480
Business Services & Supplies—4.0%
Accenture, Ltd., Class A (a)	77,300		1,390,627
First Data Corp	52,800		1,869,648
Pitney Bowes, Inc	51,700	1,688,522
		4,948,797
Cable & Broadcasting—1.4%
Comcast Corp., Class A (a)	77,400	1,748,466
Computer Software—3.4%
Microsoft Corp. (a)	48,300		2,497,110
Oracle Corp. (a)	155,400	1,678,320
		4,175,430
Computers & Business Equipment—2.0%
Cisco Systems, Inc. (a)	27,700		362,870
International Business Machines Corp.	27,100	2,100,250
		2,463,120
Cosmetics & Toiletries—2.6%
Colgate-Palmolive Co	40,400		2,118,172
The Gillette Co	35,300	1,071,708
		3,189,880
Diversified—7.3%
3M Co	11,600		1,430,280
Eaton Corp	12,000		937,320
Emerson Electric Co	41,200		2,095,020
General Electric Co	79,300		1,930,955
Philip Morris Cos., Inc	33,500		1,357,755
PPG Industries, Inc	24,500	1,228,675
		8,980,005

Description	Shares	Value
Drugs & Health Care—6.9%
Eli Lilly & Co	31,200	$	1,981,200
HCA, Inc	42,100		1,747,150
Pfizer, Inc	91,600		2,800,212
Schering-Plough Corp	31,700		703,740
Wyeth	32,700	1,222,980
		8,455,282
Financial Services—5.4%
American Express Co	65,300		2,308,355
Citigroup, Inc	85,997		3,026,234
Merrill Lynch & Co., Inc	33,700	1,278,915
		6,613,504
Food & Beverages—6.6%
Del Monte Foods Co. (a)	1		6
H.J. Heinz Co	43,000		1,413,410
Kraft Foods, Inc., Class A	49,100		1,911,463
PepsiCo, Inc	21,940		926,307
The Coca-Cola Co	26,200		1,148,084
The Kroger Co. (a)	88,800		1,371,960
Unilever NV, NY Shares	21,700	1,339,107
		8,110,337
Household Products &
Home Furnishings—1.0%
Newell Rubbermaid, Inc	39,700	1,204,101
Insurance—7.2%
American International Group, Inc	26,569		1,537,017
Jefferson-Pilot Corp	9,400		358,234
Marsh & McLennan Cos., Inc	35,200		1,626,592
MetLife, Inc	80,300		2,171,312
The Hartford Financial Services
Group, Inc	16,400		745,052
The St. Paul Cos., Inc	54,800		1,865,940
XL Capital, Ltd., Class A	7,700	594,825
		8,898,972
Leisure & Entertainment—1.1%
Mattel, Inc	70,200	1,344,330
Medical Products & Services—0.5%
Johnson & Johnson	11,500	617,665
Metals & Mining—1.1%
Alcoa, Inc	60,600	1,380,468
Multimedia—4.9%
The News Corp., Ltd. ADR	126,500		2,865,225
The Walt Disney Co	58,800		959,028
Viacom, Inc., Class B (a)	55,400	2,258,104
		6,082,357

The accompanying notes are an integral part of these financial statements.

19

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard Equity Portfolio (concluded)
Oil & Gas—8.9%
Baker Hughes, Inc	38,900	$	1,252,191
Burlington Resources, Inc	48,200		2,055,730
ChevronTexaco Corp	26,029		1,730,408
ConocoPhillips	29,780		1,441,054
Exxon Mobil Corp	53,628		1,873,762
Praxair, Inc	23,600		1,363,372
Royal Dutch Petroleum Co., NY Shares	28,600	1,258,972
		10,975,489
Retail—3.4%
Target Corp	55,400		1,662,000
The Home Depot, Inc	36,400		872,144
Wal-Mart Stores, Inc	33,600	1,697,136
		4,231,280
Semiconductors &
Components—2.5%
Intel Corp	98,700		1,536,759
Texas Instruments, Inc	103,800	1,558,038
		3,094,797
Telecommunications—4.7%
BellSouth Corp	83,500		2,160,145
SBC Communications, Inc	36,479		988,946
Verizon Communications, Inc	66,600	2,580,750
		5,729,841
Utilities—4.2%
Entergy Corp	39,500		1,800,805
KeySpan Corp	48,300		1,702,092
NiSource, Inc	84,000	1,680,000
		5,182,897
Total Common Stocks
(Identified cost $127,047,154)		117,990,829

	Principal
	Amount
Description	(000)			Value
Convertible Bond—1.5%
Computers & Business
Equipment—1.5%
Hewlett-Packard Co.,
0.00%, 10/14/17
(Identified cost $2,315,285) (d), (e)	$	4,107		$	1,873,819
Repurchase Agreement—1.1%
State Street Corp., 1.00%, 01/02/03
(Dated 12/31/02, collateralized by
$1,080,000 United States Treasury
Bond, 12.75%, 11/15/10, with a
value of $1,416,139)
(Identified cost $1,385,000)		1,385		1,385,000
Total Investments
(Identified cost $130,747,439) (b)		98.4	%	$	121,249,648
Cash and Other Assets in Excess
of Liabilities		1.6		1,932,861
Net Assets		100.0	%	$	123,182,509

The accompanying notes are an integral part of these financial statements.

20

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares		Value
Lazard Mid Cap Portfolio
Common Stocks—93.8%
Aerospace & Defense—2.0%
Rockwell Collins, Inc	31,300	$	728,038
Apparel & Textiles—3.7%
NIKE, Inc., Class B	17,600		782,672
Polo Ralph Lauren Corp. (a)	26,900	585,344
		1,368,016
Banking—6.3%
Charter One Financial, Inc	25,680		737,786
Golden West Financial Corp	4,800		344,688
Mercantile Bankshares Corp	9,500		366,605
Northern Trust Corp	11,200		392,560
SouthTrust Corp	19,100	474,635
		2,316,274
Business Services &
Supplies—10.6%
ARAMARK Corp., Class B (a)	40,500		951,750
Convergys Corp. (a)	26,900		407,535
Equifax, Inc	24,700		571,558
Gartner, Inc., Class A (a)	26,200		241,040
Pitney Bowes, Inc	21,800		711,988
The Dun & Bradstreet Corp. (a)	18,100		624,269
Valassis Communications, Inc. (a)	13,700	403,191
		3,911,331
Chemicals—0.9%
Cabot Microelectronics Corp. (a)	7,000	330,400
Computer Software—1.6%
BMC Software, Inc. (a)	33,900	580,029
Computers & Business
Equipment—1.8%
Apple Computer, Inc. (a)	19,300		276,569
Lexmark International, Inc. (a)	6,700	405,350
		681,919
Diversified—2.8%
Eaton Corp	6,500		507,715
PPG Industries, Inc	10,300	516,545
		1,024,260
Drugs & Health Care—12.4%
Allergan, Inc	8,900		512,818
Barr Laboratories, Inc. (a)	7,900		514,211
Biogen, Inc. (a)	6,900		276,414
First Health Group Corp. (a)	19,100		465,085
Genzyme Corp. (a)	13,800		408,066
King Pharmaceuticals, Inc. (a)	32,733		562,680
Lincare Holdings, Inc. (a)	12,200		385,764
Universal Health Services, Inc.,
Class B (a)	12,400		559,240

Description	Shares	Value
Watson Pharmaceuticals, Inc. (a)	17,500	$	494,725
WellChoice, Inc. (a)	17,100	409,545
		4,588,548
Electronics—2.3%
Agilent Technologies, Inc. (a)	19,000		341,240
Celestica, Inc. (a)	37,000	521,700
		862,940
Environmental—1.2%
Republic Services, Inc. (a)	21,700	455,266
Financial Services—5.7%
Federated Investors, Inc., Class B	23,100		586,047
Investment Technology Group, Inc. (a)	18,200		406,952
SEI Investments Co	18,900		513,702
The Student Loan Corp	5,900	577,020
		2,083,721
Forest & Paper Products—1.8%
Bowater, Inc	15,400	646,030
Household Products &
Home Furnishings—3.4%
Mohawk Industries, Inc. (a)	7,400		421,430
Newell Rubbermaid, Inc	11,200		339,696
The Black & Decker Corp	11,500	493,235
		1,254,361
Insurance—2.7%
Ambac Financial Group, Inc	7,850		441,484
Jefferson-Pilot Corp	3,200		121,952
The St. Paul Cos., Inc	12,700	432,435
		995,871
Leisure & Entertainment—3.9%
International Game Technology (a)	7,600		576,992
Mattel, Inc	36,700		702,805
Starwood Hotels & Resorts
Worldwide, Inc	7,300	173,302
		1,453,099
Manufacturing—1.6%
American Standard Cos., Inc. (a)	8,400	597,576
Medical Products & Services—2.2%
DaVita, Inc. (a)	17,200		424,324
Guidant Corp. (a)	12,900	397,965
		822,289
Oil & Gas—5.5%
Baker Hughes, Inc	21,400		688,866
Burlington Resources, Inc	16,900		720,785
Cooper Cameron Corp. (a)	12,300	612,786
		2,022,437

The accompanying notes are an integral part of these financial statements.

21

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares		Value
Lazard Mid Cap Portfolio (concluded)
Printing & Publishing—1.2%
Lee Enterprises, Inc	12,700	$	425,704
Real Estate—4.6%
AMB Property Corp	17,100		467,856
Archstone-Smith Trust	24,900		586,146
Health Care Property Investors, Inc	16,700	639,610
		1,693,612
Restaurants—1.2%
Yum! Brands, Inc. (a)	19,000	460,180
Retail—4.9%
American Eagle Outfitters, Inc. (a)	37,600		518,128
The Gap, Inc	39,200		608,384
The TJX Cos., Inc	34,500	673,440
		1,799,952
Telecommunications—2.2%
Harris Corp	18,100		476,030
Scientific-Atlanta, Inc	29,500	349,870
		825,900
Tobacco—1.0%
Loews Corp. - Carolina Group	17,400	352,698
Transportation—1.9%
Swift Transportation Co., Inc. (a)	35,100	702,632
Utilities—4.4%
Entergy Corp	14,400		656,496
KeySpan Corp	13,800		486,312
NiSource, Inc	23,800	476,000
		1,618,808
Total Common Stocks
(Identified cost $35,626,908)		34,601,891

	Principal
	Amount
Description	(000)			Value
Short-Term Investments—4.8%
Repurchase Agreement—3.0%
State Street Corp., 1.00%, 01/02/03
(Dated 12/31/02, collateralized by
$845,000 United States Treasury
Bond, 12.75%, 11/15/10, with a
value of $1,107,998)	$	1,085		$	1,085,000
Collateral for Securities on
Loan—1.8%
State Street Navigator Securities
Lending Prime Portfolio, 1.4883%
(n)		679		678,789
Total Short-Term Investments
(Identified cost $1,763,789)				1,763,789
Total Investments
(Identified cost $37,390,697) (b)		98.6	%	$	36,365,680
Cash and Other Assets in Excess
of Liabilities		1.4		516,011
Net Assets		100.0	%	$	36,881,691

The accompanying notes are an integral part of these financial statements.

22

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard Small Cap Portfolio
Common Stocks—97.2%
Aerospace & Defense—3.1%
DRS Technologies, Inc. (a)	202,700	$	6,350,591
Moog, Inc., Class A (a)	76,600		2,377,664
The Titan Corp. (a)	441,600	4,592,640
		13,320,895
Agriculture—1.1%
Delta & Pine Land Co	231,700	4,728,997
Automotive—1.2%
American Axle & Manufacturing
Holdings, Inc. (a)	215,800	5,054,036
Banking—9.8%
Chittenden Corp	112,300		2,861,404
Community First Bankshares, Inc	155,200		4,106,592
East West Bancorp, Inc	105,600		3,810,048
First Community Bancorp	74,200		2,443,480
First Midwest Bancorp, Inc	221,500		5,916,265
Hudson United Bancorp	179,200		5,573,120
New York Community Bancorp, Inc. .	117,750		3,400,620
Provident Financial Group, Inc	152,200		3,961,766
Sterling Bancshares, Inc	227,200		2,776,384
United Bankshares, Inc	190,500		5,536,121
W Holding Co., Inc	124,300	2,039,763
		42,425,563
Building & Construction—0.5%
Chicago Bridge & Iron Co. NV,
NY Shares	68,800	2,077,760
Business Services &
Supplies—7.7%
ADVO, Inc. (a)	113,600		3,729,488
American Management Systems,
Inc. (a)	108,500		1,300,915
Gartner, Inc., Class A (a)	275,200		2,531,840
Herman Miller, Inc	130,700		2,404,880
Paxar Corp. (a)	219,500		3,237,625
PRG-Schultz International, Inc. (a)	620,800		5,525,120
Tier Technologies, Inc., Class B (a)	234,300		3,748,800
United Stationers, Inc. (a)	153,200		4,412,313
Valassis Communications, Inc. (a)	92,300		2,716,389
Watson Wyatt & Co. Holdings (a)	173,200	3,767,100
		33,374,470
Chemicals—1.1%
Spartech Corp	228,300	4,709,829

Description	Shares	Value
Computer Software—1.5%
Fair, Isaac & Co., Inc	33,129	$	1,414,608
Mentor Graphics Corp. (a)	618,100	4,858,266
		6,272,874
Computers & Business
Equipment—4.6%
Advanced Digital Information
Corp. (a)	639,300		4,289,703
Avocent Corp. (a)	164,300		3,650,746
Extreme Networks, Inc. (a)	929,500		3,039,465
Foundry Networks, Inc. (a)	54,300		382,272
Insight Enterprises, Inc. (a)	390,200		3,242,562
Maxtor Corp. (a)	1,074,800	5,438,488
		20,043,236
Diversified—2.2%
Jarden Corp. (a)	105,400		2,515,898
Olin Corp	58,600		911,230
The Liberty Corp	155,200	6,021,760
		9,448,888
Drugs & Health Care—6.9%
aaiPharma, Inc. (a)	356,200		4,993,924
Andrx Corp. (a)	170,700		2,504,169
Apria Healthcare Group, Inc. (a)	141,100		3,138,064
Celgene Corp. (a)	177,000		3,800,190
LifePoint Hospitals, Inc. (a)	140,000		4,190,340
Manor Care, Inc. (a)	260,200		4,842,322
MIM Corp. (a)	504,900		2,928,420
Province Healthcare Co. (a)	330,300	3,213,819
		29,611,248
Education—0.5%
Learning Tree International, Inc. (a)	162,400	2,224,880
Electrical Equipment—1.7%
Axcelis Technologies, Inc. (a)	496,500		2,784,869
Coherent, Inc. (a)	155,300		3,098,235
MKS Instruments, Inc. (a)	99,700	1,638,071
		7,521,175
Electronics—1.6%
Actel Corp. (a)	288,700		4,682,714
Microsemi Corp. (a)	331,500	2,018,835
		6,701,549
Financial Services—4.5%
Financial Federal Corp. (a)	147,500		3,706,675
IndyMac Bancorp, Inc. (a)	217,500		4,021,575
Investment Technology Group, Inc. (a)	181,150		4,050,514
Irwin Financial Corp	114,700		1,892,550
Raymond James Financial, Inc	58,200		1,721,556
The South Financial Group, Inc	164,500		3,398,570
W.P. Stewart & Co., Ltd	41,700	747,264
		19,538,704

The accompanying notes are an integral part of these financial statements.

23

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard Small Cap Portfolio (continued)
Food & Beverages—2.7%
AFC Enterprises, Inc. (a)	116,200	$	2,441,362
PepsiAmericas, Inc	354,400		4,759,592
The Robert Mondavi Corp., Class A (a)	150,400	4,662,400
		11,863,354
Forest & Paper Products—0.7%
Packaging Corp. of America (a)	174,800	3,188,352
Household Products &
Home Furnishings—0.5%
Harman International Industries, Inc. .	39,600	2,356,200
Industrial & Machinery—2.8%
AMETEK, Inc	34,800		1,339,452
JLG Industries, Inc	461,800		3,477,354
Nordson Corp	175,500		4,357,665
Roper Industries, Inc	79,400	2,906,040
		12,080,511
Insurance—3.6%
AmerUs Group Co	74,000		2,091,980
HCC Insurance Holdings, Inc	122,800		3,020,880
Horace Mann Educators Corp	176,300		2,702,679
Max Re Capital, Ltd	200,400		2,208,408
RLI Corp	42,700		1,191,330
Triad Guaranty, Inc. (a)	64,000		2,359,040
W.R. Berkley Corp	47,000	1,861,670
		15,435,987
Leisure & Entertainment—3.2%
Argosy Gaming Co. (a)	102,700		1,944,111
Brunswick Corp	230,500		4,577,730
Oakley, Inc. (a)	397,700		4,084,379
Sonic Corp. (a)	158,600	3,249,714
		13,855,934
Manufacturing—2.2%
Allegheny Technologies, Inc	448,800		2,796,024
Plexus Corp. (a)	314,100		2,757,798
York International Corp	147,400	3,769,018
		9,322,840
Medical Products &
Services—4.6%
Albany Molecular Research, Inc. (a)	9,100		134,598
Hologic, Inc. (a)	143,700		1,754,577
INAMED Corp. (a)	176,500		5,436,200
Invitrogen Corp. (a)	84,700		2,650,263
Ocular Sciences, Inc. (a)	146,800		2,278,336

Description	Shares	Value
Owens & Minor, Inc	135,000	$	2,216,700
Varian, Inc. (a)	135,800		3,896,102
Viasys Healthcare, Inc. (a)	92,700	1,380,303
		19,747,079
Oil & Gas—6.5%
Cal Dive International, Inc. (a)	205,200		4,822,200
Helmerich & Payne, Inc	164,820		4,600,126
Key Energy Services, Inc. (a)	579,300		5,196,321
Kinder Morgan Management, LLC (a) . .	172,454		5,447,822
Lone Star Technologies, Inc. (a)	128,800		1,917,832
Newfield Exploration Co. (a)	71,000		2,559,550
St. Mary Land & Exploration Co	147,500	3,687,500
		28,231,351
Printing & Publishing—3.2%
Journal Register Co. (a)	266,300		4,734,814
Pulitzer, Inc	71,700		3,222,915
R. H. Donnelley Corp. (a)	192,400	5,639,244
		13,596,973
Real Estate—7.3%
Alexandria Real Estate Equities, Inc	142,000		6,049,200
Camden Property Trust	148,900		4,913,700
Capital Automotive REIT	172,500		4,088,250
Catellus Development Corp. (a)	156,000		3,096,600
Healthcare Realty Trust, Inc	106,000		3,100,500
Heritage Property Investment Trust	202,400		5,053,928
The Mills Corp	184,000	5,398,560
		31,700,738
Retail—5.5%
American Eagle Outfitters, Inc. (a)	275,200		3,792,256
AnnTaylor Stores Corp. (a)	106,800		2,180,856
Christopher & Banks Corp. (a)	121,400		2,519,050
Genesco, Inc. (a)	177,900		3,314,277
Linens ‘n Things, Inc. (a)	219,100		4,951,660
The Timberland Co., Class A (a)	152,400		5,426,964
The Wet Seal, Inc., Class A (a)	145,100	1,561,421
		23,746,484
Telecommunications—0.4%
C-COR.net Corp. (a)	567,100	1,882,772
Transportation—4.5%
EGL, Inc. (a)	251,000		3,576,750
Forward Air Corp. (a)	114,600		2,224,386
Genesee & Wyoming, Inc., Class A (a)	134,600		2,739,110
Swift Transportation Co., Inc. (a)	362,500		7,256,525
USFreightways Corp	124,600	3,582,250
		19,379,021

The accompanying notes are an integral part of these financial statements.

24

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard Small Cap Portfolio (concluded)
Utilities—1.5%
DQE, Inc	146,000	$	2,225,040
Energen Corp	77,700		2,261,070
MDU Resources Group, Inc	76,600	1,977,046
		6,463,156
Total Common Stocks
(Identified cost $441,547,245)		419,904,856

	Principal
	Amount
Description	(000)			Value
Repurchase Agreement—3.2%
State Street Corp., 1.00%, 01/02/03
(Dated 12/31/02, collateralized by
$10,415,000 United States Treasury
Bond, 10.375%, 11/15/12, with a
value of $14,073,165)
(Identified cost $13,791,000)	$	13,791		$	13,791,000
Total Investments
(Identified cost $455,338,245) (b)		100.4	%	$	433,695,856
Liabilities in Excess of Cash and
Other Assets		(0.4	)	(1,790,530		)
Net Assets		100.0	%	$	431,905,326

The accompanying notes are an integral part of these financial statements.

25

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard International Equity Portfolio
Common Stocks—98.8%
Australia—2.3%
BHP Billiton, Ltd	7,647,966	$	43,711,670
Belgium—1.4%
Fortis	1,451,360	25,587,374
Denmark—1.5%
Novo Nordisk A/S, B Shares	992,900	28,685,788
Finland—2.8%
Nokia Oyj	3,283,100	52,196,096
France—8.3%
BNP Paribas SA	835,904		34,061,602
Carrefour SA	407,200		18,131,013
Lagardere SCA	744,830		30,256,704
Schneider Electric SA (a)	215,800		10,211,110
Total Fina Elf SA	432,725	61,803,261
Total France		154,463,690
Germany—2.0%
Bayerische Motoren Werke AG	767,800		23,301,704
Siemens AG, Registered Shares	309,200	13,141,223
Total Germany		36,442,927
Hong Kong—1.1%
CLP Holdings, Ltd	2,738,500		11,026,550
Hong Kong & China Gas Co., Ltd	7,728,000	9,959,338
Total Hong Kong		20,985,888
Ireland—4.1%
Allied Irish Banks PLC	2,169,757		29,281,502
Bank of Ireland	2,516,100		25,743,867
CRH PLC	1,669,479	20,585,438
Total Ireland		75,610,807
Italy—7.2%
Alleanza Assicurazioni SpA	2,050,935		15,539,262
ENI SpA	4,244,600		67,482,425
Snam Rete Gas SpA	2,134,600		7,280,164
Telecom Italia SpA	5,776,900	43,830,298
Total Italy		134,132,149
Japan—13.6%
ACOM Co., Ltd	197,300		6,484,116
Canon, Inc	928,000		34,955,423
East Japan Railway Co	4,875		24,196,301
Kao Corp	1,254,000		27,527,345
Nikko Cordial Corp	6,855,000		23,106,092
Nippon Telegraph & Telephone
Corp	5,537		20,109,943
Nissan Motor Co., Ltd	5,768,000		45,008,578

Description	Shares	Value
NTT DoCoMo, Inc	7,628	$	14,077,121
Sony Corp	728,800		30,461,347
Tokyo Gas Co., Ltd	1,969,000		6,172,310
Toyota Motor Corp	781,200	20,999,646
Total Japan		253,098,222
Netherlands—10.8%
ABN AMRO Holding NV	1,855,860		30,342,680
Heineken NV	1,174,181		45,837,325
Koninklijke (Royal) KPN NV (a)	8,095,600		52,672,267
Koninklijke (Royal) Philips
Electronics NV	846,675		14,837,970
Royal Dutch Petroleum Co	1,310,466	57,689,796
Total Netherlands		201,380,038
Singapore—1.8%
Oversea-Chinese Banking Corp.,
Ltd	2,915,850		16,222,515
United Overseas Bank, Ltd	2,632,897	17,911,897
Total Singapore		34,134,412
Spain—2.9%
Altadis SA	1,323,400		30,192,005
Endesa SA	2,068,300	24,200,797
Total Spain		54,392,802
Sweden—0.5%
Sandvik AB	420,800	9,393,180
Switzerland—7.4%
Compagnie Financiere Richemont
AG, A Shares	1,624,100		30,304,318
Credit Suisse Group (a)	438,200		9,507,485
Novartis AG, Registered Shares	1,502,870		54,834,593
UBS AG, Registered Shares (a)	893,996	43,448,710
Total Switzerland		138,095,106
United Kingdom—31.1%
Amersham PLC	2,482,131		22,217,649
Barclays PLC	4,147,500		25,706,665
Boots Company PLC	4,353,100		41,067,179
BP PLC	6,313,100		43,397,944
BT Group PLC	5,723,750		17,968,585
Cadbury Schweppes PLC	4,662,326		29,047,731
Diageo PLC	3,435,042		37,327,976
GlaxoSmithKline PLC	3,800,201		72,925,840
HSBC Holdings PLC	5,422,762		59,932,129
Imperial Tobacco Group PLC	2,231,240		37,896,348
Kingfisher PLC	6,674,400		23,907,869
Royal Bank of Scotland
Group PLC	1,257,200		30,116,599
Standard Chartered PLC	2,036,300		23,144,355
Tesco PLC	6,389,500		19,955,712

The accompanying notes are an integral part of these financial statements.

26

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard International Equity Portfolio (concluded)
Unilever PLC	4,303,400	$	40,944,711
Vodafone Group PLC	29,968,200	54,638,339
Total United Kingdom		580,195,631
Total Common Stocks
(Identified cost $1,948,404,625)		$	1,842,505,780

	Principal
	Amount
Description		(000)			Value
Repurchase Agreement—2.3%
State Street Corp., 1.00%, 01/02/03
(Dated 12/31/02, collateralized by
$13,760,000 United States Treasury
Bond, 10.375%, 11/15/12, with a
value of $18,593,062 and
$19,450,000 United States Treasury
Bond, 12.75%, 11/15/10, with a
value of $25,503,618)
(Identified cost $ 43,225,000)	$	43,225		$	43,225,000
Total Investments
(Identified cost $1,991,629,625) (b)		101.1	%	$	1,885,730,780
Liabilities in Excess of Cash and
Other Assets		(1.1	)	(20,901,248		)
Net Assets		100.0	%	$	1,864,829,532

The accompanying notes are an integral part of these financial statements.

27

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard International Equity Select Portfolio
Common Stocks—97.5%
Denmark—2.3%
Danske Bank A/S ADR	32,400	$	535,549
Finland—3.7%
Nokia Oyj ADR	56,415	874,433
France—13.1%
Aventis SA ADR	13,800		747,822
Axa ADR	47,900		644,255
Societe Generale ADR	62,400		726,816
Total Fina Elf SA ADR	13,300	950,950
Total France		3,069,843
Germany—3.7%
Deutsche Bank AG, Registered Shares	10,100		458,843
Siemens AG ADR	9,900	417,087
Total Germany		875,930
Ireland—3.0%
Allied Irish Banks PLC ADR	26,100	701,568
Italy—5.9%
ENI SpA ADR	12,700		996,823
Sanpaolo IMI SpA ADR	30,700	394,495
Total Italy		1,391,318
Japan—5.9%
Canon, Inc. ADR	19,300		711,205
Kao Corp. ADR	3,000	658,549
Total Japan		1,369,754
Netherlands—10.6%
ABN AMRO Holding NV ADR	55,100		891,518
Heineken NV ADR	23,500		917,332
Royal Dutch Petroleum Co.,
NY Shares	15,500	682,310
Total Netherlands		2,491,160
Spain—2.6%
Endesa SA ADR	54,700	618,110

Description	Shares	Value
Switzerland—13.5%
Compagnie Financiere Richemont AG
ADR	12,500	$	233,241
Nestle SA, Registered Shares ADR	18,500		980,064
Novartis AG ADR	26,500		973,345
UBS AG, Registered Shares (a)	20,300	976,836
Total Switzerland		3,163,486
United Kingdom—33.2%
AstraZeneca PLC ADR	20,100		705,309
Barclays PLC ADR	32,700		807,690
BP PLC ADR	19,500		792,675
Cadbury Schweppes PLC ADR	36,100		924,521
Diageo PLC ADR	20,400		893,520
GlaxoSmithKline PLC ADR	27,800		1,041,388
HSBC Holdings PLC ADR	18,200		1,000,636
Tesco PLC ADR	48,800		457,236
Unilever PLC ADR	30,600	1,170,450
Total United Kingdom		7,793,425
Total Common Stocks
(Identified cost $25,274,435)		22,884,576

	Principal
	Amount
	(000)
Repurchase Agreement—2.5%
State Street Corp., 1.00%, 01/02/03
(Dated 12/31/02, collateralized by
$450,000 United States Treasury
Bond, 12.75%, 11/15/10, with a
value of $590,058)
(Identified cost $575,000)	$	575			575,000
Total Investments
(Identified cost $25,849,435) (b)	100.0		%	$	23,459,576
Cash and Other Assets in Excess
of Liabilities	0.0			5,583
Net Assets	100.0		%	$	23,465,159

The accompanying notes are an integral part of these financial statements.

28

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard International Small Cap Portfolio
Common Stocks—97.2%
Australia—3.6%
Macquarie Infrastructure Group	5,758,000	$	10,375,452
TABCORP Holdings, Ltd	1,437,100	8,618,308
Total Australia		18,993,760
Austria—1.7%
Erste Bank der oesterreichischen
Sparkassen AG	134,400	9,047,679
Belgium—0.4%
Solvus SA	290,709	2,364,294
Canada—0.8%
Intrawest Corp	382,300	4,442,985
Denmark—1.4%
ISS A/S (a)	207,800	7,486,067
Finland—5.9%
Amer Group, Ltd	430,100		15,752,016
Sampo Oyj, A Shares	1,169,800		8,900,018
TietoEnator Oyj	484,700	6,612,378
Total Finland		31,264,412
France—4.9%
Carbone Lorraine SA	160,800		3,756,232
Neopost SA (a), (c)	345,300		11,124,391
Societe BIC SA	321,600	11,086,455
Total France		25,967,078
Germany—4.3%
Fielmann AG	209,600		7,390,466
Medion AG	227,800		8,068,054
SCS Standard Computersysteme (a)	16,070		0
Stada Arzneimittel AG	139,700		5,614,828
Techem AG (a)	257,846	1,891,380
Total Germany		22,964,728
Greece—0.3%
Greek Organization of Football
Prognostics	129,950	1,369,151
Hong Kong—2.8%
Esprit Holdings, Ltd	7,005,065		11,767,406
Shaw Brothers (Hong Kong), Ltd	3,245,500	3,329,422
Total Hong Kong		15,096,828
Ireland—4.5%
Anglo Irish Bank Corp. PLC	1,491,230		10,610,005
DCC PLC	768,000		7,898,208
Waterford Wedgwood PLC	10,256,613	5,274,015
Total Ireland		23,782,228

Description	Shares	Value
Italy—4.6%
Davide Campari-Milano SpA	255,900	$	7,994,483
Interpump Group SpA	1,038,200		4,412,425
Natuzzi SpA ADR	343,100		3,485,896
Permasteelisa SpA	532,400	8,374,926
Total Italy		24,267,730
Japan—7.8%
ADERANS Co., Ltd	57,500		1,284,023
Belluna Co., Ltd	218,500		7,604,323
Hisamitsu Pharmaceutical Co., Inc	432,000		5,096,486
Japan Digital Laboratory Co., Ltd	540,900		3,395,724
Meitec Corp	86,500		2,113,845
Nissin Kogyo Co., Ltd	257,500		5,392,159
Sammy Corp	258,000		5,130,867
Secom Techno Service Co., Ltd	114,000		2,123,030
The Suruga Bank, Ltd	1,170,000		4,604,281
Yoshinoya D&C Co., Ltd	3,317	4,919,457
Total Japan		41,664,195
Netherlands—13.0%
CSM NV	499,500		10,473,028
Euronext NV	394,200		8,567,182
Fugro NV	236,563		10,706,994
Hunter Douglas NV	368,538		11,041,540
IHC Caland NV	142,406		7,516,879
Koninklijke Boskalis Westminster NV	292,000		5,904,809
Telegraaf Holdings MIJ NV	453,400		7,346,324
Van der Moolen Holding NV	359,400	7,731,668
Total Netherlands		69,288,424
Norway—1.2%
DnB Holding ASA	1,362,100		6,409,651
P4 Radio Hele Norge ASA	393,100	158,880
Total Norway		6,568,531
Singapore—2.2%
Fraser & Neave, Ltd	1,977,400		8,892,315
Want Want Holdings, Ltd	5,012,000	2,982,140
Total Singapore		11,874,455
Spain—8.4%
Abengoa SA	638,000		3,749,298
Aldeasa SA	268,500		3,953,149
Altadis SA	540,300		12,326,387
Banco Pastor SA	542,000		10,101,446
Corporacion Mapfre SA	1,177,600		9,552,533
Prosegur, Compania de Seguridad SA,
Registered Shares	477,800	4,863,615
Total Spain		44,546,428

The accompanying notes are an integral part of these financial statements.

29

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard International Small Cap Portfolio (concluded)
Sweden—4.7%
Alfa Laval (a)	737,400	$	5,924,047
D. Carnegie & Co. AB	452,100		2,905,627
Swedish Match AB	2,047,000	16,092,583
Total Sweden		24,922,257
Switzerland—3.3%
Bank Sarasin & Cie AG,
Registered B Shares	3,146		3,499,348
Edipresse SA	21,860		7,272,438
Kaba Holding AG, Registered B Shares	36,230	6,734,006
Total Switzerland		17,505,792
United Kingdom—21.4%
Ashtead Group PLC	5,208,800		2,096,411
Bunzl PLC	1,096,500		6,707,966
Carpetright PLC	674,800		6,398,659
De La Rue PLC	1,093,900		5,124,709
Euromoney Institutional Investor PLC	244,676		945,369
FKI PLC	3,340,453		4,732,457
Intertek Testing Services PLC (a)	970,200		6,294,554
Kidde PLC	6,751,700		7,690,210
Luminar PLC	535,100		3,363,989
Man Group PLC	756,427		10,801,629
Northgate PLC	843,400		5,480,579
Reckitt Benckiser PLC	670,008		12,997,674
Securicor PLC	4,983,900		6,799,980
Signet Group PLC ADR	290,012		9,425,390
Singer & Friedlander Group PLC	1,572,816		3,354,999
Trinity Mirror PLC	1,255,800		8,663,436
William Hill PLC	1,910,900		6,983,328
Wood Group (John) PLC	2,225,200	5,758,623
Total United Kingdom		113,619,962
Total Common Stocks
(Identified cost $544,720,761)		517,036,984

Description	Shares			Value
Warrant—0.0%
Singapore—0.0%
Want Want Holdings, Ltd.,
10/24/04
(Identified cost $7,760) (a), (f)		310,400		$	41,904
		Principal
		Amount
		(000)
Short-Term Investments—8.0%
Repurchase Agreement—2.4%
State Street Corp., 1.00%, 01/02/03
(Dated 12/31/02, collateralized by
$9,675,000 United States Treasury
Bond, 10.375%, 11/15/12, with a
value of $13,073,247)	$	12,811			12,811,000
Collateral for Securities on
Loan—5.6%
State Street Navigator Securities
Lending Prime Portfolio, 1.4883%
(n)		29,630		29,630,235
Total Short-Term Investments
(Identified cost $42,441,235)				42,441,235
Total Investments
(Identified cost $587,169,756) (b)		105.2	%	$	559,520,123
Liabilities in Excess of Cash and
Other Assets		(5.2	)	(27,438,312		)
Net Assets		100.0	%	$	532,081,811

The accompanying notes are an integral part of these financial statements.

30

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard Emerging Markets Portfolio
Common Stocks—90.0%
Argentina—0.8%
Tenaris SA ADR (a)	144,942	$	2,785,785
Brazil—2.5%
Companhia Vale do Rio Doce ADR	189,400		5,475,554
Empresa Brasileira de Aeronautica
SA ADR	216,100	3,435,990
Total Brazil		8,911,544
Chile—2.2%
Administradora de Fondos de Pensiones
Provida SA ADR	341,100	7,875,999
Croatia—2.1%
Pliva d.d. GDR (c)	514,900	7,372,750
Egypt—1.8%
Commercial International Bank	498,200		2,906,346
MobiNil	525,654	3,508,144
Total Egypt		6,414,490
Hong Kong—6.0%
China Mobile (Hong Kong), Ltd. ADR (a)	518,700		6,265,896
CNOOC, Ltd. ADR	303,300		7,900,965
Yue Yuen Industrial (Holdings), Ltd	2,135,300	6,954,884
Total Hong Kong		21,121,745
Hungary—3.3%
EGIS Rt	58,900		3,641,786
Gedeon Richter Rt	120,090	7,932,639
Total Hungary		11,574,425
India—7.8%
Hindalco Industries, Ltd	243,047		2,972,067
Hindustan Lever, Ltd	857,900		3,251,790
Reliance Industries, Ltd	906,300		5,626,809
Satyam Computer Services, Ltd	826,900		4,792,399
State Bank of India	1,882,500	11,096,739
Total India		27,739,804
Indonesia—3.8%
PT Hanjaya Mandala Sampoerna Tbk	16,544,000		6,839,419
PT Telekomunikasi Indonesia	3,859,500		1,660,232
PT Telekomunikasi Indonesia ADR	594,200	5,044,758
Total Indonesia		13,544,409
Israel—1.5%
Bank Hapoalim, Ltd. (a)	2,175,900		3,110,392
Koor Industries, Ltd. (a)	202,157	2,068,386
Total Israel		5,178,778

Description	Shares	Value
Mexico—9.0%
America Telecom SA de CV,
Series A1 (a)	4,675,900	$	2,725,821
Carso Global Telecom, Series A1 (a) .	1,692,500		1,876,242
Cemex SA de CV ADR	166,085		3,572,489
Fomento Economico Mexicano SA
de CV ADR	105,700		3,849,594
Grupo Financiero Banorte SA de CV,
Series O	2,140,300		5,215,754
Grupo Televisa SA ADR (a)	127,300		3,555,489
Kimberly-Clark de Mexico SA de CV,
Series A	1,461,200		3,351,376
Telefonos de Mexico SA de CV,
Series L ADR	247,200	7,905,456
Total Mexico		32,052,221
Panama—1.0%
Panamerican Beverages, Inc., Class A	175,000	3,636,500
Peru—1.0%
Credicorp, Ltd	357,200	3,357,680
Philippines—1.8%
Philippine Long Distance
Telephone Co. ADR (a)	395,400		1,988,862
San Miguel Corp., Class B	3,461,300	4,279,213
Total Philippines		6,268,075
Russia—3.3%
LUKOIL ADR	151,900		9,235,520
Wimm-Bill-Dann Foods OJSC ADR (a)	144,600	2,595,570
Total Russia		11,831,090
South Africa—13.7%
ABSA Group, Ltd	1,685,923		6,208,865
Impala Platinum Holdings, Ltd	57,900		3,677,583
Iscor, Ltd	3,647,827		9,034,010
Kumba Resources, Ltd	2,152,300		8,164,718
Old Mutual PLC	2,332,300		3,304,195
Sanlam, Ltd	5,413,400		4,794,807
Sappi, Ltd	339,600		4,531,694
Sasol, Ltd	490,900		6,007,168
Steinhoff International Holdings, Ltd.	3,649,800	2,977,519
Total South Africa		48,700,559
South Korea—16.8%
Hite Brewery Co., Ltd	85,500		3,539,522
Kookmin Bank	300,083		10,626,437
KT Corp. ADR	351,836		7,582,066
LG Household & Health Care, Ltd	78,200		2,479,086
POSCO	49,000		4,875,005
POSCO ADR	82,300		2,035,279

The accompanying notes are an integral part of these financial statements.

31

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard Emerging Markets Portfolio (concluded)
Samsung Electronics Co., Ltd	53,881	$	14,264,689
Samsung Fire & Marine
Insurance Co., Ltd	108,438		5,924,525
Samsung SDI Co., Ltd	24,800		1,432,317
SK Telecom Co., Ltd	35,330	6,821,441
Total South Korea		59,580,367
Taiwan—7.5%
Advantech Co., Ltd	493,000		886,181
China Steel Corp. GDR	376,280		4,101,452
Chinatrust Financial Holding Co.,
Ltd. (a)	4,565,284		3,715,776
Compal Electronics, Inc	1,988,000		2,058,326
Compal Electronics, Inc., Registered
Shares GDR (a)	434,396		2,237,139
Fubon Financial Holding Co., Ltd	7,384,000		5,861,329
Quanta Computer, Inc	900,750		1,476,639
Taiwan Cellular Corp	4,556,623		3,800,462
United Microelectronics Corp. ADR (a)	688,924	2,314,785
Total Taiwan		26,452,089
Thailand—2.1%
Delta Electronics (Thailand) PCL	4,179,700		2,618,373
PTT Public Co., Ltd	3,297,700		3,213,536
Thai Union Frozen Products PCL	2,848,400		1,123,499
Thai Union Frozen Products PCL
NVDR	1,443,900	569,520
Total Thailand		7,524,928
Turkey—0.6%
Turkiye Garanti Bankasi AS ADR (a), (c)	1,595,309	2,066,244
Venezuela—1.4%
Compania Anonima Nacional
Telefonos de Venezuela ADR	398,673	5,023,280
Total Common Stocks
(Identified cost $312,127,578)		319,012,762

Description	Shares			Value
Preferred Stocks—5.6%
Brazil—5.6%
Banco Itau SA ADR		186,680		$	4,521,950
Caemi Mineracao e Metalurgica SA	35,945,900				5,330,960
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar ADR		162,900			2,492,370
Companhia de Bebidas das
Americas ADR		263,091			4,013,216
Companhia Paranaense de
Energia-Copel ADR	1,176,299			3,305,400
Total Brazil				19,663,896
Total Preferred Stocks
(Identified cost $29,612,309)				19,663,896
		Principal
		Amount
		(000)
Short-Term Investments—13.4%
Repurchase Agreement—4.1%
State Street Corp., 1.00%, 01/02/03
(Dated 12/31/02, collateralized by
$11,080,000 United States Treasury
Bond, 10.375%, 11/15/12, with a
value of $14,971,739)	$	14,675			14,675,000
Collateral for Securities on
Loan—9.3%
State Street Navigator Securities
Lending Prime Portfolio, 1.4883%
(n)		32,786		32,785,785
Total Short-Term Investments
(Identified cost $47,460,785)				47,460,785
Total Investments
(Identified cost $389,200,672) (b)		109.0	%	$	386,137,443
Liabilities in Excess of Cash and
Other Assets		(9.0	)	(31,821,009		)
Net Assets		100.0	%	$	354,316,434

The accompanying notes are an integral part of these financial statements.

32

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

	Principal
	Amount
Description	(000)		Value
Lazard Bond Portfolio
Asset-Backed Securities—4.0%
Capital Auto Receivables Asset Trust,
Series 2002-3, Class A3,
3.58%, 10/16/06 (j)	$	850	$	877,242
Ford Credit Auto Owner Trust,
Series 2001-B, Class A5,
5.36%, 06/15/05		480		499,620
MBNA Credit Card Master Note Trust,
Series 2002-A6, Class A6,
3.90%, 11/15/07		500		520,211
Nationsbank Credit Card Master Trust,
Series 1993-2, Class A,
6.00%, 12/15/05		500	521,187
Total Asset-Backed Securities
(Identified cost $2,394,565)			2,418,260
Collateralized Mortgage
Obligations—0.3%
Asset Securitization Corp.,
Series 1996-D2, Class ACS2,
1.5675%, 02/14/29 (g), (h)		2,125		98,895
Merrill Lynch Mortgage Investors, Inc.,
Series 1996-C1, Class IO,
0.6944%, 04/25/28 (c), (g), (h)		2,160		51,490
Structured Asset Securities Corp.:
Series 1996-CFL, Class X1,
1.8628%, 02/25/28 (g), (h)		659		37,050
Series 1996-CFL, Class X2,
0.8261%, 02/25/28 (g), (h)		261	2,412
Total Collateralized Mortgage
Obligations
(Identified cost $229,548)			189,847
Corporate Bonds—25.3%
Aerospace & Defense—0.9%
Lockheed Martin Corp.,
7.25%, 05/15/06		200		225,242
United Technologies Corp.,
7.125%, 11/15/10		240	281,531
			506,773
Automotive—0.0%
Venture Holdings,
12.00%, 06/01/09 (l)		50	2,000
Banking & Financial
Services—11.7%
Bank of America Corp.,
7.40%, 01/15/11		450		530,084
Bank One Corp.,
6.00%, 08/01/08		550		606,869

	Principal
	Amount
Description	(000)		Value
Citigroup, Inc.,
6.00%, 02/21/12	$	515	$	565,160
Fannie Mae,
7.00%, 07/15/05		2,135		2,393,613
Ford Motor Credit Co.:
7.375%, 10/28/09		75		74,315
7.50%, 03/15/05		645		658,070
General Electric Capital Corp.,
6.00%, 06/15/12		525		566,829
General Motors Acceptance Corp.,
6.125%, 08/28/07		475		480,638
Goldman Sachs Group, Inc.,
6.60%, 01/15/12		425		469,623
Household Finance Corp.,
5.75%, 01/30/07		270		282,586
Wells Fargo & Co.,
6.375%, 08/01/11		335	375,259
			7,003,046
Brewery—0.5%
Anheuser-Busch Cos., Inc.,
7.50%, 03/15/12		250	308,050
Broadcasting—0.1%
Chancellor Media Communications,
Series B,
8.125%, 12/15/07		30	31,238
Chemicals—0.2%
ARCO Chemical Co.,
9.80%, 02/01/20		65		51,350
Terra Industries, Inc., Series B,
10.50%, 06/15/05		20		18,200
Texas Petrochemical Corp.,
11.125%, 07/01/06		80	52,000
			121,550
Commercial Services—0.1%
Coinmach Corp.,
9.00%, 02/01/10		60	62,925
Computers & Business
Equipment—0.9%
International Business Machines Corp.,
4.25%, 09/15/09		500	510,530
Consumer Products—0.2%
Buckeye Technologies, Inc.,
9.25%, 09/15/08		80		68,800
Icon Health & Fitness, Inc.,
11.25%, 04/01/12		30	26,100
			94,900

The accompanying notes are an integral part of these financial statements.

33

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

	Principal
	Amount
Description	(000)		Value
Lazard Bond Portfolio (continued)
Energy—2.3%
Compton Petroleum Corp.,
9.90%, 05/15/09	$	20	$	20,800
Conoco Funding Co.,
6.35%, 10/15/11		430		480,172
Denbury Resources, Inc., Series B,
9.00%, 03/01/08		45		46,519
Giant Industries, Inc.,
11.00%, 05/15/12		35		23,450
Parker Drilling Co., Series D,
9.75%, 11/15/06		40		40,600
Plains All American Pipeline LP,
7.75%, 10/15/12 (c)		45		46,800
Tesoro Petroleum Corp.,
9.625%, 04/01/12		25		16,250
USX Corp.,
6.65%, 02/01/06		570		623,216
Williams Cos., Inc.,
6.625%, 11/15/04		85	63,325
			1,361,132
Equipment Rental—0.1%
H&E Equipment/Finance,
11.125%, 06/15/12 (c)		20		15,000
United Rentals, Inc., Series B,
9.25%, 01/15/09		70	57,225
			72,225
Food & Beverages—2.0%
Burns Philp Capital Property, Ltd.,
9.75%, 07/15/12 (c)		90		86,400
Chiquita Brands International, Inc.,
10.56%, 03/15/09 (j)		35		35,831
Kraft Foods, Inc.,
6.25%, 06/01/12		505		564,727
Sara Lee Corp.,
6.25%, 09/15/11		475	532,738
			1,219,696
Forest & Paper Products—0.1%
Caraustar Industries, Inc.,
9.875%, 04/01/11		20		20,600
Smurfit Capital Funding PLC,
7.50%, 11/20/25		70	64,050
			84,650
Health Services—0.2%
NDCHealth Corp.,
10.50%, 12/01/12 (c)		50		50,000

	Principal
	Amount
Description	(000)		Value
Service Corp. International,
6.875%, 10/01/07	$	55	$	50,325
			100,325
Lodging & Entertainment—0.2%
Mandalay Resort Group,
9.375%, 02/15/10		15		16,125
Meristar Hospitality Corp.,
8.75%, 08/15/07		140		93,800
Wheeling Island Gaming, Inc.,
10.125%, 12/15/09		20	20,600
			130,525
Metals & Mining—0.9%
Alcoa, Inc.,
4.25%, 08/15/07		480		499,749
TriMas Corp.,
9.875%, 06/15/12 (c)		30		29,700
Wolverine Tube, Inc.,
10.50%, 04/01/09		20	20,400
			549,849
Multimedia—0.5%
Viacom Inc.,
5.625%, 08/15/12		250	266,708
Printing & Publishing—0.2%
Hollinger Participation Trust,
12.125%, 11/15/10 (c), (i)		58		55,123
Von Hoffmann Press, Inc.,
10.25%, 03/15/09		50		46,750
WRC Media Corp.,
12.75%, 11/15/09		25	24,500
			126,373
Retail—0.5%
ShopKo Stores, Inc.,
9.25%, 03/15/22		85		69,700
Target Corp.,
5.375%, 06/15/09		200	212,723
			282,423
Telecommunications—1.8%
EchoStar DBS Corp.:
9.125%, 01/15/09		20		21,050
10.375%, 10/01/07		40		43,300
MJD Communications, Inc., Series B,
9.50%, 05/01/08		40		27,600
SBC Communications, Inc.,
5.875%, 08/15/12		475		512,923
Verizon Global Funding Corp.,
7.375%, 09/01/12		425	488,979
			1,093,852

The accompanying notes are an integral part of these financial statements.

34

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

	Principal
	Amount
Description	(000)		Value
Lazard Bond Portfolio (concluded)
Transportation—0.1%
CP Ships, Ltd.,
10.375%, 07/15/12	$	65	$	68,250
Utilities—1.8%
Calpine Corp.,
7.875%, 04/01/08		110		46,200
KeySpan Corp.,
7.25%, 11/15/05		480		538,245
MidAmerican Energy Holdings Co.,
6.375%, 06/15/06		454		495,074
Teco Energy, Inc.,
10.50%, 12/01/07 (c)		15	14,700
			1,094,219
Total Corporate Bonds
(Identified cost $14,669,964)			15,091,239
Mortgage Pass-Through Securities—27.5%
Federal Home Loan Mortgage Corp.,
Pool#410425,
4.539%, 09/01/26 (g)		17		18,095
Federal National Mortgage Association:
Pool#303824,
4.651%, 07/01/25 (g)		43		45,769
Pool#342042,
5.102%, 06/01/25 (g)		35		36,955
5.50%, TBA		10,250		10,448,594
7.00%, TBA		5,240		5,509,368
Government National Mortgage
Association:
Pool#80208,
5.375%, 06/20/28 (g)		213		218,762
Pool#80093,
5.75%, 07/20/27 (g)		22		22,812
Pool#80120,
6.625%, 10/20/27 (g)		86	89,354
Total Mortgage Pass-Through
Securities
(Identified cost $16,222,523)			16,389,709

	Principal
	Amount
Description	(000)			Value
U.S. Government Security—22.6%
Federal Home Loan Bank,
1.23%, 01/14/03
(Identified cost $13,448,024)	$	13,454		$	13,448,024
U.S. Treasury Securities—34.7%
United States Treasury Notes:
2.00%, 11/30/04		4,175			4,209,573
4.00%, 11/15/12		4,300			4,360,806
6.50%, 02/15/10 (j)		10,125		12,102,534
Total U.S. Treasury Securities
(Identified cost $20,527,873)				20,672,913
Repurchase Agreement—6.7%
State Street Corp., 1.00%, 01/02/03
(Dated 12/31/02, collateralized by
$3,090,000 United States Treasury
Bond, 12.75%, 11/15/10, with a
value of $4,051,732)
(Identified cost $3,971,000) (j)		3,971		3,971,000
Total Investments
(Identified cost $71,463,497) (b)		121.1	%	$	72,180,992
Liabilities in Excess of Cash and
Other Assets		(21.1	)	(12,587,522		)
Net Assets		100.0	%	$	59,593,470

The accompanying notes are an integral part of these financial statements.

35

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

	Principal
	Amount
Description	(000)			Value
Lazard High Yield Portfolio
Corporate Bonds—82.5%
Apparel & Textiles—0.4%
Foamex LP,
9.875%, 06/15/07	$	930	$	288,300
Automotive—1.9%
Collins & Aikman Corp.,
10.75%, 12/31/11		950		904,875
Dana Corp.,
9.00%, 08/15/11		500		482,500
Venture Holdings,
12.00%, 06/01/09 (l)		1,930	77,200
			1,464,575
Broadcasting—0.5%
Chancellor Media Communications,
Series B,
8.125%, 12/15/07		370	385,263
Building & Construction—0.9%
Nortek, Inc., Series B,
9.875%, 06/15/11		690	690,863
Cable Television—3.6%
Charter Communications Holdings LLC,
10.00%, 05/15/11		790		351,550
CSC Holdings, Inc., Series B,
7.625%, 04/01/11		890		835,487
LodgeNet Entertainment Corp.,
10.25%, 12/15/06		295		283,200
Mediacom Broadband LLC,
11.00%, 07/15/13		750		761,250
Pegasus Communications Corp.,
Series B,
12.50%, 08/01/07		1,110	588,300
			2,819,787
Chemicals—4.4%
ARCO Chemical Co.,
9.80%, 02/01/20		1,015		801,850
Huntsman ICI Chemicals,
10.125%, 07/01/09		825		684,750
Lyondell Chemical Co.,
10.875%, 05/01/09		500		427,500
Terra Industries, Inc., Series B,
10.50%, 06/15/05		775		705,250
Texas Petrochemical Corp.,
11.125%, 07/01/06		1,350	877,500
			3,496,850

	Principal
	Amount
Description	(000)		Value
Commercial Services—1.4%
Coinmach Corp.,
9.00%, 02/01/10	$	640	$	671,200
Phoenix Color Corp.,
10.375%, 02/01/09		515	437,750
			1,108,950
Consumer Products—1.8%
Buckeye Technologies, Inc.,
8.50%, 12/15/05		1,165		1,054,325
Icon Health & Fitness, Inc.,
11.25%, 04/01/12		465	404,550
			1,458,875
Diversified—2.8%
PerkinElmer, Inc.,
8.875%, 01/15/13 (c)		250		246,250
Rexnord Corp.,
10.125%, 12/15/12 (c)		175		179,375
Tyco International Group SA:
5.80%, 08/01/06		280		264,600
6.375%, 02/15/06		1,180		1,144,600
6.375%, 10/15/11		410	383,350
			2,218,175
Electronics—0.5%
ON Semiconductor Corp.,
12.00%, 05/15/08 (c)		545	400,575
Energy—7.6%
Chesapeake Energy Corp.,
9.00%, 08/15/12		535		567,100
Compton Petroleum Corp.,
9.90%, 05/15/09		245		254,800
Denbury Resources, Inc., Series B,
9.00%, 03/01/08		770		795,988
Ferrellgas Partners LP,
8.75%, 06/15/12		865		895,275
Giant Industries, Inc.,
11.00%, 05/15/12		505		338,350
Hanover Equipment Trust,
8.75%, 09/01/11 (c)		295		284,675
Parker Drilling Co., Series D,
9.75%, 11/15/06		645		654,675
Reliant Energy Resources Corp.,
Series B,
8.125%, 07/15/05		750		691,190
Tesoro Petroleum Corp.,
9.625%, 04/01/12		425		276,250

The accompanying notes are an integral part of these financial statements.

36

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

	Principal
	Amount
Description	(000)		Value
Lazard High Yield Portfolio (continued)
Williams Cos., Inc.:
6.50%, 08/01/06	$	275	$	191,125
6.625%, 11/15/04		945		704,025
Series A,
7.50%, 01/15/31		275		171,875
Williams Holdings,
6.25%, 02/01/06		295	205,025
			6,030,353
Environmental—2.0%
Allied Waste North America, Inc.,
Series B:
8.875%, 04/01/08		230		233,450
10.00%, 08/01/09		745		739,412
Browning-Ferris Industries, Inc.,
7.40%, 09/15/35		775	635,254
			1,608,116
Equipment Rental—3.3%
H&E Equipment/Finance,
11.125%, 06/15/12 (c)		780		585,000
National Equipment Services, Inc.,
Series B,
10.00%, 11/30/04		660		231,000
United Rentals, Inc., Series B:
9.25%, 01/15/09		315		257,512
10.75%, 04/15/08		650		646,750
Williams Scotsman, Inc.,
9.875%, 06/01/07		950	878,750
			2,599,012
Food & Beverages—3.0%
Burns Philp Capital Property, Ltd.,
9.75%, 07/15/12 (c)		1,325		1,272,000
Chiquita Brands International, Inc.,
10.56%, 03/15/09		555		568,181
Swift & Co.,
10.125%, 10/01/09 (c)		550	519,750
			2,359,931
Forest & Paper Products—3.3%
Caraustar Industries, Inc.,
9.875%, 04/01/11		305		314,150
Consolidated Container Co.,
10.125%, 07/15/09		890		597,412
Kappa Beheer BV,
10.625%, 07/15/09		870		930,900
Smurfit Capital Funding PLC,
7.50%, 11/20/25		850	777,750
			2,620,212

	Principal
	Amount
Description	(000)		Value
Health Services—6.3%
Fresenius Medical Capital Trust,
7.875%, 02/01/08	$	785	$	769,300
HEALTHSOUTH Corp.,
10.75%, 10/01/08	1,155			975,975
NDCHealth Corp.,
10.50%, 12/01/12 (c)		760		760,000
Service Corp. International,
6.875%, 10/01/07	1,360			1,244,400
Sola International, Inc.,
6.875%, 03/15/08		585		526,541
Sybron Dental Specialties, Inc.,
8.125%, 06/15/12		715	722,150
			4,998,366
Lodging & Entertainment—8.2%
Hard Rock Hotel, Inc., Series B,
9.25%, 04/01/05		630		636,300
Hilton Hotels Corp.,
7.625%, 12/01/12		590		595,813
ITT Corp.,
7.375%, 11/15/15		750		690,000
John Q. Hammons Hotels, Series B,
8.875%, 05/15/12		810		814,050
Mandalay Resort Group:
9.375%, 02/15/10		200		215,000
Series B,
10.25%, 08/01/07		655		718,862
Meristar Hospitality Corp.:
9.00%, 01/15/08		295		259,600
9.125%, 01/15/11		375		326,250
Venetian Casino Resort LLC,
11.00%, 06/15/10 (c)	1,000			1,045,000
Wheeling Island Gaming, Inc.,
10.125%, 12/15/09		335		345,050
Wynn Las Vegas LLC,
12.00%, 11/01/10		825	833,250
			6,479,175
Metals & Mining—1.3%
TriMas Corp.,
9.875%, 06/15/12 (c)		295		292,050
Wolverine Tube, Inc.,
10.50%, 04/01/09		740	754,800
			1,046,850
Multimedia—0.6%
RH Donnelley Finance Corp.,
10.875%, 12/15/12 (c)		440	479,600
Office Equipment—2.4%
Xerox Capital Europe PLC,
5.875%, 05/15/04	2,020		1,929,100

The accompanying notes are an integral part of these financial statements.

37

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

	Principal
	Amount
Description	(000)		Value
Lazard High Yield Portfolio (continued)
Printing & Publishing—6.6%
Dex Media East LLC:
9.875%, 11/15/09 (c)	$	250	$	267,500
12.125%, 11/15/12 (c)		300		332,250
Hollinger Participation Trust,
12.125%, 11/15/10 (c), (i)		997		938,064
PRIMEDIA, Inc.:
7.625%, 04/01/08		840		747,600
8.875%, 05/15/11		275		248,875
Vertis, Inc.:
10.875%, 06/15/09 (c)		300		312,000
Series B,
10.875%, 06/15/09		590		613,600
Von Hoffmann Press, Inc.:
10.25%, 03/15/09		765		715,275
10.375%, 05/15/07 (g)		910		700,700
WRC Media Corp.,
12.75%, 11/15/09		365	357,700
			5,233,564
Real Estate—3.1%
Host Marriott LP, Series G,
9.25%, 10/01/07		1,050		1,060,500
LNR Property Corp.,
10.50%, 01/15/09		1,000		1,010,000
Tanger Properties LP,
9.125%, 02/15/08		400	409,812
			2,480,312
Restaurants—0.3%
Yum! Brands, Inc.,
7.70%, 07/01/12		215	223,600
Retail—5.6%
Medquest, Inc.,
11.875%, 08/15/12 (c)		885		862,875
NBC Acquisition Corp.,
0.00%, 02/15/09 (i)		810		729,000
Petro Stopping Centers,
10.50%, 02/01/07		855		795,150
Rite Aid Corp.,
11.25%, 07/01/08		1,055		975,875
ShopKo Stores, Inc.,
9.25%, 03/15/22		1,255	1,029,100
			4,392,000
Steel—0.3%
Armco, Inc.,
9.00%, 09/15/07		200	204,000

	Principal
	Amount
Description	(000)		Value
Telecommunications—6.7%
Alamosa PCS Holdings, Inc.,
0.00%, 02/15/10 (i)	$	1,665	$	299,700
AT&T Wireless Services, Inc.,
8.125%, 05/01/12		830		834,150
EchoStar DBS Corp.:
9.125%, 01/15/09		300		315,750
10.375%, 10/01/07		490		530,425
MJD Communications, Inc., Series B,
9.50%, 05/01/08		995		686,550
Nextel Communications, Inc.,
0.00%, 02/15/08 (i)		1,420		1,299,300
Rogers Wireless, Inc.,
9.625%, 05/01/11		750		708,750
Sprint Capital Corp.:
6.90%, 05/01/19		295		241,900
7.625%, 01/30/11		415	394,250
			5,310,775
Transportation—0.8%
CP Ships, Ltd.,
10.375%, 07/15/12		615	645,750
Utilities—2.9%
Alliant Energy Resources, Inc.,
9.75%, 01/15/13 (c)		500		496,139
Calpine Corp.,
7.875%, 04/01/08		1,645		690,900
Teco Energy, Inc.,
10.50%, 12/01/07 (c)		390		382,200
TXU Corp., Series J,
6.375%, 06/15/06		750	686,250
			2,255,489
Total Corporate Bonds
(Identified cost $68,976,002)			65,228,418
Convertible Bond—0.3%
Energy—0.3%
Hanover Compressor Co.,
4.75%, 03/14/08
(Identified cost $296,378) (d)		350	280,546
		Shares
Preferred Stock—1.7%
Broadcasting—1.7%
Paxson Communications Corp.
(Identified cost $1,891,169)		241	1,313,450

The accompanying notes are an integral part of these financial statements.

38

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Description	Shares	Value
Lazard High Yield Portfolio (concluded)
Warrants—0.0%
Cable Television—0.0%
Ono Finance PLC:
05/31/09 (a), (c), (f)	500	$	5
03/16/11 (a), (c), (f)	470	5
		10
Retail—0.0%
Travelcenters of America, Inc.,
05/01/09 (a), (c), (f)	810	8,100
Telecommunications—0.0%
Horizon PCS, Inc.,
10/01/10 (a), (c), (f)	1,730	86
Total Warrants
(Identified cost $202,445)		8,196

	Principal
	Amount
Description	(000)			Value
Repurchase Agreement—12.6%
State Street Corp., 1.00%, 01/02/03
(Dated 12/31/02, collateralized by
$7,745,000 United States Treasury
Bond, 12.75%, 11/15/10, with a
value of $10,155,554)
(Identified cost $9,955,000)	$	9,955		$	9,955,000
Total Investments
(Identified cost $81,320,994) (b)		97.1	%	$	76,785,610
Cash and Other Assets in Excess
of Liabilities		2.9		2,306,509
Net Assets		100.0	%	$	79,092,119

The accompanying notes are an integral part of these financial statements.

39

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

		Principal
		Amount
Description		(000)(k)	Value
Lazard Strategic Yield Portfolio
Currency Denominated Bonds—75.6%
Canada—0.5%
CP Ships, Ltd.,
10.375%, 07/15/12	USD	375	$	393,750
Cayman Islands—1.5%
Prime Capital Calquake &
Eurowind, Ltd.,
9.26%, 01/07/04 (c), (g), (j)	USD	840		838,026
Redwood Capital I, Ltd.,
7.3063%, 01/01/03 (c), (g)	USD	435	435,000
Total Cayman Islands			1,273,026
Costa Rica—3.8%
Costa Rica Treasury Bills (BEM):
18.74%, 01/08/03		453,828		1,193,002
19.89%, 04/09/03		314,973		787,271
21.45%, 07/09/03		510,500	1,215,190
Total Costa Rica			3,195,463
France—0.9%
Government of France,
3.50%, 07/12/04	EUR	690	732,172
Germany—0.3%
Prosieben Media AG,
11.25%, 07/31/09 (c)	EUR	285	281,134
Ireland—0.8%
Smurfit Capital Funding PLC,
7.50%, 11/20/25	USD	705	645,075
Luxembourg—0.1%
Rhiag SA,
10.75%, 06/05/07 (c)	EUR	95	97,201
Mexico—0.2%
United Mexican States,
9.875%, 01/15/07 (j)	USD	160	190,614
Namibia—0.3%
Government of Namibia,
12.00%, 01/15/10		1,850	214,111
Netherlands—0.1%
Kappa Beheer BV,
10.625%, 07/15/09	EUR	80	88,989
Norway—0.2%
Findexa II AS,
10.25%, 12/01/11	EUR	170	190,886

		Principal
		Amount
Description		(000)(k)	Value
Poland—1.7%
Government of Poland:
0.00%, 08/21/03 (e)		820	$	206,240
10.00%, 06/12/04		4,310	1,186,713
Total Poland			1,392,953
Slovenia—1.8%
Slovenia Treasury Bill,
8.29%, 03/27/03		334,730	1,496,510
South Africa—0.5%
Lesotho Water,
13.00%, 09/15/10		3,420	439,854
Thailand—0.0%
Finance One PLC,
0.00%, 01/03/05 (a), (l), (m)		20,000		0
Morgan Guarantee Trust,
0.00%, 07/31/03 (a), (l), (m)		10,569	0
Total Thailand			0
United Kingdom—2.1%
Focus Retail Group PLC,
13.00%, 11/01/10 (c)		35		57,473
Gracechurch Card Funding PLC,
Series 2, Class C,
2.57%, 10/15/09 (g)	USD	1,600		1,598,000
Luxfer Holdings PLC,
10.125%, 05/01/09		35	43,387
Total United Kingdom			1,698,860
United States—60.8%
Allied Waste North America, Inc.,
Series B,
8.50%, 12/01/08 (j)		175		175,875
American Electric Power, Inc., Series B,
5.50%, 05/15/03		1,000		982,331
Anthracite CDO, Ltd.,
Series 2002-CIBA, Class CFL,
2.6694%, 05/24/37 (c), (g), (j)		1,400		1,327,620
ARCO Chemical Co.,
9.80%, 02/01/20 (j)		1,020		805,800
Asset Securitization Corp.,
Series 1996-D2, Class ACS2,
1.5675%, 02/14/29 (g), (h), (j)		7,035		327,400
BA Master Credit Card Trust,
Series 1999-C, Class C,
2.45%, 08/15/08 (c), (g), (j)		2,650		2,634,266
Bank One Issuance Trust,
Series 2002-C2, Class C2,
2.41%, 05/15/08 (g), (j)		1,600		1,599,174

The accompanying notes are an integral part of these financial statements.

40

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

		Principal
		Amount
Description		(000)(k)		Value
Lazard Strategic Yield Portfolio (continued)
Buckeye Technologies, Inc.,
9.25%, 09/15/08 (j)		430	$	369,800
Burns Philp Capital Property, Ltd.,
9.75%, 07/15/12 (c), (j)		75		72,000
Caraustar Industries, Inc.,
9.875%, 04/01/11 (j)		230		236,900
Chancellor Media Communications,
Series B,
8.125%, 12/15/07 (j)		145		150,981
Chase Credit Card Master Trust,
Series 2002-6, Class C,
2.42%, 01/15/08 (g), (j)		1,600		1,601,339
Citicorp Mortgage Securities, Inc.:
Series 2002-10, Class B3,
5.83%, 10/25/32		473		450,003
Series 2002-10, Class B4,
5.83%, 10/25/32 (c)		234		193,774
Crest, Ltd.,
Series 2002-1A, Class B2,
2.83%, 05/27/36 (c), (g), (j)		1,400		1,400,000
CSC Holdings, Inc., Series B,
7.625%, 04/01/11		200		187,750
Fannie Mae STRIPS:
Series 322, Class 2,
6.00%, 04/01/32 (h), (j)		3,165		572,625
Series 313, Class 2,
6.50%, 07/01/31 (h), (j)		3,224		429,046
Federal Home Loan Mortgage Corp.:
Series 30, Class J,
7.50%, 02/25/23 (h), (j)		467		24,417
6.00%, TBA		4,800		4,962,000
First Horizon Asset Securities, Inc.,
Series 2000-2, Class B3,
7.75%, 06/25/30 (j)		653		651,330
Fresenius Medical Capital Trust,
7.875%, 02/01/08		150		147,000
GE Capital Mortgage Services, Inc.:
Series 1999-16, Class B3,
6.50%, 07/25/14 (c), (j)		506		521,785
Series 1996-5, Class B3,
6.75%, 03/25/11 (c), (j)		512		512,241
Giant Industries, Inc.,
11.00%, 05/15/12 (j)		390		261,300
HEALTHSOUTH Corp.,
10.75%, 10/01/08 (j)		510		430,950
Host Marriott LP, Series G,
9.25%, 10/01/07		160		161,600
Huntsman ICI Chemicals,
10.125%, 07/01/09	EUR	145		118,687

	Principal
	Amount
Description	(000)(k)	Value
John Q. Hammons Hotels, Series B,
8.875%, 05/15/12 (j)	425	$	427,125
Kansas City Southern Railway Co.,
7.50%, 06/15/09	170		179,350
Lear Corp., Series B,
7.96%, 05/15/05 (j)	275		282,219
LNR Property Corp.,
10.50%, 01/15/09	100		101,000
LodgeNet Entertainment Corp.,
10.25%, 12/15/06 (j)	55		52,800
Mandalay Resort Group:
9.375%, 02/15/10 (j)	265		284,875
Series B,
10.25%, 08/01/07 (j)	305		334,738
MBNA Master Credit Card Trust,
Series 1999-C, Class C,
2.22%, 10/16/06 (c), (g), (j)	2,700		2,698,558
Mediacom Broadband LLC,
11.00%, 07/15/13	75		76,125
Meristar Hospitality Corp.,
8.75%, 08/15/07 (j)	220		147,400
Merrill Lynch Mortgage Investors, Inc.,
Series 1996-C1, Class IO,
0.6944%, 04/25/28 (c), (g), (h), (j)	8,641		205,937
MGM Mirage, Inc.,
9.75%, 06/01/07 (j)	140		154,700
National City Credit Card Master Trust,
Series 2000-1, Class C,
2.30%, 08/15/07 (c), (g), (j)	2,900		2,887,942
National Equipment Services, Inc.,
Series B,
10.00%, 11/30/04 (j)	255		89,250
NBC Acquisition Corp.,
0.00%, 02/15/09 (i), (j)	70		63,000
NiSource Finance Corp.,
7.50%, 11/15/03	1,250		1,259,862
Norwest Asset Securities Corp.:
Series 1998-9, Class B4,
6.50%, 04/25/28 (c), (j)	778		796,633
Series 1997-5, Class B3,
7.00%, 04/25/12 (c)	175		172,000
Parker Drilling Co., Series D,
9.75%, 11/15/06	155		157,325
Pegasus Satellite,
12.375%, 08/01/06 (j)	385		204,050
Pioneer Ltd.:
3.16%, 06/15/06 (c), (g), (j)	1,000		997,500
7.41%, 06/15/06 (c), (g), (j)	1,250		1,275,000
Plains All American Pipeline LP,
7.75%, 10/15/12 (c)	265		275,600

The accompanying notes are an integral part of these financial statements.

41

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

	Principal
	Amount
Description	(000)(k)	Value
Lazard Strategic Yield Portfolio (continued)
PNC Mortgage Securities Corp.:
Series 2000-1, Class 1B3,
7.46%, 02/25/30 (j)	636	$	642,350
Series 2000-2, Class B3,
7.63%, 04/25/30	845		852,178
Service Corp. International,
6.875%, 10/01/07 (j)	195		178,425
Structured Asset Securities Corp.:
Series 1996-CFL, Class X1,
1.8628%, 02/25/28 (g), (h), (j)	1,781		99,969
Series 1996-CFL, Class X2,
0.8261%, 02/25/28 (g), (h), (j)	549		5,054
Tesoro Petroleum Corp.,
9.625%, 04/01/12	330		214,500
Texas Petrochemical Corp.,
11.125%, 07/01/06 (j)	985		640,250
Toll Corp.,
8.25%, 12/01/11 (j)	180		180,900
United Rentals, Inc., Series B:
9.25%, 01/15/09 (j)	285		232,988
10.75%, 04/15/08	260		258,700
United States Treasury Bond,
6.125%, 11/15/27	1,500		1,752,597
United States Treasury Note,
4.875%, 02/15/12	5,000		5,429,490
Venture Holdings,
12.00%, 06/01/09 (j), (l)	910		36,400
Von Hoffmann Press, Inc.,
10.375%, 05/15/07 (g)	195		150,150
Washington Mutual Mortgage
Securities Corp.,
Series 2001-2, Class B3,
7.21%, 01/25/31 (g), (j)	1,299		1,323,679
Wells Fargo Mortgage Backed
Securities Trust:
Series 2002-13, Class B3,
6.00%, 06/25/17 (j)	280		286,558
Series 2002-10, Class B3,
6.00%, 06/25/32 (j)	418		414,476
Wheeling Island Gaming, Inc.,
10.125%, 12/15/09 (j)	200		206,000
Wolverine Tube, Inc.,
10.50%, 04/01/09	155		158,100
Yamaha Motor Master Trust,
Series 2000-1, Class B,
2.12%, 05/15/08 (g), (j)	3,175	3,161,189
Total United States		50,654,936
Total Currency Denominated Bonds
(Identified cost $66,065,568)		62,985,534

Description	Shares			Value
Preferred Stock—0.8%
United States—0.8%
Paxson Communications Corp.
(Identified cost $1,092,670) (j)		120		$	654,000
Warrants—0.0%
Mexico—0.0%
United Mexican States Rights:
Series B, 06/30/04 (a), (f)	692,000				0
Series C, 06/30/05 (a), (f)	692,000				0
Series D, 06/30/06 (a), (f)	692,000			0
Total Mexico				0
Total Warrants
(Identified cost $0)				0
	Principal
	Amount
	(000)
U.S. Government Securities—26.7%
Federal Home Loan Bank:
1.23%, 01/14/03	$	4,189			4,187,139
2.39%, 04/21/03		2,620			2,600,867
Federal Home Loan Mortgage Corp.:
1.22%, 02/18/03		3,000			2,995,120
1.26%, 01/02/03		900			899,969
1.97%, 06/30/03		3,640			3,604,146
Federal National Mortgage Association:
1.23%, 01/29/03		3,000			2,997,130
1.27%, 03/05/03		400			399,111
1.90%, 06/27/03		175			173,365
2.51%, 04/04/03		4,470		4,441,016
Total U.S. Government Securities
(Identified cost $22,297,863)				22,297,863
Repurchase Agreement—2.6%
State Street Corp., 1.00%, 01/02/03
(Dated 12/31/02, collateralized by
$1,685,000 United States Treasury
Bond, 12.75%, 11/15/10, with a
value of $2,209,439)
(Identified cost $2,160,000) (j)		2,160		2,160,000
Total Investments
(Identified cost $91,616,101) (b)		105.7	%	$	88,097,397
Liabilities in Excess of Cash and
Other Assets		(5.7	)	(4,750,904		)
Net Assets		100.0	%	$	83,346,493

The accompanying notes are an integral part of these financial statements.

42

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

Lazard Strategic Yield Portfolio (continued)

Forward Foreign Currency Contracts open at December 31, 2002:

Forward			U.S. $ Cost		U.S. $
Foreign Currency	Expiration	Foreign	on Origination		Current		Unrealized		Unrealized
Purchase Contracts	Date	Currency	Date		Value		Appreciation		Depreciation
BRL	03/10/03	561,910	$	166,000	$	157,385	$	—	$	8,615
BRL	03/10/03	2,603,378		672,273		729,176		56,903		—
BRL	03/08/04	3,606,848		1,162,000		844,814		—		317,186
CAD	01/30/03	836,976		527,595		529,178		1,583		—
CLP	01/29/03	788,932,500		1,110,000		1,093,985		—		16,015
COP	02/18/03	1,629,347,320		578,000		558,805		—		19,195
CZK	04/15/03	77,199,325		2,270,502		2,557,953		287,451		—
DKK	01/30/03	41,560,622		5,418,383		5,863,496		445,113		—
EUR	01/30/03	118,698		115,374		124,402		9,028		—
EUR	01/30/03	11,368,130		11,027,086		11,914,451		887,365		—
EUR	01/30/03	62,627		61,249		65,637		4,388		—
EUR	01/30/03	27,017		26,369		28,315		1,946		—
EUR	01/30/03	484,861		470,000		508,162		38,162		—
EUR	01/30/03	341,167		331,000		357,562		26,562		—
EUR	01/30/03	249,435		245,000		261,422		16,422		—
EUR	01/30/03	122,612		120,000		128,504		8,504		—
EUR	01/30/03	2,782,296		2,747,100		2,916,006		168,906		—
EUR	01/30/03	208,644		210,000		218,671		8,671		—
EUR	01/30/03	111,893		114,500		117,270		2,770		—
EUR	01/10/03	1,179,064		1,188,379		1,236,782		48,403		—
EUR	06/30/03	1,860,000		1,860,837		1,938,205		77,368		—
EUR	06/30/03	1,125,000		1,149,582		1,172,301		22,719		—
GBP	01/30/03	39,419		61,107		63,325		2,218		—
GBP	01/30/03	801,961		1,241,756		1,288,317		46,561		—
GBP	01/30/03	2,498,467		3,860,132		4,013,684		153,552		—
GBP	01/30/03	394,938		609,745		634,452		24,707		—
GBP	01/30/03	107,240		165,000		172,277		7,277		—
GBP	01/30/03	38,773		60,000		62,288		2,288		—
GBP	01/30/03	154,741		243,500		248,585		5,085		—
GBP	01/30/03	33,177		53,000		53,298		298		—
HUF	01/09/03	90,649,220		379,317		402,013		22,696		—
HUF	06/30/03	940,385,000		3,807,304		4,044,726		237,422		—
IDR	01/29/03	11,866,400,000		1,304,000		1,312,387		8,387		—
IDR	02/14/03	2,562,565,000		283,000		281,828		—		1,172
ILS	10/21/03	2,736,525		535,000		543,954		8,954		—
INR	02/13/03	55,612,650		1,145,000		1,151,598		6,598		—
INR	02/24/03	53,063,700		1,095,000		1,097,523		2,523		—
ISK	01/23/03	26,293,096		316,000		324,319		8,319		—
JPY	01/30/03	686,826,380		5,643,602		5,794,126		150,524		—
JPY	01/30/03	14,024,091		113,000		118,308		5,308		—
JPY	01/30/03	122,357,000		1,000,000		1,032,214		32,214		—
JPY	01/30/03	4,900,680		40,000		41,343		1,343		—
JPY	01/30/03	82,679,250		690,000		697,489		7,489		—
JPY	01/30/03	37,944,991		314,200		320,107		5,907		—
JPY	01/30/03	87,166,800		720,000		735,347		15,347		—
KES	01/16/03	31,270,668		390,000		401,751		11,751		—
KRW	02/18/03	1,189,880,000		985,000		997,911		12,911		—
MXN	04/21/03	22,664,000		2,360,833		2,117,062		—		243,771

The accompanying notes are an integral part of these financial statements.

43

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

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
MXN	04/21/03	2,534,064	$	262,000	$	236,709	$	—	$	25,291
MXN	04/21/03	795,116		75,908		74,272		—		1,636
MXN	07/08/03	1,887,375		174,531		173,404		—		1,127
PHP	04/10/03	13,949,000		260,000		252,355		—		7,645
PHP	04/10/03	105,359,400		1,962,000		1,906,081		—		55,919
SKK	01/10/03	94,740,000		2,288,190		2,389,600		101,410		—
THB	02/12/03	73,280,000		1,685,567		1,696,489		10,922		—
TRL	01/15/03	405,464,963,098		2,516,509		2,394,270		—		122,239
ZAR	01/21/03	14,211,633		1,156,000		1,641,066		485,066		—
ZAR	01/21/03	2,106,629	237,554		243,260		5,706		—
Total Forward Foreign Currency Purchase Contracts			$	69,604,984	$	72,280,220	$	3,495,047	$	819,811

The accompanying notes are an integral part of these financial statements.

44

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

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
BRL	03/10/03	3,165,288	$	1,162,000	$	886,561	$	275,439	$	—
BRL	03/08/04	3,606,848		787,522		844,814		—		57,292
CAD	01/30/03	835,936		528,204		528,520		—		316
CHF	01/30/03	271,104		180,736		196,197		—		15,461
CZK	01/10/03	36,580,000		1,188,379		1,215,675		—		27,296
DKK	01/30/03	41,892,575		5,467,006		5,910,329		—		443,323
EUR	01/30/03	734,000		716,384		769,274		—		52,890
EUR	01/30/03	1,385,462		1,348,886		1,452,044		—		103,158
EUR	01/30/03	8,324,834		8,093,403		8,724,902		—		631,499
EUR	01/30/03	308,420		300,000		323,242		—		23,242
EUR	01/30/03	5,918,201		5,740,655		6,202,614		—		461,959
EUR	01/30/03	325,203		320,000		340,832		—		20,832
EUR	01/30/03	198,626		200,000		208,171		—		8,171
EUR	01/30/03	1,273,860		1,300,000		1,335,079		—		35,079
EUR	04/15/03	2,555,000		2,270,502		2,669,805		—		399,303
EUR	01/09/03	379,000		379,317		397,570		—		18,253
EUR	06/30/03	3,636,446		3,807,304		3,789,343		17,961		—
EUR	01/10/03	2,262,388		2,288,190		2,373,138		—		84,948
GBP	01/30/03	4,340,283		6,701,397		6,972,484		—		271,087
HUF	06/30/03	467,790,000		1,860,837		2,012,029		—		151,192
HUF	06/30/03	272,756,250		1,149,582		1,173,162		—		23,580
JPY	01/30/03	8,231,260		67,509		69,440		—		1,931
JPY	01/30/03	187,312,162		1,534,088		1,580,181		—		46,093
JPY	01/30/03	66,465,885		544,356		560,712		—		16,356
JPY	01/30/03	863,044,779		7,085,754		7,280,720		—		194,966
JPY	01/30/03	114,094,945		953,700		962,515		—		8,815
JPY	01/30/03	71,490,600		600,000		603,101		—		3,101
MXN	04/21/03	13,574,470		1,300,000		1,268,002		31,998		—
ZAR	01/21/03	14,211,633	1,331,301		1,641,066		—		309,765
Total Forward Foreign Currency Sale Contracts			$	59,207,012	$	62,291,522		325,398	3,409,908
Gross Unrealized appreciation/depreciation from Forward Foreign Currency Contracts							$	3,820,445	$	4,229,719

The accompanying notes are an integral part of these financial statements.

45

The Lazard Funds, Inc.

Portfolios of Investments (continued)

December 31, 2002

	Principal
	Amount
Description	(000)		Value
Lazard Mortgage Portfolio
Collateralized Mortgage
Obligations—0.5%
Federal National Mortgage Association
Grantor Trust, Series 2002-T1, Class A2,
7.00%, 11/25/31
(Identified cost $469,344) (j)	$	445	$	486,584
Mortgage Pass-Through
Securities—95.6%
Federal Home Loan Mortgage Corp.:
Pool#E77662,
6.00%, 07/01/14 (j)		65		68,458
Pool#E00763,
6.00%, 11/01/14 (j)		69		73,361
Pool#E84574,
6.00%, 07/01/16 (j)		148		155,563
Pool#E84978,
6.00%, 08/01/16 (j)		101		106,432
Pool#C00610,
6.50%, 05/01/28 (j)		95		100,014
Pool#C00835,
6.50%, 07/01/29 (j)		87		91,181
Pool#C46147,
6.50%, 07/01/29 (j)		5,823		6,072,753
Pool#C32962,
6.50%, 11/01/29 (j)		13		14,492
Pool#G00815,
7.00%, 12/01/27 (j)		50		52,869
Pool#G10890,
7.50%, 12/01/13 (j)		50		53,677
Pool#E80531,
7.50%, 05/01/15 (j)		7		8,179
Pool#C00910,
7.50%, 01/01/30 (j)		32		34,203
5.50%, TBA		5,000		5,095,310
6.00%, TBA		14,400		14,886,000
6.50%, TBA		5,222		5,440,671
7.50%, TBA		1,189		1,263,684
Federal National Mortgage Association:
Pool#545000,
6.50%, 06/01/15 (j)		109		116,485
Pool#253971,
6.50%, 06/01/31 (j)		8,470		8,853,360
Pool#672415,
6.50%, 09/01/32 (j)		4,863		5,079,277
Pool#550415,
7.00%, 11/01/15 (j)		104		111,709
Pool#614584,
7.00%, 08/01/16		497		531,554

	Principal
	Amount
Description	(000)		Value
Pool#614581,
7.00%, 09/01/16	$	593	$	634,703
Pool#619830,
7.00%, 09/01/16		498		532,656
Pool#355033,
7.00%, 11/01/26		4		4,271
Pool#390065,
7.00%, 06/01/27 (j)		12		13,522
Pool#364871,
7.50%, 12/01/11		704		753,409
Pool#364874,
7.50%, 01/01/12		430		460,219
Pool#619831,
7.50%, 09/01/16 (j)		1,046		1,119,566
Pool#630493,
7.50%, 11/01/16		618		662,041
5.50%, TBA		205		212,239
7.00%, TBA		10,610		11,157,073
Government National Mortgage
Association:
Pool#534009,
6.50%, 06/15/32 (j)		1,597		1,680,210
Pool#590221,
6.50%, 07/15/32 (j)		2,190		2,303,219
Pool#471336,
6.50%, 08/15/32		996		1,047,671
Pool#548215,
6.50%, 08/15/32		935		984,323
Pool#593192,
6.50%, 08/15/32		4,784		5,032,038
Pool#567626,
7.00%, 04/15/32 (j)		755		802,262
Pool#567629,
7.00%, 04/15/32 (j)		2,525		2,681,526
Pool#574235,
7.00%, 05/15/32 (j)		860		914,105
Pool#585453,
7.00%, 07/15/32		2,371		2,518,038
Pool#3287,
7.00%, 09/20/32 (j)		1,495		1,575,919
Pool#462758,
7.50%, 05/15/28 (j)		5		6,103
Pool#472630,
7.50%, 05/15/28 (j)		5		6,259
Pool#531205,
8.00%, 06/15/30 (j)		2	3,090
Total Mortgage Pass-Through Securities
(Identified cost $82,484,428)			83,313,694

The accompanying notes are an integral part of these financial statements.

46

The Lazard Funds, Inc.

Portfolios of Investments (concluded)

December 31, 2002

	Principal
	Amount
Description	(000)		Value
Lazard Mortgage Portfolio (concluded)
U.S. Government Security—36.7%
Federal Home Loan Bank,
1.23%, 01/14/03
(Identified cost $31,961,797)	$	31,976	$	31,961,797

	Principal
	Amount
Description	(000)			Value
Repurchase Agreement—10.2%
State Street Corp., 1.00%, 01/02/03
(Dated 12/31/02, collateralized by
$6,435,000 United States Treasury
Bond, 7.875%, 02/15/21, with a
value of $9,065,049)
(Identified cost $8,886,000) (j)	$	8,886		$	8,886,000
Total Investments
(Identified cost $123,801,569) (b)		143.0	%	$	124,648,075
Liabilities in Excess of Cash and
Other Assets		(43.0	)	(37,500,004		)
Net Assets		100.0	%	$	87,148,071

The accompanying notes are an integral part of these financial statements.

47

The Lazard Funds, Inc.

Notes to Portfolios of Investments

December 31, 2002

(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	$	133,173,203	$	3,647,892	$	15,571,447	$	(11,923,555	)
Mid Cap		37,476,570		1,541,250		2,652,140		(1,110,890	)
Small Cap		462,519,360		25,190,751		54,014,255		(28,823,504	)
International Equity		2,033,318,366		110,539,903		258,127,489		(147,587,586	)
International Equity Select		25,849,435		549,784		2,939,643		(2,389,859	)
International Small Cap		587,656,964		46,543,537		74,680,378		(28,136,841	)
Emerging Markets		392,821,580		48,059,030		54,743,167		(6,684,137	)
Bond		71,580,816		865,296		265,120		600,176
High Yield		81,445,253		2,354,660		7,014,303		(4,659,643	)
Strategic Yield		91,424,772		1,046,221		4,373,596		(3,327,375	)
Mortgage		123,801,569		851,754		5,248		846,506

(c)	Pursuant to Rule 144A under the Securities Act of 1933, these securities may only be traded among “qualified institutional buyers.”
(d)	Maturity date shown is the final conversion date.
(e)	Zero coupon security.
(f)	Date shown is the expiration date.
(g)	Variable rate security. Interest rate shown is the rate in effect at December 31, 2002.
(h)	Interest-only security. The principal amount shown represents the face value of the underlying security.
(i)	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, 2002, which may step up at a future date.
(j)	Segregated security for when-issued purchases, forward foreign currency contracts and/or forward roll transactions.
(k)	Principal amount denominated in respective country’s currency unless otherwise noted.
(l)	Issue in default.
(m)	Bankrupt security valued at zero.
(n)	Rate shown reflects 7 day yield as of December 31, 2002.

The accompanying notes are an integral part of these financial statements.

48

The Lazard Funds, Inc.

Notes to Portfolios of Investments (continued)

December 31, 2002

Security Abbreviations:
ADR	—	American Depositary Receipt
BEM	—	Bonos de Estabilizacion Monetaria
GDR	—	Global Depositary Receipt
NVDR	—	Non-Voting Depositary Receipt
REIT	—	Real Estate Investment Trust
TBA	—	To Be Announced

Currency Abbreviations:
BRL	—	Brazilian Real	INR	— Indian Rupee
CAD	—	Canadian Dollar	ISK	— Iceland Krona
CHF	—	Swiss Franc	JPY	— Japanese Yen
CLP	—	Chilean Peso	KES	— Kenyan Shilling
COP	—	Colombian Peso	KRW	— South Korean Won
CZK	—	Czech Koruna	MXN	— Mexican Peso
DKK	—	Danish Krone	PHP	— Philippine Peso
EUR	—	Euro	SKK	— Slovakian Koruna
GBP	—	British Pound Sterling	THB	— Thailand Baht
HUF	—	Hungarian Forint	TRL	— Turkish Lira
IDR	—	Indonesian Rupiah	USD	— United States Dollar
ILS	—	Israeli Shekel	ZAR	— South African Rand

The accompanying notes are an integral part of these financial statements.

49

The Lazard Funds, Inc.

Notes to Portfolios of Investments (continued)

December 31, 2002

Portfolio holdings by industry, for those Portfolios previously presented by country:

	Lazard		Lazard		Lazard		Lazard
	International		International		International		Emerging
	Equity		Equity Select		Small Cap		Markets
	Portfolio		Portfolio		Portfolio		Portfolio
INDUSTRY
Aerospace & Defense	—	%	—	%	—	%	1.0	%
Apparel & Textiles	—		—		2.2		2.0
Automotive	4.8		—		2.1		—
Banking	16.7		23.5		8.3		12.5
Brewery	2.5		3.9		—		2.1
Broadcasting	—		—		—		1.0
Building & Construction	1.1		—		3.4		1.0
Business Services & Supplies	—		—		15.0		—
Chemicals	—		—		—		1.6
Computer Software	—		—		1.7		—
Computers & Business Equipment	—		—		0.6		3.2
Conglomerates	—		—		—		0.6
Cosmetics & Toiletries	1.5		2.8		0.3		—
Diversified	4.5		1.8		7.6		—
Drugs & Health Care	6.9		14.8		2.0		5.3
Electronics	4.3		3.0		2.3		5.8
Financial Services	4.8		4.2		9.9		6.3
Food & Beverages	3.6		16.9		4.0		4.6
Forest & Paper Products	—		—		—		2.2
Household Products & Home Furnishings	—		—		5.2		2.5
Industrial & Machinery	1.0		—		2.8		—
Insurance	0.8		2.7		1.8		4.0
Leisure & Entertainment	—		—		7.2		—
Manufacturing	—		—		2.0		—
Medical Products & Services	2.7		—		—		—
Metals & Mining	2.3		—		—		8.0
Oil & Gas	12.4		14.6		1.4		7.4
Printing & Publishing	—		—		4.6		—
Retail	7.2		3.0		7.5		0.7
Steel	—		—		—		5.7
Telecommunications	13.7		3.7		—		15.3
Tobacco	3.6		—		5.3		1.9
Transportation	1.3		—		—		—
Utilities	3.1		2.6		—		0.9
Subtotal	98.8		97.5		97.2		95.6
Repurchase Agreements	2.3		2.5		2.4		4.1
Collateral for Securities on Loan	—		—		5.6		9.3
Total Investments	101.1	%	100.0	%	105.2	%	109.0	%

The accompanying notes are an integral part of these financial statements.

50

The Lazard Funds, Inc.

Notes to Portfolios of Investments (concluded)

December 31, 2002

Portfolio holdings by asset type, previously presented by country, for Lazard Strategic Yield Portfolio:

ASSET TYPE
Asset-Backed Securities	22.7	%
Collateralized Mortgage Obligations	10.2
Corporate Bonds	18.9
Foreign Government Obligations	9.2
Mortgage Pass-Through Securities	6.0
Preferred Stock	0.8
U.S. Government Securities	26.7
U.S. Treasury Securities	8.6
Subtotal	103.1
Repurchase Agreement	2.6
Total Investments	105.7	%

The accompanying notes are an integral part of these financial statements.

51

The Lazard Funds, Inc.

Statements of Assets and Liabilities

December 31, 2002

										Lazard
	Lazard			Lazard			Lazard			International
	Equity			Mid Cap			Small Cap			Equity
	Portfolio			Portfolio			Portfolio			Portfolio
ASSETS
Investments in securities, at value	$	119,864,648		$	35,280,680		$	419,904,856		$	1,842,505,780
Repurchase Agreements, at value		1,385,000			1,085,000			13,791,000			43,225,000
Cash		224			744			412			462
Foreign currency		—			—			—			102,360
Receivables for:
Investments sold		153,609			—			38,927			4,088,396
Dividends and interest		152,213			32,717			536,532			4,125,139
Capital stock sold		2,283,366			1,327,034			1,409,330			1,038,955
Gross appreciation on foreign currency contracts	—			—			—			—
Total assets	123,839,060			37,726,175			435,681,057			1,895,086,092
LIABILITIES
Payables for:
Investments purchased		303,656			103,856			2,486,041			7,223,226
Capital stock repurchased		221,045			14,519			899,881			21,466,687
Dividends payable		—			—			—			—
Gross depreciation on foreign currency contracts		—			—			—			—
Payable upon return of securities on loan		—			678,789			—			—
Management fees payable		78,639			12,891			297,457			1,203,555
Accrued directors’ fees payable		538			154			2,108			8,275
Accrued distribution fees payable		4,555			1,727			10,000			19,094
Other accrued expenses and payables	48,118			32,548			80,244			335,723
Total liabilities	656,551			844,484			3,775,731			30,256,560
Net assets	$	123,182,509		$	36,881,691		$	431,905,326		$	1,864,829,532
NET ASSETS
Paid in capital	$	165,046,284		$	40,273,193		$	486,678,470		$	2,739,097,055
Undistributed (distributions in excess of)
investment income—net		17,606			102,856			404,472			21,484,623
Unrealized appreciation (depreciation) on:
Investments—net		(9,497,791	)		(1,025,017	)		(21,642,389	)		(105,898,845	)
Foreign currency—net		—			—			—			278,152
Accumulated undistributed realized gain (loss)—net	(32,383,590		)	(2,469,341		)	(33,535,227		)	(790,131,453		)
Net assets	$	123,182,509		$	36,881,691		$	431,905,326		$	1,864,829,532
Institutional Shares
Net assets	$	101,890,610		$	28,754,070		$	388,795,217		$	1,776,798,745
Shares of capital stock outstanding*		8,788,212			3,221,004			27,721,008			199,225,457
Net asset value, offering and redemption price per share	$	11.59		$	8.93		$	14.03		$	8.92
Open Shares
Net assets	$	21,291,899		$	8,127,621		$	43,110,109		$	88,030,787
Shares of capital stock outstanding*		1,837,937			919,414			3,071,851			9,909,067
Net asset value, offering and redemption price per share	$	11.58		$	8.84		$	14.03		$	8.88
Cost of investments in securities and repurchase agreements	$	130,747,439		$	37,390,697		$	455,338,245		$	1,991,629,625
Cost of foreign currency	$	—		$	—		$	—		$	91,494

*$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.

52

	Lazard		Lazard			Lazard									Lazard
	International		International			Emerging			Lazard			Lazard			Strategic			Lazard
	Equity Select		Small Cap			Markets			Bond			High Yield			Yield			Mortgage
	Portfolio		Portfolio			Portfolio			Portfolio			Portfolio			Portfolio			Portfolio
$	22,884,576		$	546,709,123		$	371,462,443		$	68,209,992		$	66,830,610		$	85,937,397		$	115,762,075
	575,000			12,811,000			14,675,000			3,971,000			9,955,000			2,160,000			8,886,000
	852			988			939			494			50			947			577
	—			112,687			847,105			—			—			—			—
	—			1,375,381			—			8,345,461			—			—			12,133,870
	37,725			738,548			910,996			623,259			1,600,812			737,216			326,302
	—			540,854			369,473			2,668,214			790,319			1,480			15,495
	—		—			—			—			—			3,820,445			—
	23,498,153		562,288,581			388,265,956			83,818,420			79,176,791			92,657,485			137,124,319
	—			128,770			—			24,157,909			—			4,912,400			49,904,374
	—			11			739,853			644			—			22,832			—
	—			—			—			12,022			29,783			42,707			15,585
	—			—			—			—			—			4,229,719			—
	—			29,630,235			32,785,785			—			—			—			—
	2,367			333,489			300,018			17,752			20,407			58,327			27,677
	104			2,223			1,470			207			281			534			353
	523			656			1,978			1,983			203			1,000			—
	30,000		111,386			120,418			34,433			33,998			43,473			28,259
	32,994		30,206,770			33,949,522			24,224,950			84,672			9,310,992			49,976,248
$	23,465,159		$	532,081,811		$	354,316,434		$	59,593,470		$	79,092,119		$	83,346,493		$	87,148,071
$	26,854,091		$	584,400,069		$	463,578,945		$	64,072,281		$	137,391,674		$	166,770,571		$	86,178,368
	1,523			(26,632	)		202,532			(129,171	)		(137,030	)		366,652			(15,585	)
	(2,389,859	)		(27,649,633	)		(3,063,229	)		717,495			(4,535,384	)		(3,518,704	)		846,506
	—			55,635			1,966			—			—			(394,388	)		—
	(1,000,596	)	(24,697,628		)	(106,403,780		)	(5,067,135		)	(53,627,141		)	(79,877,638		)	138,782
$	23,465,159		$	532,081,811		$	354,316,434		$	59,593,470		$	79,092,119		$	83,346,493		$	87,148,071
$	20,957,309		$	529,062,338		$	345,176,006		$	48,745,504		$	78,127,546		$	79,024,511		$	87,148,071
	2,707,101			47,805,592			48,534,314			4,954,685			16,552,920			10,882,948			8,296,901
$	7.74		$	11.07		$	7.11		$	9.84		$	4.72		$	7.26		$	10.50
$	2,507,850		$	3,019,473		$	9,140,428		$	10,847,966		$	964,573		$	4,321,982			N/A
	323,608			274,030			1,282,739			1,102,999			204,131			593,297			N/A
$	7.75		$	11.02		$	7.13		$	9.83		$	4.73		$	7.28			N/A
$	25,849,435		$	587,169,756		$	389,200,672		$	71,463,497		$	81,320,994		$	91,616,101		$	123,801,569
$	—		$	112,651		$	845,264		$	—		$	—		$	—		$	—

The accompanying notes are an integral part of these financial statements.

53

The Lazard Funds, Inc.

Statements of Operations

For the Year Ended December 31, 2002

										Lazard
	Lazard			Lazard			Lazard			International
	Equity			Mid Cap			Small Cap			Equity
	Portfolio			Portfolio			Portfolio			Portfolio
INVESTMENT INCOME
Income:
Interest	$	202,413		$	47,763		$	393,082		$	2,107,258
Dividends	2,536,811			464,335			5,268,121			47,323,473
Total investment income*	2,739,224			512,098			5,661,203			49,430,731
Expenses:
Management fees		1,115,177			265,266			4,277,877			15,769,389
Administration fees		74,739			52,223			159,077			355,260
Distribution fees (Open Shares)		74,139			21,414			159,836			257,809
Custodian fees		74,882			63,889			142,578			2,255,000
Professional services		43,545			37,780			64,102			142,466
Registration fees		27,487			25,699			30,228			44,745
Shareholders’ services		76,953			54,132			98,443			153,122
Directors’ fees and expenses		8,650			2,083			33,282			123,225
Shareholders’ reports		35,439			2,633			64,630			114,967
Amortization of organizational and offering expenses		—			4,055			—			—
Other	7,902			2,787			25,893			105,624
Total expenses before fees waived and expenses    reimbursed		1,538,913			531,961			5,055,946			19,321,607
Management fees waived and expenses reimbursed		—			(134,845	)		—			—
Administration fees waived		—			—			—			—
Expense reductions	—			—			—			—
Expenses—net	1,538,913			397,116			5,055,946			19,321,607
Investment income (loss)—net	1,200,311			114,982			605,257			30,109,124
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, OPTIONS, SWAP AGREEMENTS
AND FOREIGN CURRENCY—NET
Realized gain (loss) on:
Investments, options and swap agreements—net		(22,309,387	)		(2,092,690	)		(30,325,445	)		(357,748,647	)
Foreign currency—net		—			—			—			(6,041,796	)
Change in net unrealized appreciation (depreciation)
on:
Investments—net		(6,894,718	)		(3,678,819	)		(82,045,010	)		121,626,542
Foreign currency—net	—			—			—			142,208
Realized and unrealized gain (loss) on investments,
options, swap agreements and foreign currency—
net	(29,204,105		)	(5,771,509		)	(112,370,455		)	(242,021,693		)
Net increase (decrease) in net assets resulting
from operations	$	(28,003,794	)	$	(5,656,527	)	$	(111,765,198	)	$	(211,912,569	)
*Net of foreign withholding taxes of	$	16,614		$	—		$	1,530		$	6,076,670

The accompanying notes are an integral part of these financial statements.

54

	Lazard		Lazard			Lazard									Lazard
	International		International			Emerging			Lazard			Lazard			Strategic			Lazard
	Equity Select		Small Cap			Markets			Bond			High Yield			Yield			Mortgage
	Portfolio		Portfolio			Portfolio			Portfolio			Portfolio			Portfolio			Portfolio
$	29,250		$	605,989		$	375,638		$	2,640,558		$	7,952,147		$	9,175,443		$	2,529,689
	619,253		10,409,031			8,800,861			—			389,282			255,377			—
	648,503		11,015,020			9,176,499			2,640,558			8,341,429			9,430,820			2,529,689
	217,005			3,432,752			3,512,086			250,202			529,644			1,155,203			335,508
	50,241			136,541			115,242			55,009			59,124			75,806			54,275
	5,713			9,108			22,305			22,010			4,714			16,515			—
	48,917			646,001			792,447			79,013			70,932			146,758			58,571
	37,003			58,504			52,991			38,167			39,498			43,383			42,432
	26,614			30,826			33,578			25,234			24,969			27,024			16,489
	49,862			59,174			65,165			51,998			47,986			57,992			23,887
	1,511			27,050			20,555			2,917			4,096			9,071			4,974
	2,092			6,225			22,173			2,487			1,050			5,250			211
	577			—			—			—			4,835			—			—
	2,122		20,624			15,733			3,479			4,261			8,622			4,207
	441,657			4,426,805			4,652,275			530,516			791,109			1,545,624			540,554
	(136,255	)		(15,757	)		(21,670	)		(29,978	)		(254,334	)		—			—
	(4,375	)		—			—			—			—			—			—
	(488	)	—			—			—			(1,418		)	(1,343		)	—
	300,539		4,411,048			4,630,605			500,538			535,357			1,544,281			540,554
	347,964		6,603,972			4,545,894			2,140,020			7,806,072			7,886,539			1,989,135
	(989,690	)		(19,280,262	)		(28,177,596	)		1,431,860			(11,841,659	)		(17,101,723	)		3,605,679
	—			(726,877	)		(99,265	)		—			—			2,743,643			—
	(2,530,508	)		(11,301,062	)		21,436,883			(12,803	)		(3,502,400	)		3,979,687			1,252,401
	—		33,326			14,669			—			—			(1,873,373		)	—
	(3,520,198	)	(31,274,875		)	(6,825,309		)	1,419,057			(15,344,059		)	(12,251,766		)	4,858,080
	$ (3,172,234)		$	(24,670,903	)	$	(2,279,415	)	$	3,559,077		$	(7,537,987	)	$	(4,365,227	)	$	6,847,215
	$ 81,360		$	1,170,419		$	963,970		$	—		$	—		$	—		$	—

The accompanying notes are an integral part of these financial statements.

55

The Lazard Funds, Inc.

Statements of Changes in Net Assets

	Lazard Equity Portfolio
	Year Ended			Year Ended
	December 31,			December 31,
	2002			2001
Increase (Decrease) in Net Assets:
Operations:
Investment income (loss)—net	$	1,200,311		$	1,601,922
Realized gain (loss) on investments and foreign currency—net		(22,309,387	)		(5,279,029	)
Change in unrealized appreciation (depreciation)—net	(6,894,718		)	(8,285,630		)
Net increase (decrease) in net assets resulting from operations	(28,003,794		)	(11,962,737		)
Distributions to shareholders:
From investment income—net
Institutional Shares		(1,131,482	)		(1,248,125	)
Open Shares		(159,184	)		(236,944	)
From realized gains—net
Institutional Shares		—			(14,656,459	)
Open Shares	—			(4,255,190		)
Net decrease in net assets resulting from distributions	(1,290,666		)	(20,396,718		)
Capital stock transactions:
Net proceeds from sales
Institutional Shares		27,727,036			26,766,243
Open Shares		14,335,772			14,252,473
Net proceeds from reinvestment of distributions
Institutional Shares		1,091,089			15,605,486
Open Shares		156,305			4,354,343
Cost of shares redeemed
Institutional Shares		(45,188,754	)		(63,364,605	)
Open Shares	(24,055,833		)	(36,526,716		)
Net increase (decrease) in net assets from capital stock transactions	(25,934,385		)	(38,912,776		)
Total increase (decrease) in net assets		(55,228,845	)		(71,272,231	)
Net assets at beginning of year	178,411,354			249,683,585
Net assets at end of year*	$	123,182,509		$	178,411,354
Shares issued and repurchased:
Institutional Shares:
Shares outstanding at beginning of year	10,025,389			11,217,212
Shares sold		2,217,510			1,728,480
Shares issued to shareholders from reinvestment of distributions		92,212			1,048,419
Shares repurchased	(3,546,899		)	(3,968,722		)
Net increase (decrease)	(1,237,177		)	(1,191,823		)
Shares outstanding at end of year	8,788,212			10,025,389
Open Shares:
Shares outstanding at beginning of year	2,634,812			3,722,698
Shares sold		1,090,032			921,182
Shares issued to shareholders from reinvestment of distributions		13,257			292,381
Shares repurchased	(1,900,164		)	(2,301,449		)
Net increase (decrease)	(796,875		)	(1,087,886		)
Shares outstanding at end of year	1,837,937			2,634,812
* Includes undistributed (distributions in excess of) investment income—net	$	17,606		$	116,764

The accompanying notes are an integral part of these financial statements.

56

Lazard Mid Cap Portfolio						Lazard Small Cap Portfolio
Year Ended			Year Ended			Year Ended			Year Ended
December 31,			December 31,			December 31,			December 31,
2002			2001			2002			2001
$	114,982		$	127,490		$	605,257		$	2,598,479
	(2,092,690	)		2,685,775			(30,325,445	)		125,607,248
(3,678,819		)	211,688			(82,045,010		)	(19,791,192		)
(5,656,527		)	3,024,953			(111,765,198		)	108,414,535
	—			(106,886	)		—			(2,579,512	)
	—			(24,044	)		—			(64,656	)
	(515,271	)		(2,749,584	)		(15,697,836	)		(97,208,960	)
(152,893		)		(1,177,061	)		(1,888,102	)		(10,916,659	)
(668,164		)	(4,057,575		)	(17,585,938		)	(110,769,787		)
	13,813,143			7,928,457			110,711,759			190,390,940
	6,411,779			4,053,520			92,473,402			91,239,379
	444,842			2,138,700			15,182,529			94,521,126
	125,407			953,040			1,872,236			10,893,095
	(2,504,309	)		(2,954,225	)		(198,184,868	)		(439,301,259	)
(4,397,488		)	(3,459,758		)	(105,405,889		)	(98,676,422		)
13,893,374			8,659,734			(83,350,831		)	(150,933,141		)
	7,568,683			7,627,112			(212,701,967	)		(153,288,393	)
29,313,008			21,685,896			644,607,293			797,895,686
$	36,881,691		$	29,313,008		$	431,905,326		$	644,607,293
2,041,924			1,350,976			32,492,106			40,414,908
	1,390,165			745,763			6,527,987			10,326,305
	48,352			199,576			1,034,934			5,527,335
(259,437		)	(254,391		)	(12,334,019		)	(23,776,442		)
1,179,080			690,948			(4,771,098		)	(7,922,802		)
3,221,004			2,041,924			27,721,008			32,492,106
717,284			561,206			3,934,559			3,753,674
	635,516			367,933			5,642,513			4,915,338
	13,751			89,312			127,884			638,307
(447,137		)	(301,167		)	(6,633,105		)	(5,372,760		)
202,130			156,078			(862,708		)	180,885
919,414			717,284			3,071,851			3,934,559
$	102,856		$	—		$	404,472		$	370,924

The accompanying notes are an integral part of these financial statements.

57

The Lazard Funds, Inc.

Statements of Changes in Net Assets (continued)

	Lazard International Equity Portfolio
	Year Ended			Year Ended
	December 31,			December 31,
	2002			2001
Increase (Decrease) in Net Assets:
Operations:
Investment income (loss)—net	$	30,109,124		$	24,308,666
Realized gain (loss) on investments and foreign currency—net		(363,790,443	)		(414,453,000	)
Change in unrealized appreciation (depreciation)—net	121,768,750			(356,461,877		)
Net increase (decrease) in net assets resulting from operations	(211,912,569		)	(746,606,211		)
Distributions to shareholders:
From investment income—net
Institutional Shares		(9,464,170	)		(42,220	)
Open Shares		(202,681	)		—
From realized gains—net
Institutional Shares		—			(24,111,584	)
Open Shares	—			(1,340,517		)
Net decrease in net assets resulting from distributions	(9,666,851		)	(25,494,321		)
Capital stock transactions:
Net proceeds from sales
Institutional Shares		1,237,961,302			1,945,027,728
Open Shares		252,570,046			634,542,979
Net proceeds in connection with acquisition of Lazard Global Equity Portfolio
Institutional Shares		—			81,288,941
Open Shares		—			2,952,867
Net proceeds from reinvestment of distributions
Institutional Shares		8,783,214			23,526,644
Open Shares		169,104			1,128,146
Cost of shares redeemed
Institutional Shares		(1,481,615,842	)		(2,093,454,514	)
Open Shares	(272,014,495		)	(631,516,136		)
Net increase (decrease) in net assets from capital stock transactions	(254,146,671		)	(36,503,345		)
Total increase (decrease) in net assets		(475,726,091	)		(808,603,877	)
Net assets at beginning of year	2,340,555,623			3,149,159,500
Net assets at end of year*	$	1,864,829,532		$	2,340,555,623
Shares issued and repurchased:
Institutional Shares:
Shares outstanding at beginning of year	222,189,526			223,097,242
Shares sold		127,897,561			171,818,188
Shares issued in connection with acquisition of Lazard Global Equity Portfolio		—			8,377,479
Shares issued to shareholders from reinvestment of distributions		942,405			2,150,297
Shares repurchased	(151,804,035		)	(183,253,680		)
Net increase (decrease)	(22,964,069		)	(907,716		)
Shares outstanding at end of year	199,225,457			222,189,526
Open Shares:
Shares outstanding at beginning of year	11,703,788			10,976,004
Shares sold		26,575,768			56,203,294
Shares issued in connection with acquisition of Lazard Global Equity Portfolio		—			306,015
Shares issued to shareholders from reinvestment of distributions		18,222			103,582
Shares repurchased	(28,388,711		)	(55,885,107		)
Net increase (decrease)	(1,794,721		)	727,784
Shares outstanding at end of year	9,909,067			11,703,788
* Includes undistributed (distributions in excess of) investment income—net	$	21,484,623		$	4,289,579

**Portfolio commenced operations on May 31, 2001.

The accompanying notes are an integral part of these financial statements.

58

Lazard International Equity Select Portfolio						Lazard International Small Cap Portfolio						Lazard Emerging Markets Portfolio
Year Ended			Period Ended			Year Ended			Year Ended			Year Ended			Year Ended
December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
2002			2001**			2002			2001			2002			2001
$	347,964		$	763		$	6,603,972		$	5,175,053		$	4,545,894		$	2,899,657
	(989,690	)		(10,906	)		(20,007,139	)		3,514,010			(28,276,861	)		(31,273,376	)
(2,530,508		)	140,649			(11,267,736		)	(33,019,481		)	21,451,552			16,308,651
(3,172,234		)	130,506			(24,670,903		)	(24,330,418		)	(2,279,415		)	(12,065,068		)
	(318,477	)		(4,765	)		(7,171,804	)		(4,563,670	)		(4,037,021	)		(2,665,662	)
	(29,966	)		—			(26,978	)		(30,803	)		(82,176	)		(34,843	)
	—			—			—			—			—			—
—			—			—			—			—			—
(348,443		)	(4,765		)	(7,198,782		)	(4,594,473		)	(4,119,197		)	(2,700,505		)
	22,819,628			8,668,436			383,788,995			260,652,498			299,712,296			290,044,436
	2,450,660			426,000			3,288,469			59,788,773			14,316,793			41,611,179
	—			—			—			—			—			—
	—			—			—			—			—			—
	314,616			4,616			6,722,476			4,071,244			3,809,865			2,515,204
	27,512			—			22,923			160,826			77,772			26,413
	(7,601,487	)		(210,486	)		(220,003,473	)		(187,255,561	)		(261,081,227	)		(286,763,102	)
(39,400		)	—			(3,587,015		)	(58,230,864		)	(11,439,962		)	(40,498,793		)
17,971,529			8,888,566			170,232,375			79,186,916			45,395,537			6,935,337
	14,450,852			9,014,307			138,362,690			50,262,025			38,996,925			(7,830,236	)
9,014,307			—			393,719,121			343,457,096			315,319,509			323,149,745
$	23,465,159		$	9,014,307		$	532,081,811		$	393,719,121		$	354,316,434		$	315,319,509
937,949			—			33,699,290			27,193,777			42,736,911			42,246,142
	2,570,262			960,804			32,269,208			21,945,154			38,889,222			39,269,503
	—			—			—			—			—			—
	40,536			515			616,175			355,086			534,343			350,790
(841,646		)	(23,370		)	(18,779,081		)	(15,794,727		)	(33,626,162		)	(39,129,524		)
1,769,152			937,949			14,106,302			6,505,513			5,797,403			490,769
2,707,101			937,949			47,805,592			33,699,290			48,534,314			42,736,911
47,429			—			298,378			131,623			927,234			724,435
	277,299			47,429			274,383			4,986,204			1,802,074			5,902,193
	—			—			—			—			—			—
	3,541			—			2,109			13,872			10,877			3,689
(4,661		)	—			(300,840		)	(4,833,321		)	(1,457,446		)	(5,703,083		)
276,179			47,429			(24,348		)	166,755			355,505			202,799
323,608			47,429			274,030			298,378			1,282,739			927,234
$	1,523		$	844		$	(26,632	)	$	(81,425	)	$	202,532		$	(124,900	)

The accompanying notes are an integral part of these financial statements.

59

The Lazard Funds, Inc.

Statements of Changes in Net Assets (concluded)

	Lazard Bond Portfolio
	Year Ended			Year Ended
	December 31,			December 31,
	2002			2001
Increase (Decrease) in Net Assets:
Operations:
Investment income (loss)—net	$	2,140,020		$	3,136,018
Realized gain (loss) on investments, options, swap agreements and
foreign currency—net	1,431,860			776,338
Change in unrealized appreciation (depreciation)—net	(12,803		)	347,117
Net increase (decrease) in net assets resulting from operations	3,559,077			4,259,473
Distributions to shareholders:
From investment income—net
Institutional Shares		(1,779,401	)		(2,628,400	)
Open Shares		(363,821	)		(510,688	)
From realized gains—net
Institutional Shares		—			—
Open Shares		—			—
From capital
Institutional Shares		—			—
Open Shares	—			—
Net decrease in net assets resulting from distributions	(2,143,222		)	(3,139,088		)
Capital stock transactions:
Net proceeds from sales
Institutional Shares		14,804,435			29,194,189
Open Shares		3,252,031			79,748,733
Net proceeds from reinvestment of distributions
Institutional Shares		1,555,070			2,305,059
Open Shares		338,336			413,275
Cost of shares redeemed
Institutional Shares		(12,782,601	)		(43,319,757	)
Open Shares	(1,809,414		)	(82,946,538		)
Net increase (decrease) in net assets from capital stock transactions	5,357,857			(14,605,039		)
Total increase (decrease) in net assets		6,773,712			(13,484,654	)
Net assets at beginning of year	52,819,758			66,304,412
Net assets at end of year*	$	59,593,470		$	52,819,758
Shares issued and repurchased:
Institutional Shares:
Shares outstanding at beginning of year	4,603,503			5,852,741
Shares sold		1,519,530			3,065,623
Shares issued to shareholders from reinvestment of distributions		161,903			241,107
Shares repurchased	(1,330,251		)	(4,555,968		)
Net increase (decrease)	351,182			(1,249,238		)
Shares outstanding at end of year	4,954,685			4,603,503
Open Shares:
Shares outstanding at beginning of year	921,653			1,222,954
Shares sold		334,149			8,411,660
Shares issued to shareholders from reinvestment of distributions		35,217			43,196
Shares repurchased	(188,020		)	(8,756,157		)
Net increase (decrease)	181,346			(301,301		)
Shares outstanding at end of year	1,102,999			921,653
* Includes undistributed (distributions in excess of) investment income—net	$	(129,171	)	$	(146,907	)

The accompanying notes are an integral part of these financial statements.

60

Lazard High Yield Portfolio						Lazard Strategic Yield Portfolio						Lazard Mortgage 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,
2002			2001			2002			2001			2002			2001
$	7,806,072		$	8,406,287		$	7,886,539		$	13,294,268		$	1,989,135		$	435,570
	(11,841,659	)		(18,818,427	)		(14,358,080	)		(13,350,328	)		3,605,679			(107,585	)
(3,502,400		)	12,874,077			2,106,314			8,938,141			1,252,401			(472,897		)
(7,537,987		)	2,461,937			(4,365,227		)	8,882,081			6,847,215			(144,912		)
	(7,756,049	)		(6,992,230	)		(5,858,506	)		(12,879,019	)		(2,242,351	)		(436,936	)
	(187,053	)		(1,414,057	)		(225,134	)		(445,881	)		—			—
	—			—			—			—			(2,856,017	)		(277,226	)
	—			—			—			—			—			—
	—			—			(1,994,483	)		—			—			—
—			—			(79,873		)	—			—			—
(7,943,102		)	(8,406,287		)	(8,157,996		)	(13,324,900		)	(5,098,368		)	(714,162		)
	33,315,841			28,754,762			111,973,009			131,288,520			35,602,493			79,433,502
	277,793			3,072,449			2,524,408			23,903,863			—			—
	7,243,422			6,559,195			7,110,539			11,949,392			4,729,288			573,732
	108,635			1,384,015			275,541			383,444			—			—
	(18,643,150	)		(24,709,902	)		(198,656,188	)		(208,533,685	)		(32,563,109	)		(1,617,653	)
(11,445,492		)	(4,703,853		)	(4,563,661		)	(27,137,453		)	—			—
10,857,049			10,356,666			(81,336,352		)	(68,145,919		)	7,768,672			78,389,581
	(4,624,040	)		4,412,316			(93,859,575	)		(72,588,738	)		9,517,519			77,530,507
83,716,159			79,303,843			177,206,068			249,794,806			77,630,552			100,045
$	79,092,119		$	83,716,159		$	83,346,493		$	177,206,068		$	87,148,071		$	77,630,552
12,013,527			10,008,954			21,852,473			30,161,493			7,547,321			10,000
	6,503,819			4,573,006			14,344,532			16,591,227			3,360,753			7,641,003
	1,396,070			1,027,842			945,294			1,502,386			449,901			56,015
(3,360,496		)	(3,596,275		)	(26,259,351		)	(26,402,633		)	(3,061,074		)	(159,697		)
4,539,393			2,004,573			(10,969,525		)	(8,309,020		)	749,580			7,537,321
16,552,920			12,013,527			10,882,948			21,852,473			8,296,901			7,547,321
2,057,861			2,061,919			846,806			1,209,528			—			—
	58,368			467,150			324,564			3,035,801			—			—
	20,386			216,515			36,709			48,388			—			—
(1,932,484		)	(687,723		)	(614,782		)	(3,446,911		)	—			—
(1,853,730		)	(4,058		)	(253,509		)	(362,722		)	—			—
204,131			2,057,861			593,297			846,806			—			—
$	(137,030	)	$	—		$	366,652		$	(1,142,099	)	$	(15,585	)	$	15,937

The accompanying notes are an integral part of these financial statements.

61

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	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	14.10		$	16.72		$	21.08		$	21.75		$	19.98
Income (loss) from investment operations:
Net investment income (loss) (a)		0.11			0.13			0.17			0.26			0.28
Net realized and unrealized gain (loss)	(2.48		)	(1.07		)	(0.79		)	0.66			3.10
Total from investment operations	(2.37		)	(0.94		)	(0.62		)	0.92			3.38
Less distributions from:
Net investment income		(0.14	)		(0.13	)		(0.23	)		(0.26	)		(0.26	)
Net realized gains	—			(1.55		)	(3.51		)	(1.33		)	(1.35		)
Total distributions	(0.14		)	(1.68		)	(3.74		)	(1.59		)	(1.61		)
Net asset value, end of period	$	11.59		$	14.10		$	16.72		$	21.08		$	21.75
Total Return (b)	(16.84		)%		(5.90	)%		(2.64	)%		4.23	%		17.31	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	101,891		$	141,329		$	187,517		$	377,660		$	361,126
Ratios to average net assets:
Net expenses		0.97	%		0.90	%		0.86	%		0.84	%		0.85	%
Gross expenses		0.97	%		0.90	%		0.86	%		0.84	%		0.85	%
Net investment income		0.87	%		0.82	%		0.85	%		1.14	%		1.28	%
Portfolio turnover rate		74	%		89	%		36	%		62	%		76	%
	Year Ended
Open Shares	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	14.07		$	16.70		$	21.05		$	21.76		$	19.99
Income (loss) from investment operations:
Net investment income (loss) (a)		0.07			0.09			0.12			0.20			0.20
Net realized and unrealized gain (loss)	(2.47		)	(1.08		)	(0.79		)	0.65			3.12
Total from investment operations	(2.40		)	(0.99		)	(0.67		)	0.85			3.32
Less distributions from:
Net investment income		(0.09	)		(0.09	)		(0.17	)		(0.23	)		(0.20	)
Net realized gains	—			(1.55		)	(3.51		)	(1.33		)	(1.35		)
Total distributions	(0.09		)	(1.64		)	(3.68		)	(1.56		)	(1.55		)
Net asset value, end of period	$	11.58		$	14.07		$	16.70		$	21.05		$	21.76
Total Return (b)	(17.08		)%		(6.23	)%		(2.91	)%		3.92	%		16.98	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	21,292		$	37,082		$	62,167		$	121,994		$	117,624
Ratios to average net assets:
Net expenses		1.28	%		1.18	%		1.13	%		1.10	%		1.12	%
Gross expenses		1.28	%		1.18	%		1.13	%		1.10	%		1.12	%
Net investment income		0.55	%		0.54	%		0.57	%		0.89	%		0.96	%
Portfolio turnover rate		74	%		89	%		36	%		62	%		76	%

(a) For periods beginning with 12/31/99, net investment income (loss) has been computed using the average shares method.

(b) Total returns assume changes in share price and reinvestment of all dividends and distributions.

The accompanying notes are an integral part of these financial statements.

62

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
Institutional Shares	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	10.64		$	11.36		$	10.78		$	10.46		$	10.26
Income (loss) from investment operations:
Net investment income (loss) (a)		0.04			0.07			0.02			0.02			0.05
Net realized and unrealized gain (loss)	(1.57		)	1.31			2.20			0.43			0.31
Total from investment operations	(1.53		)	1.38			2.22			0.45			0.36
Less distributions from:
Net investment income		—			(0.07	)		(0.03	)		(0.03	)		(0.05	)
Net realized gains	(0.18		)	(2.03		)	(1.61		)	(0.10		)	(0.11		)
Total distributions	(0.18		)	(2.10		)	(1.64		)	(0.13		)	(0.16		)
Net asset value, end of period	$	8.93		$	10.64		$	11.36		$	10.78		$	10.46
Total Return (b)	(14.47		)%		12.85	%		22.44	%		4.38	%		3.65	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	28,754		$	21,729		$	15,344		$	27,521		$	55,731
Ratios to average net assets:
Net expenses		1.05	%		1.05	%		1.05	%		1.05	%		1.05	%
Gross expenses		1.40	%		1.71	%		1.50	%		1.17	%		1.23	%
Net investment income		0.40	%		0.65	%		0.20	%		0.23	%		0.48	%
Portfolio turnover rate		104	%		160	%		152	%		113	%		86	%
	Year Ended
Open Shares	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	10.57		$	11.30		$	10.74		$	10.45		$	10.26
Income (loss) from investment operations:
Net investment income (loss) (a)		0.01			0.04			(0.01	)		(0.01	)		0.02
Net realized and unrealized gain (loss)	(1.56		)	1.30			2.18			0.42			0.32
Total from investment operations	(1.55		)	1.34			2.17			0.41			0.34
Less distributions from:
Net investment income		—			(0.04	)		—			(0.02	)		(0.04	)
Net realized gains	(0.18		)	(2.03		)	(1.61		)	(0.10		)	(0.11		)
Total distributions	(0.18		)	(2.07		)	(1.61		)	(0.12		)	(0.15		)
Net asset value, end of period	$	8.84		$	10.57		$	11.30		$	10.74		$	10.45
Total Return (b)	(14.75		)%		12.50	%		22.00	%		3.96	%		3.42	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	8,128		$	7,584		$	6,342		$	14,024		$	16,345
Ratios to average net assets:
Net expenses		1.35	%		1.35	%		1.35	%		1.35	%		1.35	%
Gross expenses		1.83	%		2.13	%		1.91	%		1.55	%		1.66	%
Net investment income (loss)		0.09	%		0.35	%		(0.09	)%		(0.08	)%		0.29	%
Portfolio turnover rate		104	%		160	%		152	%		113	%		86	%

(a) For periods beginning with 12/31/99, net investment income (loss) has been computed using the average shares method.

(b) Total returns assume changes in share price and reinvestment of all dividends and distributions.

The accompanying notes are an integral part of these financial statements.

63

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	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	17.70		$	18.07		$	16.57		$	17.39		$		20.02
Income (loss) from investment operations:
Net investment income (loss) (a)		0.02			0.08			0.09			0.10				0.08
Net realized and unrealized gain (loss)	(3.18		)	3.06			2.45			0.17			(2.60			)
Total from investment operations	(3.16		)	3.14			2.54			0.27			(2.52			)
Less distributions from:
Net investment income		—			(0.09	)		(0.23	)		(0.11	)			(0.01	)
Net realized gains	(0.51		)	(3.42		)	(0.81		)	(0.98		)	(0.10			)
Total distributions	(0.51		)	(3.51		)	(1.04		)	(1.09		)	(0.11			)
Net asset value, end of period	$	14.03		$	17.70		$	18.07		$	16.57		$		17.39
Total Return (b)	(17.97		)%		18.06	%		15.89	%		1.77	%		(12.62		)%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	388,795		$	575,077		$	730,179		$	906,945		$	1,411,503
Ratios to average net assets:
Net expenses		0.85	%		0.83	%		0.83	%		0.81	%			0.81	%
Gross expenses		0.85	%		0.83	%		0.83	%		0.81	%			0.81	%
Net investment income		0.14	%		0.41	%		0.52	%		0.60	%			0.50	%
Portfolio turnover rate		93	%		80	%		67	%		50	%			46	%
	Year Ended
Open Shares	12/31/02			12/31/01			12/31/00			12/31/99				12/31/98
Net asset value, beginning of period	$	17.67		$	18.04		$	16.51		$	17.35			$	20.02
Income (loss) from investment operations:
Net investment income (loss) (a)		(0.03	)		0.02			0.04			0.06				0.03
Net realized and unrealized gain (loss)	(3.10		)	3.05			2.45			0.16				(2.60		)
Total from investment operations	(3.13		)	3.07			2.49			0.22				(2.57		)
Less distributions from:
Net investment income		—			(0.02	)		(0.15	)		(0.08	)			—
Net realized gains	(0.51		)	(3.42		)	(0.81		)	(0.98		)		(0.10		)
Total distributions	(0.51		)	(3.44		)	(0.96		)	(1.06		)		(0.10		)
Net asset value, end of period	$	14.03		$	17.67		$	18.04		$	16.51			$	17.35
Total Return (b)	(17.82		)%		17.69	%		15.60	%		1.47	%		(12.86		)%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	43,110		$	69,531		$	67,717		$	86,413			$	93,547
Ratios to average net assets:
Net expenses		1.15	%		1.13	%		1.12	%		1.09	%			1.09	%
Gross expenses		1.15	%		1.13	%		1.12	%		1.09	%			1.09	%
Net investment income (loss)		(0.17	)%		0.12	%		0.24	%		0.33	%			0.21	%
Portfolio turnover rate		93	%		80	%		67	%		50	%			46	%

(a) For periods beginning with 12/31/99, net investment income (loss) has been computed using the average shares method.

(b) Total returns assume changes in share price and reinvestment of all dividends and distributions.

The accompanying notes are an integral part of these financial statements.

64

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	12/31/02				12/31/01				12/31/00				12/31/99				12/31/98
Net asset value, beginning of period	$		10.01		$		13.46		$		17.29		$		15.23		$		13.97
Income (loss) from investment operations:
Net investment income (loss) (a)			0.14				0.11				0.15				0.34				0.18
Net realized and unrealized gain (loss)	(1.18			)	(3.45			)	(2.01			)	3.25				2.03
Total from investment operations	(1.04			)	(3.34			)	(1.86			)	3.59				2.21
Less distributions from:
Net investment income			(0.05	)			— (c)				(0.17	)			(0.54	)			(0.14	)
Net realized gains	—				(0.11			)	(1.80			)	(0.99			)	(0.81			)
Total distributions	(0.05			)	(0.11			)	(1.97			)	(1.53			)	(0.95			)
Net asset value, end of period	$		8.92		$		10.01		$		13.46		$		17.29		$		15.23
Total Return (b)		(10.44		)%		(24.85		)%		(10.55		)%			24.07	%			16.04	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	1,776,799			$	2,224,089			$	3,001,933			$	3,584,093			$	2,879,289
Ratios to average net assets:
Net expenses			0.90	%			0.90	%			0.88	%			0.88	%			0.90	%
Gross expenses			0.90	%			0.90	%			0.88	%			0.88	%			0.90	%
Net investment income			1.45	%			0.95	%			0.97	%			2.09	%			1.37	%
Portfolio turnover rate			58	%			69	%			51	%			35	%			41	%
		Year Ended
Open Shares		12/31/02				12/31/01				12/31/00				12/31/99				12/31/98
Net asset value, beginning of period		$	9.95			$	13.41			$	17.28			$	15.23			$	13.95
Income (loss) from investment operations:
Net investment income (loss) (a)			0.11				0.08				0.10				0.31				0.18
Net realized and unrealized gain (loss)		(1.16		)		(3.43		)		(2.02		)		3.22				2.00
Total from investment operations		(1.05		)		(3.35		)		(1.92		)		3.53				2.18
Less distributions from:
Net investment income			(0.02	)			—				(0.15	)			(0.49	)			(0.09	)
Net realized gains		—				(0.11		)		(1.80		)		(0.99		)		(0.81		)
Total distributions		(0.02		)		(0.11		)		(1.95		)		(1.48		)		(0.90		)
Net asset value, end of period		$	8.88			$	9.95			$	13.41			$	17.28			$	15.23
Total Return (b)		(10.57		)%		(25.02		)%		(10.95		)%			23.67	%			15.82	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)		$	88,031			$	116,466			$	147,226			$	138,131			$	47,303
Ratios to average net assets:
Net expenses			1.21	%			1.19	%			1.15	%			1.16	%			1.24	%
Gross expenses			1.21	%			1.19	%			1.15	%			1.16	%			1.24	%
Net investment income			1.14	%			0.70	%			0.66	%			1.87	%			1.02	%
Portfolio turnover rate			58	%			69	%			51	%			35	%			41	%

(a) For periods beginning with 12/31/99, net investment income (loss) has been computed using the average shares method.

(b) Total returns assume changes in share price and reinvestment of all dividends and distributions.

(c) Amount is less than $0.01 per share.

The accompanying notes are an integral part of these financial statements.

65

The Lazard Funds, Inc.

Financial Highlights (continued)

Selected data for a share of capital stock outstanding throughout each period:

LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO

				For the
	Year			Period
	Ended			5/31/01* to
Institutional Shares	12/31/02			12/31/01
Net asset value, beginning of period	$	9.15		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (a)		0.12			0.01
Net realized and unrealized gain (loss)	(1.41		)	(0.85		)
Total from investment operations	(1.29		)	(0.84		)
Less distributions from:
Net investment income		(0.12	)		(0.01	)
Net realized gains	—			—
Total distributions	(0.12		)	(0.01		)
Net asset value, end of period	$	7.74		$	9.15
Total Return (b)	(14.12		)%	(8.43		)%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	20,957		$	8,580
Ratios to average net assets:
Net expenses (c)		1.15	%		1.15	%
Gross expenses (c)		1.63	%	13.75		%
Net investment income (c)		1.41	%		0.15	%
Portfolio turnover rate		32	%		1	%

				For the
	Year			Period
	Ended			5/31/01* to
Open Shares	12/31/02			12/31/01
Net asset value, beginning of period	$	9.16		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (a)		0.08			(0.02	)
Net realized and unrealized gain (loss)	(1.40		)	(0.82		)
Total from investment operations	(1.32		)	(0.84		)
Less distributions from:
Net investment income		(0.09	)		—
Net realized gains	—			—
Total distributions	(0.09		)	—
Net asset value, end of period	$	7.75		$	9.16
Total Return (b)	(14.37		)%	(8.40		)%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	2,508		$	434
Ratios to average net assets:
Net expenses (c)		1.45	%		1.45	%
Gross expenses (c)		2.79	%	47.06		%
Net investment income (loss) (c)		0.93	%	(0.31		)%
Portfolio turnover rate		32	%		1	%

*	Commencement of operations.
(a)	Net investment income (loss) has been computed using the average shares method.
(b)	Total returns assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized.
(c)	Annualized for periods of less than one year.

The accompanying notes are an integral part of these financial statements.

66

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	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	11.58		$	12.57		$	14.12		$	11.40		$	11.69
Income (loss) from investment operations:
Net investment income (loss) (a)		0.17			0.18			0.16			0.14			0.05
Net realized and unrealized gain (loss)	(0.53		)	(1.03		)	(0.81		)	2.81			0.83
Total from investment operations	(0.36		)	(0.85		)	(0.65		)	2.95			0.88
Less distributions from:
Net investment income		(0.15	)		(0.14	)		(0.11	)		(0.12	)		(0.05	)
Net realized gains	—			—			(0.79		)	(0.11		)	(1.12		)
Total distributions	(0.15		)	(0.14		)	(0.90		)	(0.23		)	(1.17		)
Net asset value, end of period	$	11.07		$	11.58		$	12.57		$	14.12		$	11.40
Total Return (b)		(3.08	)%		(6.77	)%		(4.44	)%		26.07	%		7.55	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	529,062		$	390,278		$	341,808		$	217,684		$	177,779
Ratios to average net assets:
Net expenses		0.96	%		0.95	%		0.98	%		1.01	%		1.04	%
Gross expenses		0.96	%		0.95	%		0.98	%		1.01	%		1.04	%
Net investment income		1.45	%		1.48	%		1.13	%		1.17	%		0.81	%
Portfolio turnover rate		25	%		17	%		43	%		50	%		56	%
	Year Ended
Open Shares	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	11.53		$	12.53		$	14.06		$	11.38		$	11.69
Income (loss) from investment operations:
Net investment income (loss) (a)		0.13			0.11			0.10			0.09			0.01
Net realized and unrealized gain (loss)	(0.54		)	(1.03		)	(0.80		)	2.80			0.83
Total from investment operations	(0.41		)	(0.92		)	(0.70		)	2.89			0.84
Less distributions from:
Net investment income		(0.10	)		(0.08	)		(0.04	)		(0.10	)		(0.03	)
Net realized gains	—			—			(0.79		)	(0.11		)	(1.12		)
Total distributions	(0.10		)	(0.08		)	(0.83		)	(0.21		)	(1.15		)
Net asset value, end of period	$	11.02		$	11.53		$	12.53		$	14.06		$	11.38
Total Return (b)		(3.55	)%		(7.33	)%		(4.85	)%		25.55	%		7.21	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	3,019		$	3,441		$	1,649		$	2,441		$	2,646
Ratios to average net assets:
Net expenses		1.43	%		1.43	%		1.43	%		1.43	%		1.43	%
Gross expenses		1.86	%		2.03	%		2.27	%		2.12	%		1.93	%
Net investment income		1.15	%		0.91	%		0.68	%		0.77	%		0.43	%
Portfolio turnover rate		25	%		17	%		43	%		50	%		56	%

(a) For periods beginning with 12/31/99, net investment income (loss) has been computed using the average shares method.

(b) Total returns assume changes in share price and reinvestment of all dividends and distributions.

The accompanying notes are an integral part of these financial statements.

67

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	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	7.22		$	7.52		$	10.70		$	6.94		$	9.20
Income (loss) from investment operations:
Net investment income (loss) (a)		0.10			0.07			0.06			0.09			0.10
Net realized and unrealized gain (loss)	(0.13		)	(0.31		)	(3.22		)	3.77			(2.26		)
Total from investment operations	(0.03		)	(0.24		)	(3.16		)	3.86			(2.16		)
Less distributions from:
Net investment income		(0.08	)		(0.06	)		(0.02	)		(0.10	)		(0.10	)
Net realized gains	—			—			—			—			—
Total distributions	(0.08		)	(0.06		)	(0.02		)	(0.10		)	(0.10		)
Net asset value, end of period	$	7.11		$	7.22		$	7.52		$	10.70		$	6.94
Total Return (b)		(0.37	)%		(3.16	)%	(29.53		)%		55.81	%	(23.49		)%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	345,176		$	308,608		$	317,691		$	465,278		$	298,033
Ratios to average net assets:
Net expenses		1.31	%		1.29	%		1.26	%		1.24	%		1.28	%
Gross expenses		1.31	%		1.29	%		1.27	%		1.25	%		1.29	%
Net investment income		1.30	%		0.91	%		0.62	%		1.05	%		1.84	%
Portfolio turnover rate		31	%		43	%		72	%		46	%		36	%
	Year Ended
Open Shares	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	7.24		$	7.54		$	10.74		$	6.97		$	9.20
Income (loss) from investment operations:
Net investment income (loss) (a)		0.08			0.05			0.03			0.06			0.11
Net realized and unrealized gain (loss)	(0.13		)	(0.32		)	(3.23		)	3.79			(2.26		)
Total from investment operations	(0.05		)	(0.27		)	(3.20		)	3.85			(2.15		)
Less distributions from:
Net investment income		(0.06	)		(0.03	)		—			(0.08	)		(0.08	)
Net realized gains	—			—			—			—			—
Total distributions	(0.06		)	(0.03		)	—			(0.08		)	(0.08		)
Net asset value, end of period	$	7.13		$	7.24		$	7.54		$	10.74		$	6.97
Total Return (b)		(0.65	)%		(3.54	)%	(29.80		)%		55.26	%	(23.30		)%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	9,140		$	6,712		$	5,459		$	10,491		$	8,191
Ratios to average net assets:
Net expenses		1.60	%		1.60	%		1.60	%		1.60	%		1.60	%
Gross expenses		1.84	%		2.00	%		1.80	%		1.75	%		1.76	%
Net investment income		1.09	%		0.63	%		0.30	%		0.73	%		1.54	%
Portfolio turnover rate		31	%		43	%		72	%		46	%		36	%

(a) For periods beginning with 12/31/99, net investment income (loss) has been computed using the average shares method.

(b) Total returns assume changes in share price and reinvestment of all dividends and distributions.

The accompanying notes are an integral part of these financial statements.

68

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	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	9.56		$	9.37		$	9.29		$	9.89		$	10.03
Income (loss) from investment operations:
Net investment income (loss) (a)		0.41			0.52			0.59			0.55			0.55
Net realized and unrealized gain (loss)	0.28			0.19			0.08			(0.60		)	0.01
Total from investment operations	0.69			0.71			0.67			(0.05		)	0.56
Less distributions from:
Net investment income		(0.41	)		(0.52	)		(0.59	)		(0.55	)		(0.55	)
Net realized gains	—			—			—			—			(0.15		)
Total distributions	(0.41		)	(0.52		)	(0.59		)	(0.55		)	(0.70		)
Net asset value, end of period	$	9.84		$	9.56		$	9.37		$	9.29		$	9.89
Total Return (b)		7.44	%		7.68	%		7.53	%		(0.46	)%		5.77	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	48,745		$	44,013		$	54,847		$	91,557		$	100,397
Ratios to average net assets:
Net expenses		0.98	%		0.91	%		0.82	%		0.76	%		0.78	%
Gross expenses		0.98	%		0.91	%		0.82	%		0.76	%		0.79	%
Net investment income		4.30	%		5.44	%		6.38	%		5.74	%		5.45	%
Portfolio turnover rate		391	%		238	%		355	%		549	%		335	%
	Year Ended
Open Shares	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	9.56		$	9.37		$	9.29		$	9.88		$	10.02
Income (loss) from investment operations:
Net investment income (loss) (a)		0.40			0.50			0.57			0.51			0.52
Net realized and unrealized gain (loss)	0.27			0.19			0.08			(0.58		)	0.01
Total from investment operations	0.67			0.69			0.65			(0.07		)	0.53
Less distributions from:
Net investment income		(0.40	)		(0.50	)		(0.57	)		(0.52	)		(0.52	)
Net realized gains	—			—			—			—			(0.15		)
Total distributions	(0.40		)	(0.50		)	(0.57		)	(0.52		)	(0.67		)
Net asset value, end of period	$	9.83		$	9.56		$	9.37		$	9.29		$	9.88
Total Return (b)		7.15	%		7.49	%		7.25	%		(0.76	)%		5.42	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	10,848		$	8,807		$	11,457		$	11,605		$	15,226
Ratios to average net assets:
Net expenses		1.10	%		1.10	%		1.10	%		1.10	%		1.10	%
Gross expenses		1.44	%		1.35	%		1.27	%		1.15	%		1.21	%
Net investment income		4.15	%		5.24	%		6.13	%		5.37	%		5.11	%
Portfolio turnover rate		391	%		238	%		355	%		549	%		335	%

(a) For periods beginning with 12/31/99, net investment income (loss) has been computed using the average shares method.

(b) Total returns assume changes in share price and reinvestment of all dividends and distributions.

The accompanying notes are an integral part of these financial statements.

69

The Lazard Funds, Inc.

Financial Highlights (continued)

Selected data for a share of capital stock outstanding throughout each period:

LAZARD HIGH YIELD PORTFOLIO

													For the
													Period
	Year Ended												1/2/98*
													to
Institutional Shares	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	5.95		$	6.57		$	8.77		$	9.42		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (a)		0.58			0.76			0.96			0.92			0.88
Net realized and unrealized gain (loss)	(1.22		)	(0.62		)	(2.20		)	(0.65		)	(0.57		)
Total from investment operations	(0.64		)	0.14			(1.24		)	0.27			0.31
Less distributions from:
Net investment income		(0.59	)		(0.76	)		(0.96	)		(0.92	)		(0.89	)
Net realized gains	—			—			—			—			—
Total distributions	(0.59		)	(0.76		)	(0.96		)	(0.92		)	(0.89		)
Net asset value, end of period	$	4.72		$	5.95		$	6.57		$	8.77		$	9.42
Total Return (b)	(11.14		)%		2.03	%	(15.19		)%		2.94	%		2.90	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	78,128		$	71,467		$	65,752		$	83,664		$	41,935
Ratios to average net assets:
Net expenses (c)		0.75	%		0.75	%		0.75	%		0.94	%		1.05	%
Gross expenses (c)		1.08	%		1.07	%		1.00	%		1.06	%		1.55	%
Net investment income (c)	11.09		%	11.85		%	12.24		%	10.08		%		8.87	%
Portfolio turnover rate		229	%		234	%		148	%		190	%		418	%
													For the
														Period
	Year Ended												2/24/98*
													to
Open Shares	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	5.95		$	6.57		$	8.78		$	9.42		$	10.37
Income (loss) from investment operations:
Net investment income (loss) (a)		0.55			0.74			0.94			0.90			0.72
Net realized and unrealized gain (loss)	(1.19		)	(0.62		)	(2.21		)	(0.65		)	(0.94		)
Total from investment operations	(0.64		)	0.12			(1.27		)	0.25			(0.22		)
Less distributions from:
Net investment income		(0.58	)		(0.74	)		(0.94	)		(0.89	)		(0.73	)
Net realized gains	—			—			—			—			—
Total distributions	(0.58		)	(0.74		)	(0.94		)	(0.89		)	(0.73		)
Net asset value, end of period	$	4.73		$	5.95		$	6.57		$	8.78		$	9.42
Total Return (b)	(11.27		)%		1.72	%	(15.54		)%		2.68	%	(2.24		)%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	965		$	12,249		$	13,552		$	1,305		$	949
Ratios to average net assets:
Net expenses (c)		1.05	%		1.05	%		1.05	%		1.22	%		1.35	%
Gross expenses (c)		2.48	%		1.46	%		1.38	%		2.92	%		9.77	%
Net investment income (c)		9.84	%	11.57		%	12.10		%		9.89	%		8.59	%
Portfolio turnover rate		229	%		234	%		148	%		190	%		418	%

*	Commencement of operations.
(a)	For periods beginning with 12/31/99, net investment income (loss) has been computed using the average shares method.
(b)	Total returns assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized.
(c)	Annualized for periods of less than one year.

The accompanying notes are an integral part of these financial statements.

70

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	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	7.81		$	7.96		$	8.83		$	9.01		$	9.66
Income (loss) from investment operations:
Net investment income (loss) (a)		0.39			0.48			0.59			0.61			0.76
Net realized and unrealized gain (loss)	(0.54		)	(0.15		)	(0.49		)	(0.18		)	(0.69		)
Total from investment operations	(0.15		)	0.33			0.10			0.43			0.07
Less distributions from:
Net investment income		(0.30	)		(0.48	)		(0.97	)		(0.61	)		(0.44	)
Net realized gains		—			—			—			—			—-
Capital	(0.10		)	—			—			—			(0.28		)
Total distributions	(0.40		)	(0.48		)	(0.97		)	(0.61		)	(0.72		)
Net asset value, end of period	$	7.26		$	7.81		$	7.96		$	8.83		$	9.01
Total Return (b)		(2.00	)%		4.09	%		1.12	%		4.91	%		0.75	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	79,025		$	170,590		$	240,162		$	306,116		$	397,599
Ratios to average net assets:
Net expenses		0.98	%		0.93	%		0.93	%		0.91	%		0.90	%
Gross expenses		0.98	%		0.93	%		0.93	%		0.91	%		0.90	%
Net investment income		5.14	%		5.99	%		6.82	%		6.82	%		6.94	%
Portfolio turnover rate		363	%		292	%		207	%		257	%		276	%
	Year Ended
Open Shares	12/31/02			12/31/01			12/31/00			12/31/99			12/31/98
Net asset value, beginning of period	$	7.81		$	7.96		$	8.83		$	9.02		$	9.66
Income (loss) from investment operations:
Net investment income (loss) (a)		0.35			0.43			0.55			0.58			0.73
Net realized and unrealized gain (loss)	(0.54		)	(0.15		)	(0.49		)	(0.19		)	(0.69		)
Total from investment operations	(0.19		)	0.28			0.06			0.39			0.04
Less distributions from:
Net investment income		(0.25	)		(0.43	)		(0.93	)		(0.58	)		(0.40	)
Net realized gains		—			—			—			—			—
Capital	(0.09		)	—			—			—			(0.28		)
Total distributions	(0.34		)	(0.43		)	(0.93		)	(0.58		)	(0.68		)
Net asset value, end of period	$	7.28		$	7.81		$	7.96		$	8.83		$	9.02
Total Return (b)		(2.48	)%		3.53	%		0.71	%		4.40	%		0.37	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	4,322		$	6,616		$	9,633		$	16,035		$	22,460
Ratios to average net assets:
Net expenses		1.58	%		1.46	%		1.34	%		1.27	%		1.28	%
Gross expenses		1.58	%		1.46	%		1.34	%		1.27	%		1.28	%
Net investment income		4.58	%		5.38	%		6.40	%		6.49	%		6.60	%
Portfolio turnover rate		363	%		292	%		207	%		257	%		276	%

(a) For periods beginning with 12/31/99, net investment income (loss) has been computed using the average shares method.

(b) Total returns assume changes in share price and reinvestment of all dividends and distributions.

The accompanying notes are an integral part of these financial statements.

71

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	12/31/02			12/31/01			12/31/00
Net asset value, beginning of period	$	10.29		$	10.00		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (a)		0.25			0.40			— (d)
Net realized and unrealized gain (loss)	0.60			0.33			—
Total from investment operations	0.85			0.73			—
Less distributions from:
Net investment income		(0.28	)		(0.40	)		— (d)
Net realized gains	(0.36		)	(0.04		)	—
Total distributions	(0.64		)	(0.44		)	—
Net asset value, end of period	$	10.50		$	10.29		$	10.00
Total Return (b)		8.38	%		7.44	%		0.04	%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	87,148		$	77,631		$	100
Ratios to average net assets:
Net expenses (c)		0.64	%		0.65	%		0.65	%
Gross expenses (c)		0.64	%		1.37	%	570.50		% (e)
Net investment income (c)		2.37	%		3.04	%		4.38	%
Portfolio turnover rate		497	%		249	%		0	%

*	Commencement of operations.
(a)	For the periods ended 12/31/02 and 12/31/00, net investment income (loss) was computed using the average shares method.
(b)	Total returns assume changes in share price and reinvestment of all dividends and distributions. Periods of less than one year are not annualized.
(c)	Annualized for periods of less than one year.
(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.

72

The Lazard Funds, Inc.
Notes to Financial Statements
December 31, 2002

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 eleven 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 Equity Select Portfolio, Lazard International Small Cap Portfolio, Lazard Emerging Markets Portfolio, Lazard Bond Portfolio, Lazard High Yield 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 and other assets for which current 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 gain (loss) 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 State Street 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, 2002, the value of the securities on loan and corresponding collateral received were as follows:

	Securities
Portfolio	Loaned		Collateral
Mid Cap (1)	$	658,519	$	678,789
International Equity (2)		67,075,115		75,595,447
International Small Cap (1)		28,081,069		29,630,235
Emerging Markets (1)		30,704,545		32,785,785

⁽¹⁾ Collateral is cash.

⁽²⁾ Collateral is U.S. Treasury obligations.

In accordance with generally accepted accounting principles, any cash received as collateral for securities lending transactions is shown on the respective Portfolio of Investments. The related amount payable on return of the securities on loan, where cash is received as collateral, is shown on the respective Statement of Assets and Liabilities. During the year ended December 31, 2002, the income earned from securities lending, which is included in inter-

73

The Lazard Funds, Inc.
Notes to Financial Statements (continued)
December 31, 2002

est income on the Statement of Operations of the respective Portfolios, was as follows:

	Securities
Portfolio	Lending Income
Mid Cap	$	15,837
Small Cap		25,327
International Equity	1,244,158
International Small Cap		331,018
Emerging Markets		204,121

(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 (loss) on investments. Net realized gain (loss) on foreign currency transactions represents net foreign currency gain (loss) from forward foreign currency contracts, disposition of foreign currencies, currency gain (loss) 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 gain (loss) 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 gain (loss). When the contract is closed, the Portfolio records a realized gain (loss) equal to the difference between the value at the time it was opened and the value at the time it was closed. Such gain (loss) is disclosed in the realized or unrealized gain (loss) on foreign currency in the accompanying Statement of Operations of the respective Portfolios.

(f) Structured Investments—Strategic Yield Portfolio 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. The 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 or 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—Certain Portfolios 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, such as an exchange of floating rate payments for fixed rate payments. If forecasts of interest rates and other market factors are incorrect, investment performance will be lower than it 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 or 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 a Portfolio as unrealized gain or loss. The difference between the rates received and paid by a Portfolio constitutes investment income or loss.

74

The Lazard Funds, Inc.
Notes to Financial Statements (continued)
December 31, 2002

(j) Options Transactions— For hedging and investment purposes, certain Portfolios may purchase and write (sell) put and call options that are traded on U.S. and foreign securities exchanges and over-the-counter markets. The Portfolio pays a premium whether or not the option is exercised.

The Portfolio bears the risk of loss of any change in market value should the counterparty not perform under the contract. The risk involved in writing an option is that if the option is exercised the underlying security or other assets could then be purchased or sold by the Portfolio at a disadvantageous price. Put and call options purchased are accounted for in the same manner as portfolio securities and other assets. When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written.

Transactions in options written for the year ended December 31, 2002 were as follows:

	Number of
Strategic Yield Portfolio	Contracts		Premiums
Options outstanding at
beginning of the year	—		$	—
Options written	9,000			21,797
Options terminated in closing
purchase transactions	(2,500	)		(6,055	)
Options expired	(6,500	)	(15,742		)
Options outstanding
at December 31, 2002	—		$	—

(k) 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, 2002, 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		—		2,566,482
High Yield		1,150,441		6,288,085
Strategic Yield		14,900,897		22,094,886
Portfolio	Expiring 2008		Expiring 2009
International Equity	$	—	$	306,476,891
International Equity Select		—		10,906
International Small Cap		—		3,580,062
Emerging Markets		—		28,250,429
Bond		2,500,484		—
High Yield		9,656,682		20,597,062
Strategic Yield		9,399,400		16,205,277

Portfolio	Expiring 2010
Equity	$	29,011,082
Mid Cap		1,950,786
Small Cap		20,017,622
International Equity		401,228,521
International Equity Select		849,474
International Small Cap		12,123,813
Emerging Markets		39,743,070
High Yield		13,902,783
Strategic Yield		17,080,505

Of the total capital loss carryforward shown for International Equity Portfolio, $10,493,400 was acquired in the Lazard Global Equity Portfolio (“Global Equity”) 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, 2002, the following Portfolios elected to defer net capital and currency losses arising between November 1, 2002 and December 31, 2002, as follows:

Portfolio	Amount
Equity	$	946,742
Mid Cap		414,725
Small Cap		5,932,023
International Equity		40,737,305
International Equity Select		140,216
International Small Cap		8,533,177
Emerging Markets		628,507
High Yield		1,907,831
Strategic Yield		684,797
Mortgage		37,054

(l) Dividends and Distributions—The Fund intends to declare dividends from net investment income daily on shares of Bond Portfolio, High Yield Portfolio, Strategic Yield Portfolio and Mortgage Portfolio and to pay such dividends monthly. Dividends from net investment income, if any, on shares of Equity Portfolio, Mid Cap Portfolio, Small Cap Portfolio, International Equity Portfolio, International Equity Select Portfolio, International Small Cap Portfolio and Emerging Markets 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

The Lazard Funds, Inc.
Notes to Financial Statements (continued)
December 31, 2002

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	2002		2001		2002		2001
Equity:
Institutional	$	1,131,482	$	3,059,786	$	—	$	12,844,798
Open		159,184		771,802		—		3,720,332
Mid Cap:
Institutional		470,368		2,376,991		44,903		479,479
Open		139,569		1,001,436		13,324		199,669
Small Cap:
Institutional		5,757,212		27,137,886		9,940,624		72,650,586
Open		692,463		2,825,201		1,195,639		8,156,114
International
Equity:
Institutional		9,464,170		6,109,169		—		18,044,635
Open		202,681		337,300		—		1,003,217
International
Equity Select:
Institutional		318,477		4,765		—		—
Open		29,966		—		—		—
International
Small Cap:
Institutional		7,171,804		4,563,670		—		—
Open		26,978		30,803		—		—
Emerging
Markets:
Institutional		4,037,021		2,665,662		—		—
Open		82,176		34,843		—		—
Bond:
Institutional		1,779,401		2,628,400		—		—
Open		363,821		510,688		—		—
High Yield:
Institutional		7,756,049		6,992,230		—		—
Open		187,053		1,414,057		—		—
Strategic Yield:
Institutional		5,858,506		12,879,019		—		—
Open		225,134		445,881		—		—
Mortgage:
Institutional		5,067,450		664,767		30,918		49,395

As of December 31, 2002, 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	$	17,606	$—
Mid Cap		84,901	—
Small Cap		—	—
International Equity	21,475,741		—
International Equity Select		1,523	—
International Small Cap		—	—
Emerging Markets		202,532	—
Bond		—	—
High Yield		—	—
Strategic Yield		—	—
Mortgage		175,835	—

(m) Allocation of Expenses—Expenses not directly chargeable to a specific Portfolio are allocated among the Portfolios primarily on the basis of relative net assets. A Portfolio accrues distribution and service (12b-1) fees to its Open Shares. Each Portfolio’s income, expenses (other than class specific expenses) and realized and unrealized gains and losses are allocated proportionally each day between the classes based upon the relative net assets of each class.

(n) 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.

(o) Redemption Fee—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 a Portfolio are included as paid in capital on its Statement of Assets and Liabilities. During the year ended December 31, 2002, redemption fees were received as follows:

Portfolio	Redemption Fees
Equity	$	2,628
Mid Cap		49
Small Cap		305,054
International Equity		861,174
International Equity Select		2
International Small Cap		76,844
Emerging Markets		61,987
Bond		6,034
High Yield		118
Strategic Yield		10,842

76

The Lazard Funds, Inc.
Notes to Financial Statements (continued) December 31, 2002

(p) 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

3. Investment Management, Administrative and

   Distribution Agreements

The Fund has entered into investment management agreements (the “Management Agreements”) with Lazard Asset Management (the “Investment Manager”), a division of Lazard Frères & Co. LLC (“LF & Co.”). Pursuant to the Management Agreements, the Investment Manager regularly provides each Portfolio with investment research, advice and supervision and furnishes continuously an investment program for the Portfolio consistent with its investment objective and policies, including the purchase, retention and disposition of securities. Each Portfolio pays the Investment Manager a management fee, accrued daily and payable monthly, 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 Equity Select	0.85
International Small Cap	0.75
Emerging Markets	1.00
Bond	0.50
High Yield	0.75
Strategic Yield	0.75
Mortgage	0.40

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 Annual		Open Shares Annual
Portfolio	Operating Expenses		Operating Expenses
Mid Cap	1.05	%	1.35	%
International Equity Select	1.15		1.45
International Small Cap	N/A		1.43
Emerging Markets	N/A		1.60
Bond	N/A		1.10
High Yield	0.75		1.05
Mortgage	0.65		N/A

During the year ended December 31, 2002, the Investment Manager waived its management fee/reimbursed the Portfolios for other expenses as follows:

	Institutional Shares		Open Shares
	Amount Waived/		Amount Waived/
Portfolio	Reimbursed		Reimbursed
Mid Cap	$	93,844	$	41,001
International Equity Select	106,162			30,093
International Small Cap		—		15,757
Emerging Markets		—		21,670
Bond		—		29,978
High Yield	227,406			26,928

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 and 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 for the first six months of International Equity Select Portfolio’s operations. Thereafter, the monthly base and additional class fees were increased by 1/6 per month until March 2002, when the Portfolio’s net assets exceeded $25 million and the full monthly base and additional class fees became effective.

The Fund has a distribution agreement with LF & Co. pursuant to which LF & Co. acts as distributor for shares of each Portfolio and bears the cost of printing and mailing prospectuses to potential investors and of any advertising expenses incurred in connection with 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 its 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.

77

The Lazard Funds, Inc.
Notes to Financial Statements (concluded)
December 31, 2002

4. Securities Transactions and Transactions with Affiliates

Purchases and sales of portfolio securities (excluding short-term securities) for the year ended December 31, 2002 were as follows:

Portfolio	Purchases		Sales
Equity	$	107,851,247	$	136,773,187
Mid Cap		47,477,776		35,253,267
Small Cap		511,261,272		593,489,786
International Equity		1,198,070,667		1,428,240,278
International Equity Select		25,478,557		7,259,517
International Small Cap		274,797,967		111,740,622
Emerging Markets		142,781,825		103,585,896
Bond (1)		197,092,401		194,840,068
High Yield		156,953,594		153,722,768
Strategic Yield (2)		377,557,474		416,787,269
Mortgage (3)		196,076,190		157,707,439

(1)	Includes purchases and sales of U.S. Government securities of $159,746,274 and $137,948,733, respectively.
(2)	Includes purchases and sales of U.S. Government securities of $158,711,383 and $155,731,997, respectively.
(3)	Includes purchases and sales of U.S. Government securities of $194,189,849 and $151,357,708, respectively.

For the year ended December 31, 2002, no brokerage commissions were paid to LF& Co. for portfolio transactions executed on behalf of the Portfolios.

5. Line of Credit

The Fund has entered into a $50 million Line of Credit Agreement (the “Agreement”) with State Street 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 the 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, 2002, the Fund had borrowings under the Agreement as follows:

	Weighted
	Average Daily				Average
	Amount of		Maximum		Interest
Portfolio	Loan		Loan		Rate
International Equity	$	24,670,579	$	35,804,169	2.285	%

The Fund had no borrowings outstanding under the agreement at December 31, 2002.

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. Subsequent Event

Effective January 13, 2003, Lazard Asset Management, a division of LF & Co., reorganized the legal form of its operations to become a separate limited liability company, Lazard Asset Management LLC (“LAM LLC”). LAM LLC is a subsidiary of LF & Co. LAM LLC succeeded to the entire investment advisory business conducted by Lazard Asset Management. Accordingly, beginning on January 13, 2003, LAM LLC became the Fund’s Investment Manager.

78

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 Equity Select Portfolio (commenced operations on May 31, 2001), Lazard International Small Cap Portfolio, Lazard Emerging Markets Portfolio, Lazard Bond Portfolio, Lazard High Yield Portfolio, Lazard Strategic Yield Portfolio and Lazard Mortgage Portfolio) as of December 31, 2002 and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, or the period from commencement of operations to December 31, 2001 and the financial highlights for 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, 2002, 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, 2002, the results of their operations for the year then ended, 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 6, 2003

79

The Lazard Funds, Inc.
Proxy Voting Results
(unaudited)

A special meeting of shareholders was held on November 1, 2002, to vote on the following proposals. The proposals received the required number of votes of shareholders of the relevant Portfolio and were adopted.

Proposal 1: For all Portfolios, to elect a Board of Directors.

Director	For	Against	Abstain	Broker Non Vote
John J. Burke	317,994,375.638	—	850,901.715	—
Kenneth S. Davidson	317,983,919.390	—	861,357.963	—
William Katz	317,978,024.138	—	867,253.215	—
Lester Z. Lieberman	317,891,768.386	—	953,508.967	—
Richard Reiss, Jr.	317,988,867.138	—	856,410.215	—
Norman Eig	318,055,705.390	—	789,571.963	—
Herbert W. Gullquist	318,055,480.390	—	789,796.963	—
John Rutledge	317,953,004.138	—	892,273.215	—

Proposal 2: For Equity, Small Cap, International Equity, Bond and Strategic Yield Portfolios only, increase the Portfolio’s percentage limitation on lending securities.

Portfolio	For	Against	Abstain	Broker Non Vote
Equity	4,609,214.456	153,402.366	77,406.000	2,028,086.000
Small Cap	19,679,601.591	1,569,831.054	40,294.878	6,227,105.000
International Equity	119,196,308.520	5,473,620.972	230,302.646	38,798,585.000
Bond	2,604,269.300	23,301.000	6,213.000	42,231.000
Strategic Yield	11,259,544.396	24,693.403	20,847.921	9,304,415.000

Proposal 3: For Equity Portfolio only, expand the Portfolio’s ability to invest in securities of a single issuer.

Portfolio	For	Against	Abstain	Broker Non Vote
Equity	4,604,538.204	202,342.618	33,142.000	2,028,086.000

80

The Lazard Funds, Inc.
Board of Directors and Officers Information
(unaudited)

Name (Age)	Position(s) with	Principal Occupation(s) During Past 5 Years
Address	the Fund*	and Other Directorships Held
Non-Interested Directors:
John J. Burke (74)	Director	Retired; Former Vice Chairman and Director, Montana Power Company.
50 Burning Tree Lane	since May 1991
Butte, MT 59701
Kenneth S. Davidson (57)	Director	President, Davidson Capital Management Corporation; Vice Chairman
Davidson Capital	since August 1995	of the 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 (48)	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 (72)	Director	Private Investor; Director, Dowel Associates, a real estate developer;
25 Lindsley Drive	since October 1991	Chairman, Healthcare Foundation of NJ; Director, Cives Steel Co.; Director,
Morristown, NJ 07960		Northside Power Transmission Co.; Advisory Trustee, New Jersey Medical
		School; Trustee and Chairman of Investment Committee, Clarkson University.
Richard Reiss, Jr. (58)	Director	Managing Partner, Georgica Advisors LLC, an investment manager;
Georgica Advisors LLC	since May 1991	Director, Lazard Alternative Strategies Fund, LLC; Director, O’Charley’s,
Carnegie Hall Tower		Inc., a restaurant chain.
152 West 57th Street
46th Floor
New York, NY 10019
Interested Directors**:
Norman Eig (61)	Chairman of the	Managing Director and Co-Chief Executive Officer of the Investment Manager.
Lazard Asset Management LLC	Board
30 Rockefeller Plaza	since May 1991
New York, NY 10112-6300
Herbert W. Gullquist (65)	President and Director	Managing Director, Co-Chief Executive Officer and Chief Investment Officer
Lazard Asset Management LLC	since May 1991	of the Investment Manager.
30 Rockefeller Plaza
New York, NY 10112-6300
John Rutledge (54)	Director	President, Rutledge Capital, LLC, an economics and investment advisory
Rutledge Capital, LLC	since May 1991	firm; Director, Strategic Optical Holdings Corp.; Director, Framed Picture
101 Dingletown Road		Enterprise; Director, Crom Corporation, a water storage system manufacturer;
Greenwich, CT 06830		Director, Earle M. Jorgensen Co., a steel service company; Director,
		Amerindo Funds, Inc., a family of three investment portfolios; Director,
		Vingage Corporation, a streaming video company; Chairman of Advisory
		Board, Saugatuck Capital; Chairman, Stairmaster Sports Medical; Chairman,
		Adobe Corp., an evaporative cooler company.

*	Each Director serves an indefinite term, until his successor is elected, and each Director serves in such capacity for 15 Lazard portfolios.
**	Mr. Eig and Mr. Gullquist are “interested persons” (as defined in the Act) of the Fund (“Interested Director”) because of their positions with the
	Investment Manager; 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.

81

The Lazard Funds, Inc.
Board of Directors and Officers Information (concluded)
(unaudited)

Name (Age)	Position(s) with
Address	the Fund*	Principal Occupation(s) During Past 5 Years
Officers:
Nathan A. Paul (29)	Vice President	Director and General Counsel of the Investment Manager; from
Lazard Asset Management LLC	and Secretary	September 1997 to October 2000, an Associate at Schulte Roth & Zabel LLP,
30 Rockefeller Plaza	since April 2002	a law firm.
New York, NY 10112-6300
Bernard J. Grzelak (31)	Treasurer	Vice President of the Investment Manager; from August 1993 to September
Lazard Asset Management LLC	since October 2000	2000, a Manager with Deloitte & Touche LLP.
30 Rockefeller Plaza
New York, NY 10112-6300
Brian D. Simon (40)	Assistant Secretary	Vice President of the Investment Manager; from July 1999 to October 2002,
Lazard Asset Management LLC	since November 2002	Vice President, Law & Regulation at J. & W. Seligman & Co.; from July 1997
30 Rockefeller Plaza		to July 1999, an Associate at Schulte Roth & Zabel LLP, a law firm.
New York, NY 10112-6300
Stephen St. Clair (44)	Assistant Treasurer	Fund Administration Manager of the Investment Manager.
Lazard Asset Management LLC	since July 2000
30 Rockefeller Plaza
New York, NY 10112-6300

* Each Officer serves an indefinite term, until his successor is elected, and each Officer serves in such capacity for 15 Lazard portfolios.

82

Tax Information (Unaudited)
The Lazard Funds, Inc.
Year Ended December 31, 2002

The following tax information represents year end disclosure of a tax benefit passed through to shareholders for 2002.

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	96.71	%
Mid Cap	14.41
Small Cap	15.09
International Equity	—
International Equity Select	—
International Small Cap	—
Emerging Markets	—
Bond	—
High Yield	4.81
Strategic Yield	2.31
Mortgage	—

83

The Lazard Funds, Inc.
30 Rockefeller Plaza
New York, New York 10112-6300
Telephone: 800-823-6300
http://www.LazardNet.com

Investment Manager
Lazard Asset Management LLC
30 Rockefeller Plaza
New York, New York 10112-6300
Telephone: 800-823-6300

Distributor
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, New York 10112-6300

Custodian
State Street Corporation
225 Franklin Street
Boston, Massachusetts 02110

Transfer Agent and Dividend Disbursing Agent
Boston Financial Data Services, Inc.
P.O. Box 8514
Boston, Massachusetts 02266-8514
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

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.

The Lazard Funds, Inc.	30 Rockefeller Plaza	Tel 800-823-6300
	New York, NY 10112- 6300	www.LazardNet.com

M F 0 3 1 0 1