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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number           811-06312

The Lazard Funds, Inc.
(Exact name of registrant as specified in charter)

30 Rockefeller Plaza
New York, New York 10112
(Address of principal executive offices)           (Zip code)

Nathan A. Paul, Esq.
Lazard Asset Management LLC
30 Rockefeller Plaza
New York, New York 10112
(Name and address of agent for service)

Registrant's telephone number, including area code:           (212) 632-6000

Date of fiscal year end:           12/31

Date of reporting period:           12/31/07



ITEM 1. REPORTS TO STOCKHOLDERS.


Lazard Funds Annual Report
 
U.S. Equity
 
International Equity
 
Emerging Markets
Lazard U.S. Equity Value Portfolio
 
Lazard International Equity Portfolio
 
Lazard Emerging Markets Portfolio
Lazard U.S. Strategic Equity Portfolio
 
Lazard International Equity Select Portfolio
 
 
Lazard Mid Cap Portfolio
 
Lazard International Strategic Equity Portfolio
 
Fixed Income
Lazard Small Cap Portfolio
 
Lazard International Small Cap Portfolio
  Lazard High Yield Portfolio
Lazard U.S. Small Cap Equity Growth Portfolio
       
 
 Lazard Funds
 
 

 

The Lazard Funds, Inc.
 
 

 
Table of Contents
 
Page
Investment Overviews
 
2
Performance Overviews
 
11
Information About Your Portfolio’s Expenses
 
22
Portfolio Holdings Presented by Sector
 
25
Portfolio Holdings Presented by Credit Rating
 
26
Portfolios of Investments
   
Lazard U.S. Equity Value Portfolio
 
27
Lazard U.S. Strategic Equity Portfolio
 
29
Lazard Mid Cap Portfolio
 
31
Lazard Small Cap Portfolio
 
33
Lazard U.S. Small Cap Equity Growth Portfolio
 
36
Lazard International Equity Portfolio
 
38
Lazard International Equity Select Portfolio
 
40
Lazard International Strategic Equity Portfolio
 
42
Lazard International Small Cap Portfolio
 
44
Lazard Emerging Markets Portfolio
 
46
Lazard High Yield Portfolio
 
48
Notes to Portfolios of Investments
 
51
Statements of
   
Assets and Liabilities
 
54
Operations
 
56
Changes in Net Assets
 
58
Financial Highlights
 
64
Notes to Financial Statements
 
75
Report of Independent Registered Public Accounting Firm
 
80
Proxy Voting Results
 
81
Board of Directors and Officers Information
 
82
Other Information
 
84
Tax Information
 
87

Please consider a Portfolio’s investment objectives, risks, charges and expenses carefully before investing. For more complete information about The Lazard Funds, Inc., you may obtain the prospectus by calling 800-823-6300, or online, at www.LazardNet.com. Read the prospectus carefully before you invest. The prospectus contains investment objectives, risks, charges, expenses and other information about Portfolios of The Lazard Funds, Inc., which may not be detailed in this report.

Distributed by Lazard Asset Management Securities LLC. 
 



The Lazard Funds, Inc.
Investment Overviews
 


World Markets Overview
 
U.S. Equities: Growth Stocks Reign at Every Capitalization Tier 
 
Equity markets were volatile in 2007, and many trends in place in recent years reversed. After an extended period of easily available credit, increasing defaults among subprime U.S. mortgages led to a sharp rise in the yield spreads above Treasurys among a wide variety of debt instruments, including the LIBOR rates at which banks make loans to one another. Throughout the year, the market grappled with intensifying credit problems on the one hand and continued robust global growth and the efforts of central banks to stabilize credit markets on the other. This led to a volatile market, with sharp swings in market sentiment. Financial stocks were particularly hard hit in the decline, based on concerns that they would suffer losses in their investment portfolios and reduced fee income due to a slowdown in new security issuance. In addition, investment banks that had extended financing to fund recent mergers faced losses due to their inability to resell the loans profitably in a more risk-averse environment. More cyclical areas of the market, such as materials, energy, industrials and technology, outperformed during the year, as investors expected emerging economies to continue to grow strongly even if weakness in the U.S. housing market led to a significant economic slowdown in the United States. In addition, the aggressive cuts in interest rates triggered fears that easier monetary policy could cause an upturn in inflation, increasing the attractiveness of hard assets such as commodities. The utilities and consumer staples sectors also outperformed, as investors sought defensive characteristics amid an uncertain economic outlook. Conversely, financial stocks underperformed, and consumer discretionary stocks were weak due to the negative impact of declining housing prices on consumer confidence.
 
During 2007, large-cap stocks outpaced small caps, as investors began to appreciate their more stable cash flow and dividend yields. Large-cap stocks, as measured by the Russell 1000® Index, gained 5.77% for the year, outpacing small-cap stocks which lost 1.57% as measured by the Russell 2000® Index. Mid-cap stocks also outperformed their small-cap brethren, as the Russell Midcap® Index rose 5.60% for the year. In addition, growth stocks outperformed
 
value stocks for 2007 at every capitalization tier by a double-digit spread. Large-cap growth stocks, as measured by the Russell 1000 Growth Index, rose 11.81%, while large-cap value stocks lost 0.17%, as measured by the Russell 1000 Value Index. Mid-cap growth stocks also enjoyed an edge over their value peers, as the Russell Midcap Growth Index rose 11.43%, beating the 1.42% loss of the Russell Midcap Value Index. The growth-versus-value advantage also affected small-cap returns. Small-cap growth stocks, as measured by the Russell 2000 Growth Index, rose 7.05%, while small-cap value stocks, as measured by the Russell 2000 Value Index, finished with a 9.78% loss.
 
International Equities: German Shares Lead Europe
 
International equity markets ended 2007 a little ahead in local-currency terms. However, in light of the weak U.S. currency, this was another year of double-digit returns for U.S.-dollar investors. Divergence among countries and sectors was marked, and the market environment changed materially over the summer. As the extent of bad housing debts in the United States became clearer, stocks perceived as exposed to the credit economies of the United States, United Kingdom and Ireland, principally in the financials, building materials, and consumer discretionary sectors, performed poorly. Classically defensive sectors, such as telecom services and consumer staples, performed well as doubts grew about the outlook for corporate profits. The utilities sector benefited from a combination of rising power prices and perceived defensive characteristics, but pharmaceutical stocks continued to disappoint due to poor industry-specific news flow. Stocks perceived as principally exposed to growth in China and other emerging markets were very strong over the year, driven mostly by stocks in commodity areas (oil, mining, steel) as well as capital goods companies. Emerging markets equities generally rose materially in 2007. Japan was the weakest market, as the domestic economy slipped back into recession and attempts to take a more Anglo-Saxon approach to corporate strategy and balance sheets met with strong resistance. German stocks performed well, with strong momentum for internal change across many large German corporations, while Hong Kong and Australian stocks were very strong on the back of the booms in China and commodities. Finally we saw small- and mid-cap stocks materially underperform
 
2

 

The Lazard Funds, Inc.
Investment Overviews (continued)
 


larger companies, whose valuation and defensive characteristics are starting to become more appreciated in a more nervous market.
 
In 2007, international small-cap stocks ended their multiyear streak of outperformance over their large-cap counterparts. International small-cap stocks gained 1.45% for the year, as measured by the Morgan Stanley Capital International (MSCI®) Europe, Australasia, and Far East (EAFE®) Small Cap Index, while international large-cap stocks returned 11.17%, as measured by the MSCI EAFE Index.
 
Emerging Markets Equities: Another Record Year
 
Emerging markets equities recorded a record fifth consecutive positive year in 2007, with returns of almost 40%, as measured by the MSCI Emerging Markets Index. Most country markets finished the year higher with Peru, Turkey, Brazil, India and China being the best performers.
 
The year began with a modest fall, after having enjoyed strong performance in 2006. Markets then began to correct sharply at the end of February, as the Shanghai market encountered a steep decline. This was further amplified by investors’ concerns about the U.S. subprime mortgage market. Despite the ensuing volatility, most developing-country stock markets were remarkably resilient and finished the first quarter higher. A dramatic rise was witnessed during the second quarter as investors became more optimistic about the global economic outlook, despite evidence of inflationary pressures and higher interest rates. Shares experienced a very volatile, but mostly stronger, market environment during the third quarter. After a strong July, many markets plummeted in August as global investors became concerned about the quality of mortgage-debt assets and the financial health of consumption in the United States. After the U.S. Federal Reserve addressed this, in September, with a 50 basis point drop in short-term interest rates, capital markets recovered very strongly. The fourth quarter encompassed a volatile and modestly stronger market environment. After a robust period in October, many markets experienced profit-taking in November as global investors, once again, became concerned about subprime debt and the financial health of consumption in the United States. In reaction to this, the U.S. Federal Reserve instituted two separate 25 basis point cuts in short-term interest rates, which buoyed capital markets. By Index sector, industrials, materials, telecom
 
services and energy performed better than the MSCI Emerging Markets Index over the year. The worst performing sectors for the year were information technology, consumer staples and consumer discretionary.
 
High Yield Fixed Income: Risk Reshapes the Bond Markets
 
Credit quality and risk were words rarely heard over the past few years as a glut of new issues spilled into the market at tight spreads. Levered yield buyers tripped over each other to buy these securities at consistently tighter spreads. This changed in the second half of 2007, when questions arose about structured asset-backed securities, their investment-grade or enhanced ratings and their ultimate liquidity. As a result of these issues, demand for high yield slowed and a number of troubled funds sought to sell some of their better-quality high yield. In the ensuing flight to quality, high-yield credit spreads widened out to more opportunistic levels in 2007. U.S. Treasury securities rallied during the latter part of the year, with ten-year Treasury yields falling about 65 basis points for all of 2007. Better-quality high yield, as represented by the double B Index, widened relative to Treasury securities but not nearly as much as the lower tiers. Double B spreads widened out to about 460 basis points from 200 basis points at the beginning of the year. This largely reflected the pressure on the double B rated homebuilders, bank and mortgage lenders and automotive finance companies that are part of the double B Index. Stripping out these troubled industries from the Index would produce a double B spread of approximately 370 basis points. This is the first time in more than four years that solid double B credits might be purchased at such spreads.
 
Lazard U.S. Equity Value Portfolio
Lazard U.S. Strategic Equity Portfolio
Lazard Mid Cap Portfolio
 
For the year ended December 31, 2007, Lazard U.S. Equity Value Portfolio’s Institutional Shares posted a total return of 1.65%, while Open Shares posted a total return of 1.59%, as compared with the (0.17)% return of the Russell 1000 Value Index.
 
For the year ended December 31, 2007, Lazard U.S. Strategic Equity Portfolio’s Institutional Shares posted a total return of 0.33%, while Open Shares posted a total return of (0.07)%, as compared with the 5.49% return of the S&P 500® Index.
 
3

 

The Lazard Funds, Inc.
Investment Overviews (continued)
  

 
For the year ended December 31, 2007, Lazard Mid Cap Portfolio’s Institutional Shares posted a total return of (2.93)%, while Open Shares posted a total return of (3.17)%, as compared with the 5.60% return of the Russell Midcap Index.
 
The Portfolios’ performance during 2007 can be broken down into two distinct periods, as the market environment changed dramatically midway through the year. Each Portfolio benefited from solid broadbased stock selection during the first half of the year, in some cases driven by robust corporate activity, particularly in the financials and technology sectors, as several holdings were acquired. U.S. Equity Value and U.S. Strategic Equity Portfolios took profits in First Data, Alltel Corp and A.G. Edwards after these companies agreed to be acquired, and their shares reached our target valuation. Similarly, Mid Cap Portfolio took profits in several holdings that became buyout targets and reached our target valuation, including Alltel Corp., CDW Corp., A.G. Edwards, Solectron and Avaya. The Portfolios also benefited from stock selection in the consumer staples sector during the first half of the year, as shares of Coca-Cola Enterprises and Smithfield Foods rose. Coca-Cola Enterprises, which bottles and distributes Coca-Cola Company (Coke) products, saw its stock rise based on reports that Coke would purchase another beverage company in an effort to improve its portfolio of products. We believe that this kind of strategic purchase could significantly benefit Coca-Cola Enterprises.
 
The market environment changed during the second half of the year, as volatility increased due to losses in subprime mortgages, significant write downs at some large financial institutions and an overall slowdown in housing. Each Portfolio’s performance was hurt by stock selection in the consumer discretionary sector, due to uncertainty about the impact of the housing slowdown on consumer spending. Generally weak consumer spending, as well as a decline in the number of department stores where the company’s traditional brands are sold, hurt the performance of retailer Liz Claiborne. However, we believe that management’s strategy of using the cash flow from mature brands to fund expansion into faster-growing brands is sound. Holdings in J.C. Penney also declined, after the company reported disappointing earnings due to slower sales and warmer-than-expected weather. However, our longterm view for the company is still positive, as we
 
believe it will benefit from supply chain improvements and a focus on exclusive brands. Weakness in several other consumer discretionary holdings, including the shares of phone-directory provider R.H. Donnelley also detracted from the Portfolios’ performance in this sector.
 
For U.S. Equity Value Portfolio, stock selection in the technology sector helped performance as shares of VMware posted significant gains after one of the more successful initial public offerings in recent history. The company is a spin-off of storage giant EMC and specializes in software for virtual infrastructure solutions. We took profits in VMware after it surpassed our target valuation. Some of the Portfolio’s larger-cap technology shares, such as Microsoft and IBM, also performed well this year. For example, Microsoft rose sharply after the company’s most recent earnings were strong, due to solid PC demand and robust sales of premium operating systems. The Portfolio also benefited from stock selection in the financials sector, driven by gains in Bank of New York Mellon.
 
For U.S. Strategic Equity Portfolio, stock selection in telecom services detracted from performance, as shares of Sprint Nextel declined. The company has lost market share in the wireless business and a management change was implemented during the fourth quarter to address this issue. We believe the company will benefit from renewed efforts to retain subscribers as it focuses on simplified calling plans and improved customer service. In addition, stock selection in health care hurt returns due to weakness in the shares of Sepracor. Sales of the company’s key products, including the sleep-aid drug Lunesta, were disappointing and research and marketing costs rose more than expected. We subsequently sold this stock from the Portfolio. In contrast, stock selection in the financials sector benefited the Portfolio, driven by gains in Bank of New York Mellon, an asset manager with limited credit exposure. The company’s most recent earnings were better than expected due to strong results in its asset-management and asset-servicing businesses, and it expects to realize even greater synergies as a result of a recently completed merger.
 
For Mid Cap Portfolio, stock selection in the industrials sector hurt performance, due to the Portfolio’s exposure to U.S.-centric industrials and a lack of exposure to more global areas such as construction and engineering. In particular, shares of Pitney Bowes
 
4



The Lazard Funds, Inc. 
Investment Overviews (continued)
 

 
declined after the company announced a disappointing quarter. Earnings for the most recent quarter were below estimates and lower than the same period a year ago, as sales were hurt by weakness in the financial-services industry. Industrial holdings with exposure to housing, such as Masco and USG, also detracted from performance. Despite the housing slow down, Masco continues to generate a significant amount of free cash flow, which it is using to buy back stock and pay an attractive dividend.
 
2007 was a challenging year, due to turmoil in the credit markets and as valuation measures in general, and free-cash-flow yield in particular, were not good predictors of stock performance, particularly in the second half of the year. Amid uncertainty about U.S. growth, investors favored the strong-performing sec-tors expected to benefit from global growth at the expense of the sectors more reliant on the U.S. economy. However, recent market volatility has created opportunities to build positions in companies that are trading at compelling valuations, and we believe that these Portfolios are well-positioned to benefit from those companies that are attractively valued yet offer high returns on capital and high levels of free cash flow.
 
Lazard Small Cap Portfolio
 
For the year ended December 31, 2007, Lazard Small Cap Portfolio’s Institutional Shares posted a total return of (6.38)%, while Open Shares posted a total return of (6.60)%, as compared with the (1.57)% return of the Russell 2000 Index.
 
Although the Portfolio had kept pace with the Russell 2000 Index through the first half of the year, it lost ground in the second half. In the health care sector, the Portfolio’s underweight position in biotechnology stocks detracted from returns during the year, as we have historically avoided companies and industries that do not generate cash flows or have sustainable sales revenues.
 
In addition, we underestimated the severity of the housing and construction downturn, and several holdings that we bought on weakness continued to fall as market conditions further deteriorated. Poor performers over the period included holdings in Beacon Roofing Supply, Insteel Industries, Houston Wire & Cable and Watsco, which are all suppliers of various products and services to both the commercial and residential building markets. Although we
 
were aware of the various degrees of residential-housing exposure within these companies, we believed that their stock prices already reflected the worst-case scenarios and that there were positive opportunities for these cash-generating businesses. However, concerns that economic weakness could impact the commercial side of these businesses has continued to keep these stocks under pressure. While conditions remain difficult, we do believe that these companies have solid business models.
 
In the technology sector, Portfolio holdings with exposure to the semiconductor industry also performed poorly. Integrated Device Technology, Actel, LTX and Benchmark Electronics were all down over 25% for the year, based on concerns related to the cyclicality of the semiconductor industry. Actel and LTX were subsequently sold from the Portfolio, as we believed there was better appreciation potential in other stocks.
 
On the positive side, the consumer discretionary sector was a good source of returns for the Portfolio. Despite difficult conditions for many companies that rely on consumer spending, several holdings continued to post strong results. Bally Technologies, a gaming equipment and services provider, was up over 150% for the year as the company continued to execute well and posted robust earnings increases. Rare Hospitality, a steak-house operator, was another key contributor to returns, as Darden Restaurants purchased the company at a significant premium. As a result, we took profits in Rare Hospitality and no longer own the stock. Aeropostale, a teen apparel retailer, was another strong performer in a challenging retail environment.
 
Due to continued concerns related to a slowdown in the economy and weaker consumer spending, we are taking a more cautious approach and focusing on companies with high visibility into earnings. As many companies across the small-cap universe have come down in price and valuation, we will also use this weakness as an opportunity to upgrade the quality of the Portfolio.
 
Lazard U.S. Small Cap Equity Growth Portfolio
 
For the year ended December 31, 2007, Lazard U.S. Small Cap Equity Growth Portfolio’s Institutional Shares posted a total return of 13.09%, while Open Shares posted a total return of 13.04%, as compared with the 7.05% return of the Russell 2000 Growth Index.
 
5

 

The Lazard Funds, Inc. 
Investment Overviews (continued)
 

 
The primary drivers of the Portfolio’s strong perfor-mance for 2007 were stock selection in industrials, technology and consumer discretionary. The only area of weakness was stock selection and an underweight position in the health care sector.
 
During the year, good stock opportunities continued to be found in the industrials sector. Huron Consulting, a provider of financial and operational consulting services, was a strong performer as the company continued to execute well and delivered solid earnings numbers throughout the year. BE Aerospace, a manufacturer of interior products for aviation aircraft, RBC Bearings, a maker of precision bearings for a variety of industrial end uses, and Kennametal, a global supplier of precision tool equipment, all benefited from strong export markets and growing international sales. These companies were four of the Portfolio’s top holdings, which greatly benefited performance.
 
Stock selection in the technology sector also boosted performance, and the technology stocks owned by the Portfolio generally fell into two categories. Our holdings in small, but dominant, companies in a specific technology niche include AuthenTec, a developer of fingerprint authentication sensors, Concur Technologies, a provider of eCommerce software services for business travel, and Synaptics, a developer of custom-designed user-interface systems for mobile computing. These companies have a leading market share and benefit from the technology network effect to retain their competitive advantages. Our other technology holdings include well run businesses in strong secular-growth industries, such as Rubicon Technology, a manufacturer of synthetic sapphires for LED displays and optical applications, Interactive Intelligence, a provider of automated and interactive communication systems, and Atheros Communications, a developer of WiFi network technologies. All of these stocks performed well in 2007, but we sold Atheros when the downside risk to valuation appeared greater than the upside opportunity.
 
Stock selection in the consumer discretionary sector also added value during the year as the Portfolio’s holdings returned over 10% while the benchmark Index lost 2.5% in this sector. Our ability to find companies that serve specialty and niche markets proved successful, as many other companies were hard hit by growing fears of a consumer slowdown
 
due to ongoing credit market and recession concerns. Crocs, a maker of closed-cell resin shoes, performed strongly over the period, despite pulling back in the fourth quarter. Investors were concerned that the company’s inventory build up was a signal of slowing growth, but we believe the build up is part of Croc’s natural growth as it continues to expand its product offerings and grow its business at an impressive double-digit pace.
 
The only area of weakness for the Portfolio in 2007 was health care. We are typically underweight in this sector as many companies in the biotech industry do not generate cash or have any ongoing sales revenue. We look to invest in profitable companies and in a risk-averse environment. It was surprising to see the health care sector take market leadership, although this was likely due to the sector’s lack of consumer or housing exposure, which made it a defensive play. Several of the stocks that we did own, such as Emergent Biosolutions, Sirona Dental and Mentor, all disappointed and were sold out of the Portfolio as the investment thesis for each was no longer intact.
 
In this volatile market, uncertainty seems to be around every corner and companies are severely punished for even hinting at an earnings miss. Stocks seem to be moving on rumors and limited news flow. Within this environment, we are staying focused on the fundamentals and individual events that will ultimately drive the long-term value of the businesses we own.
 
Lazard International Equity Portfolio
 
For the year ended December 31, 2007, Lazard International Equity Portfolio’s Institutional Shares posted a total return of 10.96%, while Open Shares posted a total return of 10.57%, as compared with the 11.17% return of the MSCI EAFE Index.
 
During the year, stock selection in the consumer staples sector aided performance as InBev shares benefited from the company’s cost reductions in Western Europe as well as strong volume growth in Brazil. Shares of Nestle and Unilever also rose, as both companies continued to improve margins, while the Portfolio’s tobacco holdings were boosted by industry consolidation. Stock selection in the telecom services sector also helped performance, as shares of Turkcell rose. The Turkish wireless provider generated strong
 
6

 

The Lazard Funds, Inc. 
Investment Overviews (continued)
 

 
results, as it was able to maintain market share without reducing prices. In addition, shares of Singapore Telecommunications performed well, as the company benefited from continued strong growth in its emerging-markets businesses. Conversely, performance was hurt by the Portfolio’s lack of exposure to mining companies, which continued to rise amid resilient commodity prices and expectations of continued strong growth in the commodity-intensive emerging markets. We believe these shares continue to discount an extended period of commodity prices well above historical norms. Stock selection in the financials sector also detracted from performance, as Japanese holdings, such as Sumitomo Trust, Sumitomo Mitsui Financial and Nomura, declined. Turmoil in the global credit markets may deter the Bank of Japan from raising interest rates, limiting the potential for these companies to increase their net interest income. However, we believe their profitability has already improved dramatically, as the Japanese economy emerges from extended weakness, and that this profitability improvement should persist as the economy continues to normalize. We subsequently sold Nomura in the fourth quarter, as we believed there was greater appreciation potential in our other large Japanese financial holdings.
 
As investors began to question the sustainability of economic growth during the last six months, many market trends reversed, with larger stocks outperforming small-cap stocks and more consistently profitable companies outperforming deeper cyclicals. We believe this reversal has further to go and that the Portfolio is well positioned for such an environment, as the valuations of high-quality, more consistently profitable companies remain attractive despite their recent outperformance.
 
Lazard International Equity Select Portfolio
 
For the year ended December 31, 2007, Lazard International Equity Select Portfolio’s Institutional Shares posted a total return of 9.25%, while Open Shares posted a total return of 8.92%, as compared with the 11.17% return of the MSCI EAFE Index.
 
Good stock selection in the telecom services sector benefited the Portfolio’s performance during 2007, as emerging markets holdings Mobile TeleSystems (Russia) and Turkcell (Turkey) posted solid gains. Shares of Vodafone and Singapore Telecommunications also performed well. Returns were also boosted by stock selection
 
 
in the consumer staples sector, as shares of Nestle, Heineken and Unilever rose due to continued margin improvements. The Portfolio’s tobacco holdings, such as Imperial Tobacco and British American Tobacco, also posted gains due to industry consolidation. The Portfolio’s stock selection in the consumer discretionary sector added value during the period, helped by gains in the shares of Adidas. The company has experienced significant margin improvement and cost synergies from its integration of Reebok, and its order backlog was strong which bodes well for future sales. Gains in Daimler shares, following the company’s decision to sell its Chrysler division, also helped returns in this sector. Conversely, performance was hurt by the Portfolio’s lack of exposure to mining companies, which continued to rise amid resilient commodity prices and expectations of continued strong growth in the commodity-intensive emerging markets. We believe these shares continue to discount an extended period of commodity prices well above historical norms. Stock selection in the financials sector also detracted from performance, as Japanese holdings, such as Sumitomo Mitsui Financial and Nomura, declined. Turmoil in the global credit markets may deter the Bank of Japan from raising interest rates, limiting the potential for these companies to increase their net interest income. However, we believe their profitability has already improved dramatically, as the Japanese economy emerges from extended weakness, and that this profitability improvement should persist as the economy continues to normalize.
 
As investors began to question the sustainability of economic growth during the last six months, many market trends reversed, with larger stocks outperforming small-cap stocks and more consistently profitable companies outperforming deeper cyclicals. We believe this reversal has further to go and that the Portfolio is well positioned for such an environment, as the valuations of high-quality, more consistently profitable companies remain attractive despite their recent outperformance.
 
Lazard International Strategic Equity Portfolio
 
For the year ended December 31, 2007, Lazard International Strategic Equity Portfolio’s Institutional Shares posted a total return of 12.88%, while Open Shares posted a total return of 12.37%, as compared with the 11.17% return of the MSCI EAFE Index.
 
7

 

The Lazard Funds, Inc. 
Investment Overviews (continued)
 

 
Overall, the Portfolio ended the year somewhat ahead of the broader market, with a very strong fourth-quarter performance compensating for a disappointing start to the year.
 
Positive contributors to performance for the year included Daimler, which is in the middle of a substantial restructuring and sold its Chrysler division to a private-equity firm in the first half of the year. In the energy sector, the Portfolio’s holdings in OMV and Cairn Energy performed well, due to their attractive valuation in a higher oil-price environment. The Portfolio also owned Julius Baer, which performed strongly based on the successful restructuring of its private bank. Holdings in Gaz de France performed well as the merits of its merger with Suez gained greater appreciation. In addition, the tobacco industry’s emerging-markets growth, pricing power, oligopolistic competition, cost reductions and very high free cash flows once again proved attractive to investors, benefiting the Portfolio’s holdings in Japan Tobacco, Imperial Tobacco, Eastern Tobacco in Egypt and British American Tobacco. Emerging-markets mobile-telecom holdings Mobinil and Turkcell performed strongly, driven by their low valuations and excellent operating results. Turkish bank holdings Asya Katilim Bankasi and Turkiye Halk Bankasi also contributed to performance, although we sold the former after it reached our target valuation.
 
In contrast, stock selection in the materials sector significantly detracted from the Portfolio’s performance, as we did not own stocks in the commodity areas of mining, steel and chemicals, which enjoyed margins, returns, and valuations that were very materially above historic levels. However, the market continued to invest in these companies in the belief that strong demand and a delayed supply response would allow these super-normal profits to be maintained for an extended period. Shares of Irish building-materials company CRH, also hurt performance in this sector, as the stock declined based on concerns about the company’s U.S. construction exposure. However, our investment in Indian cement company Grasim performed very well, partially offsetting this drag on performance. The Portfolio’s performance also suffered from U.K. and Irish macroeconomic exposure through holdings in DIY retailer Kingfisher, broadcaster ITV, travel company Thomas Cook, and Irish banks. We subsequently sold Kingfisher, as we believed that rising rates in the
 
United Kingdfom could negatively impact sales momentum. Shares of U.K. mortgage lender Northern Rock were particularly weak as its business model started to come under pressure in a changed debt-market environment. However, we recognized this emerging risk and sold the stock before its major collapse. In addition, the Portfolio’s Japanese financials performed poorly as a weak domestic economy hampered loan growth and the potential for interest rate rises, thus depressing margin expansion. Shares of Keyence, a Japanese technology holding, also performed poorly as the company suffered from low levels of technology capital expenditures. We sold Keyence based on the disappointing outlook for its business.
 
We have seen a material change in debt markets since the summer. Going forward, we believe both consumers and companies could find it harder and more expensive to borrow money to spend or invest. This is likely to impact asset prices and may cause some slowdown in global GDP growth, especially in credit-driven economies such as the United States and United Kingdom. It remains unclear how large the impact may be or to what extent it spills over into China and other emerging markets, thus causing considerable uncertainty on the outlook for corporate profits. We remain confident that our focus on stock selection and on the combination of sustainably high or improving returns, at attractive valuations, should be well placed in a variety of market conditions as shown by the track record of the strategy since inception.
 
Lazard International Small Cap Portfolio
 
For the year ended December 31, 2007, Lazard International Small Cap Portfolio’s Institutional Shares posted a total return of (4.61)%, while Open Shares posted a total return of (4.79)%, as compared with the 1.45% return of the MSCI EAFE Small Cap Index.
 
During the period, the primary source of the Portfolio’s underperformance was stock selection within the consumer discretionary and industrials sectors, as economically sensitive stocks were weak, particularly those with U.S. exposure. This was countered by good stock selection in energy and materials sectors. Geographically, Ireland and Australia underperformed, while the Netherlands was strong.
 
8

 

The Lazard Funds, Inc. 
Investment Overviews (continued)
 

 
Fugro, a Netherlands-based oil-services company, was a significant outperformer during the year. Fugro is the world’s leading provider of specialty seismic services to the energy, mining, and construction sectors. The company published strong results, particularly in relation to its offshore-services segment. With oil prices continuing to remain high, demand for Fugro’s services are extremely robust. In addition, the company continues to expand its fleet of vessels, which may lead to higher day rates, lower operating costs, and better utilization rates. We believe this will result in improved margins and earnings, going forward.
 
In contrast, construction and building-related holdings, such as U.K. welding-equipment manufacturer Charter and Dutch pipe-manufacturer Wavin, experienced weak performance during the year. In addition to having some exposure, albeit small, to the U.S. residential-housing market, investors worried that the U.S. subprime crisis would spill over to Europe. In addition to the Irish and Spanish markets, which have been cooling for some time, the German market began to soften toward the end of the first half. We sold Wavin, but continue to hold Charter as we believe that its dominant market position should allow it to earn strong returns even in the trough of the cycle. Charter also has exposure to Eastern European markets that continue to benefit from cyclical and secular growth in building and construction.
 
Questions about global economic health remain as we enter 2008, namely, how severe will the U.S. housing downturn be? What will be the impact of the U.S. subprime crisis on the general economy and how will the U.S. consumer respond? While these issues are mainly U.S.-centric, their impact may be felt around the world. Other more widespread concerns such as commodity-price inflation, particularly in energy, could also impact economic development, going forward. Currency fluctuations, particularly the weak U.S. dollar, remain a concern as well. In this environment, discipline, in terms of business models and valuations, will be of the utmost importance. We believe that our focus on companies with strong fundamentals, high financial productivity, proven managements, strong cash flows, and strong balance sheets will allow us to perform positively going forward.
.
Lazard Emerging Markets Portfolio
 
For the year ended December 31, 2007, Lazard Emerging Markets Portfolio’s Institutional Shares posted a total return of 33.05%, while Open Shares posted a total return of 32.71%, as compared with the 39.38% return of the MSCI Emerging Markets Index.
 
During the year, performance benefited from stock selection in the materials, telecom services and energy sectors. From a regional perspective, performance was enhanced by stock selection in Brazil, the Philippines, Russia, and Turkey. For example, positions in CVRD and Kumba (Brazilian and South African iron-ore producers, respectively) rose sharply, due to robust iron-ore pricing trends. Holdings in mobile-phone operators Mobile TeleSystems (Russia) and Turkcell (Turkey) performed strongly, due to robust subscriber growth and the companies’ impressive results. Overweight positions in Brazil, Egypt, Indonesia and India also added value, as did underweight positions in Russia and Taiwan. Conversely, performance was hurt by poor stock selection in South Korea, Mexico, Taiwan, India and Indonesia, and within the industrials, consumer discretionary, technology and financials sectors. For example, shares of Samsung Electronics (a South Korean electronics company) performed poorly, due to lackluster industry conditions as well as the strong Korean won. The Portfolio’s holdings in Truworths International and Steinhoff International (South African-based consumer companies) also declined, due to the rising interest rate environment in South Africa. Underweight positions in China and the energy sector subtracted value, as did an overweight position in the consumer discretionary sector.
 
We currently view the emerging markets as reasonably valued in the medium and long term. However, on a short-term basis, we believe there is evidence that some areas of the markets have become expensive or, at least, fairly valued. As a result, we are neutral in the near term.
 
Lazard High Yield Portfolio
 
For the year ended December 31, 2007, Lazard High Yield Portfolio’s Institutional Shares posted a total return of 3.63%, while Open Shares posted a total return of 3.53%, as compared with the 2.19% return of the Merrill Lynch High Yield Master II® Index.

 
9


The Lazard Funds, Inc.
 
Investment Overviews (concluded)
 

The Portfolio materially outperformed the Merrill Lynch High Yield Master II Index for the third and fourth quarters and for all of 2007. The Portfolio’s higher-quality holdings held up well and led to the outperformance. The Portfolio’s performance was particularly helped by underweight positions in General Motors, Ford, their affiliates and home builders. Performance was also positively impacted by security selection and overweight positions in the metal and chemical sectors.
 
From our perspective, value has returned to the upper tier of high yield. We believe the best time to
 
buy better-quality high yield is when spreads are widening and fast money players are selling their best credits to raise cash. We consider this to be an opportune time to purchase better-quality high yield. Our worst-case outlook for the economy is a “muddle- through” scenario with sub-par growth and a steep- ening Treasury curve. We believe the weaker U.S. dollar may lead to further growth in exports and help shore up the economy. Better-quality sectors may feel a pinch from rising credit standards but will fare better than lower-quality credits in a slowing economy that, we anticipate, will see continued market volatility.
 

Notes to Investment Overviews:

All returns reflect 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. Past performance is not indicative, nor a guarantee, of future results.

The performance data of the indices and other market data have been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to their accuracy. These indices are unmanaged, have no fees or costs and are not available for investment.

The views of the Fund’s management and the portfolio holdings described in this report are as of December 31, 2007; these views and portfolio holdings may have changed subsequent to this date. Nothing herein should be construed as a recommendation to buy, sell, or hold a particular security. There is no assurance that the securities discussed herein will remain in each Portfolio at the time you receive this report, or that securities sold will not have been repurchased. The specific portfolio securities may in aggregate represent only a small percentage of each Portfolio’s holdings. It should not be assumed that investments in the securities identified and discussed were, or will be, profitable, or that the investment decisions we make in the future will be profitable, or equal the investment performance of the securities discussed herein.

The views and opinions expressed are provided for general information only, and do not constitute specific tax, legal, or investment advice to, or recommendations for, any person. There can be no guarantee as to the accuracy of the outlooks for markets, sectors and securities as discussed herein. You should read the Fund’s prospectus for a more detailed discussion of each Portfolio’s investment objective, strategies, risks and fees.

10

 

The Lazard Funds, Inc.
Performance Overviews
 

Lazard U.S. Equity Value Portfolio

Comparison of Changes in Value of $10,000 Investment in the Institutional Shares of
Lazard U.S. Equity Value Portfolio and Russell 1000® Value Index*

Lazard Funds

   
U.S. Equity Value Portfolio Institutional Shares
 
$
12,790
 
   
Russell 1000 Value Index
   
12,358
 

Average Annual Total Returns*
Periods Ended December 31, 2007
         
 
 
One
Year
 
Since
Inception†
 
U.S. Equity Value Portfolio**
             
Institutional Shares
   
1.65
%
 
11.55
%
Open Shares
   
1.59
   
11.32
 
Russell 1000 Value Index
   
(0.17
)
 
9.86
 
 

*
All returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, nor a guarantee, of future results; the investment return and principle 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 Russell 1000 Value Index measures the performance of those Russell 1000 companies (the 1,000 largest companies in the Russell 3000® Index, which consists of the 3,000 largest U.S. companies by capitalization) with lower price-to-book ratios and lower forecasted growth values. The index is unmanaged, has no fees or costs and is not available for investment.
 
**
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 September 30, 2005.

11

 

The Lazard Funds, Inc.
Performance Overviews (continued)
 

  Lazard U.S. Strategic Equity Portfolio

Comparison of Changes in Value of $10,000 Investment in the Institutional Shares of
Lazard U.S. Strategic Equity Portfolio and S&P 500® Index*

Lazard Funds

   
U.S. Strategic Equity Portfolio Institutional Shares
 
$
12,370
 
   
S&P 500 Index
   
12,799
 
 
Average Annual Total Returns*
Periods Ended December 31, 2007
         
 
 
One
Year
 
Since
Inception†
 
U.S. Strategic Equity Portfolio**
             
Institutional Shares
   
0.33
%
 
7.34
%
Open Shares
   
(0.07
)
 
7.06
 
S&P 500 Index
   
5.49
   
8.57
 
 

*
All returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.
 
The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, nor a guarantee, of future results; the investment return and principle 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 S&P 500 Index is a market capitalization-weighted index of 500 common stocks, designed to measure performance of the broad domestic economy through changes in the aggregate market value of these stocks, which represent all major industries. The index is unmanaged, has no fees or costs and is not available for investment.
 
**
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 December 30, 2004.

12

 

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*

Lazard Funds

   
Mid Cap Portfolio Institutional Shares
 
$
25,031
 
   
Russell Midcap Index
   
25,730
 
 

Average Annual Total Returns*
Year Ended December 31, 2007
             
   
One
Year
 
Five
Years
 
Ten
Years
 
Mid Cap Portfolio**
                   
Institutional Shares
   
(2.93
)%
 
14.38
%
 
9.61
%
Open Shares
   
(3.17
)
 
14.07
   
9.28
 
Russell Midcap Index
   
5.60
   
18.20
   
9.91
 
 

*
All returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, nor a guarantee, of future results; the investment return and principle 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 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 index is unmanaged, has no fees or costs and is not available for investment.

**
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.

13

 

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*

Lazard Funds

   
Small Cap Portfolio Institutional Shares
 
$
18,280
 
   
Russell 2000 Index
   
19,822
 

Average Annual Total Returns*
Year Ended December 31, 2007
             
   
One
Year
 
Five
Years
 
Ten
Years
 
Small Cap Portfolio**
                   
Institutional Shares
   
(6.38
)%
 
12.86
%
 
6.22
%
Open Shares
   
(6.60
)
 
12.53
   
5.96
 
Russell 2000 Index
   
(1.57
)
 
16.24
   
7.08
 
 

*
All returns reflect reinvestment of all dividends and distributions, if any.

The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, nor a guarantee, of future results; the investment return and principle 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 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 index is unmanaged, has no fees or costs and is not available for investment.

**
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.

14

 

The Lazard Funds, Inc.
 
Performance Overviews (continued)
 


Lazard U.S. Small Cap Equity Growth Portfolio

Comparison of Changes in Value of $10,000 Investment in the Institutional Shares of
Lazard U.S. Small Cap Equity Growth Portfolio and Russell 2000 Growth Index*

Lazard Funds

   
U.S. Small Cap Equity Growth Portfolio Institutional Shares
 
$
11,495
 
   
Russell 2000 Growth Index
   
11,125
 

Average Annual Total Returns*
Periods Ended December 31, 2007
         
 
 
One
Year
 
Since
Inception†
 
U.S. Small Cap Equity Growth Portfolio**
             
Institutional Shares
   
13.09
%
 
7.88
%
Open Shares
   
13.04
   
7.62
 
Russell 2000 Growth Index
   
7.05
   
5.97
 
 

*
All returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, nor a guarantee, of future results; the investment return and principle 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 Russell 2000 Growth Index measures the performance of those Russell 2000 companies (the 2,000 smallest companies in the Russell 3000 Index, which consists of the 3,000 largest U.S. companies by capitalization) with higher price-to-book ratios and higher forecasted growth values. The index is unmanaged, has no fees or costs and is not available for investment.

The Portfolio invests in initial public offerings (“IPOs”). The effect of IPOs on the Portfolio’s performance may be significant, particularly given the relatively small size of this Portfolio. You should be aware that IPOs may not continue to be available for investment by the Portfolio or, if available, the effect of IPO investing on the Portfolio’s performance may not be as significant as the Portfolio’s asset size increases.

**
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 February 28, 2006.

15

 

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*

Lazard Funds

   
International Equity Portfolio Institutional Shares
 
$
19,761
 
   
MSCI EAFE Index
   
22,947
 

Average Annual Total Returns*
Year Ended December 31, 2007
 
   
One
Year
 
Five
Years
 
Ten
Years
 
International Equity Portfolio**
                   
Institutional Shares
   
10.96
%
 
17.92
%
 
7.05
%
Open Shares
   
10.57
   
17.59
   
6.76
 
MSCI EAFE Index
   
11.17
   
21.58
   
8.66
 
 

*
All returns reflect reinvestment of all dividends and distributions, if any.

The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, nor a guarantee, of future results; the investment return and principle 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 MSCI EAFE Index is a broadly diversified international index comprised of equity securities of approximately 1,000 companies located outside the United States. The index is unmanaged, has no fees or costs and is not available for investment.

**
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.

16

 

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*

Lazard Funds

   
International Equity Select Portfolio Institutional Shares
 
$
17,397
 
   
MSCI EAFE Index
   
19,710
 

Average Annual Total Returns*
Periods Ended December 31, 2007
             
   
One
Year
 
Five
Years
 
Since
Inception†
 
International Equity Select Portfolio**
                   
Institutional Shares
   
9.25
%
 
17.21
%
 
8.77
%
Open Shares
   
8.92
   
16.87
   
8.49
 
MSCI EAFE Index
   
11.17
   
21.58
   
10.85
 
 

*
All returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, nor a guarantee, of future results; the investment return and principle 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 MSCI EAFE Index is a broadly diversified international index comprised of equity securities of approximately 1,000 companies located outside the United States. The index is unmanaged, has no fees or costs and is not available for investment.

**
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.

17

 

The Lazard Funds, Inc.
 
Performance Overviews (continued)
 


Lazard International Strategic Equity Portfolio

Comparison of Changes in Value of $10,000 Investment in the Institutional Shares of
Lazard International Strategic Equity Portfolio and MSCI EAFE Index*

Lazard Funds

   
International Strategic Equity Portfolio Institutional Shares
 
$
15,373
 
   
MSCI EAFE Index
   
15,058
 

Average Annual Total Returns*
Periods Ended December 31, 2007
 
   
Institutional Shares
 
Open Shares
 
   
One
Year
 
Since
Inception†
 
One
Year
 
Since
Inception†
 
International Strategic Equity Portfolio**
   
12.88
%
 
21.95
%
 
12.37
%
 
15.95
%
MSCI EAFE Index
   
11.17
   
20.79
   
11.17
   
15.87
 
 

*
All returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, nor a guarantee, of future results; the investment return and principle 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 MSCI EAFE Index is a broadly diversified international index comprised of equity securities of approximately 1,000 companies located outside the United States. The index is unmanaged, has no fees or costs and is not available for investment.

**
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 Institutional Shares was October 31, 2005 and for Open Shares was February 3, 2006.

18

 

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*

Lazard Funds

   
International Small Cap Portfolio Institutional Shares
 
$
30,454
 
   
MSCI EAFE Small Cap Index
   
29,275
 

Average Annual Total Returns*
Year Ended December 31, 2007
             
   
One
Year
 
Five
Years
 
Ten
Years
 
International Small Cap Portfolio**
                   
Institutional Shares
   
(4.61
)%
 
21.07
%
 
11.78
%
Open Shares
   
(4.79
)
 
20.74
   
11.38
 
MSCI EAFE Small Cap Index
   
1.45
   
26.36
   
11.33
 
 

*
All returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, nor a guarantee, of future results; the investment return and principle 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 MSCI EAFE Small Cap Index is an arithmetic, market value-weighted average of the perfor- mance of securities of small cap companies listed on the stock exchanges of MSCI EAFE Index countries. The index is unmanaged, has no fees or costs and is not available for investment.

**
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.

19

 

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 Index*

Lazard Funds
 
Lazard Fund Logo
   
Emerging Markets Portfolio Institutional Shares
 
$
40,139
 
Lazard Fund Logo
   
MSCI Emerging Markets Index
   
37,942
 
 
Average Annual Total Returns*
Year Ended December 31, 2007
             
 
 
One
Year
 
Five
Years
 
Ten
Years
 
Emerging Markets Portfolio**
             
Institutional Shares
   
33.05
%
 
37.71
%
 
14.91
%
Open Shares
   
32.71
   
37.44
   
14.66
 
MSCI Emerging Markets Index
   
39.38
   
36.99
   
14.26
 
 

*
All returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

 
The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, nor a guarantee, of future results; the investment return and principle 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 MSCI Emerging Markets Index is comprised of emerging market securities in countries open to non-local investors. The index is unmanaged, has no fees or costs and is not available for investment.

**
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.
 
20

 

The Lazard Funds, Inc.
 
Performance Overviews (concluded)
 

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*

Lazard Funds
 
Lazard Fund Logo
   
High Yield Portfolio Institutional Shares
 
$
13,225
 
Lazard Fund Logo
   
Merrill Lynch High Yield Master II Index
   
17,111
 
 
Average Annual Total Returns*
             
Periods Ended December 31, 2007
             
   
Institutional Shares
 
Open Shares
 
 
 
One
Year
 
Five
Years
 
Since
Inception†
 
One
Year
 
Five
Years
 
Since
Inception†
 
High Yield Portfolio**
   
3.63
%
 
10.18
%
 
2.84
%
 
3.53
%
 
9.89
%
 
2.09
%
Merrill Lynch High Yield
Master II Index
   
2.19
   
10.76
   
5.52
   
2.19
   
10.76
   
5.38
 
 

*
All returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

 
The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, nor a guarantee, of future results; the investment return and principle 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 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 index is unmanaged, has no fees or costs and is not available for investment.

**
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.
 
21



The Lazard Funds, Inc.
Information About Your Portfolio’s Expenses
 

Expense Example

As a shareholder in a Portfolio of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees, distribution and service (12b-1) fees (Open Shares only), and other expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the six month period from July 1, 2007 through December 31, 2007 and held for the entire period.

Actual Expenses

For each Share class of the Portfolios, the first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

For each Share class of the Portfolios, the second line of the table below provides information about hypothetical account values and hypothetical expenses based on the class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 
 
 
         
Annualized
 
   
Beginning
Account Value
 
Ending
Account Value
 
  Expenses Paid  
During Period*
 
  Expense Ratio  
During Period
 
   
7/1/07
 
12/31/07
 
7/1/07 - 12/31/07
 
7/1/07 - 12/31/07
 
U.S. Equity Value Portfolio
                 
Institutional Shares
                 
Actual
 
$
1,000.00
 
$
944.10
 
$
4.91
   
1.00
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,020.15
 
$
5.10
   
1.00
%
Open Shares
                         
Actual
 
$
1,000.00
 
$
944.50
 
$
6.39
   
1.30
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,018.63
 
$
6.63
   
1.30
%
U.S. Strategic Equity Portfolio
                         
Institutional Shares
                         
Actual
 
$
1,000.00
 
$
930.80
 
$
4.79
   
0.98
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,020.25
 
$
5.01
   
0.98
%
Open Shares
                         
Actual
 
$
1,000.00
 
$
928.60
 
$
6.57
   
1.35
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,018.39
 
$
6.88
   
1.35
%
 
22

 

The Lazard Funds, Inc.
 
Information About Your Portfolio’s Expenses
 (continued)
 

 
 
 
 
         
Annualized
 
   
Beginning
Account Value
 
Ending
Account Value
 
  Expenses Paid  
During Period*
 
  Expense Ratio  
During Period
 
   
7/1/07
 
12/31/07
 
7/1/07 - 12/31/07
 
7/1/07 - 12/31/07
 
Mid Cap Portfolio
                 
Institutional Shares
                 
Actual
 
$
1,000.00
 
$
865.50
 
$
4.09
   
0.87
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,020.82
 
$
4.43
   
0.87
%
Open Shares
                         
Actual
 
$
1,000.00
 
$
865.00
 
$
5.31
   
1.13
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,019.51
 
$
5.75
   
1.13
%
Small Cap Portfolio
                         
Institutional Shares
                         
Actual
 
$
1,000.00
 
$
882.40
 
$
4.48
   
0.94
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,020.44
 
$
4.81
   
0.94
%
Open Shares
                         
Actual
 
$
1,000.00
 
$
882.10
 
$
6.00
   
1.27
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,018.82
 
$
6.44
   
1.27
%
U.S. Small Cap Equity Growth Portfolio
                         
Institutional Shares
                         
Actual
 
$
1,000.00
 
$
966.60
 
$
6.20
   
1.25
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,018.90
 
$
6.37
   
1.25
%
Open Shares
                         
Actual
 
$
1,000.00
 
$
964.80
 
$
7.70
   
1.55
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,017.37
 
$
7.90
   
1.55
%
International Equity Portfolio
                         
Institutional Shares
                         
Actual
 
$
1,000.00
 
$
1,035.90
 
$
4.65
   
0.91
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,020.64
 
$
4.61
   
0.91
%
Open Shares
                         
Actual
 
$
1,000.00
 
$
1,034.40
 
$
6.20
   
1.21
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,019.11
 
$
6.15
   
1.21
%
International Equity Select Portfolio
                         
Institutional Shares
                         
Actual
 
$
1,000.00
 
$
1,009.10
 
$
5.82
   
1.15
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,019.41
 
$
5.85
   
1.15
%
Open Shares
                         
Actual
 
$
1,000.00
 
$
1,008.30
 
$
7.34
   
1.45
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,017.89
 
$
7.38
   
1.45
%
International Strategic Equity Portfolio
                         
Institutional Shares
                         
Actual
 
$
1,000.00
 
$
1,045.40
 
$
4.56
   
0.88
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,020.74
 
$
4.51
   
0.88
%
Open Shares
                         
Actual
 
$
1,000.00
 
$
1,042.90
 
$
6.62
   
1.29
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,018.73
 
$
6.54
   
1.29
%
 
23

 

The Lazard Funds, Inc.
 
Information About Your Portfolio’s Expenses
 (concluded)
 

 
 
 
 
         
Annualized
 
   
Beginning
 
Ending
 
 Expenses Paid 
 
  Expense Ratio  
 
   
Account Value
 
Account Value
 
During Period*
 
During Period
 
   
7/1/07
 
12/31/07
 
7/1/07 - 12/31/07
 
7/1/07 - 12/31/07
 
International Small Cap Portfolio
                 
Institutional Shares
                 
Actual
 
$
1,000.00
 
$
910.90
 
$
4.96
   
1.03
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,020.02
 
$
5.24
   
1.03
%
Open Shares
                         
Actual
 
$
1,000.00
 
$
910.10
 
$
6.09
   
1.26
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,018.83
 
$
6.43
   
1.26
%
Emerging Markets Portfolio
                         
Institutional Shares
                         
Actual
 
$
1,000.00
 
$
1,132.50
 
$
6.53
   
1.21
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,019.08
 
$
6.18
   
1.21
%
Open Shares
                         
Actual
 
$
1,000.00
 
$
1,131.50
 
$
7.91
   
1.47
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,017.78
 
$
7.49
   
1.47
%
High Yield Portfolio
                         
Institutional Shares
                         
Actual
 
$
1,000.00
 
$
1,007.40
 
$
2.78
   
0.55
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,022.43
 
$
2.80
   
0.55
%
Open Shares
                         
Actual
 
$
1,000.00
 
$
1,006.00
 
$
4.30
   
0.85
%
Hypothetical (5% Return Before Expenses)
 
$
1,000.00
 
$
1,020.92
 
$
4.33
   
0.85
%
 

*
Expenses are equal to the Portfolio’s annualized expense ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect one-half year period).
 
24

 

The Lazard Funds, Inc.
Portfolio Holdings Presented by Sector
December 31, 2007

 
   
Lazard
   
Lazard
               
Lazard
 
Sector*
 
U.S. Equity
Value
Portfolio
   
U.S. Strategic
Equity
Portfolio
   
Lazard
Mid Cap
Portfolio
   
Lazard
Small Cap
Portfolio
   
U.S. Small Cap
Equity Growth
Portfolio
 
Consumer Discretionary
   
9.9
%
   
13.7
%
   
15.6
%
   
8.7
%
   
18.6
%
Consumer Staples
   
6.2
     
12.6
     
6.9
     
0.2
     
 
Energy
   
15.0
     
9.4
     
9.6
     
5.9
     
4.9
 
Financials
   
28.1
     
17.0
     
18.0
     
15.8
     
4.6
 
Health Care
   
11.2
     
9.8
     
7.7
     
8.2
     
8.3
 
Industrials
   
6.3
     
7.3
     
15.9
     
13.3
     
26.8
 
Information Technology
   
8.2
     
18.2
     
15.0
     
17.7
     
26.5
 
Materials
   
3.2
     
4.7
     
4.4
     
7.2
     
5.8
 
Telecommunication Services
   
5.6
     
3.4
     
2.5
     
2.7
     
 
Utilities
   
3.4
     
     
     
     
 
Short-Term Investments
   
2.9
     
3.9
     
4.4
     
20.3
     
4.5
 
Total Investments
   
100.0
%
   
100.0
%
   
100.0
%
   
100.0
%
   
100.0
%
                                         
Sector*
   
Lazard
International
Equity
Portfolio
     
Lazard
International
Equity Select
Portfolio
     
Lazard
International
Strategic Equity
Portfolio
     
Lazard
International
Small Cap
Portfolio
     
Lazard
Emerging
Markets
Portfolio
 
Consumer Discretionary
   
8.7
%
   
5.0
%
   
12.7
%
   
11.9
%
   
11.3
%
Consumer Staples
   
16.5
     
20.2
     
18.1
     
     
10.1
 
Energy
   
7.3
     
10.6
     
3.1
     
5.2
     
6.0
 
Financials
   
17.6
     
22.5
     
19.0
     
17.5
     
18.2
 
Health Care
   
7.9
     
9.0
     
5.4
     
5.3
     
0.7
 
Industrials
   
8.6
     
6.1
     
15.1
     
25.0
     
9.0
 
Information Technology
   
5.3
     
7.1
     
3.1
     
6.3
     
10.1
 
Materials
   
1.6
     
2.5
     
8.5
     
10.1
     
14.1
 
Telecommunication Services
   
7.8
     
11.3
     
6.0
     
0.9
     
10.6
 
Utilities
   
5.6
     
4.6
     
7.3
     
     
1.5
 
Short-Term Investments
   
13.1
     
1.1
     
1.7
     
17.8
     
8.4
 
Total Investments
   
100.0
%
   
100.0
%
   
100.0
%
   
100.0
%
   
100.0
%


*
Represents percentage of total investments.
 
25

 

The Lazard Funds, Inc.
Portfolio Holdings Presented by Credit Rating
December 31, 2007

 
   
Lazard
 
S&P Credit Rating*
 
High Yield
Portfolio
 
BBB
   
1.5
%
BBB-
   
5.6
 
BB+
   
8.4
 
BB
   
6.4
 
BB-
   
17.6
 
B+
   
12.0
 
B
   
13.2
 
B-
   
7.5
 
CCC+
   
4.4
 
CCC
   
0.9
 
Short-Term Investments
   
22.5
 
Total Investments
   
100.0
%
 

*
Represents percentage of total investments.
 
26

 

The Lazard Funds, Inc.
Portfolios of Investments
December 31, 2007


Description
 
Shares
 
Value
 
Description
 
Shares
 
Value
 
Lazard U.S. Equity Value Portfolio 
           
Electric—3.1% 
           
Common Stocks—97.7% 
           
Entergy Corp. 
 
400
 
$
47,808
 
Alcohol & Tobacco—1.5% 
           
Exelon Corp. 
 
1,160
   
94,702
 
Altria Group, Inc.
 
668
 
$
50,487
 
PG&E Corp. 
 
1,900
   
81,871
 
Reynolds American, Inc.
 
1,300
   
85,748
 
Wisconsin Energy Corp. 
 
960
   
46,762
 
         
136,235
           
271,143
 
Automotive—0.6%
           
Energy Exploration & 
           
The Goodyear Tire & Rubber Co. (a) 
 
1,870
   
52,771
 
Production—3.0% 
           
Banking—9.5% 
           
Anadarko Petroleum Corp.
 
900
   
59,121
 
Bank of America Corp. 
 
6,511
   
268,644
 
Apache Corp. 
 
360
   
38,715
 
Bank of New York Mellon Corp. 
 
3,474
   
169,392
 
Devon Energy Corp.
 
655
   
58,236
 
First Horizon National Corp.
 
1,510
   
27,407
 
Newfield Exploration Co. (a)
 
1,270
   
66,929
 
Huntington Bancshares, Inc.
 
6,420
   
94,759
 
Occidental Petroleum Corp.
 
580
   
44,654
 
Marshall & Ilsley Corp. 
 
1,627
   
43,083
           
267,655
 
SunTrust Banks, Inc.
 
1,365
   
85,299
 
Energy Integrated—12.0% 
           
Wachovia Corp.
 
2,247
   
85,453
 
Chevron Corp.
 
2,911
   
271,683
 
Wells Fargo & Co.
 
2,180
   
65,814
 
ConocoPhillips. 
 
2,150
   
189,845
 
         
839,851
 
Exxon Mobil Corp.
 
5,556
   
520,542
 
Cable Television—1.7% 
           
Marathon Oil Corp. 
 
1,320
   
80,335
 
Comcast Corp., Class A (a) 
 
8,230
   
149,128
           
1,062,405
 
Chemicals—1.7% 
           
Financial Services—9.4% 
           
RPM International, Inc. 
 
2,900
   
58,870
 
AmeriCredit Corp. (a) 
 
4,320
   
55,253
 
The Dow Chemical Co. 
 
2,220
   
87,512
 
Capital One Financial Corp. 
 
1,800
   
85,068
 
         
146,382
 
Citigroup, Inc. 
 
7,220
   
212,557
 
Commercial Services—1.1% 
           
JPMorgan Chase & Co.
 
5,076
   
221,567
 
Automatic Data Processing, Inc. 
 
976
   
43,461
 
Legg Mason, Inc. 
 
700
   
51,205
 
R.H. Donnelley Corp. (a) 
 
1,500
   
54,720
 
Lehman Brothers Holdings, Inc. 
 
1,600
   
104,704
 
         
98,181
 
Morgan Stanley
 
1,850
   
98,253
 
Computer Software—2.0% 
                     
828,607
 
Microsoft Corp.
 
2,820
   
100,392
 
Food & Beverages—2.1% 
           
Sybase, Inc. (a)
 
2,790
   
72,791
 
Coca-Cola Enterprises, Inc.
 
2,070
   
53,882
 
         
173,183
 
Kraft Foods, Inc., Class A
 
1,904
   
62,128
 
Consumer Products—2.0% 
           
Pilgrim’s Pride Corp.
 
2,400
   
69,480
 
Mattel, Inc. 
 
3,500
   
66,640
           
185,490
 
The Procter & Gamble Co. 
 
1,485
   
109,029
 
Forest & Paper Products—2.0% 
           
         
175,669
 
Ball Corp. 
 
870
   
39,150
 
Drugs—5.1% 
           
Kimberly-Clark Corp. 
 
879
   
60,950
 
Pfizer, Inc. 
 
12,694
   
288,535
 
Pactiv Corp. (a) 
 
2,800
   
74,564
 
Wyeth 
 
3,640
   
160,851
           
174,664
 
         
449,386
 
Gas Utilities—0.4% 
           
             
Dynegy, Inc., Class A (a)
 
4,870
   
34,772
 
             
Health Services—1.5% 
           
             
Community Health Systems, Inc. (a)
 
2,300
   
84,778
 
             
WellPoint, Inc. (a) 
 
600
   
52,638
 
                       
137,416
 
 
The accompanying notes are an integral part of these financial statements.
 
27

 

The Lazard Funds, Inc
Portfolios of Investments (continued)
December 31, 2007

Description
 
Shares
   
Value
Lazard U.S. Equity Value Portfolio (concluded) 
Insurance—8.6%
         
American International Group, Inc.
 
3,400
 
$
198,220
Lincoln National Corp.
 
1,781
   
103,690
Marsh & McLennan Cos., Inc.
 
2,500
   
66,175
MetLife, Inc.
 
820
   
50,528
The Allstate Corp.
 
1,180
   
61,631
The Hartford Financial Services
         
Group, Inc.
 
1,150
   
100,269
The Travelers Cos., Inc.
 
2,315
   
124,547
W.R. Berkley Corp.
 
1,700
   
 50,677
         
 755,737
Leisure & Entertainment—4.3%
         
Brinker International, Inc.
 
2,900
   
56,724
Cinemark Holdings, Inc.
 
3,800
   
64,600
News Corp., Class A
 
2,541
   
52,065
Time Warner, Inc.
 
9,800
   
161,798
Viacom, Inc., Class B (a)
 
1,100
   
 48,312
         
 383,499
Manufacturing—6.4%
         
General Dynamics Corp.
 
600
   
53,394
General Electric Co.
 
9,075
   
336,410
PACCAR, Inc.
 
1,000
   
54,480
The Boeing Co.
 
800
   
69,968
United Technologies Corp.
 
650
   
 49,751
         
 564,003
Medical Products—4.6%
         
Boston Scientific Corp. (a)
 
5,560
   
64,663
Covidien, Ltd.
 
1,070
   
47,390
Johnson & Johnson.
 
3,505
   
233,784
Medtronic, Inc.
 
1,200
   
 60,324
         
 406,161
Metals & Mining—0.3%
         
Alcoa, Inc.
 
700
   
 25,585
Real Estate—0.8%
         
CBL & Associates Properties, Inc.
 
2,900
   
 69,339
Retail—2.6%
         
Foot Locker, Inc.
 
5,590
   
76,359
J.C. Penney Co., Inc.
 
1,200
   
52,788
Liz Claiborne, Inc.
 
2,030
   
41,311
Wal-Mart Stores, Inc.
 
1,230
   
 58,462
         
 228,920
Description
   
Shares
   
Value
 
Semiconductors &
             
Components—1.9%
             
Flextronics International, Ltd. (a)
   
5,410
 
$
65,245
 
Texas Instruments, Inc.
   
1,500
   
50,100
 
Tyco Electronics, Ltd.
   
1,500
   
55,695
 
           
171,040
 
Technology—1.0%
             
International Business Machines Corp.
860
   
92,966
 
Technology Hardware—2.9%
             
Brocade Communications Systems, Inc. (a)
6,200
   
45,508
 
Cadence Design Systems, Inc. (a)
   
3,200
   
54,432
 
Dell, Inc. (a)
   
1,800
   
44,118
 
Motorola, Inc.
   
4,040
   
64,802
 
QLogic Corp. (a)
   
3,070
   
43,594
 
           
252,454
 
Telecommunications—5.6%
             
AT&T, Inc.
   
7,130
   
296,323
 
Sprint Nextel Corp.
   
6,450
   
84,688
 
Verizon Communications, Inc.
   
2,559
   
111,803
 
           
492,814
 
Total Common Stocks
             
(Identified cost $9,124,016)
         
8,625,456
 
               
     
Principal
       
     
Amount
       
     
(000)
       
Repurchase Agreement—3.0%
             
State Street Bank and Trust Co.,
             
0.70%, 01/02/08
             
(Dated 12/31/07, collateralized by
             
$255,000 United States Treasury
             
Note, 5.125%, 06/30/11, with a
             
value of $270,300)
             
Proceeds of $262,010
             
(Identified cost $262,000)
 
$
262
   
262,000
 
               
Total Investments—100.7%
             
(Identified cost $9,386,016) (b)
        $
8,887,456
 
Liabilities in Excess of Cash and Other Assets—(0.7)%
         
(58,766)
 
Net Assets—100.0%
       
$
8,828,690
 
               
               
The accompanying notes are an integral part of these financial statements.

 

The Lazard Funds, Inc
Portfolios of Investments (continued)
December 31, 2007

 
Description
 
Shares
   
Value
 
Description
 
Shares
   
Value
 
Lazard U.S. Strategic Equity Portfolio
       
Financial Services—3.6%
           
Common Stocks—96.0%
           
Capital One Financial Corp.
 
9,100
 
$
430,066
 
Alcohol & Tobacco—3.1%
           
Citigroup, Inc.
 
31,122
   
916,232
 
Altria Group, Inc.
 
18,000
 
$
1,360,440
 
JPMorgan Chase & Co.
 
37,791
   
1,649,577
 
Reynolds American, Inc.
 
25,800
   
1,701,768
 
Lehman Brothers Holdings, Inc.
 
8,300
   
543,152
 
         
3,062,208
           
3,539,027
 
             
Food & Beverages—4.2%
           
Banking—6.0%
           
Coca-Cola Enterprises, Inc.
 
66,300
   
1,725,789
 
Bank of America Corp.
 
42,914
   
1,770,632
 
Kraft Foods, Inc., Class A
 
39,253
   
1,280,825
 
Bank of New York Mellon Corp.
 
72,625
   
3,541,195
 
Smithfield Foods, Inc. (a)
 
40,600
   
1,174,152
 
Huntington Bancshares, Inc.
 
47,800
   
705,528
           
4,180,766
 
         
6,017,355
               
             
Forest & Paper Products—4.1%
           
Cable Television—2.4%
           
Ball Corp.
 
21,915
   
986,175
 
Comcast Corp., Class A (a)
 
132,700
   
2,404,524
 
Kimberly-Clark Corp.
 
32,280
   
2,238,295
 
Chemicals—1.4%
           
Louisiana-Pacific Corp.
 
64,440
   
881,539
 
The Dow Chemical Co.
 
35,300
   
1,391,526
           
4,106,009
 
Commercial Services—1.6%
           
Housing—2.8%
           
Idearc, Inc.
 
40,800
   
716,448
 
Centex Corp.
 
21,200
   
535,512
 
R.H. Donnelley Corp. (a)
 
25,359
   
925,096
 
D.R. Horton, Inc.
 
46,800
   
616,356
 
         
1,641,544
 
Masco Corp.
 
44,300
   
957,323
 
             
USG Corp. (a)
 
18,900
   
676,431
 
Computer Software—8.1%
                     
2,785,622
 
Microsoft Corp.
 
162,735
   
5,793,366
               
Oracle Corp. (a)
 
46,300
   
1,045,454
 
Insurance—5.0%
           
Yahoo!, Inc. (a)
 
52,200
   
1,214,172
 
American International Group, Inc.
 
26,400
   
1,539,120
 
         
8,052,992
 
Marsh & McLennan Cos., Inc.
 
51,700
   
1,368,499
 
Consumer Products—0.9%
           
PartnerRe, Ltd.
 
11,500
   
949,095
 
The Stanley Works
 
18,385
   
891,305
 
The Allstate Corp.
 
22,400
   
1,169,952
 
                       
5,026,666
 
Drugs—4.1%
                         
Barr Pharmaceuticals, Inc. (a)
 
25,100
   
1,332,810
 
Leisure & Entertainment—3.9%
           
Wyeth
 
62,600
   
2,766,294
 
Brinker International, Inc.
 
42,100
   
823,476
 
         
4,099,104
 
News Corp., Class A.
 
58,580
   
1,200,304
 
             
Time Warner, Inc.
 
114,500
   
1,890,395
 
             
 
       
3,914,175
 
Energy Integrated—8.2%
                         
Arch Coal, Inc.
 
25,000
   
1,123,250
               
Chevron Corp.
 
15,700
   
1,465,281
 
Manufacturing—5.7%
           
ConocoPhillips
 
19,500
   
1,721,850
 
Dover Corp.
 
23,000
   
1,060,070
 
Hess Corp.
 
10,700
   
1,079,202
 
Honeywell International, Inc.
 
17,193
   
1,058,573
 
Massey Energy Co.
 
63,700
   
2,277,275
 
Pitney Bowes, Inc.
 
40,100
   
1,525,404
 
Valero Energy Corp.
 
7,900
   
553,237
 
Textron, Inc.
 
14,000
   
998,200
 
         
8,220,095
 
United Technologies Corp.
 
13,080
   
1,001,143
 
                       
5,643,390
 
Energy Services—1.1%
                         
BJ Services Co.
 
46,970
   
1,139,492
 
Medical Products—5.7%
           
             
Boston Scientific Corp. (a)
 
110,300
   
1,282,789
 
             
Johnson & Johnson
 
65,460
   
4,366,182
 
                       
5,648,971
 
 
 The accompanying notes are an integral part of these financial statements.
 
29

 

The Lazard Funds, Inc.
Portfolios of Investments (continued)

 
Description
 
Shares
 
Value
Lazard U.S. Strategic Equity Portfolio (concluded)
Metals & Mining—1.5%
 
 
 
 
 
Newmont Mining Corp.
 
 29,700
 
$
 1,450,251
           
Real Estate—2.4%
         
CBL & Associates Properties, Inc.
 
39,100
   
934,881
Public Storage
 
 19,800
   
1,453,518
         
  2,388,399
Retail—6.7%
       
 
CVS Caremark Corp.
 
32,900
   
1,307,775
Foot Locker, Inc.
 
 76,000
   
 1,038,160
J.C. Penney Co., Inc.
 
 29,300
 
 
 1,288,907
Liz Claiborne, Inc.
 
 63,605
   
 1,294,362
Wal-Mart Stores, Inc.
 
 37,100
   
 1,763,363
         
 6,692,567
Semiconductors & Components—4.3%
         
Flextronics International, Ltd. (a)
 
158,100
   
1,906,686
Intel Corp.
 
89,300
   
2,380,738
 
 
 
   
4,287,424
Technology—1.2%
 
 
   
 
International Business Machines Corp.
 
11,490
   
1,242,069
Technology Hardware—4.6%
   
Cisco Systems, Inc. (a)
 
 35,355
   
957,060
Dell, Inc. (a)
 
50,000
   
1,225,500
Motorola, Inc.
 
83,200
   
1,334,528
Sun Microsystems, Inc. (a)
 
58,825
   
1,066,497
 
 
 
   
4,583,585
Description
 
Shares
 
Value
 
Telecommunications—3.4%
   
 
 
 
 
 
Sprint Nextel Corp.
   
126,866
 
$
1,665,751
 
Verizon Communications, Inc.
   
 39,000
   
1,703,910
 
           
3,369,661
 
Total Common Stocks
         
 
 
(Identified cost $97,098,700)
           95,778,727  
 
         
 
 
     
 Principal
       
     
Amount
(000)
       
Repurchase Agreement—3.9%
             
State Street Bank and Trust Co.,
             
 0.70%, 01/02/08
(Dated 12/31/07, collateralized by
$3,650,000 United States Treasury Bond,
5.00%, 05/15/37, with a value of $3,987,625)
             
             
Proceeds of $3,909,152
(Identified cost $3,909,000)
 
$ 
3,909
      3,909,000  
Total Investments—99.9% 
 
   
 
 
(Identified cost $101,007,700) (b)
       
$
99,687,727
 
Cash and Other Assets in Excess of Liabilities—0.1%
       
 
111,598
 
Net Assets—100.0%
       
$
99,799,325
 
 
       
 
 
 
               
               
               
               

 

The accompanying notes are an integral part of these financial statements.
 
30



The Lazard Funds, Inc.
Portfolios of Investments (continued)

 
Description
 
Shares
 
Value
 
Description
 
Shares
 
Value
 
Lazard Mid Cap Portfolio
       
Food & Beverages—5.2%
       
Common Stocks—95.8%
           
Coca-Cola Enterprises, Inc.
 
282,300
 
$
7,348,269
 
Alcohol & Tobacco—1.7%
           
Pilgrim’s Pride Corp.
 
264,000
   
7,642,800
 
Molson Coors Brewing Co., Class B
 
140,100
 
$
7,231,962
 
Smithfield Foods, Inc. (a)
 
269,300
   
7,788,156
 
Banking—3.9%
                     
22,779,225
 
First Horizon National Corp.
 
111,800
   
2,029,170
 
Forest & Paper Products—3.6%
           
Hudson City Bancorp, Inc.
 
356,800
   
5,359,136
 
Ball Corp.
 
127,400
   
5,733,000
 
Huntington Bancshares, Inc.
 
368,000
   
5,431,680
 
Bemis Co., Inc.
 
188,100
   
5,150,178
 
Marshall & Ilsley Corp.
 
155,798
   
4,125,531
 
Louisiana-Pacific Corp.
 
344,800
   
4,716,864
 
         
16,945,517
           
15,600,042
 
Chemicals—0.9%
           
Health Services—1.4%
           
RPM International, Inc.
 
189,600
   
3,848,880
 
Omnicare, Inc.
 
260,700
   
5,946,567
 
Commercial Services—7.6%
           
Housing—4.4%
           
Cintas Corp.
 
274,300
   
9,221,966
 
Centex Corp.
 
122,800
   
3,101,928
 
Idearc, Inc.
 
302,700
   
5,315,412
 
D.R. Horton, Inc.
 
308,700
   
4,065,579
 
NeuStar, Inc., Class A (a)
 
222,000
   
6,366,960
 
Masco Corp.
 
420,500
   
9,087,005
 
R.H. Donnelley Corp. (a)
 
222,435
   
8,114,429
 
USG Corp. (a)
 
88,700
   
3,174,573
 
WESCO International, Inc. (a)
 
107,000
   
4,241,480
           
19,429,085
 
         
33,260,247
 
Insurance—9.5%
           
Computer Software—1.3%
       
Aon Corp.
 
91,800
   
4,377,942
 
Sybase, Inc. (a)
 
223,000  
   
5,818,070
 
Lincoln National Corp.
 
147,334
   
8,577,785
 
Drugs—3.5%
           
Marsh & McLennan Cos., Inc.
 
224,400
   
5,939,868
 
Barr Pharmaceuticals, Inc. (a)
 
187,600
   
9,961,560
 
OneBeacon Insurance Group, Ltd.
 
285,000
   
6,127,500
 
Warner Chilcott, Ltd. (a)
 
300,900
   
5,334,957
 
PartnerRe, Ltd.
 
53,700
   
4,431,861
 
         
15,296,517
 
RenaissanceRe Holdings, Ltd.
 
110,300
   
6,644,472
 
Energy—2.0%
           
Willis Group Holdings, Ltd.
 
135,900
   
5,160,123
 
Covanta Holding Corp. (a)
 
316,600
   
8,757,156
           
41,259,551
 
Energy Integrated—4.1%
           
Leisure & Entertainment—3.9%
           
Foundation Coal Holdings, Inc.
 
96,400
   
5,061,000
 
Brinker International, Inc.
 
318,900
   
6,237,684
 
Massey Energy Co.
 
217,900
   
7,789,925
 
Darden Restaurants, Inc.
 
151,800
   
4,206,378
 
Sunoco, Inc.
 
72,300
   
5,237,412
 
Royal Caribbean Cruises, Ltd.
 
156,800
   
6,654,592
 
         
18,088,337
           
17,098,654
 
Energy Services—5.5%
           
Manufacturing—7.3%
           
BJ Services Co.
 
302,200
   
7,331,372
 
Dover Corp.
 
219,600
   
10,121,364
 
Patterson-UTI Energy, Inc.
 
286,600
   
5,594,432
 
Hubbell, Inc., Class B
 
102,900
   
5,309,640
 
Pride International, Inc. (a)
 
160,600
   
5,444,340
 
Pitney Bowes, Inc.
 
312,100
   
11,872,284
 
The Williams Cos., Inc.
 
152,600
   
5,460,028
 
Textron, Inc.
 
65,600
   
4,677,280
 
         
23,830,172
           
31,980,568
 
Financial Services—1.3%
           
Medical Products—2.8%
           
Ameriprise Financial, Inc.
 
103,600
   
5,709,396
 
Applera Corp. - Applied Biosystems Group
   151,900      5,152,448  
             
Hospira, Inc. (a)
 
166,300
   
7,091,032
 
                       
12,243,480
 

The accompanying notes are an integral part of these financial statements.
 
31



The Lazard Funds, Inc.
Portfolios of Investments (continued)

 
Description
 
Shares
 
Value
 
Description
 
Shares
 
Value
 
Lazard Mid Cap Portfolio (concluded)
           
Telecommunications—2.6%
           
Real Estate—3.4% 
 
 
 
 
 
 
Citizens Communications Co.
 
877,200
 
$
11,166,756
 
CBL & Associates Properties, Inc.
 
313,200
 
$ 
7,488,612   
Transportation—0.7% 
           
Public Storage
 
98,000
   
7,194,180
 
YRC Worldwide, Inc. (a)
 
168,800
   
2,884,792
 
         
14,682,792
 
Total Common Stocks
           
Retail—7.0%
           
(Identified cost $448,377,788)
       
417,613,283
 
Foot Locker, Inc.
 
566,700
   
7,741,122
     
Principal
       
Hanesbrands, Inc. (a)
 
160,700
   
4,366,219
 
 
 
Amount
       
J.C. Penney Co., Inc.
  146,900    
6,462,131  
 
 
 
(000)
       
Liz Claiborne, Inc.
 
367,700
   
7,482,695  
 
Repurchase Agreement—4.4%  
           
Pacific Sunwear of California, Inc. (a)
 
317,400
   
4,478,514 
 
State Street Bank and Trust Co.,
           
         
30,530,681 
 
0.70%, 01/02/08
           
 Semiconductors &            
(Dated 12/31/07, collateralized 
           
 Components—4.7% 
           
by $18,545,000 United States
           
Analog Devices, Inc.
  181,400    
5,750,380  
 
Treasury Note, 5.125%, 06/30/11,
           
Flextronics International, Ltd. (a)
  1,210,200     14,595,012   
with a value of $19,657,700)
       
 
 
 
     
20,345,392 
 
Proceeds of $19,270,749
       
Technology Hardware—7.5%            
(Identified cost $19,270,000)
$  19,270  
 
19,270,000
 
Arrow Electronics, Inc. (a)
 
151,000
   
5,931,280
 
Total Investments—100.2%
     
 
 
 
Ingram Micro, Inc., Class A (a)
 
587,700
   
10,602,108
 
(Identified cost $467,647,788) (b)
     
$
436,883,283
 
Lexmark International, Inc., Class A (a)
  188,700    
6,578,082
 
Liabilities in Excess of Cash and
           
QLogic Corp. (a)
 
289,600
    4,112,320  
Other Assets—(0.2)%
       
(868,553
)
 Sun Microsystems, Inc. (a)
  311,950     
5,655,654 
 
Net Assets—100.0%
      $
436,014,730
 
 
       
32,879,444
 
 
       
 
 

The accompanying notes are an integral part of these financial statements.
 
32

 

The Lazard Funds, Inc.
Portfolios of Investments (continued)

 
Description
 
Shares
 
Value
 
Description
 
Shares
 
Value
 
Lazard Small Cap Portfolio
     
Consumer Products—3.6%
           
Common Stocks—99.7%
           
Central Garden & Pet Co.,
Class A (a), (c)
   
71,940
  $  
385,598
 
Automotive—0.8%
           
Ethan Allen Interiors, Inc. (c)
 
30,700
 
  
874,950
 
ArvinMeritor, Inc. (c)
 
89,200
 
$
1,046,316
 
Matthews International Corp., Class A (c)
 
45,500
   
2,132,585
 
Banking—7.7%
           
Polaris Industries, Inc. (c)
   31,400      1,499,978  
Bank of the Ozarks, Inc. (c)
 
61,750
   
1,617,850
 
 
 
 
   
4,893,111
 
BankUnited Financial Corp., Class A (c)
 
85,650
   
590,985
  Energy Exploration &         
 
 
First Community Bancorp (c)
 
26,600
   
1,096,984
 
Production—3.5%
           
Prosperity Bancshares, Inc. (c)
 
89,440
   
2,628,642
 
Goodrich Petroleum Corp. (a), (c)
 
48,600
   
1,099,332
 
Sterling Bancshares, Inc. (c)
 
77,600
     866,016  
TXCO Resources, Inc. (a), (c)
   166,093      2,003,082  
Texas Capital Bancshares, Inc. (a), (c)
 
92,800
   
1,693,600
 
Venoco, Inc. (a), (c)
 
78,700
   
1,568,491
 
Wintrust Financial Corp. (c)
 
56,200
   
1,861,906
 
 
 
 
   
4,670,905
 
         
10,355,983
           
 
 
Chemicals—4.5%
           
Energy Integrated—1.1%
           
Headwaters, Inc. (a), (c)
 
67,200
   
788,928
 
Foundation Coal Holdings, Inc. (c)
 
29,000
   
1,522,500
 
Hercules, Inc. (c)
 
105,400
   
2,039,490
 
Energy Services—2.8%
           
Polypore International, Inc. (c)
 
89,600
   
1,568,000
 
Complete Production Services,
           
Rockwood Holdings, Inc. (a)
 
51,700
   
1,717,474
 
Inc. (a), (c)
 
47,000
   
844,590
 
         
6,113,892
 
Oceaneering International, Inc. (a)
 
21,300
   
1,434,555
 
Commercial Services—7.8%
           
W-H Energy Services, Inc. (a), (c)
 
26,400
   
1,483,944
 
A. M. Castle & Co. (c)
 
33,800
   
919,022
           
3,763,089
 
Administaff, Inc. (c)
 
21,400
   
605,192
 
Financial Services—4.1%
           
Consolidated Graphics, Inc. (a), (c)
 
30,600
   
1,463,292
 
Duff & Phelps Corp., Class A
 
65,400
   
1,287,072
 
Euronet Worldwide, Inc. (a), (c)
 
45,200
   
1,356,000
 
National Financial Partners Corp. (c)
 
23,500
   
1,071,835
 
First Advantage Corp., Class A (a), (c)
 
50,800
   
836,676
 
Waddell & Reed Financial, Inc. (c)
 
87,350
   
3,152,461
 
G & K Services, Inc., Class A (c)
 
57,400
   
2,153,648
           
5,511,368
 
ValueClick, Inc. (a), (c)
 
53,900
   
1,180,410
 
Health Services—5.0%
           
Waste Connections, Inc. (a), (c)
 
30,775
   
950,947
 
Emergency Medical Services Corp., Class A (a), (c)
  42,000     1,229,760  
Watson Wyatt Worldwide, Inc., Class A (c)
 
24,100
   
1,118,481
 
Five Star Quality Care, Inc. (a), (c)
 
153,550
   
1,274,465
 
         
10,583,668
 
inVentiv Health, Inc. (a)
 
19,200
   
594,432
 
Computer Software—2.9%
           
Kendle International, Inc. (a), (c)
 
26,900
   
1,315,948
 
Secure Computing Corp. (a), (c)
 
219,551
   
2,107,690
 
Magellan Health Services, Inc. (a), (c)
 
24,800
   
1,156,424
 
United Online, Inc. (c).
 
159,300
   
1,882,926
 
Skilled Healthcare Group, Inc.,
           
         
3,990,616
 
Class A
 
83,100
   
1,215,753
 
Construction & Engineering—2.5%
                     
6,786,782
 
Dycom Industries, Inc. (a), (c)
 
91,100
   
2,427,815
 
Housing—1.7%
           
EMCOR Group, Inc. (a), (c)
 
37,700
   
890,851
 
Beacon Roofing Supply, Inc. (a), (c)
 
98,100
   
826,002
 
         
3,318,666
 
Watsco, Inc. (c)
 
40,050
   
1,472,238
 
                       
2,298,240
 

The accompanying notes are an integral part of these financial statements.
 
33



The Lazard Funds, Inc.
Portfolios of Investments (continued)


Description
 
Shares
 
Value
 
Description
 
Shares
 
Value
 
Lazard Small Cap Portfolio (continued)
     
Retail—3.0%
           
Insurance—1.4%
           
Aeropostale, Inc. (a), (c)
 
26,400
 
$
699,600
 
Max Capital Group, Ltd. (c)
 
66,400
 
$
1,858,536
 
Brown Shoe Co., Inc. (c)
 
82,300
   
1,248,491
 
Leisure & Entertainment—2.9%
           
Carter’s, Inc. (a), (c)
 
43,800
   
847,530
 
Bally Technologies,
Inc. (a), (c)
 
20,800
   
1,034,176
 
Pacific Sunwear of California,
Inc. (a), (c)
 
88,550
   
1,249,440
 
Entravision Communications Corp.,
                     
4,045,061
 
Class A (a), (c)
 
201,000
   
1,573,830
 
Semiconductors &
           
Red Robin Gourmet Burgers,
           
Components—11.0%
           
Inc. (a), (c)
 
26,600
   
850,934
 
Benchmark Electronics, Inc. (a), (c)
 
47,224
   
837,282
 
TravelCenters of America LLC (a), (c)
 
36,100
   
451,250
 
Coherent, Inc. (a)
 
64,393
   
1,614,333
 
         
3,910,190
 
CPI International, Inc. (a), (c)
 
63,800
   
1,090,980
 
Manufacturing—8.7%
           
FARO Technologies, Inc. (a), (c)
 
47,900
   
1,301,922
 
Altra Holdings, Inc. (a)
 
117,900
   
1,960,677
 
Integrated Device Technology, Inc. (a)
 
126,650
   
1,432,411
 
Insteel Industries, Inc. (c)
 
59,900
   
702,627
 
Microsemi Corp. (a), (c)
 
66,100
   
1,463,454
 
Kaman Corp. (c)
 
39,100
   
1,439,271
 
ON Semiconductor Corp. (a), (c)
 
253,300
   
2,249,304
 
Kennametal, Inc.
 
25,700
   
973,002
 
Plexus Corp. (a)
 
72,100
   
1,893,346
 
Knoll, Inc.
 
50,250
   
825,607
 
Semtech Corp. (a), (c)
 
89,700
   
1,392,144
 
Olympic Steel, Inc. (c)
 
40,000
   
1,268,400
 
TTM Technologies, Inc. (a), (c)
 
137,800
   
1,606,748
 
Regal-Beloit Corp. (c)
 
31,400
   
1,411,430
           
14,881,924
 
RTI International Metals, Inc. (a), (c)
 
22,400
   
1,544,032
 
Services—0.9%
           
The Middleby Corp. (a), (c)
6,100
467,382
Bright Horizons Family Solutions, Inc. (a), (c)
 
36,125
   
1,247,758
 
TriMas Corp. (c)
 
106,100
   
1,123,599
               
         
11,716,027
 
Technology Hardware—5.2%
           
Medical Products—5.2%
           
Brightpoint, Inc. (a), (c)
 
210,500
   
3,233,280
 
American Medical Systems
           
FEI Co. (a), (c)
 
80,100
   
1,988,883
 
Holdings, Inc. (a), (c)
 
69,600
   
1,006,416
 
Houston Wire & Cable Co. (c)
 
65,900
   
931,826
 
Pharmanet Development
           
Mattson Technology, Inc. (a), (c)
 
96,500
   
826,040
 
Group, Inc. (a), (c)
 
62,200
   
2,438,862
           
6,980,029
 
PSS World Medical, Inc. (a), (c)
 
68,200
   
1,334,674
 
Telecommunications—3.3%
           
Symmetry Medical, Inc. (a), (c)
 
128,800
   
2,244,984
 
Alaska Communications Systems
           
         
7,024,936
 
Group, Inc. (c)
 
126,600
   
1,899,000
 
Metals & Mining—2.9%
           
NTELOS Holdings Corp. (c)
 
43,700
   
1,297,453
 
Quanex Corp. (c)
 
27,900
   
1,448,010
 
PAETEC Holding Corp. (a), (c)
 
136,200
   
1,327,950
 
Schnitzer Steel Industries, Inc.,
                     
4,524,403
 
Class A (c)
 
35,750
   
2,471,398
 
Transportation—0.5%
           
         
3,919,408
 
AirTran Holdings, Inc. (a), (c)
 
91,750
   
656,930
 
Real Estate—6.7%
           
Total Common Stocks
           
Corporate Office Properties Trust (c)
 
44,400
   
1,398,600
 
(Identified cost $133,684,249)
       
134,652,085
 
Digital Realty Trust, Inc. (c)
 
36,000
   
1,381,320
 
Short-Term Investments—25.5%
           
Home Properties, Inc. (c)
 
33,900
   
1,520,415
 
Collateral for Securities on Loan—24.3%
           
MFA Mortgage Investments, Inc.
 
311,850
   
2,884,612
 
State Street Navigator Securities
 
 
   
 
 
Mid-America Apartment Communities, Inc.
 
43,200
   
1,846,800
 
Lending Prime Portfolio,
4.88% (e), (f)
 
32,831,036
   
 32,831,036
 
9,031,747
             
 
The accompanying notes are an integral part of these financial statements.
 
34



The Lazard Funds, Inc.
Portfolios of Investments (continued)


Description
 
Principal
Amount
(000)
 
Value
 
Description
 
Value
 
Lazard Small Cap Portfolio (concluded)
             
Total Investments—125.2%
       
Repurchase Agreement—1.2%
             
(Identified cost $168,071,285) (b)
 
$
169,039,121
 
State Street Bank and Trust Co., 0.70%, 
             
Liabilities in Excess of Cash and
 
 
 
 
01/02/08 (Dated 12/31/07, collateralized
             
Other Assets—(25.2)%
 
 
(33,983,297
)
by $1,500,000 United States Treasury
             
Net Assets—100.0%
 
$
135,055,824
 
Note, 5.125%, 06/30/11, with a value
                       
of $1,590,000) Proceeds of
                       
$1,556,061
 
$
1,556
 
$
1,556,000
           
Total Short-Term Investments
                       
(Identified cost $34,387,036)
         
34,387,036
           

The accompanying notes are an integral part of these financial statements.
 
35


The Lazard Funds, Inc.
Portfolios of Investments (continued)
December 31, 2007 

 
Description
 
Shares
 
Value
 
Description
 
Shares
 
Value
 
Lazard U.S. Small Cap Equity Growth Portfolio
       
Leisure & Entertainment—6.1%
           
Common Stocks—95.4%
           
Life Time Fitness, Inc. (a)
 
7,410
 
$
368,129
 
Commercial Services—9.3%
           
LoopNet, Inc. (a)
 
11,000
   
154,550
 
Broadridge Financial Solutions, Inc.
 
8,800
 
$
197,384
 
Orient-Express Hotels, Ltd., Class A.
 
4,120
   
236,982
 
Concur Technologies, Inc. (a)
 
5,300
   
191,913
 
Shutterfly, Inc. (a)
 
8,700
   
222,894 
 
CyberSource Corp. (a)
 
10,400
   
184,808
 
 
       
982,555 
 
Huron Consulting Group, Inc. (a)
 
7,600
   
612,788
 
Manufacturing—20.7%
           
Standard Parking Corp. (a)
 
6,200
   
300,638
 
A.S.V., Inc. (a)
 
9,130
   
126,451
 
         
1,487,531
 
BE Aerospace, Inc. (a)
 
12,130
   
641,677
 
Computer Software—10.1%
           
Gardner Denver, Inc. (a)
 
12,970
   
428,010
 
ANSYS, Inc. (a)
 
4,400
   
182,424
 
Gibraltar Industries, Inc.
 
10,320
   
159,134
 
Ariba, Inc. (a)
 
13,400
   
149,410
 
Hubbell, Inc., Class B.
 
6,025
   
310,890
 
Blackboard, Inc. (a)
 
5,500
   
221,375
 
ICF International, Inc. (a)
 
6,470
   
163,432
 
GSI Commerce, Inc. (a)
 
9,200
   
179,400
 
Kennametal, Inc.
 
13,450
   
509,217
 
Interactive Intelligence, Inc. (a)
 
10,100
   
266,135
 
RBC Bearings, Inc. (a)
 
13,425
   
583,451
 
NIC, Inc.
 
28,200
   
238,008
 
The Toro Co.
 
3,450
   
187,818
 
S1 Corp. (a)
 
25,250
   
184,325
 
Trinity Industries, Inc.
 
7,012 
   
194,653
 
Website Pros, Inc. (a)
 
16,670
   
193,539
           
3,304,733
 
         
1,614,616
 
Medical Products—3.4%
           
Consumer Products—3.5%
           
Medical Action Industries, Inc. (a)
 
9,700 
   
202,245
 
FGX International Holdings, Ltd.
 
17,100
   
202,635
 
Wright Medical Group, Inc. (a)
 
11,840 
   
345,373
 
Tempur-Pedic International, Inc.
 
4,540
   
117,904
           
547,618
 
Universal Electronics, Inc. (a)
 
7,200
   
240,768
 
Metals & Mining—5.8%
           
 
       
561,307
 
Century Aluminum Co. (a)
 
7,450 
   
401,853
 
Energy Exploration & Production—1.3%
       
Reliance Steel & Aluminum Co.
 
9,650 
   
523,030
 
EXCO Resources, Inc. (a)
 
13,100
   
202,788
           
924,883
 
Energy Services—3.6%                           
Dril-Quip, Inc. (a).
 
10,310
   
573,855
 
Real Estate—1.5%
           
Financial Services—1.6%
           
FelCor Lodging Trust, Inc.
 
15,060 
   
234,785
 
HFF, Inc., Class A.
 
12,000
   
92,880
 
Retail—8.8%
           
TradeStation Group, Inc. (a)
 
11,900
   
169,099
 
Audible, Inc. (a)
 
15,200 
   
135,584
 
         
261,979
 
Crocs, Inc. (a)
 
10,600 
   
390,186
 
Health Services—4.8%
           
Deckers Outdoor Corp. (a)
 
600 
   
93,036
 
Air Methods Corp. (a)
 
3,450
   
171,361
 
Dick’s Sporting Goods, Inc. (a)
 
13,560 
   
376,426
 
Genoptix, Inc.
 
5,000
   
153,500
 
Urban Outfitters, Inc. (a)
 
8,730 
   
237,980
 
Sun Healthcare Group, Inc. (a)
 
16,300
   
279,871
 
Zumiez, Inc. (a)
 
7,365 
   
179,411
 
Varian, Inc. (a)
 
2,600
   
169,780
           
1,412,623
 
         
774,512
 
Semiconductors &
Components—9.1%
           
Housing—0.4%
 
14,180
   
67,497
 
AuthenTec, Inc.
 
16,780 
   
243,813
 
PGT, Inc. (a)
Insurance—1.5%
           
Diodes, Inc. (a)
 
7,725 
   
232,291
 
Aspen Insurance Holdings, Ltd.
 
8,220
   
237,065
 
RF Micro Devices, Inc. (a)
 
42,100 
   
240,391
 
             
Rubicon Technology, Inc. 
 
8,400 
   
199,500
 
             
Silicon Motion Technology Corp. ADR (a)
 
8,800 
   
156,464
 
             
Technitrol, Inc. 
 
7,700 
   
220,066
 
             
TTM Technologies, Inc. (a)
 
13,900 
   
162,074
 
                       
1,454,599
 

The accompanying notes are an integral part of these financial statements.
 
36

 

The Lazard Funds, Inc.
Portfolios of Investments (continued) 
December 31, 2007 


Description
 
Shares
 
Value
 
Description
 
Principal Amount
(000)
 
Value
 
Lazard U.S. Small Cap Equity Growth Portfolio (concluded)     
 
Repurchase Agreement—4.5%
             
Technology Hardware—3.9% 
           
State Street Bank and Trust Co.,
      
 
   
Aixtron AG Sponsored ADR (a)
 
12,200
 
$
170,800
 
 0.70%, 01/02/08
             
FormFactor, Inc. (a)
 
7,150
   
236,665
 
 (Dated 12/31/07, collateralized by
             
Synaptics, Inc. (a)
 
5,285
   
217,530
 
 $690,000 United States Treasury
             
 
       
624,995
 
 Note, 5.125%, 06/30/11, with a
             
Total Common Stocks
           
 value of $731,400)
             
(Identified cost $14,151,054)
       
15,267,941
 
 Proceeds of $717,028
             
             
 (Identified cost $717,000)
  $
717
 
$
 717,000
 
                             
 
 
  
       
Total Investments—99.9% 
             
 
            
(Identified cost $14,868,054) (b) 
       
$
15,984,941
 
 
           
Cash and Other Assets in Excess of Liabilities—0.1% 
         
19,692
 
              
Net Assets—100.0% 
       
$
16,004,633
 

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

37

 

The Lazard Funds, Inc.
Portfolios of Investments (continued)
December 31, 2007 


 
Description
 
Shares
 
Value
 
Description
 
Shares
 
Value
 
Lazard International Equity Portfolio     
        
Japan—13.7% 
 
 
        
Common Stocks—96.1%
           
Canon, Inc.
 
58,800
 
$
2,736,964
 
Argentina—0.9%
           
Daito Trust Construction Co., Ltd.
 
122,000
   
6,759,880
 
Tenaris SA ADR
 
78,000
 
$
3,488,940
 
East Japan Railway Co
 
526
   
4,341,154
 
Belgium—1.3% 
           
Hoya Corp
 
102,900
   
3,279,094
 
InBev NV
 
56,307
   
4,692,449
 
Japan Tobacco, Inc.
 
977
   
5,841,973
 
Canada—0.5% 
           
JSR Corp
 
130,800
   
3,377,863
 
Telus Corp
 
33,900
   
1,698,177
 
Nidec Corp
 
57,400
   
4,254,326
 
Finland—2.5% 
           
Sony Financial Holdings, Inc.
 
705
   
2,694,669
 
Nokia Oyj
 
238,400
   
9,243,620
 
Sumitomo Mitsui Financial Group, Inc.
 
536
   
4,015,862
 
France—12.6% 
           
Takeda Pharmaceutical Co., Ltd.
 
48,200
   
2,834,660
 
Axa (c)
 
76,024
   
3,044,424
 
The Sumitomo Trust and
           
BNP Paribas
 
39,100
   
4,242,873
 
Banking Co., Ltd.
 
766,000
   
5,128,837
 
Gaz de France (c)
 
141,800
   
8,292,749
 
THK Co., Ltd.
 
92,300
   
1,871,365
 
Groupe Danone
 
60,100
   
5,395,170
 
Tokyo Gas Co., Ltd.
 
730,000
   
3,417,536
 
Sanofi-Aventis
 
107,297
   
9,879,900
 
Total Japan
       
50,554,183
 
Total SA
 
140,596
   
11,681,885
 
Netherlands—2.3%
           
Vivendi (c)
 
81,900
   
3,757,501
 
Heineken NV
 
77,350
   
5,000,822
 
Total France
       
46,294,502
 
TNT NV
 
86,360
   
3,566,920
 
Germany—14.0%
 
   
 
Total Netherlands
       
8,567,742
 
Adidas AG (c)
 
72,591
   
5,440,311
 
New Zealand—0.8%
           
Allianz SE (c)
 
23,100
   
4,996,769
 
Telecom Corp. of New Zealand, Ltd. (c)
 
901,022
   
3,016,209
 
Continental AG (c)
 
38,500
   
5,009,152
 
Singapore—3.0%
           
Daimler AG
 
110,800
   
10,772,679
 
DBS Group Holdings, Ltd.
 
202,800
   
2,916,364
 
Deutsche Post AG
 
217,100
   
7,462,335
 
Singapore Telecommunications, Ltd. (c)
 
2,926,600
   
8,132,551
 
E.ON AG (c)
 
34,700
   
7,386,239
 
Total Singapore
       
11,048,915
 
Siemens AG
 
64,588
   
10,279,748
 
South Korea—0.7% 
           
Total Germany
       
51,347,233
 
Kookmin Bank Sponsored ADR (c)
 
34,300
   
2,514,876
 
Greece—2.1% 
           
Spain—1.9% 
           
National Bank of Greece SA
 
58,450
   
4,014,762
 
Banco Santander SA (c)
 
319,200
   
6,902,293
 
OPAP SA
 
88,625
   
3,552,925
 
Sweden—0.6%
           
Total Greece
       
7,567,687
 
Telefonaktiebolaget LM Ericsson,
           
Ireland—0.9%
           
B Shares
 
 878,100
   
2,062,377
 
CRH PLC
 
93,221
   
3,250,607
 
Switzerland—8.2% 
           
Italy—3.2% 
           
Credit Suisse Group
 
86,959
   
5,230,674
 
Eni SpA (c)
 
165,930
   
6,077,080
 
Nestle SA
 
23,076
   
10,598,878
 
UniCredito Italiano SpA
 
709,267
   
5,890,069
 
Novartis AG
 
201,600
   
11,058,040
 
Total Italy
       
11,967,149
 
Zurich Financial Services AG
 
11,200
   
3,289,317
 
             
Total Switzerland
       
30,176,909
 
             
Turkey—2.0%
           
             
Turkcell Iletisim Hizmetleri AS ADR (c)
 
268,900
   
7,413,573
 

The accompanying notes are an integral part of these financial statements.
 
38

 

The Lazard Funds, Inc.
Portfolios of Investments (continued) 
December 31, 2007 

 
Description
 
Shares
   
Value
 
Description
 
Principal
Amount
(000)
   
Value
 
Lazard International Equity Portfolio (concluded)  
       
Repurchase Agreement—4.1% 
           
United Kingdom—24.9%
           
State Street Bank and Trust Co.,
           
BAE Systems PLC
 
770,900
 
$
7,642,078
 
0.70%, 01/02/08
           
BP PLC
 
677,748
   
8,297,121
 
(Dated 12/31/07, collateralized by
           
British American Tobacco PLC
 
156,100
   
6,105,898
 
$14,680,000 United States Treasury
           
Diageo PLC
 
305,242
   
6,562,240
 
Note, 5.125%, 06/30/11, with a
           
GlaxoSmithKline PLC
 
325,550
   
8,288,431
 
value of $15,560,800)
           
HSBC Holdings PLC
 
171,900
   
2,881,191
 
Proceeds of $15,254,593
$
15,254
 
$
15,254,000
 
Imperial Tobacco Group PLC
 
116,140
   
6,269,827
 
Total Short-Term Investments
           
Lloyds TSB Group PLC
 
435,800
   
4,094,617
 
(Identified cost $53,348,586)
       
53,348,586
 
National Grid PLC
 
221,327
   
3,674,384
 
Total Investments—110.6%
           
Old Mutual PLC
 
1,416,392
   
4,725,432
 
(Identified cost $350,692,796) (b)
     
$
406,698,635
 
Prudential PLC
 
343,300
   
4,865,617
 
Liabilities in Excess of Cash and
           
Reckitt Benckiser Group PLC
 
91,500
   
5,307,558
 
Other Assets—(10.6)%
       
(38,927,246
) 
Tesco PLC
 
567,900
   
5,395,130
 
Net Assets—100.0%
     
$
367,771,389
 
Unilever PLC
 
155,400
   
5,846,513
               
Vodafone Group PLC
 
3,099,383
   
11,586,571
               
Total United Kingdom
       
91,542,608
               
                                
Total Common Stocks
                         
(Identified cost $297,344,210)
       
353,350,049
               
Short-Term Investments—14.5%
                         
Collateral for Securities
on Loan—10.4%
                         
State Street Navigator Securities
Lending Prime Portfolio,
4.88% (e), (f)
 
38,094,586
   
38,094,586
               

The accompanying notes are an integral part of these financial statements.
 
39

 

The Lazard Funds, Inc.
Portfolios of Investments (continued) 
December 31, 2007 

 
Description
 
Shares
 
Value
 
Description
 
Shares
 
Value
 
Lazard International Equity Select Portfolio                    
Common Stocks—96.1%
           
Japan—6.1% 
           
Argentina—1.4%
           
Canon, Inc. Sponsored ADR
 
11,000
 
$
504,130
 
Tenaris SA ADR
 
8,250
 
$
369,023
 
Hoya Corp. Sponsored ADR
 
5,300
   
165,890
 
Belgium—1.8% 
           
Nissan Motor Co., Ltd. Sponsored ADR
 
11,600
   
251,952
 
InBev NV
 
5,650
   
470,853
 
Nomura Holdings, Inc. ADR
 
21,250
   
355,938
 
Brazil—0.9% 
           
Sumitomo Mitsui Financial Group, Inc. ADR
 
41,000
   
298,480
 
Companhia Vale do Rio Doce ADR
 
7,100
   
231,957
 
Total Japan
       
1,576,390 
 
Canada—0.2%
           
Netherlands—5.3%
           
Telus Corp
 
1,100
   
53,509
 
Heineken NV ADR
 
16,450
   
525,577 
 
Finland—2.3%
           
Royal Dutch Shell PLC, A Shares
 
12,100
   
508,611
 
Nokia Oyj Sponsored ADR
 
15,300
   
587,367
 
TNT NV ADR
 
8,400
   
342,300 
 
France—10.7%
           
Total Netherlands
       
1,376,488
 
Axa Sponsored ADR
 
8,550
   
339,521
 
Russia—1.4%
           
Groupe Danone
 
5,970
   
535,926
 
Mobile TeleSystems Sponsored ADR
 
3,670
   
373,569 
 
Sanofi-Aventis ADR
 
7,770
   
353,768
 
Singapore—3.3%
           
Suez SA Sponsored ADR
 
12,970
   
881,960
 
DBS Group Holdings, Ltd.
 
17,150
   
246,625
 
Total SA Sponsored ADR
 
8,300
   
685,580
 
Singapore Telecommunications, Ltd. ADR
 
22,750
   
615,388 
 
Total France
       
2,796,755
 
Total Singapore
       
862,013
 
Germany—10.6%
           
South Korea—3.1%
           
Adidas AG Sponsored ADR
 
8,150
   
302,772
 
Kookmin Bank
 
6,790
   
500,518
 
Allianz SE ADR
 
12,450
   
264,563
 
Samsung Electronics Co., Ltd. GDR (d)
 
1,040
   
304,460
 
Daimler AG
 
7,240
   
703,919
 
Total South Korea
       
804,978
 
Deutsche Post AG
 
16,070
   
552,371
 
Spain—1.1%
           
E.ON AG
 
1,300
   
276,718
 
Banco Santander SA
 
12,850
   
277,865
 
Siemens AG
 
4,070
   
647,776
 
Sweden—0.9%
           
             
Telefonaktiebolaget LM Ericsson Sponsored ADR
 
9,600
   
224,160
 
Total Germany
       
2,748,119
 
Switzerland—15.8%
           
Indonesia—0.9%
           
Credit Suisse Group Sponsored ADR
 
7,500
   
450,750
 
PT Telekomunikasi Indonesia Tbk
           
Julius Baer Holding AG
 
3,280
   
271,173
 
Sponsored ADR
 
5,800
   
243,658
 
Nestle SA Sponsored ADR
 
6,550
   
749,975
 
Ireland—1.5%
           
Novartis AG ADR
 
14,300
   
776,633
 
CRH PLC Sponsored ADR
 
11,500
   
401,120
 
Roche Holding AG
 
4,520
   
780,914
 
Italy—3.1%
           
UBS AG
 
7,290
   
335,340
 
Eni SpA Sponsored ADR
 
6,850
   
496,145
 
Zurich Financial Services AG ADR
 
25,550
   
740,950
 
Intesa Sanpaolo Sponsored ADR
 
1
   
48
 
Total Switzerland
       
4,105,735
 
UniCredito Italiano SpA
 
37,400
   
310,586
 
Turkey—2.7%
           
Total Italy
       
806,779
 
Turkcell Iletisim Hizmetleri AS ADR
 
25,400
   
700,278
 
 
The accompanying notes are an integral part of these financial statements.
 
40

 


The Lazard Funds, Inc.
Portfolios of Investments (continued) 
December 31, 2007 


Description
 
Shares
   
Value
 
Description
   
Principal Amount (000)
   
Value
 
Lazard International Equity Select Portfolio (concluded)
 
Repurchase Agreement—1.1%
       
United Kingdom—23.0%
           
State Street Bank and Trust Co.,
   
BP PLC Sponsored ADR
 
8,350
 
$
610,969
 
0.70%, 01/02/08
   
British American Tobacco PLC
   
(Dated 12/31/07, collateralized by
   
Sponsored ADR
 
7,250
   
569,560
 
$275,000 United States Treasury
   
Cadbury Schweppes PLC
         
Note, 5.125%, 06/30/11, with a
   
Sponsored ADR
 
4,700
   
232,039
 
value of $291,500)
   
Diageo PLC Sponsored ADR
7,050
   
605,101
 
Proceeds of $283,011
   
GlaxoSmithKline PLC Sponsored ADR
7,400
   
372,886
 
(Identified cost $283,000)
$
283
 
$
283,000
 
HSBC Holdings PLC Sponsored ADR
2,950
   
246,945
 
Total Investments—97.2%
       
Imperial Tobacco Group PLC ADR
 
2,650
   
284,292
 
(Identified cost $21,970,414) (b)
     
$
25,288,423
 
Lloyds TSB Group PLC Sponsored ADR
7,600
   
286,140
 
Cash and Other Assets in Excess
   
Prudential PLC
 
 54,460
   
771,866
 
of Liabilities—2.8%
     
729,770
 
Reckitt Benckiser Group PLC
4,485
   
260,157
 
Net Assets—100.0%
       
$
26,018,193
 
Tesco PLC Sponsored ADR
 
9,500
   
266,000
           
Unilever PLC Sponsored ADR
 
16,500
   
617,430
                 
Vodafone Group PLC Sponsored ADR
 
23,350
   
871,422
                 
Total United Kingdom
       
5,994,807
                 
Total Common Stocks
                           
(Identified cost $21,687,414)
   
25,005,423
                 
 
The accompanying notes are an integral part of these financial statements.

41

 

The Lazard Funds, Inc.
Portfolios of Investments (continued) 
December 31, 2007 


Description
 
Shares
   
Value
 
Description
 
Shares
   
Value
 
Lazard International Strategic Equity Portfolio
 
Nippon Electric Glass Co., Ltd.
 
410,000
 
$
6,701,517
 
Common Stocks—98.1%
           
THK Co., Ltd.
 
240,100
   
4,867,981
 
Austria—1.8%
           
USS Co., Ltd.
 
91,810
   
5,711,673
 
OMV AG
 
98,810
 
$
8,006,261
 
Total Japan
       
51,267,354
 
Egypt—4.8%
           
Mexico—0.9%
           
Eastern Tobacco
 
104,510
   
8,506,683
 
Kimberly-Clark de Mexico
           
Egyptian Company for Mobile Services
332,070
   
12,250,396
 
SAB de CV, Series A
 
874,500
   
3,818,721
 
Total Egypt
       
20,757,079
 
Netherlands—1.3%
           
Finland—2.1%
           
TNT NV
 
140,547
   
5,805,002
 
  Sampo Oyj, A Shares  
339,400
   
8,971,655
 
Norway—1.6%
           
France—7.9%
       
Telenor ASA (a)
 
283,700
   
6,779,207
 
Gaz de France
 
262,160
   
15,331,644
 
Singapore—1.9%
           
Groupe Danone
 
110,040
   
9,878,278
 
DBS Group Holdings, Ltd.
 
583,000
   
8,383,827
 
Sanofi-Aventis
 
99,050
   
9,120,517
Spain—2.4%
           
Total France
       
34,330,439
 
Banco Santander SA
 
483,900
   
10,463,720
 
Germany—15.5%
           
Switzerland—8.8%
           
Continental AG
 
48,680
   
6,333,650
 
Julius Baer Holding AG
 
109,092
   
9,019,133
 
Daimler AG
 
177,880
   
17,294,622
 
Nestle SA
 
32,790
   
15,060,549
 
Deutsche Post AG
 
410,770
   
14,119,316
 
Novartis AG
 
166,837
   
9,151,241
 
Hypo Real Estate Holding AG
 
106,530
   
5,622,655
 
UBS AG
 
110,980
   
5,136,556
 
Siemens AG
 
58,830
   
9,363,312
 
Total Switzerland
       
38,367,479
 
Symrise AG (a)
 
281,583
   
7,937,354
 
Turkey—3.9%
           
Wincor Nixdorf AG
 
68,880
   
6,545,892
 
Turkcell Iletisim Hizmetleri AS
 
641,610
   
7,005,850
 
Total Germany
       
67,216,801
 
Turkiye Halk Bankasi AS
 
971,670
   
10,112,497
 
Greece—1.6%
           
Total Turkey
     
17,118,347
 
OPAP SA
 
178,420
   
7,152,754
 
United Kingdom—22.9%
         
India—2.3%
           
BAE Systems PLC
 
1,609,125
   
15,951,562
 
Grasim Industries, Ltd.
           
British American Tobacco PLC
 
313,028
   
12,244,183
 
Sponsored GDR (d)
 
106,900
   
10,048,600
 
British Energy Group PLC
 
519,500
   
5,677,302
 
Ireland—3.0%
           
Cairn Energy PLC (a)
 
86,999
   
5,323,561
 
Anglo Irish Bank Corp. PLC
 
296,800
   
4,747,266
 
Imperial Tobacco Group PLC
 
134,470
   
7,259,374
 
CRH PLC
 
237,455
   
8,280,032
 
ITV PLC
 
2,604,700
   
4,427,919
 
Total Ireland
       
13,027,298
 
National Grid PLC
 
651,533
   
10,816,495
 
Italy—3.6%
           
Old Mutual PLC
 
1,828,860
   
6,101,527
 
Maire Tecnimont SpA
 
449,587
   
2,346,628
 
Prudential PLC
 
469,200
   
6,650,007
 
Prysmian SpA
 
531,020
   
13,113,024
 
Shire PLC
 
228,690
   
5,230,597
 
Total Italy
     
15,459,652
 
Standard Chartered PLC
 
199,160
   
7,310,501
 
Japan—11.8%
         
Tesco PLC
 
1,286,686
   
12,223,697
 
Daito Trust Construction Co., Ltd. 
 
250,000
   
13,852,213
 
Thomas Cook Group PLC (a)
 
64,640
   
362,856
 
Japan Tobacco, Inc.
 
1,596
   
9,543,284
 
Total United Kingdom
       
99,579,581
 
JSR Corp.
 
410,100
   
10,590,686
 
Total Common Stocks
           
       
(Identified cost $371,113,462)
 
426,553,777
 
 
The accompanying notes are an integral part of these financial statements.

42

 

The Lazard Funds, Inc.
Portfolios of Investments (continued) 
December 31, 2007 

 
Description
   
Principal
Amount
(000)
   
Value
 
Description
   
Value
 
Lazard International Strategic Equity Portfolio (concluded)
 
Total Investments—99.8%
 
$
434,162,777
 
Repurchase Agreement—1.7%
             
(Identified cost
$378,722,462) (b)
   
State Street Bank and Trust Co.,
       
Cash and Other Assets in 
 
0.70%, 01/02/08
             
Excess of Liabilities—0.2%
 
762,574
 
(Dated 12/31/07, collateralized
         
Net Assets—100.0%
 
$
434,925,351
 
by $7,325,000 United States Treasury Note, 5.125%, 06/30/11, with a Value of $7,764,500) Proceeds of $7,609,296 (Identified cost $7,609,000)
  $
7,609
 
$
7,609,000
           
 
The accompanying notes are an integral part of these financial statements.

43

 

The Lazard Funds, Inc.
Portfolios of Investments (continued) 
December 31, 2007 


Description
 
Shares
   
Value
 
Description
 
Shares
   
Value
 
Lazard International Small Cap Portfolio
 
Japan—23.4%
           
Common Stocks—96.2%
           
ABC-Mart, Inc.
 
54,800
 
$
1,196,903
 
Australia—4.3%
           
Amano Corp. (c)
 
204,000
   
2,437,810
 
ABC Learning Centres, Ltd. (c)
 
607,629
 
$
2,763,679
 
Asahi Pretec Corp. (c)
 
116,100
   
3,169,718
 
Fairfax Media, Ltd. (c)
 
595,506
   
2,447,098
 
Creed Corp. (c)
 
978
   
1,987,253
 
James Hardie Industries NV (c)
 
354,900
   
2,009,949
 
Daito Trust Construction Co., Ltd.
 
58,500
   
3,241,418
 
Macquarie Infrastructure Group (c)
 
862,220
   
2,293,930
 
Don Quijote Co., Ltd. (c)
 
84,000
   
1,654,209
 
Total Australia
       
9,514,656
 
Eizo Nanao Corp.
 
97,700
   
2,518,695
 
Belgium—1.1%
           
Hisamitsu Pharmaceutical Co., Inc. (c)
97,800
   
2,976,503
 
Telenet Group Holding NV (a)
 
82,271
   
2,396,064
 
Ichiyoshi Securities Co., Ltd. (c)
 
198,100
   
1,798,088
 
Finland—2.5%
     
JAFCO Co., Ltd. (c)
 
66,000
   
2,174,104
 
KCI Konecranes Oyj
 
65,500
   
2,258,122
 
JSR Corp.
 
153,600
   
3,966,665
 
Sampo Oyj, A Shares
 
118,100
   
3,121,840
 
K.K. DaVinci Advisors (a), (c)
 
3,131
   
2,774,641
 
Total Finland
     
5,379,962
 
Konami Corp. (c)
 
106,700
   
3,495,699
 
France—2.8%
       
Misumi Group, Inc. (c)
 
187,100
   
3,265,855
 
Carbone Lorraine SA.
 
45,737
   
3,156,254
OSG Corp. (c)
 
205,800
   
2,247,469
 
Neopost SA (c)
 
28,600
   
2,947,514
 
Suruga Bank, Ltd. (c)
 
202,700
   
2,209,986
 
Total France
       
6,103,768
 
Sysmex Corp.
 
62,300
   
2,648,928
 
Germany—7.0%
       
THK Co., Ltd.
 
138,900
   
2,816,171
 
Aareal Bank AG
 
56,059
   
2,565,382
 
Union Tool Co.
 
75,600
   
2,524,173
 
Compugroup Holding AG (a)
 
124,851
   
2,336,492
 
USS Co., Ltd.
 
37,580
   
2,337,922
 
CTS Eventim AG
 
53,340
   
2,066,623
 
Total Japan
       
51,442,210
 
Pfeiffer Vacuum Technology AG (c)
 
26,019
   
2,092,260
 
Netherlands—10.0%
           
SGL Carbon AG (a)
 
48,700
   
2,635,892
 
Advanced Metallurgical Group NV (c)
 
66,628
   
5,001,208
 
Symrise AG (a)
 
128,208
   
 3,613,969
 
Fugro NV
 
54,462
   
4,204,263
 
Total Germany
     
 15,310,618
 
Koninklijke Boskalis Westminster NV
 
74,405
   
4,531,935
 
Greece—2.0%
       
Ordina NV (c)
 
142,521
   
2,542,149
 
Piraeus Bank SA
 
112,554
   
4,393,742
 
SBM Offshore NV
 
98,708
   
3,117,227
 
Hong Kong—2.0%
           
USG People NV (c)
 
96,595
   
2,621,169
 
Esprit Holdings, Ltd.
 
288,065
   
4,318,722
 
Total Netherlands
       
22,017,951
 
Ireland—4.4%
       
Norway—3.9%
           
Anglo Irish Bank Corp. PLC 
 
242,922
   
3,885,496
 
Acergy SA (c)
 
104,600
   
2,335,746
 
DCC PLC
 
124,760
   
3,515,317
 
ODIM ASA (a)
 
146,700
   
2,269,455
 
Grafton Group PLC Units (a)
 
272,678
   
2,162,810
 
Songa Offshore ASA (a), (c)
 
291,200
   
3,941,766
 
Total Ireland
       
9,563,623
 
Total Norway
       
8,546,967
 
Isle of Man—1.3%
       
Portugal—1.0%
           
Hansard Global PLC
 
509,906
   
2,910,567
 
Banif SGPS SA
 
387,372
   
2,265,429
 
Italy—0.7%
         
Spain—2.2%
           
AICON SpA (c) 
 
495,649
   
1,500,054
 
Codere SA (a)
 
81,931
   
2,180,128
 
           
Indra Sistemas SA (c)
 
98,751
   
2,682,560
 
       
Total Spain
       
4,862,688
 
 
The accompanying notes are an integral part of these financial statements.

44

 
 

The Lazard Funds, Inc.
Portfolios of Investments (continued)
December 31, 2007


Description
 
Shares
 
Value
   
Description
 
Shares
 
Value
 
Lazard International Small Cap Portfolio (concluded)
   
Preferred Stock—1.7%
             
Sweden—5.0%
             
Germany—1.7%
             
Duni AB
 
285,536
 
$
2,186,847
   
Fuchs Petrolub AG
             
Elekta AB, B Shares (c)
 
137,300
   
2,288,971
   
(Identified cost $3,089,637)
   
43,146
 
$
3,822,115
 
Getinge AB, B Shares
 
129,400
   
3,473,651
   
Short-Term Investments—21.1%
             
KappAhl Holding AB (a)
 
233,400
   
3,051,476
   
Collateral for Securities
             
Total Sweden
       
11,000,945
   
on Loan—19.5%
             
Switzerland—6.4%
             
State Street Navigator Securities
         
Bank Sarasin & Cie AG, B Shares
 
636
   
3,005,432
   
Lending Prime Portfolio,
         
Banque Cantonale Vaudoise
 
5,108
   
2,260,397
   
4.88% (e), (f)
   
42,914,058
   
42,914,058
 
Burckhardt Compression Holding AG
 
11,747
   
3,839,058
         
Principal
       
Gottex Fund Management
                   
Amount
       
Holdings, Ltd.
 
42,632
   
2,613,312
         
(000)
       
Swissquote Group Holding SA
 
39,800
   
2,237,574
   
Repurchase Agreement—1.6%
             
Total Switzerland
       
13,955,773
   
State Street Bank and Trust Co.,
             
United Kingdom—16.2%
             
0.70%, 01/02/08
             
Ashmore Group PLC
 
487,142
   
2,608,507
   
(Dated 12/31/07, collateralized by
             
Charter PLC (a)
 
168,530
   
2,662,001
   
$3,375,000 United States Treasury
             
Chemring Group PLC
 
71,646
   
2,932,237
   
Note, 5.125%, 06/30/11, with a
             
Enodis PLC
 
697,596
   
2,221,816
   
value of $3,577,500)
             
Enterprise Inns PLC
 
167,734
   
1,626,051
   
Proceeds of $3,506,136
 
$
3,506
   
3,506,000
 
Filtrona PLC
 
515,753
   
2,078,983
   
Total Short-Term Investments
             
Hampson Industries PLC
 
883,011
   
2,733,258
   
(Identified cost $46,420,058)
         
46,420,058
 
Intertek Group PLC
 
150,091
   
2,957,835
   
Total Investments—119.0%
             
Man Group PLC
 
269,047
   
3,047,365
   
(Identified cost $253,312,162) (b)
       
$
261,313,065
 
Northgate PLC
 
151,857
   
2,324,584
   
Liabilities in Excess of Cash and
             
Regus Group PLC
 
1,108,532
   
1,825,998
   
Other Assets—(19.0)%
         
(41,809,295
)
Sepura, Ltd.
 
629,539
   
2,218,094
   
Net Assets—100.0%
       
$
219,503,770
 
Victrex PLC
 
253,481
   
3,632,971
                   
William Hill PLC
 
260,275
   
2,717,453
                   
Total United Kingdom
       
35,587,153
                   
Total Common Stocks
                             
(Identified cost $203,802,467)
       
211,070,892
                   
 
The accompanying notes are an integral part of these financial statements.
 
45

 

The Lazard Funds, Inc.
Portfolios of Investments (continued)
December 31, 2007


Description
 
Shares
 
Value
   
Description
 
Shares
 
Value
 
Lazard Emerging Markets Portfolio
   
Israel—3.4%
           
Common Stocks—88.2%
             
Bank Hapoalim BM
 
27,356,546
 
$
136,605,044
 
Argentina—2.3%
             
Israel Chemicals, Ltd
 
7,164,332
   
91,224,711
 
Tenaris SA ADR
 
3,508,700
 
$
156,944,151
   
Total Israel
       
227,829,755
 
Bahrain—0.5%
             
Kazakhstan—0.8%
           
Investcorp Bank BSC GDR
 
505,935
   
14,156,061
   
Eurasian Natural Resources Corp.
 
4,275,731
   
54,472,139
 
Investcorp Bank BSC GDR (d)
 
700,149
   
19,590,169
   
Malaysia—1.3%
           
Total Bahrain
       
33,746,230
   
British American Tobacco Malaysia
           
Brazil—5.2%
             
Berhad
 
4,848,600
   
60,479,211
 
Banco do Brasil SA
 
2,474,200
   
42,256,000
   
PLUS Expressways Berhad
 
28,996,800
   
28,760,056
 
Brasil Telecom Participacoes
             
Total Malaysia
       
89,239,267
 
SA ADR (c)
 
92,053
   
6,865,313
   
Mexico—6.4%
           
Empresa Brasileira de Aeronautica
             
Cemex SAB de CV Sponsored
           
SA ADR
 
2,209,600
   
100,735,664
   
ADR (a), (c)
 
3,329,065
   
86,056,330
 
JHSF Participacoes SA
 
13,682,100
   
43,506,003
   
Desarrolladora Homex SA de
           
Redecard SA
 
4,244,642
   
68,677,354
   
CV ADR (a), (c)
 
2,546,016
   
125,900,491
 
Souza Cruz SA
 
3,182,765
   
86,184,985
   
Fomento Economico Mexicano
           
Total Brazil
       
348,225,319
   
SAB de CV Sponsored ADR
 
1,490,100
   
56,877,117
 
Egypt—5.6%
             
Grupo Televisa SA Sponsored ADR
 
4,026,400
   
95,707,528
 
Eastern Tobacco
 
910,827
   
74,137,561
   
Kimberly-Clark de Mexico SAB
           
Egyptian Company for Mobile
             
de CV, Series A (c)
 
14,735,365
   
64,345,629
 
Services
 
1,215,353
   
44,835,592
   
Total Mexico
       
428,887,095
 
Orascom Construction Industries
 
1,614,786
   
168,025,564
   
Philippines—2.7%
           
Orascom Telecom Holding SAE
 
5,430,600
   
90,463,238
   
Philippine Long Distance Telephone
           
Total Egypt
       
377,461,955
   
Co. Sponsored ADR (c)
 
2,417,699
   
183,068,168
 
Hungary—0.7%
             
Russia—7.1%
           
Richter Gedeon Nyrt. (c)
 
201,127
   
48,272,914
   
Eurasia Drilling Co., Ltd. GDR (d)
 
1,692,576
   
46,122,696
 
India—10.5%
             
Evraz Group SA GDR
 
698,650
   
54,145,375
 
Grasim Industries, Ltd.
 
914,498
   
84,106,438
   
Mobile TeleSystems Sponsored ADR
 
1,338,200
   
136,215,378
 
Hero Honda Motors, Ltd.
 
3,436,995
   
60,778,524
   
Oriflame Cosmetics SA SDR
 
2,124,950
   
135,784,805
 
Hindustan Unilever, Ltd.
 
11,654,931
   
62,717,515
   
TNK-BP Holding (a)
 
23,710,485
   
52,874,381
 
Oil and Natural Gas Corp., Ltd.
 
5,139,548
   
161,429,923
   
Vsmpo-Avisma Corp
 
169,087
   
51,064,274
 
Punjab National Bank, Ltd.
 
4,713,370
   
79,522,797
   
Total Russia
       
476,206,909
 
Satyam Computer Services, Ltd.
 
11,190,368
   
128,129,217
   
South Africa—12.6%
           
State Bank of India
 
2,170,662
   
130,245,227
   
Aquarius Platinum, Ltd.
 
12,174,144
   
139,344,671
 
Total India
       
706,929,641
   
Imperial Holdings, Ltd.
 
7,803,595
   
119,183,133
 
Indonesia—4.1%
             
Kumba Iron Ore, Ltd.
 
3,333,748
   
139,021,001
 
PT Astra International Tbk
 
38,284,268
   
111,276,073
   
Massmart Holdings, Ltd.
 
5,208,996
   
54,876,867
 
PT Bank Mandiri Tbk
 
126,718,500
   
47,220,096
   
Murray & Roberts Holdings, Ltd.
 
1
   
15
 
PT Telekomunikasi Indonesia
             
Naspers, Ltd., N Shares
 
3,475,683
   
82,386,861
 
Tbk Sponsored ADR
 
1,532,623
   
64,385,492
   
Nedbank Group, Ltd.
 
2,832,801
   
56,371,262
 
PT United Tractors Tbk
 
43,095,400
   
50,012,229
   
Pretoria Portland Cement Co., Ltd.
 
8,496,972
   
54,355,954
 
Total Indonesia
       
272,893,890
   
Sanlam, Ltd.
 
12,238,794
   
40,740,168
 
               
Steinhoff International Holdings, Ltd.
 
22,469,272
   
63,781,322
 
               
Truworths International, Ltd.
 
25,803,925
   
101,941,805
 
               
Total South Africa
       
852,003,059
 
 
The accompanying notes are an integral part of these financial statements.
 
46

 

The Lazard Funds, Inc.
Portfolios of Investments (continued)
December 31, 2007


Description
 
Shares
 
Value
   
Description
 
Shares
 
Value
 
Lazard Emerging Markets Portfolio (concluded)
   
Preferred Stocks—6.6%
       
South Korea—13.9%
             
Brazil—6.6%
             
Amorepacific Corp.
 
54,202
 
$
41,112,569
   
AES Tiete SA
   
1,440,700,546
 
$
53,823,925
 
GS Engineering & Construction
             
Companhia Energetica de Minas
             
Corp.
 
319,640
   
53,270,488
   
Gerais
   
2,904,400
   
53,029,775
 
Hite Brewery Co., Ltd.
 
454,065
   
69,124,793
   
Companhia Vale do Rio Doce,
             
Kookmin Bank
 
3,402,568
   
250,816,935
   
A Shares
   
4,275,312
   
121,894,429
 
Samsung Electronics Co., Ltd.
 
316,365
   
187,916,179
   
Iochpe Maxion SA
   
2,530,220
   
53,163,050
 
Shinhan Financial Group
             
Klabin SA
   
15,429,530
   
57,297,300
 
Co., Ltd.
 
3,245,252
   
185,482,594
   
Suzano Papel e Celulose SA
   
3,199,305
   
52,123,508
 
SK Telecom Co., Ltd.
 
118,526
   
31,529,271
   
Tam SA Sponsored ADR (c)
   
2,283,736
   
55,083,712
 
SK Telecom Co., Ltd. ADR (c)
 
507,800
   
15,152,752
   
Total Brazil
         
446,415,699
 
Woongjin Coway Co., Ltd.
 
3,191,640
   
103,995,534
   
Total Preferred Stocks
             
Total South Korea
       
938,401,115
   
(Identified cost $356,432,887)
         
446,415,699
 
Taiwan—7.0%
             
Short-Term Investments—8.7%
             
Advanced Semiconductor
             
Collateral for Securities
             
Engineering, Inc.
 
43,121,000
   
43,208,081
   
on Loan—4.5%
             
Advantech Co., Ltd.
 
14,019,759
   
31,943,153
   
State Street Navigator Securities
             
Chinatrust Financial Holding Co.,
             
Lending Prime Portfolio,
             
Ltd. (a)
 
115,103,512
   
81,799,810
   
4.88% (e), (f)
   
301,756,315
   
301,756,315
 
Fubon Financial Holding Co.,
                   
Principal
       
Ltd.
 
77,609,000
   
68,912,399
         
Amount
       
Hon Hai Precision Industry
                   
(000)
       
Co., Ltd.
 
16,479,690
   
102,634,460
   
Repurchase Agreement—4.2%
             
Novatek Microelectronics
             
State Street Bank and Trust Co.,
             
Corp., Ltd.
 
12,134,547
   
46,391,460
   
0.70%, 01/02/08
             
Taiwan Semiconductor
             
(Dated 12/31/07, collateralized
             
Manufacturing Co., Ltd.
 
51,534,918
   
98,511,305
   
by $286,900,000 United States
             
Total Taiwan
       
473,400,668
   
Treasury Bill and Note, 3.40%-
             
Turkey—4.1%
             
5.125%, 01/17/08-06/30/11,
             
Ford Otomotiv Sanayi AS (c)
 
4,085,185
   
42,167,403
   
with a value of $292,673,800)
             
Turkcell Iletisim Hizmetleri AS
 
14,950,156
   
163,243,333
   
Proceeds of $286,941,158
 
$
286,930
   
286,930,000
 
Turkiye Is Bankasi, C Shares (c)
 
10,920,378
   
68,470,700
                   
Total Turkey
       
273,881,436
   
Total Short-Term Investments
       
Total Common Stocks
             
(Identified cost $588,686,315)
         
588,686,315
 
(Identified cost $5,010,132,660)
       
5,941,863,711
   
Total Investments—103.5%
       
               
(Identified cost
             
               
$5,955,251,862) (b)
       
$
6,976,965,725
 
               
Liabilities in Excess of Cash
             
               
and Other Assets—(3.5)%
         
(239,010,620
)
               
Net Assets—100.0%
       
$
6,737,955,105
 
 
The accompanying notes are an integral part of these financial statements.
 
47

 

The Lazard Funds, Inc.
Portfolios of Investments (continued)
December 31, 2007

 
     
Principal
           
Principal
       
     
Amount
           
Amount
       
Description
   
(000)
 
Value
 
Description
 
(000)
 
Value
 
Lazard High Yield Portfolio
             
Tronox Worldwide LLC,
             
Corporate Bonds—95.5%
             
9.50%, 12/01/12 (c)
 
$
800
 
$
772,000
 
Automotive—5.1%
                         
3,172,585
 
ArvinMeritor, Inc.,
             
Computer Services—1.4%
             
8.125%, 09/15/15 (c)
 
$
550
 
$
471,625
 
SunGard Data Systems, Inc.,
       
Ford Motor Credit Co.,
             
10.25%, 08/15/15
   
824
   
842,540
 
7.00%, 10/01/13 (c)
   
1,725
   
1,452,200
 
Diversified—2.7%
             
General Motors Acceptance Corp.,
             
Leucadia National Corp.,
             
6.75%, 12/01/14 (c)
   
1,325
   
1,066,177
 
7.00%, 08/15/13
   
950
   
915,563
 
Venture Holdings Co LLC,
             
The Greenbrier Cos, Inc.,
             
12.00%, 06/01/09 (a), (h)
   
2,840
   
284
 
8.375%, 05/15/15
   
700
   
668,500
 
           
2,990,286
             
1,584,063
 
Building & Construction—1.7%
     
Drugs—0.8%
             
KB Home,
             
Elan Finance PLC,
             
7.75%, 02/01/10 (c)
   
1,060
   
983,150
 
7.75%, 11/15/11
   
500
   
472,500
 
Building Materials—2.5%
             
Electric Generation—2.8%
             
Goodman Global Holding Co., Inc.,
             
Edison Mission Energy:
             
7.875%, 12/15/12 (c)
   
390
   
401,700
 
7.00%, 05/15/17 (c)
   
200
   
196,500
 
Legrand SA,
             
7.50%, 06/15/13 (c)
   
675
   
691,875
 
8.50%, 02/15/25
   
925
   
1,076,469
 
The AES Corp.,
             
           
1,478,169
 
9.50%, 06/01/09
   
710
   
734,850
 
Cable Television—7.8%
                     
1,623,225
 
Cablevision Systems Corp.,
             
Electronics—2.0%
             
8.00%, 04/15/12 (c)
   
725
   
703,250
 
Freescale Semiconductor, Inc.:
             
Charter Communications Holdings LLC,
             
8.875%, 12/15/14 (c)
   
225
   
200,250
 
11.00%, 10/01/15 (c)
   
684
   
557,460
 
10.125%, 12/15/16 (c)
   
375
   
308,438
 
DirecTV Holdings LLC:
             
NXP BV,
             
6.375%, 06/15/15 (c)
   
400
   
386,000
 
7.875%, 10/15/14 (c)
   
700
   
663,250
 
8.375%, 03/15/13
   
450
   
469,125
             
1,171,938
 
EchoStar DBS Corp.:
             
Energy Exploration &
             
5.75%, 10/01/08
   
50
   
50,000
 
Production—4.4%
             
6.625%, 10/01/14 (c)
   
810
   
810,000
 
Chesapeake Energy Corp.,
             
Mediacom Broadband LLC,
             
6.375%, 06/15/15 (c)
   
375
   
362,344
 
8.50%, 10/15/15 (c)
   
725
   
636,187
 
Compagnie Generale de Geophysique,
             
Shaw Communications, Inc.,
             
7.50%, 05/15/15 (c)
   
750
   
762,187
 
7.25%, 04/06/11 (c)
   
900
   
919,125
 
OPTI Canada, Inc.,
             
           
4,531,147
 
8.25%, 12/15/14 (d)
   
525
   
519,094
 
Chemicals—5.5%
             
PetroHawk Energy Corp.,
             
ARCO Chemical Co.,
             
9.125%, 07/15/13
   
425
   
446,781
 
9.80%, 02/01/20
   
535
   
522,963
 
Seitel, Inc.,
             
Momentive Performance
             
9.75%, 02/15/14 (c)
   
525
   
446,250
 
Materials, Inc.:
             
 
         
2,536,656
 
9.75%, 12/01/14 (d)
   
275
   
254,375
 
Energy Integrated—0.9%
             
11.50%, 12/01/16 (c), (d)
   
250
   
216,250
 
Verasun Energy Corp.,
             
Mosaic Global Holdings, Inc.,
             
9.875%, 12/15/12 (c)
   
500
   
503,750
 
7.30%, 01/15/28
   
775
   
759,500
 
Environmental—1.3%
             
NOVA Chemicals Corp.,
             
Browning-Ferris Industries, Inc.,
             
6.50%, 01/15/12 (c)
   
687
   
647,497
 
7.40%, 09/15/35
   
775
   
731,406
 
 
The accompanying notes are an integral part of these financial statements.
 
48

 

The Lazard Funds, Inc.
Portfolios of Investments (continued)
December 31, 2007

 
   
Principal
           
Principal
     
   
Amount
           
Amount
     
Description
 
(000)
 
Value
   
Description
 
(000)
 
Value
 
Lazard High Yield Portfolio (continued)
 
Hotels—1.5%
             
Financial Services—0.0%
               
Host Marriott LP, 7.125%,
             
Finance One PLC,
               
11/01/13 (c)
 
$
850
 
$
856,375
 
0.00%, 01/03/08 (a), (h), (i)
 
$
20,000
 
$
0
   
Leisure & Entertainment—1.2%
       
Morgan Guarantee Trust,
               
Royal Caribbean Cruises, Ltd.:
             
0.00%, 01/03/08 (a), (h), (i)
   
10,569
   
0
   
7.25%, 06/15/16 (c)
   
300
   
295,875
 
           
0
   
8.00%, 05/15/10 (c)
   
400
   
415,500
 
Food & Beverages—3.2%
                           
711,375
 
Constellation Brands, Inc.,
               
Machinery—1.2%
             
7.25%, 09/01/16 (c)
   
725
   
685,125
   
Case New Holland, Inc.:
             
Dean Foods Co.,
               
6.00%, 06/01/09 (c)
   
325
   
323,781
 
7.00%, 06/01/16 (c)
   
800
   
712,000
   
7.125%, 03/01/14 (c)
   
350
   
351,313
 
NBTY, Inc.,
                           
675,094
 
7.125%, 10/01/15
   
475
   
460,156
   
Media—2.4%
             
           
1,857,281
   
CanWest Media, Inc.,
             
Forest & Paper Products—4.0%
       
8.00%, 09/15/12 (c)
   
911
   
856,032
 
Georgia-Pacific Corp.:
               
Interpublic Group of Cos., Inc.,
             
8.125%, 05/15/11 (c)
   
300
   
303,000
   
6.25%, 11/15/14
   
600
   
510,000
 
9.50%, 12/01/11
   
500
   
525,000
               
1,366,032
 
Smurfit Capital Funding PLC,
               
Metals & Mining—5.6%
             
7.50%, 11/20/25
   
1,600
   
1,524,000
   
Arch Western Finance LLC,
             
 
         
2,352,000
   
6.75%, 07/01/13
   
1,000
   
972,500
 
Gaming—2.8%
               
Century Aluminum Co.,
             
Majestic Star Casino LLC,
               
7.50%, 08/15/14
   
225
   
222,187
 
9.75%, 01/15/11
   
100
   
69,000
   
Freeport-McMoRan Copper & Gold,
             
Mandalay Resorts Group,
               
Inc.:
             
9.375%, 02/15/10 (c)
   
1,035
   
1,071,225
   
8.25%, 04/01/15
   
650
   
689,000
 
Wynn Las Vegas LLC,
               
8.375%, 04/01/17 (c)
   
100
   
107,250
 
6.625%, 12/01/14 (c)
   
500
   
491,250
   
Massey Energy Co.,
             
 
         
1,631,475
   
6.875%, 12/15/13 (c)
   
800
   
752,000
 
Gas Distribution—1.2%
               
Peabody Energy Corp.,
             
Ferrellgas Partners LP,
               
6.875%, 03/15/13
   
500
   
501,250
 
8.75%, 06/15/12 (c)
   
684
   
703,665
               
3,244,187
 
Health Services—7.0%
               
Printing & Publishing—2.7%
       
Fresenius Medical Capital Trust,
               
Idearc, Inc.,
             
7.875%, 02/01/08
   
1,120
   
1,120,000
   
8.00%, 11/15/16
   
725
   
663,375
 
HCA, Inc,
               
Phoenix Color Corp.,
             
9.25%, 11/15/16 (c)
   
675
   
710,437
   
13.00%, 02/01/09
   
515
   
504,700
 
HealthSouth Corp.,
               
RH Donnelley Corp.,
             
10.75%, 06/15/16 (c)
   
350
   
365,750
   
8.875%, 01/15/16
   
400
   
373,000
 
Senior Housing Properties Trust,
                           
1,541,075
 
7.875%, 04/15/15
   
179
   
183,699
   
Real Estate—2.2%
             
Service Corp. International,
               
AMR Real Estate Partners:
             
6.75%, 04/01/16 (c)
   
750
   
721,875
   
7.125%, 02/15/13 (c)
   
500
   
469,375
 
Tenet Healthcare Corp.,
               
8.125%, 06/01/12
   
350
   
339,063
 
7.375%, 02/01/13
   
500
   
441,250
   
Forest City Enterprises, Inc.,
             
The Cooper Cos., Inc.,
               
7.625%, 06/01/15
   
475
   
451,250
 
7.125%, 02/15/15
   
525
   
511,219
               
1,259,688
 
           
4,054,230
                   
 
The accompanying notes are an integral part of these financial statements.
 
49

 
 

The Lazard Funds, Inc.
Portfolios of Investments (concluded)
December 31, 2007

 
Description
   
Principal Amount (000)
   
Value
 
Description
 
Shares
   
Value
 
Lazard High Yield Portfolio (concluded)
 
Preferred Stock—0.0%
           
Retail—4.5%
             
Broadcasting—0.0%
           
Saks, Inc.,
             
ION Media Networks, Inc.,
         
9.875%, 10/01/11
 
$
1,225
 
$
1,298,500
 
14.25%, 11/15/12
           
Stater Brothers Holdings, Inc.,
             
(Identified cost $1,551)
 
4
 
$
26,000
 
8.125%, 06/15/12 (c) .
   
725
   
710,500
 
Warrants—0.0%
           
The Neiman Marcus Group, Inc.,
             
Cable Television—0.0%
           
10.375%, 10/15/15 (c)
   
600
   
625,500
 
Ono Finance PLC:
           
           
2,634,500
 
05/31/09 (a), (d), (g)
 
500
   
5
 
Support Services—2.4%
             
03/16/11 (a), (d), (g)
 
470
   
5
 
Avis Budget Car Rental LLC:
                       
10
 
7.625%, 05/15/14
   
640
   
604,800
               
7.75%, 05/15/16 (c)
   
110
   
102,850
 
Total Warrants
           
Hertz Corp.,
             
(Identified cost $64,841)
       
10
 
8.875%, 01/01/14
   
650
   
658,125
 
Short-Term Investments—27.8%
           
           
1,365,775
 
Collateral for Securities
           
Telecommunications—12.0%
       
on Loan—25.0%
           
Citizens Communications Co.,
             
State Street Navigator Securities
           
6.25%, 01/15/13 (c)
   
1,000
   
980,000
 
Lending Prime Portfolio,
           
Intelsat Bermuda, Ltd.,
             
4.88% (e), (f)
 
14,511,128
   
14,511,128
 
11.25%, 06/15/16 (c)
   
350
   
360,500
     
 
       
Intelsat Subsidiary Holding Co., Ltd.,
                 
Principal
Amount
       
8.25%, 01/15/13
   
800
   
806,000
     
(000)
       
Level 3 Financing, Inc.,
             
Repurchase Agreement—2.8%
       
9.25%, 11/01/14 (c)
   
850
   
769,250
 
State Street Bank and Trust Co.,
           
Nortel Networks, Ltd.,
             
0.70%, 01/02/08
           
10.75%, 07/15/16 (c), (d)
   
375
   
393,750
 
(Dated 12/31/07, collateralized by
           
PanAmSat Corp.,
             
$1,565,000 United States Treasury
           
9.00%, 08/15/14
   
846
   
854,460
 
Note, 5.125%, 06/30/11, with a
           
Qwest Corp.,
             
value of $1,658,900) 
           
7.875%, 09/01/11
   
800
   
835,000
 
Proceeds of $1,623,063
$
1,623
   
1,623,000
 
Rogers Wireless Communications, Inc.,
           
Total Short-Term Investments
       
9.625%, 05/01/11
   
1,000
   
1,137,500
 
(Identified cost $16,134,128)
   
16,134,128
 
Windstream Corp.:
             
Total Investments—123.3%
     
7.00%, 03/15/19 (c)
   
375
   
359,062
 
(Identified cost $75,797,251) (b)
 
$
71,597,521
 
8.625%, 08/01/16
   
475
   
498,750
 
Liabilities in Excess of Cash and
   
           
6,994,272
 
Other Assets—(23.3)%
   
(13,543,464
)
Transportation—2.7%
             
Net Assets—100.0%
      $
58,054,057
 
Kansas City Southern Railway Co.,
                           
7.50%, 06/15/09
   
610
   
610,763
               
Stena AB,
                           
7.50%, 11/01/13
   
975
   
958,181
               
           
1,568,944
               
Total Corporate Bonds
                           
(Identified cost $59,596,731)
         
55,437,383
               

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

50

 

The Lazard Funds, Inc.
Notes to Portfolios of Investments
December 31, 2007 

 
(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) are as follows:
 
Portfolio
 
Aggregate
Cost
 
Aggregate
Gross
Unrealized Appreciation
 
Aggregate
Gross
Unrealized Depreciation
 
Net
Unrealized Appreciation (Depreciation)
 
U.S. Equity Value
 
$
9,398,190
 
$
558,199
 
$
1,068,933
 
$
(510,734
)
U.S. Strategic Equity
   
101,823,499
   
9,490,235
   
11,626,007
   
(2,135,772
)
Mid Cap
   
473,070,091
   
26,747,945
   
62,934,753
   
(36,186,808
)
Small Cap
   
170,574,182
   
11,965,821
   
13,500,882
   
(1,535,061
)
U.S. Small Cap Equity Growth
   
14,852,896
   
2,199,677
   
1,067,632
   
1,132,045
 
International Equity
   
352,416,623
   
61,990,759
   
7,708,747
   
54,282,012
 
International Equity Select
   
22,002,532
   
4,087,272
   
801,381
   
3,285,891
 
International Strategic Equity
   
378,714,112
   
63,307,881
   
7,859,216
   
55,448,665
 
International Small Cap
   
254,274,773
   
26,683,317
   
19,645,025
   
7,038,292
 
Emerging Markets
   
5,956,919,150
   
1,189,030,936
   
168,984,361
   
1,020,046,575
 
High Yield
   
76,095,098
   
1,014,408
   
5,511,985
   
(4,497,577
)
 
(c)
Security or portion thereof is out on loan.

(d)
Pursuant to Rule 144A under the Securities Act of 1933, these securities may only be traded among “qualified institutional buyers.” At December 31, 2007, these securities amounted to 1.2%, 2.3%, 1.0% and 2.4% of net assets of Lazard International Equity Select Portfolio, Lazard International Strategic Equity Portfolio, Lazard Emerging Markets Portfolio and Lazard High Yield Portfolio, respectively, and are considered to be liquid.
 
(e)
Rate shown reflects 7 day yield as of December 31, 2007.

(f)
Represents security purchased with cash collateral received for securities on loan.

(g)
Date shown is the expiration date.

(h)
Issue in default.

(i)
Bankrupt issuer; security valued at zero; principal amount denominated in respective country’s currency.

Security Abbreviations:
 
ADR — American Depositary Receipt
GDR — Global Depositary Receipt
SDR — Swedish Depositary Receipt

The accompanying notes are an integral part of these financial statements.
 
51

 

The Lazard Funds, Inc.
Notes to Portfolios of Investments (concluded)
December 31, 2007

 
Portfolio holdings by industry (as percentage of net assets), for those Portfolios previously presented by country:

 
 
Lazard
International
Equity
Portfolio
 
 
Lazard
International
Equity Select
Portfolio
 
 
Lazard
International
Strategic Equity Portfolio
 
 
Lazard
International
Small Cap
Portfolio
 
 
Lazard
Emerging
Markets
Portfolio
 
Industry
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agriculture  
 
%
 
%
 
%
 
%
 
1.4
%
Alcohol & Tobacco
 
9.4
 
 
9.4
 
 
8.6
 
 
 
 
4.3
 
Automotive
 
4.3
 
 
3.7
 
 
5.4
 
 
 
 
3.2
 
Banking
 
11.9
 
 
9.0
 
 
9.4
 
 
8.2
 
 
13.4
 
Cable Television
 
 
 
 
 
 
 
 
 
1.2
 
Chemicals 
 
0.9
 
 
 
 
4.3
 
 
8.7
 
 
 
Commercial Services
 
 
 
 
 
1.3
 
 
11.9
 
 
 
Construction & Engineering 
 
 
 
 
 
0.5
 
 
2.1
 
 
3.3
 
Consumer Products
 
1.4
 
 
1.0
 
 
 
 
1.6
 
 
6.0
 
Drugs   
 
8.7
 
 
8.8
 
 
5.4
 
 
1.4
 
 
0.7
 
Electric
 
3.0
 
 
4.5
 
 
3.8
 
 
 —
 
 
1.6
 
Energy Exploration & Production
 
— 
 
 
 
 
1.2
 
 
— 
 
 
2.4
 
Energy Integrated 
 
7.1
 
 
 8.8
 
 
  1.9
 
 
 1.7
 
 
1.5
 
Energy Services 
 
0.9
 
 
 1.4
 
 
  —
 
 
 6.2
 
 
2.3
 
Financial Services
 
 2.4
 
 
 4.8
 
 
 6.0
 
 
 6.7
 
 
5.9
 
Food & Beverages 
 
5.9
 
 
8.2
 
 
5.7
 
 
— 
 
 
0.8
 
Forest & Paper Products
 
 —
 
 
 
 
 0.9
 
 
1.0
 
 
2.6
 
Gas Utilities
 
 3.2
 
 
 
 
3.5
 
 
 —
 
 
 
Health Services
 
 
 
 
 
 
 
1.1
 
 
 
Housing  
 
2.7
 
 
1.5
 
 
7.4
 
 
2.4
 
 
5.2
 
Insurance
 
5.1
 
 
8.1
 
 
3.6
 
 
2.7
 
 
 
Leisure & Entertainment
 
2.0
 
 
 
 
2.7
 
 
5.3
 
 
1.4
 
Manufacturing 
 
5.4
 
 
2.5
 
 
11.6
 
 
19.0
 
 
3.0
 
Medical Products
 
 
 
 
 
 
 
3.8
 
 
 
Metals & Mining
 
 
 
0.9
 
 
 
 
— 
 
 
8.3
 
Real Estate
 
 
 
 
 
 
 
2.2
 
 
0.6
 
Retail
 
2.9
 
 
2.2
 
 
2.8
 
 
4.1
 
 
2.3
 
Semiconductors & Components
 
1.6
 
 
3.7
 
 
 
 
— 
 
 
6.1
 
Technology 
 
1.3
 
 
 
 
1.5
 
 
2.4
 
 
1.9
 
Technology Hardware 
 
3.1
 
 
3.2
 
 
 
 
2.2
 
 
1.5
 
Telecommunications
 
8.7
 
 
11.0
 
 
6.0
 
 
1.1
 
 
10.9
 
Transportation
 
4.2
 
 
3.4
 
 
4.6
 
 
2.1
 
 
3.0
 
     Subtotal
 
96.1
 
 
96.1
 
 
98.1
 
 
97.9
 
 
94.8
 
Collateral for Securities on Loan
 
10.4
 
 
 
 
 
 
19.5
 
 
4.5
 
Repurchase Agreements 
 
4.1
 
 
1.1
 
 
1.7
 
 
1.6
 
 
4.2
 
Total Investments
 
110.6
%
 
97.2
%
 
99.8
%
 
119.0
%
 
103.5
%
 
The accompanying notes are an integral part of these financial statements.

52


[This Page Intentionally Left Blank]

53

 
 

The Lazard Funds, Inc.
Statements of Assets and Liabilities
December 31, 2007

 
 
Lazard
U.S. Equity
Value
Portfolio
 
 
Lazard
U.S. Strategic
Equity
Portfolio
 
 

Lazard
Mid Cap
Portfolio
 
 
Lazard
Small Cap
Portfolio
 
                                 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments in securities, at value*
 
$
8,887,456
 
 
$
99,687,727
 
 
$
436,883,283
 
 
$
169,039,121
 
Cash
 
 
857
 
 
 
20
 
 
 
358
 
 
 
889
 
Foreign currency
 
 
 
 
 
 
 
 
 
 
 
 
Receivables for: 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital stock sold
 
 
 
 
 
104,136
 
 
 
1,130,956
 
 
 
107,858
 
Dividends and interest
 
 
14,071
 
 
 
152,951
 
 
 
467,053
 
 
 
151,901
 
Investments sold
 
 
 
 
 
264,991
 
 
 
 
 
 
531,010
 
Income from securities loaned
 
 
 
 
 
 
 
 
 
 
 
16,415
 
Amount due from Investment Manager (Note 3)
 
 
7,407
 
 
 
 
 
 
 
 
 
 
Total assets
 
 
8,909,791
 
 
 
100,209,825
 
 
 
438,481,650
 
 
 
169,847,194
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payables for:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency due to Custodian
 
 
 
 
 
 
 
 
 
 
 
 
Management fees
 
 
 
 
 
66,773
 
 
 
287,258
 
 
 
93,769
 
Accrued distribution fees
 
 
89
 
 
 
2,476
 
 
 
34,291
 
 
 
5,686
 
Accrued directors’ fees
 
 
27
 
 
 
340
 
 
 
1,383
 
 
 
500
 
Investments purchased
 
 
 
 
 
219,625
 
 
 
86,310
 
 
 
627,773
 
Capital stock redeemed
 
 
49,614
 
 
 
75,508
 
 
 
1,967,519
 
 
 
1,163,590
 
Dividends
 
 
 
 
 
 
 
 
 
 
 
 
Amounts due upon return of securities on loan
 
 
 
 
 
 
 
 
 
 
 
32,831,036
 
Other accrued expenses and payables
 
 
31,371
 
 
 
45,778
 
 
 
90,159
 
 
 
69,016
 
Total liabilities
 
 
81,101
 
 
 
410,500
 
 
 
2,466,920
 
 
 
34,791,370
 
Net assets
 
$
8,828,690
 
 
$
99,799,325
 
 
$
436,014,730
 
 
$
135,055,824
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Paid in capital
 
$
9,424,258
 
 
$
100,791,087
 
 
$
472,276,624
 
 
$
137,059,209
 
Undistributed (distributions in excess of) net investment income (loss)
 
 
(21,307
)
 
 
11,861
 
 
 
87,467
 
 
 
21,379
 
Accumulated undistributed net realized gain (loss)
 
 
(75,701
)
 
 
316,350
 
 
 
(5,584,856
)
 
 
(2,992,600
)
Net unrealized appreciation (depreciation) on:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments
 
 
(498,560
)
 
 
(1,319,973
)
 
 
(30,764,505
)
 
 
967,836
 
Foreign currency
 
 
 
 
 
 
 
 
 
 
 
 
Net assets
 
$
8,828,690
 
 
$
99,799,325
 
 
$
436,014,730
 
 
$
135,055,824
 
Institutional Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net assets
 
$
8,487,623
 
 
$
88,241,765
 
 
$
277,952,926
 
 
$
109,852,775
 
Shares of capital stock outstanding**
 
 
754,370
 
 
 
8,801,899
 
 
 
22,311,342
 
 
 
9,484,085
 
Net asset value, offering and redemption price per share
 
$
11.25
 
 
$
10.03
 
 
$
12.46
 
 
$
11.58
 
                                 
Open Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net assets
 
$
341,067
 
 
$
11,557,560
 
 
$
158,061,804
 
 
$
25,203,049
 
Shares of capital stock outstanding**
 
 
30,169
 
 
 
1,150,059
 
 
 
12,865,182
 
 
 
2,205,839
 
Net asset value, offering and redemption price per share
 
$
11.31
 
 
$
10.05
 
 
$
12.29
 
 
$
11.43
 
                                 
Cost of investments in securities
 
$
9,386,016
 
 
$
101,007,700
 
 
$
467,647,788
 
 
$
168,071,285
 
Cost of foreign currency
 
$
 
 
$
 
 
$
 
 
$
 
* Includes collateral for securities on loan, at value
 
$
 
 
$
 
 
$
 
 
$
32,831,036
 
 
**$0.001 par value 2,250,000,000 shares authorized for the Portfolios in total

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

54

 

 

Lazard
U.S. Small Cap
Equity Growth
Portfolio
 
 
Lazard
International
Equity
Portfolio
 
 
Lazard
International
Equity Select
Portfolio
 
 
Lazard
International
Strategic Equity
Portfolio
 
 
Lazard
International
Small Cap
Portfolio
 
 
Lazard
Emerging
Markets
Portfolio
 
 
Lazard
High Yield
Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
15,984,941
 
 
$
406,698,635
 
 
$
25,288,423
 
 
 
$
434,162,777
 
 
$
261,313,065
 
 
$
6,976,965,725
 
 
$
71,597,521
 
 
110
 
 
 
488
 
 
 
134
 
 
 
 
754
 
 
 
703
 
 
 
459
 
 
 
580
 
 
 
 
 
1,111,399
 
 
 
 
 
 
 
276
 
 
 
 
 
 
9,755,923
 
 
 
 
 
 
 
 
200,002
 
 
 
301,003
 
 
 
 
83,339
 
 
 
2,094,159
 
 
 
94,529,962
 
 
 
416
 
 
9,607
 
 
 
741,783
 
 
 
41,472
 
 
 
 
1,108,854
 
 
 
353,754
 
 
 
11,378,014
 
 
 
1,070,373
 
 
205,928
 
 
 
 
 
 
548,544
 
 
 
 
328,694
 
 
 
1,078,547
 
 
 
11,377,403
 
 
 
 
 
 
 
 
23,483
 
 
 
 
 
 
 
 
 
 
34,967
 
 
 
155,262
 
 
 
6,174
 
 
5,817
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16,206,403
 
 
 
408,775,790
 
 
 
26,179,576
 
 
 
 
435,684,694
 
 
 
264,875,195
 
 
 
7,104,162,748
 
 
 
72,675,064
 
                                                       
 
 
 
 
 
 
 
19,723
 
 
 
 
 
 
 
992,696
 
 
 
 
 
 
 
 
 
 
 
245,850
 
 
 
5,617
 
 
 
 
276,618
 
 
 
158,763
 
 
 
5,595,128
 
 
 
5,967
 
 
148
 
 
 
7,166
 
 
 
2,949
 
 
 
 
3,421
 
 
 
20,635
 
 
 
307,057
 
 
 
420
 
 
48
 
 
 
1,266
 
 
 
85
 
 
 
 
1,287
 
 
 
919
 
 
 
18,513
 
 
 
193
 
 
171,357
 
 
 
1,674,747
 
 
 
43,659
 
 
 
 
182,172
 
 
 
416
 
 
 
41,530,352
 
 
 
 
 
 
 
 
859,907
 
 
 
49,277
 
 
 
 
190,340
 
 
 
1,080,909
 
 
 
12,052,110
 
 
 
20,427
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44,848
 
 
 
 
 
38,094,586
 
 
 
 
 
 
 
 
 
 
42,914,058
 
 
 
301,756,315
 
 
 
14,511,128
 
 
30,217
 
 
 
120,879
 
 
 
40,073
 
 
 
 
105,505
 
 
 
203,029
 
 
 
4,948,168
 
 
 
38,024
 
 
201,770
 
 
 
41,004,401
 
 
 
161,383
 
 
 
 
759,343
 
 
 
45,371,425
 
 
 
366,207,643
 
 
 
14,621,007
 
$
16,004,633
 
 
$
367,771,389
 
 
$
26,018,193
 
 
 
$
434,925,351
 
 
$
219,503,770
 
 
$
6,737,955,105
 
 
$
58,054,057
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
14,992,012
 
 
$
324,745,169
 
 
$
21,613,614
 
 
 
$
378,764,090
 
 
$
201,829,062
 
 
$
5,463,651,863
 
 
$
108,121,567
 
 
(278
)
 
 
(67,176
)
 
 
45
 
 
 
 
(23,862
)
 
 
(123,817
)
 
 
40,292
 
 
 
(284,000
)
 
(103,988
)
 
 
(12,900,104
)
 
 
1,086,398
 
 
 
 
714,018
 
 
 
9,784,319
 
 
 
254,728,809
 
 
 
(45,583,780
)
 
1,116,887
 
 
 
56,005,839
 
 
 
3,318,009
 
 
 
 
55,440,315
 
 
 
8,000,903
 
 
 
1,019,573,489
 
 
 
(4,199,730
)
 
 
 
 
(12,339
)
 
 
127
 
 
 
 
30,790
 
 
 
13,303
 
 
 
(39,348
)
 
 
 
$
16,004,633
 
 
$
367,771,389
 
 
$
26,018,193
 
 
 
$
434,925,351
 
 
$
219,503,770
 
 
$
6,737,955,105
 
 
$
58,054,057
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
15,315,732
 
 
$
335,322,873
 
 
$
12,102,535
 
 
 
$
418,583,611
 
 
$
129,724,674
 
 
$
5,270,497,312
 
 
$
56,277,969
 
 
1,363,879
 
 
 
19,104,018
 
 
 
1,026,949
 
 
 
 
32,409,457
 
 
 
12,363,024
 
 
 
220,678,561
 
 
 
10,936,413
 
$
11.23
 
 
$
17.55
 
 
$
11.78
 
 
 
$
12.92
 
 
$
10.49
 
 
$
23.88
 
 
$
5.15
 
$
688,901
 
 
$
32,448,516
 
 
$
13,915,658
 
 
 
$
16,341,740
 
 
$
89,779,096
 
 
$
1,467,457,793
 
 
$
1,776,088
 
 
61,624
 
 
 
1,833,826
 
 
 
1,178,185
 
 
 
 
1,266,859
 
 
 
8,540,137
 
 
 
60,722,332
 
 
 
343,679
 
$
11.18
 
 
$
17.69
 
 
$
11.81
 
 
 
$
12.90
 
 
$
10.51
 
 
$
24.17
 
 
$
5.17
 
$
14,868,054
 
 
$
350,692,796
 
 
$
21,970,414
 
 
 
$
378,722,462
 
 
$
253,312,162
 
 
$
5,955,251,862
 
 
$
75,797,251
 
$
 
 
$
1,116,841
 
 
$
 
 
 
$
276
 
 
$
 
 
$
9,780,302
 
 
$
 
$
 
 
$
38,094,586
 
 
$
 
 
 
$
 
 
$
42,914,058
 
 
$
301,756,315
 
 
$
14,511,128
 
 
The accompanying notes are an integral part of these financial statements.

55

 

The Lazard Funds, Inc.
Statements of Operations
For the year ended December 31, 2007

 
 
Lazard
U.S. Equity
Value
Portfolio
 
 
Lazard
U.S. Strategic
Equity
Portfolio
   
Lazard
Mid Cap
Portfolio
   
Lazard
Small Cap
Portfolio
 
                                 
INVESTMENT INCOME (LOSS)
 
 
 
 
 
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
 
Income:
 
 
 
 
 
 
 
   
 
 
   
 
 
 
Dividends
 
$
182,127
 
 
$
2,174,584
   
$
6,014,888
   
$
1,885,963
 
Interest
 
 
10,951
 
 
 
84,499
   
 
1,127,005
   
 
250,303
 
Income from securities loaned
 
 
 
 
 
   
 
   
 
168,016
 
Total investment income*
 
 
193,078
 
 
 
2,259,083
   
 
7,141,893
   
 
2,304,282
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
 
Expenses:
 
 
 
 
 
 
 
   
 
 
   
 
 
 
Management fees
 
 
60,517
 
 
 
920,426
   
 
3,175,248
   
 
1,470,195
 
Custodian fees
 
 
64,209
 
 
 
69,523
   
 
130,216
   
 
99,323
 
Distribution fees (Open Shares)
 
 
1,446
 
 
 
30,809
   
 
365,402
   
 
81,539
 
Shareholders’ services
 
 
46,555
 
 
 
50,922
   
 
58,036
   
 
53,592
 
Shareholders’ reports
 
 
366
 
 
 
5,822
   
 
38,249
   
 
12,969
 
Administration fees
 
 
51,626
 
 
 
74,837
   
 
135,273
   
 
89,650
 
Professional services
 
 
63,029
 
 
 
48,330
   
 
53,936
   
 
49,643
 
Registration fees
 
 
25,692
 
 
 
25,295
   
 
41,422
   
 
27,808
 
Directors’ fees and expenses
 
 
426
 
 
 
6,962
   
 
23,808
   
 
11,720
 
Shareholders’ meeting
 
 
2,122
 
 
 
3,561
   
 
5,544
   
 
8,790
 
Amortization of offering expenses
 
 
 
 
 
   
 
   
 
 
Other
 
 
5,082
 
 
 
15,607
   
 
21,437
   
 
23,147
 
Total gross expenses
 
 
321,070
 
 
 
1,252,094
   
 
4,048,571
   
 
1,928,376
 
Management fees waived and expenses reimbursed
 
 
(219,250
)
 
 
(6,531
)
 
 
   
 
 
Administration fees waived
 
 
(18,750
)
 
 
   
 
   
 
 
Expense reductions
 
 
(559
)
 
 
   
 
(261
)
 
 
 
Total net expenses
 
 
82,511
 
 
 
1,245,563
   
 
4,048,310
   
 
1,928,376
 
Net investment income (loss)
 
 
110,567
 
 
 
1,013,520
   
 
3,093,583
   
 
375,906
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
 
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
 
 
 
 
 
 
 
   
 
 
   
 
 
 
Net realized gain (loss) on:
 
 
 
 
 
 
 
   
 
 
   
 
 
 
Investments**
 
 
320,782
 
 
 
13,970,887
   
 
37,492,588
   
 
11,536,340
 
Foreign currency
 
 
 
 
 
   
 
   
 
 
Net change in unrealized appreciation (depreciation) on:
 
 
 
 
 
 
 
   
 
 
   
 
 
 
Investments***
 
 
(534,978
)
 
 
(14,012,905
)
 
 
(63,675,417
)
 
 
(21,525,998
)
Foreign currency
 
 
 
 
 
   
 
   
 
 
Net realized and unrealized gain (loss) on investments and foreign currency
 
 
(214,196
)
 
 
(42,018
)
 
 
(26,182,829
)
 
 
(9,989,658
)
Contribution from Investment Manager (Note 3)
 
 
 
 
 
   
 
   
 
 
Net increase (decrease) in net assets resulting from operations
 
$
(103,629
)
 
$
971,502
   
$
(23,089,246
)
 
$
(9,613,752
)
 
 
 
 
 
 
 
 
   
 
 
   
 
 
 
*   Net of foreign withholding taxes of
 
$
 
 
$
   
$
   
$
28
 
**  Net of foreign capital gains taxes of
 
$
 
 
$
   
$
   
$
 
*** Net change in unrealized foreign capital gains taxes of
 
$
 
 
$
   
$
   
$
 
 
The accompanying notes are an integral part of these financial statements.

56


 

Lazard
U.S. Small Cap
Equity Growth
Portfolio
 
 
Lazard
International
Equity
Portfolio
 
 
Lazard
International
Equity Select
Portfolio
 
 
Lazard
International
Strategic Equity
Portfolio
 
 
Lazard
International
Small Cap
Portfolio
 
 
Lazard
Emerging
Markets
Portfolio
 
 
Lazard
High Yield
Portfolio
 
                                                     
$
56,125
 
 
$
14,032,647
 
 
$
774,712
 
 
$
10,412,609
 
 
$
12,488,338
 
 
$
115,968,254
 
 
$
 
 
56,280
 
 
 
476,338
 
 
 
40,478
 
 
 
608,802
 
 
 
1,196,133
 
 
 
12,263,406
 
 
 
5,549,548
 
 
 
 
 
587,221
 
 
 
 
 
 
 
 
 
694,067
 
 
 
1,881,202
 
 
 
35,581
 
 
112,405
 
 
 
15,096,206
 
 
 
815,190
 
 
 
11,021,411
 
 
 
14,378,538
 
 
 
130,112,862
 
 
 
5,585,129
 
 
139,845
 
 
 
3,802,457
 
 
 
256,934
 
 
 
3,202,170
 
 
 
4,519,629
 
 
 
48,169,061
 
 
 
378,909
 
 
50,911
 
 
 
271,538
 
 
 
65,019
 
 
 
251,179
 
 
 
328,039
 
 
 
4,805,693
 
 
 
63,281
 
 
1,036
 
 
 
118,751
 
 
 
34,197
 
 
 
37,089
 
 
 
497,506
 
 
 
2,356,495
 
 
 
5,684
 
 
46,559
 
 
 
55,887
 
 
 
47,559
 
 
 
49,734
 
 
 
92,572
 
 
 
1,793,630
 
 
 
47,456
 
 
234
 
 
 
34,075
 
 
 
2,754
 
 
 
9,217
 
 
 
206,236
 
 
 
1,557,325
 
 
 
5,307
 
 
52,816
 
 
 
152,994
 
 
 
56,103
 
 
 
136,066
 
 
 
172,083
 
 
 
637,698
 
 
 
63,931
 
 
53,451
 
 
 
55,611
 
 
 
46,480
 
 
 
54,205
 
 
 
58,044
 
 
 
136,102
 
 
 
47,227
 
 
28,086
 
 
 
38,099
 
 
 
24,437
 
 
 
29,598
 
 
 
71,284
 
 
 
256,677
 
 
 
26,295
 
 
750
 
 
 
50,749
 
 
 
2,811
 
 
 
24,193
 
 
 
36,878
 
 
 
263,388
 
 
 
4,027
 
 
64
 
 
 
14,607
 
 
 
1,897
 
 
 
2,838
 
 
 
35,724
 
 
 
251,872
 
 
 
2,150
 
 
1,099
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,245
 
 
 
55,070
 
 
 
4,868
 
 
 
21,189
 
 
 
41,225
 
 
 
207,483
 
 
 
6,163
 
 
379,096
 
 
 
4,649,838
 
 
 
543,059
 
 
 
3,817,478
 
 
 
6,059,220
 
 
 
60,435,424
 
 
 
650,430
 
 
(184,212
)
 
 
 
 
 
(153,167
)
 
 
 
 
 
 
 
 
 
 
 
(262,885
)
 
(18,750
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,203
)
 
 
(834
)
 
 
 
 
 
(185,440
)
 
 
(1,995
)
 
176,134
 
 
 
4,649,838
 
 
 
388,689
 
 
 
3,816,644
 
 
 
6,059,220
 
 
 
60,249,984
 
 
 
385,550
 
 
(63,729
)
 
 
10,446,368
 
 
 
426,501
 
 
 
7,204,767
 
 
 
8,319,318
 
 
 
69,862,878
 
 
 
5,199,579
 
                                                     
 
50,613
 
 
 
117,935,389
 
 
 
4,526,217
 
 
 
31,027,535
 
 
 
223,149,249
 
 
 
997,054,065
 
 
 
549,990
 
 
 
 
 
(741,014
)
 
 
(3,772
)
 
 
(629,960
)
 
 
(1,054,615
)
 
 
(9,926,198
)
 
 
 
 
1,063,953
 
 
 
(74,688,131
)
 
 
(2,189,623
)
 
 
14,471,921
 
 
 
(240,811,805
)
 
 
277,655,422
 
 
 
(3,285,542
)
 
 
 
 
(40,707
)
 
 
(1,197
)
 
 
19,269
 
 
 
14,136
 
 
 
(59,162
)
 
 
 
 
1,114,566
 
 
 
42,465,537
 
 
 
2,331,625
 
 
 
44,888,765
 
 
 
(18,703,035
)
 
 
1,264,724,127
 
 
 
(2,735,552
)
 
12,944
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,063,781
 
 
$
52,911,905
 
 
$
2,758,126
 
 
$
52,093,532
 
 
$
(10,383,717
)
 
$
1,334,587,005
 
 
$
2,464,027
 
$
 
 
$
1,223,522
 
 
$
66,896
 
 
$
852,732
 
 
$
828,887
 
 
$
10,226,882
 
 
$
 
$
 
 
$
 
 
$
 
 
$
 
 
$
 
 
$
2,630,899
 
 
$
 
$
 
 
$
 
 
$
 
 
$
 
 
$
 
 
$
1,372,255
 
 
$
 
 
The accompanying notes are an integral part of these financial statements.

57



The Lazard Funds, Inc.
Statements of Changes in Net Assets

   
Lazard U.S. Equity Value Portfolio
 
   
Year Ended
December 31,
2007
 
Year Ended
December 31,
2006
 
INCREASE (DECREASE) IN NET ASSETS
             
Operations:
             
Net investment income
 
$
110,567
 
$
3,333
 
Net realized gain on investments
   
320,782
   
20,652
 
Net change in unrealized appreciation (depreciation) on investments
   
(534,978
)
 
35,975
 
Net increase (decrease) in net assets resulting from operations
   
(103,629
)
 
59,960
 
Distributions to shareholders:
             
From net investment income
             
Institutional Shares
   
(105,751
)
 
(18,511
)
Open Shares
   
(3,653
)
 
(9,450
)
From net realized gains
             
Institutional Shares
   
(389,570
)
 
(5,581
)
Open Shares
   
(18,098
)
 
(3,408
)
Net decrease in net assets resulting from distributions
   
(517,072
)
 
(36,950
)
Capital stock transactions:
             
Net proceeds from sales
             
Institutional Shares
   
8,193,054
   
252,300
 
Open Shares
   
967,026
   
226,200
 
Net proceeds in connection with acquisition of Lazard Equity Portfolio
             
Institutional Shares
   
   
 
Open Shares
   
   
 
Net proceeds from reinvestment of distributions
             
Institutional Shares
   
494,481
   
24,092
 
Open Shares
   
21,427
   
4,645
 
Cost of shares redeemed
             
Institutional Shares
   
(5,704
)
 
 
Open Shares
   
(852,034
)
 
 
Net increase (decrease) in net assets from capital stock transactions
   
8,818,250
   
507,237
 
Redemption fees (Note 2j):
             
Institutional Shares
   
20
   
 
Open Shares
   
429
   
 
Net increase in net assets from redemption fees
   
449
   
 
Total increase (decrease) in net assets
   
8,197,998
   
530,247
 
Net assets at beginning of year
   
630,692
   
100,445
 
Net assets at end of year*
 
$
8,828,690
 
$
630,692
 
*Includes undistributed (distributions in excess of) net investment income of
 
$
(21,307
)
$
(24,019
)
Shares issued and redeemed:
             
Institutional Shares:
             
Shares outstanding at beginning of year
   
33,272
   
9,025
 
Shares sold
   
678,435
   
22,194
 
Shares issued in connection with acquisition of Lazard Equity Portfolio
   
   
 
Shares issued to shareholders from reinvestment of distributions
   
43,122
   
2,053
 
Shares redeemed
   
(459
)
 
 
Net increase (decrease)
   
721,098
   
24,247
 
Shares outstanding at end of year
   
754,370
   
33,272
 
Open Shares:
             
Shares outstanding at beginning of year
   
20,414
   
1,002
 
Shares sold
   
78,812
   
19,020
 
Shares issued in connection with acquisition of Lazard Equity Portfolio
   
   
 
Shares issued to shareholders from reinvestment of distributions
   
1,858
   
392
 
Shares redeemed
   
(70,915
)
 
 
Net increase (decrease)
   
9,755
   
19,412
 
Shares outstanding at end of year
   
30,169
   
20,414
 

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

58


 

Lazard U.S. Strategic Equity Portfolio
 
 
Lazard Mid Cap Portfolio
 
Lazard Small Cap Portfolio
 
Year Ended
December 31,
2007
 
Year Ended
December 31,
2006
 
 
Year Ended
December 31,
2007
 
Year Ended
December 31,
2006
 
Year Ended
December 31,
2007
 
Year Ended
December 31,
2006
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,013,520
 
$
388,311
 
 
$
3,093,583
 
$
1,458,503
 
$
375,906
 
$
134,646
 
 
13,970,887
 
 
2,971,945
 
 
 
37,492,588
 
 
18,890,456
 
 
11,536,340
 
 
52,843,777
 
 
(14,012,905
)
 
5,313,074
 
 
 
(63,675,417
)
 
15,595,684
 
 
(21,525,998
)
 
(11,559,895
 
971,502
 
 
8,673,330
 
 
 
(23,089,246
)
 
35,944,643
 
 
(9,613,752
)
 
41,418,528
 
                                     
 
(928,263
)
 
(390,410
)
 
 
(2,255,532
)
 
(1,240,961
)
 
(368,961
)
 
(110,375
 
(75,125
)
 
(1,086
)
 
 
(836,453
)
 
(197,978
)
 
 
 
 
                                     
 
(13,250,346
)
 
(1,665,988
)
 
 
(29,413,726
)
 
(11,031,438
)
 
(19,129,580
)
 
(39,424,315
 
(1,707,827
)
 
(8,519
)
 
 
(16,992,927
)
 
(3,556,423
)
 
(4,239,158
)
 
(7,362,733
 
(15,961,561
)
 
(2,066,003
)
 
 
(49,498,638
)
 
(16,026,800
)
 
(23,737,699
)
 
(46,897,423
                                     
 
7,942,092
 
 
55,865,263
 
 
 
194,754,341
 
 
77,725,113
 
 
11,903,601
 
 
11,671,979
 
 
4,306,777
 
 
62,657
 
 
 
161,283,433
 
 
47,877,913
 
 
6,031,372
 
 
11,551,777
 
                                     
 
 
 
51,729,353
 
 
 
 
 
 
 
 
 
 
 
 
 
11,583,237
 
 
 
 
 
 
 
 
 
 
                                     
 
13,993,348
 
 
2,050,427
 
 
 
20,979,694
 
 
10,417,726
 
 
18,536,919
 
 
38,773,151
 
 
1,590,727
 
 
8,133
 
 
 
15,941,625
 
 
2,762,170
 
 
3,886,744
 
 
6,935,593
 
                                     
 
(37,611,892
)
 
(14,169,939
)
 
 
(130,294,329
)
 
(40,186,186
)
 
(89,649,834
)
 
(103,765,069
)
 
(4,462,321
)
 
(36,917
)
 
 
(69,855,700
)
 
(29,019,541
)
 
(14,412,212
)
 
(17,873,533
)
 
(14,241,269
)
 
107,092,214
 
 
 
192,809,064
 
 
69,577,195
 
 
(63,703,410
)
 
(52,706,102
)
                                     
 
 
 
12,092
 
 
 
158
 
 
46
 
 
63
 
 
1,698
 
 
253
 
 
 
 
 
16,061
 
 
551
 
 
156
 
 
979
 
 
253
 
 
12,092
 
 
 
16,219
 
 
597
 
 
219
 
 
2,677
 
 
(29,231,075
)
 
113,711,633
 
 
 
120,237,399
 
 
89,495,635
 
 
(97,054,642
)
 
(58,182,320
)
 
129,030,400
 
 
15,318,767
 
 
 
315,777,331
 
 
226,281,696
 
 
232,110,466
 
 
290,292,786
 
$
99,799,325
 
$
129,030,400
 
 
$
436,014,730
 
$
315,777,331
 
$
135,055,824
 
$
232,110,466
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
11,861
 
$
 
 
$
87,467
 
$
89,516
 
$
21,379
 
$
80,332
 
                                     
 
9,919,704
 
 
1,453,051
 
 
 
16,333,214
 
 
12,998,140
 
 
13,604,388
 
 
16,447,073
 
 
649,063
 
 
5,253,082
 
 
 
12,735,545
 
 
5,535,870
 
 
798,951
 
 
744,910
 
 
 
 
4,357,985
 
 
 
 
 
 
 
 
 
 
 
1,351,329
 
 
172,762
 
 
 
1,640,429
 
 
719,954
 
 
1,465,612
 
 
2,640,538
 
 
(3,118,197
)
 
(1,317,176
)
 
 
(8,397,846
)
 
(2,920,750
)
 
(6,384,866
)
 
(6,228,133
)
 
(1,117,805
)
 
8,466,653
 
 
 
5,978,128
 
 
3,335,074
 
 
(4,120,303
)
 
(2,842,685
)
 
8,801,899
 
 
9,919,704
 
 
 
22,311,342
 
 
16,333,214
 
 
9,484,085
 
 
13,604,388
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,138
 
 
22,498
 
 
 
5,651,015
 
 
4,159,844
 
 
2,495,815
 
 
2,423,023
 
 
361,154
 
 
5,915
 
 
 
10,716,890
 
 
3,424,301
 
 
432,400
 
 
696,657
 
 
 
 
974,199
 
 
 
 
 
 
 
 
 
 
 
153,329
 
 
683
 
 
 
1,264,020
 
 
193,294
 
 
312,242
 
 
477,819
 
 
(364,562
)
 
(3,157
)
 
 
(4,766,743
)
 
(2,126,424
)
 
(1,034,618
)
 
(1,101,684
)
 
149,921
 
 
977,640
 
 
 
7,214,167
 
 
1,491,171
 
 
(289,976
)
 
72,792
 
 
1,150,059
 
 
1,000,138
 
 
 
12,865,182
 
 
5,651,015
 
 
2,205,839
 
 
2,495,815
 

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

59

 

The Lazard Funds, Inc.
Statements of Changes in Net Assets (continued)
 

   
Lazard U S  Small Cap
Equity Growth Portfolio
 
   
Year Ended 
December 31,
2007
 
Period Ended
December 31,
2006**
 
INCREASE (DECREASE) IN NET ASSETS
             
Operations:
             
Net investment income (loss)
 
$
(63,729
)
$
(8,544
)
Net realized gain on investments and foreign currency
 
50,613
   
92,034
 
Net change in unrealized appreciation (depreciation) on investments and foreign currency
   
1,063,953
   
23,716
 
Contribution from Investment Manager (Note 3)
   
12,944
   
 
Net increase in net assets resulting from operations
   
1,063,781
   
107,206
 
Distributions to shareholders:
             
From net investment income
             
Institutional Shares
   
   
 
Open Shares
   
   
 
From net realized gains
             
Institutional Shares
   
(202,723
)
 
(37,527
)
Open Shares
   
(8,235
)
 
(2,879
)
Net decrease in net assets resulting from distributions
   
(210,958
)
 
(40,406
)
Capital stock transactions:
             
Net proceeds from sales
             
Institutional Shares
   
10,732,189
   
3,515,872
 
Open Shares
   
546,200
   
275,713
 
Net proceeds from reinvestment of distributions
             
Institutional Shares
   
202,723
   
37,527
 
Open Shares
   
8,235
   
2,879
 
Cost of shares redeemed
             
Institutional Shares
   
(49,025
)
 
(33,293
)
Open Shares
   
(104,968
)
 
(49,273
)
Net increase (decrease) in net assets from capital stock transactions
   
11,335,354
   
3,749,425
 
Redemption fees (Note 2j):
             
Institutional Shares
   
231
   
 
Open Shares
   
   
 
Net increase in net assets from redemption fees
   
231
   
 
Total increase (decrease) in net assets
   
12,188,408
   
3,816,225
 
Net assets at beginning of period
   
3,816,225
   
 
Net assets at end of period*
 
$
16,004,633
 
$
3,816,225
 
* Includes undistributed (distributions in excess of) net investment income (loss) of
 
$
(278
)
$
701
 
**Portfolio commenced operations on February 28, 2006.
             
† The inception date for Open Shares was February 3, 2006.
             
Shares issued and redeemed:
             
Institutional Shares:
             
Shares outstanding at beginning of period
   
357,156
   
 
Shares sold
   
993,353
   
357,078
 
Shares issued to shareholders from reinvestment of distributions
   
17,599
   
3,683
 
Shares redeemed
   
(4,229
)
 
(3,605
)
Net increase (decrease)
   
1,006,723
   
357,156
 
Shares outstanding at end of period
   
1,363,879
   
357,156
 
Open Shares:
   
 
   
 
 
Shares outstanding at beginning of period
   
22,564
       
Shares sold
   
47,576
   
27,153
 
Shares issued to shareholders from reinvestment of distributions
   
716
   
283
 
Shares redeemed
   
(9,232
)
 
(4,872
)
Net increase (decrease)
   
39,060
   
22,564
 
Shares outstanding at end of period
   
61,624
   
22,564
 
 
The accompanying notes are an integral part of these financial statements.
 
60

 

 
 

Lazard International
   
Lazard International
   
Lazard International
 
Equity Portfolio
   
Equity Select Portfolio
   
Strategic Equity Portfolio
 
Year Ended
December 31,
2007
 
Year Ended
December 31,
2006
   
Year Ended
December 31,
2007
 
Year Ended 
December 31, 
2006
   
Year Ended
December 31,
2007
 
Year Ended
December 31,
2006†
 
                                       
$
10,446,368
 
$
19,313,146
   
$
426,501
 
$
435,065
   
$
7,204,767
 
$
4,126,935
 
 
117,194,375
   
194,705,168
     
4,522,445
   
2,933,164
     
30,397,575
   
24,401,068
 
 
(74,728,838
)
 
(31,215,564
)
   
(2,190,820
)
 
1,717,464
     
14,491,190
   
28,616,354
 
 
   
     
   
     
   
 
 
52,911,905
   
182,802,750
     
2,758,126
   
5,085,693
     
52,093,532
   
57,144,357
 
                                       
 
(10,448,711
)
 
(36,929,653
)
   
(220,687
)
 
(270,467
)
   
(7,569,889
)
 
(3,729,151
)
 
(823,251
)
 
(2,164,261
)
   
(205,485
)
 
(167,945
)
   
(234,589
)
 
(68,574
)
                                       
 
   
     
(2,145,180
)
 
(1,269,846
)
   
(32,463,744
)
 
(20,303,769
)
 
   
     
(2,237,967
)
 
(979,095
)
   
(1,261,316
)
 
(629,537
)
 
(11,271,962
)
 
(39,093,914
)
   
(4,809,319
)
 
(2,687,353
)
   
(41,529,538
)
 
(24,731,031
)
                                       
 
42,760,108
   
108,177,480
     
3,659,073
   
6,083,166
     
67,878,911
   
157,114,791
 
 
12,817,420
   
16,790,800
     
3,938,401
   
2,558,331
     
6,172,001
   
10,129,474
 
                                       
 
8,455,736
   
30,420,503
     
2,007,567
   
1,277,067
     
37,683,990
   
21,410,518
 
 
648,480
   
1,959,247
     
2,303,146
   
1,075,249
     
1,464,736
   
692,287
 
                                       
 
(455,325,852
)
 
(609,253,647
)
   
(9,532,789
)
 
(4,219,258
)
   
(41,260,992
)
 
(2,617,952
)
 
(34,029,351
)
 
(25,155,199
)
   
(3,528,784
)
 
(2,239,904
)
   
(2,181,358
)
 
(232,557
)
 
(424,673,459
)
 
(477,060,816
)
   
(1,153,386
)
 
4,534,651
     
69,757,288
   
186,496,561
 
                                       
 
28
   
37,678
     
427
   
1,252
     
3,465
   
473
 
 
2,341
   
331
     
518
   
98
     
   
250
 
 
2,369
   
38,009
     
945
   
1,350
     
3,465
   
723
 
 
(383,031,147
)
 
(333,313,971
)
   
(3,203,634
)
 
6,934,341
     
80,324,747
   
218,910,610
 
 
750,802,536
   
1,084,116,507
     
29,221,827
   
22,287,486
     
354,600,604
   
135,689,994
 
$
367,771,389
 
$
750,802,536
   
$
26,018,193
 
$
29,221,827
   
$
434,925,351
 
$
354,600,604
 
$
(67,176
)
$
1,495,998
   
$
45
 
$
   
$
(23,862
)
$
(24,363
)
                                       
                                       
                                       
 
42,981,256
   
73,968,882
     
1,275,571
   
1,045,758
     
27,171,668
   
12,580,701
 
 
2,525,820
   
7,155,699
     
274,686
   
464,155
     
5,256,475
   
13,105,649
 
 
488,254
   
1,951,864
     
167,049
   
97,749
     
2,956,838
   
1,695,234
 
 
(26,891,312
)
 
(40,095,189
)
   
(690,357
)
 
(332,091
)
   
(2,975,524
)
 
(209,916
)
 
(23,877,238
)
 
(30,987,626
)
   
(248,622
)
 
229,813
     
5,237,789
   
14,590,967
 
 
19,104,018
   
42,981,256
     
1,026,949
   
1,275,571
     
32,409,457
   
27,171,668
 
                                       
 
3,028,637
   
3,476,798
     
957,538
   
853,150
     
843,756
   
 
 
752,954
   
1,088,540
     
291,150
   
198,410
     
471,941
   
808,123
 
 
36,914
   
124,972
     
191,154
   
82,132
     
115,062
   
54,842
 
 
(1,984,679
)
 
(1,661,673
)
   
(261,657
)
 
(176,154
)
   
(163,900
)
 
(19,209
)
 
(1,194,811
)
 
(448,161
)
   
220,647
   
104,388
     
423,103
   
843,756
 
 
1,833,826
   
3,028,637
     
1,178,185
   
957,538
     
1,266,859
   
843,756
 

The accompanying notes are an integral part of these financial statements.
 
61

 

The Lazard Funds, Inc.
Statements of Changes in Net Assets (concluded)
 

   
Lazard International Small Cap Portfolio
 
   
Year Ended 
December 31,
2007
 
Year Ended 
December 31, 
2006
 
INCREASE (DECREASE) IN NET ASSETS
             
Operations:
             
Net investment income
 
$
8,319,318
 
$
7,785,005
 
Net realized gain on investments and foreign currency
   
222,094,634
   
106,510,860
 
Net change in unrealized appreciation (depreciation) on investments and foreign currency
   
(240,797,669
)
 
42,100,222
 
Net increase (decrease) in net assets resulting from operations
   
(10,383,717
)
 
156,396,087
 
Distributions to shareholders:
             
From net investment income
             
Institutional Shares
   
(5,263,330
)
 
(8,298,726
)
Open Shares
   
(3,173,582
)
 
(1,293,901
)
From net realized gains
             
Institutional Shares
   
(46,662,720
)
 
(113,927,331
)
Open Shares
   
(33,083,117
)
 
(22,197,890
)
Net decrease in net assets resulting from distributions
   
(88,182,749
)
 
(145,717,848
)
Capital stock transactions:
             
Net proceeds from sales
             
Institutional Shares
   
79,708,233
   
184,768,792
 
Open Shares
   
201,108,792
   
104,305,829
 
Net proceeds from reinvestment of distributions
             
Institutional Shares
   
44,484,125
   
119,146,211
 
Open Shares
   
33,531,668
   
22,377,378
 
Cost of shares redeemed
             
Institutional Shares
   
(642,207,115
)
 
(200,877,780
)
Open Shares
   
(234,090,777
)
 
(49,811,547
)
Net increase (decrease) in net assets from capital stock transactions
   
(517,465,074
)
 
179,908,883
 
Redemption fees (Note 2j):
             
Institutional Shares
   
2,573
   
1,955
 
Open Shares
   
9,026
   
5,708
 
Net increase in net assets from redemption fees
   
11,599
   
7,663
 
Total increase (decrease) in net assets
   
(616,019,941
)
 
190,594,785
 
Net assets at beginning of year
   
835,523,711
   
644,928,926
 
Net assets at end of year*
 
$
219,503,770
 
$
835,523,711
 
* Includes undistributed (distributions in excess of) net investment income of
 
$
(123,817
)
$
(2,802,181
)
Shares issued and redeemed:
             
Institutional Shares:
             
Shares outstanding at beginning of year
   
39,230,803
   
34,086,489
 
Shares sold
   
4,569,352
   
9,403,782
 
Shares issued to shareholders from reinvestment of distributions
   
4,301,060
   
6,719,909
 
Shares redeemed
   
(35,738,191
)
 
(10,979,377
)
Net increase (decrease)
   
(26,867,779
)
 
5,144,314
 
Shares outstanding at end of year
   
12,363,024
   
39,230,803
 
Open Shares:
   
 
   
 
 
Shares outstanding at beginning of year
     7,728,361    
3,629,711
 
Shares sold
   
11,079,380
   
5,561,002
 
Shares issued to shareholders from reinvestment of distributions
   
3,242,908
   
1,264,678
 
Shares redeemed
   
(13,510,512
)
 
(2,727,030
)
Net increase (decrease)
   
811,776
   
4,098,650
 
Shares outstanding at end of year
   
8,540,137
   
7,728,361
 

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

62

 

 

Lazard Emerging Markets Portfolio
   
Lazard High Yield Portfolio
               
Year Ended
December 31,
2007
 
Year Ended
December 31,
2006
   
Year Ended
December 31,
2007
 
Year Ended
December 31,
2006
               
                                       
$
69,862,878
 
$
36,652,134
   
$
5,199,579
 
$
5,549,434
               
 
987,127,867
   
307,528,076
     
549,990
   
2,509,910
               
 
277,596,260
   
281,179,252
     
(3,285,542
)
 
(1,406,323
)
             
 
1,334,587,005
   
625,359,462
     
2,464,027
   
6,653,021
               
                                       
 
(55,726,056
)
 
(32,694,103
)
   
(5,035,000
)
 
(5,376,099
)
             
 
(11,904,973
)
 
(3,516,848
)
   
(164,579
)
 
(173,335
)
             
                                       
 
(612,235,665
)
 
(267,955,997
)
   
   
               
 
(169,978,884
)
 
(41,301,087
)
   
   
               
 
(849,845,578
)
 
(345,468,035
)
   
(5,199,579
)
 
(5,549,434
)
             
                                       
 
2,712,892,181
   
1,352,454,300
     
795,553
   
8,194,508
               
 
1,138,597,916
   
355,869,553
     
873,555
   
342,657
               
                                       
 
596,080,729
   
263,255,080
     
4,256,453
   
4,477,428
               
 
170,027,763
   
41,328,690
     
152,448
   
163,339
               
                                       
 
(1,198,253,828
)
 
(535,704,693
)
   
(14,589,624
)
 
(20,404,288
)
             
 
(352,893,158
)
 
(180,342,867
)
   
(1,332,565
)
 
(1,331,911
)
             
 
3,066,451,603
   
1,296,860,063
     
(9,844,180
)
 
(8,558,267
)
             
                                       
 
99,727
   
22,786
     
254
   
               
 
236,716
   
36,896
     
2,236
   
               
 
336,443
   
59,682
     
2,490
   
               
 
3,551,529,473
   
1,576,811,172
     
(12,577,242
)
 
(7,454,680
)
             
 
3,186,425,632
   
1,609,614,460
     
70,631,299
   
78,085,979
               
$
6,737,955,105
 
$
3,186,425,632
   
$
58,054,057
 
$
70,631,299
               
$
40,292
 
$
1,329
   
$
(284,000
)
$
(284,000
)
             
                                       
 
133,219,000
   
79,234,728
     
12,778,921
   
14,254,153
               
 
113,062,483
   
68,689,002
     
149,946
   
1,553,044
               
 
25,017,247
   
12,989,211
     
803,612
   
850,410
               
 
(50,620,169
)
 
(27,693,941
)
   
(2,796,066
)
 
(3,878,686
)
             
 
87,459,561
   
53,984,272
     
(1,842,508
)
 
(1,475,232
)
             
 
220,678,561
   
133,219,000
     
10,936,413
   
12,778,921
               
                                       
 
21,215,039
   
10,890,070
     
405,406
   
564,731
               
 
47,056,649
   
17,703,837
     
164,143
   
64,661
               
 
7,053,673
   
2,015,281
     
28,671
   
30,908
               
 
(14,603,029
)
 
(9,394,149
)
   
(254,541
)
 
(254,894
)
             
 
39,507,293
   
10,324,969
     
(61,727
)
 
(159,325
)
             
 
60,722,332
   
21,215,039
     
343,679
   
405,406
               
 
The accompanying notes are an integral part of these financial statements.
 
63

 

The Lazard Funds, Inc.
Financial Highlights
Selected data for a share of capital stock outstanding throughout each period:

LAZARD U.S. EQUITY VALUE PORTFOLIO
   
Year Ended
 
For the
Period
9/30/05* to
 
Institutional Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
Net asset value, beginning of period
 
$
11.73
 
$
10.02
 
$
10.00
 
Income from investment operations:
                   
Net investment income (a)
   
0.17
   
0.18
   
0.03
 
Net realized and unrealized gain
     0.05    
2.33
   
0.02
 
Total from investment operations
   
0.22
   
2.51
   
0.05
 
Less distributions from:
                   
Net investment income
   
(0.15
)
 
(0.62
)
 
(0.03
)
Net realized gains
   
(0.55
)
 
(0.18
)
 
 
Total distributions
   
(0.70
)
 
(0.80
)
 
(0.03
)
Redemption fees
   
(c) 
 
   
 
Net asset value, end of period
 
$
11.25
 
$
11.73
 
$
10.02
 
Total Return (b)
   
1.65%
 
 
25.23%
 
 
0.48%
 
Ratios and Supplemental Data:
                   
Net assets, end of period (in thousands)
 
$
8,488
 
$
390
 
$
90
 
Ratios to average net assets:
                 
Net expenses (d)
   
1.00%
 
 
1.00%
 
 
1.00%
 
Gross expenses (d)
   
3.56%
 
 
112.90%
 
 
388.31%
 
Net investment income (d)
   
1.40%
 
 
1.57%
 
 
1.17%
 
Portfolio turnover rate
   
83%
 
 
95%
 
 
13%
 

   
Year Ended
 
For the
Period
9/30/05* to
 
Open Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
Net asset value, beginning of period
 
$
11.77
 
$
10.02
 
$
10.00
 
Income from investment operations:
                   
Net investment income (a)
   
0.13
   
0.12
   
0.02
 
Net realized and unrealized gain
   
0.06
   
2.37
   
0.02
 
Total from investment operations
   
0.19
   
2.49
   
0.04
 
Less distributions from:
                   
Net investment income
   
(0.11
)
 
(0.56
)
 
(0.02
)
Net realized gains
   
(0.55
)
 
(0.18
)
 
 
Total distributions
   
(0.66
)
 
(0.74
)
 
(0.02
)
Redemption fees
   
0.01
   
   
 
Net asset value, end of period
 
$
11.31
 
$
11.77
 
$
10.02
 
Total Return (b)
   
1.59%
 
 
24.83%
 
 
0.41%
 
Ratios and Supplemental Data:
                   
Net assets, end of period (in thousands)
 
$
341
 
$
240
 
$
10
 
Ratios to average net assets:
                   
Net expenses (d)
   
1.30%
 
 
1.30%
 
 
1.30%
 
Gross expenses (d)
   
9.40%
 
 
138.32%
 
 
596.46%
 
Net investment income (d)
   
1.02%
 
 
1.05%
 
 
0.86%
 
Portfolio turnover rate
   
83%
 
 
95%
 
 
13%
 

*
Commencement of operations.
(a)
Net investment income has been computed using the average shares method.
(b)
Total returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower. Period of less than one year is not annualized.
(c)
Amount is less than $0.01 per share.
(d)
Annualized for period of less than one year.

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 U.S. STRATEGIC EQUITY PORTFOLIO
   
Year Ended
 
For the
Period
12/30/04* to
 
Institutional Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
Net asset value, beginning of period
 
$
11.81
 
$
10.38
 
$
10.00
 
$
10.00
 
Income (loss) from investment operations:
                         
Net investment income (a)
   
0.11
   
0.08
   
0.09
   
(c)
Net realized and unrealized gain (loss)
   
(0.04
)
 
1.73
   
0.41
   
 
Total from investment operations
   
0.07
   
1.81
   
0.50
   
 
Less distributions from:
                         
Net investment income
   
(0.12
)
 
(0.07
)
 
(0.03
)
 
 
Net realized gains
   
(1.73
)
 
(0.31
)
 
(0.09
)
 
 
Total distributions
   
(1.85
)
 
(0.38
)
 
(0.12
)
 
 
Redemption fees
   
   
(c)
 
   
 
Net asset value, end of period
 
$
10.03
 
$
11.81
 
$
10.38
 
$
10.00
 
Total Return (b) 
   
0.33%
 
 
17.44%
 
 
4.99%
 
 
0.00%
 
Ratios and Supplemental Data:
                         
Net assets, end of period (in thousands)
 
$
88,242
 
$
117,194
 
$
15,085
 
$
400
 
Ratios to average net assets:
                         
Net expenses (d)
   
0.98%
 
 
1.05%
 
 
1.16%
 
 
1.25%
 
Gross expenses (d)
   
0.98%
 
 
1.35%
 
 
13.80%
 
 
546.34%
(e)
Net investment income (d)
   
0.86%
 
 
0.71%
 
 
0.90%
 
 
1.92%
 
Portfolio turnover rate
   
58%
 
 
82%
 
 
53%
 
 
0%
 

   
Year Ended
 
For the
Period
12/30/04* to
 
Open Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
Net asset value, beginning of period
 
$
11.83
 
$
10.39
 
$
10.00
 
$
10.00
 
Income (loss) from investment operations:
                         
Net investment income (a)
   
0.06
   
(c)
 
0.06
   
(c)
Net realized and unrealized gain (loss)
   
(0.03
)
 
1.79
   
0.35
   
 
Total from investment operations
   
0.03
   
1.79
   
0.41
   
 
Less distributions from:
                         
Net investment income
   
(0.08
)
 
(0.04
)
 
   
 
Net realized gains
   
(1.73
)
 
(0.31
)
 
(0.09
)
 
 
Total distributions
   
(1.81
)
 
(0.35
)
 
(0.09
)
 
 
Redemption fees
   
(c) 
 
   
0.07
   
 
Net asset value, end of period
 
$
10.05
 
$
11.83
 
$
10.39
 
$
10.00
 
Total Return (b)
   
(0.07)%
 
 
17.20%
 
 
4.79%
 
 
0.00%
 
Ratios and Supplemental Data:
                         
Net assets, end of period (in thousands)
 
$
11,558
 
$
11,836
 
$
234
 
$
100
 
Ratios to average net assets:
                         
Net expenses (d)
   
1.35%
 
 
1.35%
 
 
1.50%
 
 
1.55%
 
Gross expenses (d)
   
1.40%
 
 
7.38%
 
 
33.06%
 
 
1,049.82%
(e)
Net investment income (d)
   
0.50%
 
 
0.03%
 
 
0.58%
 
 
1.62%
 
Portfolio turnover rate
   
58%
 
 
82%
 
 
53%
 
 
0%
 

*
Commencement of operations.
(a)
Net investment income has been computed using the average shares method.
(b)
Total returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower. Period of less than one year is not annualized.
(c)
Amount is less than $0.01 per share.
(d)
Annualized for period of less than one year.
(e)
Gross expense ratio was the result of the Portfolio being in existence for two days during the period ended 12/31/04.

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 year:

LAZARD MID CAP PORTFOLIO
   
Year Ended
 
Institutional Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
14.41
 
$
13.23
 
$
13.20
 
$
11.49
 
$
8.93
 
Income (loss) from investment operations:
                               
Net investment income (a)
   
0.12
   
0.09
   
0.09
   
0.03
   
0.04
 
Net realized and unrealized gain (loss)
   
(0.51
)
 
1.88
   
1.07
   
2.83
   
2.55
 
Total from investment operations
   
(0.39
)
 
1.97
   
1.16
   
2.86
   
2.59
 
Less distributions from:
                               
Net investment income
   
(0.11
)
 
(0.08
)
 
(0.07
)
 
(0.04
)
 
(0.03
)
Net realized gains
   
(1.45
)
 
(0.71
)
 
(1.06
)
 
(1.11
)
 
 
Total distributions
   
(1.56
)
 
(0.79
)
 
(1.13
)  
 
(1.15
)
 
(0.03
)
Redemption fees
   
(c) 
 
(c) 
 
   
(c) 
 
 
Net asset value, end of year
 
$
12.46
 
$
14.41
 
$
13.23
 
$
13.20
 
$
11.49
 
Total Return (b)
   
(2.93)%
 
 
14.85%
 
 
8.89%
 
 
24.97%
 
 
29.03%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
277,953
 
$
235,367
 
$
171,912
 
$
56,431
 
$
39,625
 
Ratios to average net assets:
                               
Net expenses
   
0.87%
 
 
0.89%
 
 
0.93%
 
 
1.05%
 
 
1.05%
 
Gross expenses
   
0.87%
 
 
0.89%
 
 
0.93%
 
 
1.13%
 
 
1.31%
 
Net investment income
   
0.81%
 
 
0.66%
 
 
0.67%
 
 
0.21%
 
 
0.42%
 
Portfolio turnover rate
   
100%
 
 
76%
 
 
80%
 
 
92%
 
 
96%
 

   
Year Ended
 
Open Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
14.23
 
$
13.07
 
$
13.06
 
$
11.38
 
$
8.84
 
Income (loss) from investment operations:
                               
Net investment income (loss) (a)
   
0.09
   
0.05
   
0.05
   
(0.01
)
 
0.01
 
Net realized and unrealized gain (loss)
   
(0.51
)
 
1.86
   
1.05
   
2.80
   
2.53
 
Total from investment operations
   
(0.42
)
 
1.91
   
1.10
   
2.79
   
2.54
 
Less distributions from:
                               
Net investment income
   
(0.07
)
 
(0.04
)
 
(0.03
)
 
   
(c)
Net realized gains
   
(1.45
)
 
(0.71
)
 
(1.06
)
 
(1.11
)
 
 
Total distributions
   
(1.52
)
 
(0.75
)
 
(1.09
)
 
(1.11
)
 
 
Redemption fees
   
(c)  
 
(c) 
 
(c) 
 
(c) 
 
(c)
Net asset value, end of year
 
$
12.29
 
$
14.23
 
$
13.07
 
$
13.06
 
$
11.38
 
Total Return (b)
   
(3.17)%
 
 
14.57%
 
 
8.53%
 
 
24.59%
 
 
28.74%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
158,062
 
$
80,410
 
$
54,370
 
$
30,412
 
$
14,978
 
Ratios to average net assets:
                               
Net expenses
   
1.13%
 
 
1.18%
 
 
1.23%
 
 
1.35%
 
 
1.35%
 
Gross expenses
   
1.13%
 
 
1.18%
 
 
1.23%
 
 
1.45%
 
 
1.69%
 
Net investment income (loss)
   
0.58%
 
 
0.37%
 
 
0.35%
 
 
(0.09)%
 
 
0.12%
 
Portfolio turnover rate
   
100%
 
 
76%
 
 
80%
 
 
92%
 
 
96%
 
 
(a)
Net investment income (loss) has been computed using the average shares method.
(b)
Total returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.
(c)
Amount is less than $0.01 per share.

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 year:

LAZARD SMALL CAP PORTFOLIO
   
Year Ended
 
Institutional Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
14.44
 
$
15.40
 
$
18.84
 
$
19.49
 
$
14.03
 
Income (loss) from investment operations:
                               
Net investment income (a)
   
0.04
   
0.02
   
0.02
   
0.01
   
0.07
 
Net realized and unrealized gain (loss)
   
(0.87
)
 
2.60
   
0.76
   
2.93
   
5.39
 
Total from investment operations
   
(0.83
)
 
2.62
   
0.78
   
2.94
   
5.46
 
Less distributions from:
                               
Net investment income
   
(0.04
)
 
(0.01
)
 
(0.02
)
 
(0.07
)
 
 
Net realized gains
   
(1.99
)
 
(3.57
)
 
(4.20
)
 
(3.52
)
 
 
Total distributions
   
(2.03
)
 
(3.58
)
 
(4.22
)
 
(3.59
)
 
 
Redemption fees
   
(c) 
 
(c) 
 
(c) 
 
(c) 
 
(c)
Net asset value, end of year
 
$
11.58
 
$
14.44
 
$
15.40
 
$
18.84
 
$
19.49
 
Total Return (b)
   
(6.38)%
 
 
17.11%
 
 
4.31%
 
 
15.28%
 
 
38.92%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
109,853
 
$
196,483
 
$
253,236
 
$
390,906
 
$
465,876
 
Ratios to average net assets:
                               
Net expenses
   
0.93%
 
 
0.91%
 
 
0.88%
 
 
0.86%
 
 
0.86%
 
Gross expenses
   
0.93%
 
 
0.91%
 
 
0.88%
 
 
0.86%
 
 
0.86%
 
Net investment income
   
0.24%
 
 
0.10%
 
 
0.10%
 
 
0.07%
 
 
0.42%
 
Portfolio turnover rate
   
98%
 
 
86%
 
 
87%
 
 
100%
 
 
77%
 

   
Year Ended
 
Open Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
14.27
 
$
15.29
 
$
18.78
 
$
19.44
 
$
14.03
 
Income (loss) from investment operations:
                               
Net investment income (loss) (a)
   
(0.01
)
 
(0.03
)
 
(0.04
)
 
(0.05
)
 
0.02
 
Net realized and unrealized gain (loss)
   
(0.84
)
 
2.58
   
0.75
   
2.91
   
5.39
 
Total from investment operations
   
(0.85
)
 
2.55
   
0.71
   
2.86
   
5.41
 
Less distributions from:
                               
Net investment income
   
   
   
   
(c) 
 
 
Net realized gains
   
(1.99
)
 
(3.57
)
 
(4.20
)
 
(3.52
)
 
 
Total distributions
   
(1.99
)
 
(3.57
)
 
(4.20
)
 
(3.52
)
 
 
Redemption fees
   
(c) 
 
(c) 
 
(c) 
 
(c) 
 
(c)
Net asset value, end of year
 
$
11.43
 
$
14.27
 
$
15.29
 
$
18.78
 
$
19.44
 
Total Return (b)
   
(6.60)%
 
 
16.77%
 
 
3.93%
 
 
14.90%
 
 
38.56%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
25,203
 
$
35,627
 
$
37,057
 
$
50,295
 
$
50,202
 
Ratios to average net assets:
                               
Net expenses
   
1.25%
 
 
1.23%
 
 
1.19%
 
 
1.18%
 
 
1.19%
 
Gross expenses
   
1.25%
 
 
1.23%
 
 
1.19%
 
 
1.18%
 
 
1.19%
 
Net investment income (loss)
   
(0.07)%
 
 
(0.21)%
 
 
(0.21)%
 
 
(0.25)%
 
 
0.11%
 
Portfolio turnover rate
   
98%
 
 
86%
 
 
87%
 
 
100%
 
 
77%
 

(a)
Net investment income (loss) has been computed using the average shares method.
(b)
Total returns reflect reinvestment of all dividends and distributions, if any.
(c)
Amount is less than $0.01 per share.

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 U.S. SMALL CAP EQUITY GROWTH PORTFOLIO
Institutional Shares
 
Year
Ended
12/31/07
 
For the
Period
2/28/06* to
12/31/06
 
Net asset value, beginning of period
 
$
10.05
 
$
10.00
 
Income (loss) from investment operations:
             
Net investment loss (a)
   
(0.05
)
 
(0.03
)
Net realized and unrealized gain
   
1.37
   
0.19
 
Contribution from Investment Manager (Note 3)
   
0.01
   
 
Total from investment operations
   
1.33
   
0.16
 
Less distributions from:
             
Net realized gains
   
(0.15
)
 
(0.11
)
Total distributions
   
(0.15
)
 
(0.11
)
Redemption fees
   
(c) 
 
 
Net asset value, end of period
 
$
11.23
 
$
10.05
 
Total Return (b)
   
13.09%
 
 
1.65%
 
Ratios and Supplemental Data:
             
Net assets, end of period (in thousands)
 
$
15,316
 
$
3,590
 
Ratios to average net assets:
             
Net expenses (d)
   
1.25%
 
 
1.25%
   
Gross expenses (d)
   
2.54%
 
 
10.02%
 
Net investment loss (d)
   
(0.45)%
 
 
(0.37)%
 
Portfolio turnover rate
   
70%
 
 
82%
 

Open Shares
 
Year
Ended
12/31/07
 
For the
Period
2/28/06* to
12/31/06
 
Net asset value, beginning of period
 
$
10.02
 
$
10.00
 
Income (loss) from investment operations:
             
Net investment loss (a)
   
(0.08
)
 
(0.07
)
Net realized and unrealized gain
   
1.38
   
0.20
 
Contribution from Investment Manager (Note 3)
   
0.01
   
 
Total from investment operations
   
1.31
   
0.13
 
Less distributions from:
             
Net realized gains
   
(0.15
)
 
(0.11
)
Total distributions
   
(0.15
)
 
(0.11
)
Net asset value, end of period
 
$
11.18
 
$
10.02
 
Total Return (b)
   
13.04%
 
 
1.25%
  
Ratios and Supplemental Data:
             
Net assets, end of period (in thousands)
 
$
689
 
$
226
 
Ratios to average net assets:
             
Net expenses (d)
   
1.55%
 
 
1.55%
 
Gross expenses (d)
   
8.41%
 
 
22.14%
 
Net investment loss (d)
   
(0.75)%
 
 
(0.80)%
 
Portfolio turnover rate
   
70%
 
 
82%
 

*
Commencement of operations.
(a)
Net investment loss has been computed using the average shares method.
(b)
Total returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower. Period of less than one year is not annualized.
(c)
Amount is less than $0.01 per share.
(d)
Annualized for period of less than one year.

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 year:

LAZARD INTERNATIONAL EQUITY PORTFOLIO
   
Year Ended
 
Institutional Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
16.31
 
$
14.00
 
$
12.91
 
$
11.37
 
$
8.92
 
Income from investment operations:
                               
Net investment income (a)
   
0.36
   
0.33
   
0.26
   
0.18
   
0.18
 
Net realized and unrealized gain
   
1.42
   
2.83
   
1.16
   
1.60
   
2.43
 
Total from investment operations
   
1.78
   
3.16
   
1.42
   
1.78
   
2.61
 
Less distributions from:
                               
Net investment income
   
(0.54
)
 
(0.85
)
 
(0.33
)
 
(0.24
)
 
(0.16
)
Total distributions
   
(0.54
)
 
(0.85
)
 
(0.33
)
 
(0.24
)
 
(0.16
)
Redemption fees
   
(c) 
 
(c) 
 
(c) 
 
(c) 
 
(c)
Net asset value, end of year
 
$
17.55
 
$
16.31
 
$
14.00
 
$
12.91
 
$
11.37
 
Total Return (b)
   
10.96%
 
 
22.92%
 
 
11.25%
 
 
16.01%
 
 
29.51%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
335,323
 
$
701,145
 
$
1,035,346
 
$
1,509,462
 
$
2,103,600
 
Ratios to average net assets:
                               
Net expenses
   
0.89%
 
 
0.84%
 
 
0.89%
 
 
0.90%
 
 
0.90%
 
Gross expenses
   
0.89%
 
 
0.84%
 
 
0.89%
 
 
0.90%
 
 
0.90%
 
Net investment income
   
2.08%
 
 
2.14%
 
 
2.03%
 
 
1.51%
 
 
1.90%
 
Portfolio turnover rate
   
50%
 
 
68%
 
 
60%
 
 
58%
 
 
44%
 

   
Year Ended
 
Open Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
16.40
 
$
14.03
 
$
12.94
 
$
11.37
 
$
8.88
 
Income from investment operations:
                               
Net investment income (a)
   
0.32
   
0.25
   
0.23
   
0.14
   
0.15
 
Net realized and unrealized gain
   
1.41
   
2.87
   
1.16
   
1.61
   
2.44
 
Total from investment operations
   
1.73
   
3.12
   
1.39
   
1.75
   
2.59
 
Less distributions from:
                               
Net investment income
   
(0.44
)
 
(0.75
)
 
(0.30
)
 
(0.18
)
 
(0.10
)
Total distributions
   
(0.44
)
 
(0.75
)
 
(0.30
)
 
(0.18
)
 
(0.10
)
Redemption fees
   
(c) 
 
(c) 
 
(c) 
 
(c) 
 
(c)
Net asset value, end of year
 
$
17.69
 
$
16.40
 
$
14.03
 
$
12.94
 
$
11.37
 
Total Return (b)
   
10.57%
 
 
22.59%
 
 
10.93%
 
 
15.64%
 
 
29.29%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
32,449
 
$
49,657
 
$
48,770
 
$
89,742
 
$
105,336
 
Ratios to average net assets:
                               
Net expenses
   
1.19%
 
 
1.15%
 
 
1.18%
 
 
1.20%
 
 
1.21%
 
Gross expenses
   
1.19%
 
 
1.15%
 
 
1.18%
 
 
1.20%
 
 
1.21%
 
Net investment income
   
1.89%
 
 
1.63%
 
 
1.78%
 
 
1.18%
 
 
1.61%
 
Portfolio turnover rate
   
50%
 
 
68%
 
 
60%
 
 
58%
 
 
44%
 

(a)
Net investment income has been computed using the average shares method.
(b)
Total returns reflect reinvestment of all dividends and distributions, if any.
(c)
Amount is less than $0.01 per share.

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 year:

LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO
   
Year Ended
 
Institutional Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
13.07
 
$
11.73
 
$
11.25
 
$
9.80
 
$
7.74
 
Income from investment operations:
                               
Net investment income (a)
   
0.22
   
0.25
   
0.18
   
0.14
   
0.18
 
Net realized and unrealized gain
   
0.97
   
2.43
   
0.82
   
1.47
   
2.12
 
Total from investment operations
   
1.19
   
2.68
   
1.00
   
1.61
   
2.30
 
Less distributions from:
                               
Net investment income
   
(0.25
)
 
(0.23
)
 
(0.16
)
 
(0.16
)
 
(0.24
)
Net realized gains
   
(2.23
)
 
(1.11
)
 
(0.36
)
 
   
 
Total distributions
   
(2.48
)
 
(1.34
)
 
(0.52
)  
 
(0.16
)  
 
(0.24
)
Redemption fees
   
(c) 
 
(c) 
 
   
   
 
Net asset value, end of year
 
$
11.78
 
$
13.07
 
$
11.73
 
$
11.25
 
$
9.80
 
Total Return (b)
   
9.25%
 
 
23.01%
 
 
8.90%
 
 
16.45%
 
 
29.80%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
12,103
 
$
16,677
 
$
12,262
 
$
10,455
 
$
9,788
 
Ratios to average net assets:
                               
Net expenses
   
1.15%
 
 
1.15%
 
 
1.15%
 
 
1.15%
 
 
1.15%
 
Gross expenses
   
1.67%
 
 
1.85%
 
 
1.97%
 
 
2.13%
 
 
1.85%
 
Net investment income
   
1.58%
 
 
1.90%
 
 
1.55%
 
 
1.43%
 
 
2.26%
 
Portfolio turnover rate
   
50%
 
 
40%
 
 
33%
 
 
16%
 
 
29%
 

   
Year Ended
 
Open Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
13.10
 
$
11.75
 
$
11.28
 
$
9.82
 
$
7.75
 
Income from investment operations:
                               
Net investment income (a)
   
0.16
   
0.21
   
0.12
   
0.13
   
0.09
 
Net realized and unrealized gain
   
0.99
   
2.44
   
0.83
   
1.46
   
2.19
 
Total from investment operations
   
1.15
   
2.65
   
0.95
   
1.59
   
2.28
 
Less distributions from:
                               
Net investment income
   
(0.21
)
 
(0.19
)
 
(0.12
)
 
(0.13
)
 
(0.21
)
Net realized gains
   
(2.23
)
 
(1.11
)
 
(0.36
)
 
   
 
Total distributions
   
(2.44
)
 
(1.30
)
 
(0.48
)
 
(0.13
)
 
(0.21
)
Redemption fees
   
(c) 
 
(c) 
 
(c) 
 
(c) 
 
 
Net asset value, end of year
 
$
11.81
 
$
13.10
 
$
11.75
 
$
11.28
 
$
9.82
 
Total Return (b)
   
8.92%
 
 
22.72%
 
 
8.46%
 
 
16.17%
 
 
29.49%
 
Ratios and Supplemental Data:
                           
Net assets, end of year (in thousands)
 
$
13,916
 
$
12,545
 
$
10,026
 
$
6,744
 
$
7,279
 
Ratios to average net assets:
                               
Net expenses
   
1.45%
 
 
1.45%
 
 
1.45%
 
 
1.45%
 
 
1.45%
 
Gross expenses
   
1.95%
 
 
2.13%
 
 
2.28%
 
 
2.47%
 
 
2.68%
 
Net investment income
   
1.21%
 
 
1.65%
 
 
1.05%
 
 
1.28%
 
 
1.09%
 
Portfolio turnover rate
   
50%
 
 
40%
 
 
33%
 
 
16%
 
 
29%
 

(a)
Net investment income has been computed using the average shares method.
(b)
Total returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.
(c)
Amount is less than $0.01 per share.

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 INTERNATIONAL STRATEGIC EQUITY PORTFOLIO
   
Year Ended
 
For the
Period
10/31/05* to
 
Institutional Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
Net asset value, beginning of period
 
$
12.66
 
$
10.79
 
$
10.00
 
Income (loss) from investment operations:
                   
Net investment income (loss) (a)
   
0.23
   
0.19
   
(c)
Net realized and unrealized gain
   
1.36
   
2.64
   
0.79
 
Total from investment operations
   
1.59
   
2.83
   
0.79
 
Less distributions from:
                   
Net investment income
   
(0.25
)
 
(0.15
)
 
 
Net realized gains
   
(1.08
)
 
(0.81
)
 
 
Total distributions
   
(1.33
)
 
(0.96
)
 
 
Redemption fees
   
(c) 
 
(c) 
 
(c)
Net asset value, end of period
 
$
12.92
 
$
12.66
 
$
10.79
 
Total Return (b)
   
12.88%
 
 
26.22%
 
 
7.90%
 
Ratios and Supplemental Data:
                   
Net assets, end of period (in thousands)
 
$
418,584
 
$
343,931
 
$
135,690
 
Ratios to average net assets:
                   
Net expenses (d)
   
0.88%
 
 
0.94%
 
 
1.46%
 
Gross expenses (d)
   
0.88%
 
 
0.94%
 
 
1.46%
 
Net investment income (loss) (d)
   
1.70%
 
 
1.57%
 
 
(0.20)%
 
Portfolio turnover rate
   
84%
 
 
68%
 
 
12%
 

Open Shares
 
Year
Ended
12/31/07
 
For the
Period
2/3/06* to
12/31/06
 
Net asset value, beginning of period
 
$
12.64
 
$
11.49
 
Income from investment operations:
             
Net investment income (a)
   
0.17
   
0.12
 
Net realized and unrealized gain
   
1.37
   
1.93
 
Total from investment operations
   
1.54
   
2.05
 
Less distributions from:
             
Net investment income
   
(0.20
)
 
(0.09
)
Net realized gains
   
(1.08
)
 
(0.81
)
Total distributions
   
(1.28
)
 
(0.90
)
Redemption fees
   
   
(c)
Net asset value, end of period
 
$
12.90
 
$
12.64
 
Total Return (b)
   
12.37%
 
 
17.90%
 
Ratios and Supplemental Data:
             
Net assets, end of period (in thousands)
 
$
16,342
 
$
10,669
 
Ratios to average net assets:
             
Net expenses (d)
   
1.28%
 
 
1.45%
 
Gross expenses (d)
   
1.28%
 
 
1.63%
 
Net investment income (d)
   
1.29%
 
 
1.10%
 
Portfolio turnover rate
   
84%
 
 
68%
 

*
Commencement of operations.
(a)
Net investment income (loss) has been computed using the average shares method.
(b)
Total returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower Periods of less than one year are not annualized.
(c)
Amount is less than $001 per share.
(d)
Annualized for periods of less than one year.

The accompanying notes are an integral part of these financial statements.
 
71

 

The Lazard Funds, Inc.
Financial Highlights (continued)
Selected data for a share of capital stock outstanding throughout each year:

LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
   
Year Ended
 
Institutional Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
17.80
 
$
17.10
 
$
19.24
 
$
15.46
 
$
11.07
 
Income (loss) from investment operations:
                               
Net investment income (a)
   
0.27
   
0.22
   
0.24
   
0.29
   
0.27
 
Net realized and unrealized gain (loss)
   
(1.20
)
 
4.16
   
2.45
   
4.66
   
4.39
 
Total from investment operations
   
(0.93
)
 
4.38
   
2.69
   
4.95
   
4.66
 
Less distributions from:
                               
Net investment income
   
(0.63
)
 
(0.25
)
 
(0.22
)
 
(0.26
)
 
(0.27
Net realized gains
   
(5.75
)
 
(3.43
)
 
(4.61
)
 
(0.91
)
 
 
Total distributions
   
(6.38
)
 
(3.68
)
 
(4.83
)
 
(1.17
)
 
(0.27
)
Redemption fees
   
(c) 
 
(c) 
 
(c) 
 
(c) 
 
(c)
Net asset value, end of year
 
$
10.49
 
$
17.80
 
$
17.10
 
$
19.24
 
$
15.46
 
Total Return (b)
   
(4.61)%
 
 
26.31%
 
 
14.77%
 
 
32.28%
 
 
42.21%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
129,725
 
$
698,166
 
$
582,909
 
$
674,066
 
$
644,240
 
Ratios to average net assets:
                               
Net expenses
   
0.91%
 
 
0.86%
 
 
0.93%
 
 
0.94%
 
 
0.95%
 
Gross expenses
   
0.91%
 
 
0.86%
 
 
0.93%
 
 
0.94%
 
 
0.95%
 
Net investment income
   
1.48%
 
 
1.20%
 
 
1.24%
 
 
1.71%
 
 
2.15%
 
Portfolio turnover rate
   
59%
 
 
49%
 
 
33%
 
 
39%
 
 
18%
 

   
Year Ended
 
Open Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
17.77
 
$
17.09
 
$
19.22
 
$
15.41
 
$
11.02
 
Income (loss) from investment operations:
                               
Net investment income (a)
   
0.21
   
0.17
   
0.18
   
0.23
   
0.21
 
Net realized and unrealized gain (loss)
   
(1.17
)
 
4.13
   
2.45
   
4.64
   
4.36
 
Total from investment operations
   
(0.96
)
 
4.30
   
2.63
   
4.87
   
4.57
 
Less distributions from:
                               
Net investment income
   
(0.55
)
 
(0.19
)
 
(0.16
)
 
(0.18
)
 
(0.20
)
Net realized gains
   
(5.75
)
 
(3.43
)
 
(4.61
)   
 
(0.91
)
 
 
Total distributions
   
(6.30
)
 
(3.62
)
 
(4.77
)  
 
(1.09
)   
 
(0.20
)
Redemption fees
   
(c) 
 
(c) 
 
0.01
   
0.03
   
0.02
 
Net asset value, end of year
 
$
10.51
 
$
17.77
 
$
17.09
 
$
19.22
 
$
15.41
 
Total Return (b)
   
(4.79)%
 
 
25.83%
 
 
14.47%
 
 
32.04%
 
 
41.71%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
89,779
 
$
137,358
 
$
62,020
 
$
49,585
 
$
20,124
 
Ratios to average net assets:
                               
Net expenses
   
1.20%
 
 
1.19%
 
 
1.27%
 
 
1.36%
 
 
1.43%
 
Gross expenses
   
1.20%
 
 
1.19%
 
 
1.27%
 
 
1.36%
 
 
1.46%
 
Net investment income
   
1.17%
 
 
0.89%
 
 
0.93%
 
 
1.30%
 
 
1.59%
 
Portfolio turnover rate
   
59%
 
 
49%
 
 
33%
 
 
39%
 
 
18%
 

(a)
Net investment income has been computed using the average shares method.
(b)
Total returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.
(c)
Amount is less than $0.01 per share.

The accompanying notes are an integral part of these financial statements.
 
72

 

The Lazard Funds, Inc.
Financial Highlights (continued)
Selected data for a share of capital stock outstanding throughout each year:

LAZARD EMERGING MARKETS PORTFOLIO
   
Year Ended
 
Institutional Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
20.60
 
$
17.84
 
$
13.98
 
$
10.80
 
$
7.11
 
Income from investment operations:
                               
Net investment income (a)
   
0.36
   
0.33
   
0.29
   
0.16
   
0.17
 
Net realized and unrealized gain
   
6.41
   
4.98
   
5.42
   
3.16
   
3.69
 
Total from investment operations
   
6.77
   
5.31
   
5.71
   
3.32
   
3.86
 
Less distributions from:
                               
Net investment income
   
(0.29
)
 
(0.27
)
 
(0.18
)
 
(0.14
)
 
(0.17
)
Net realized gains
   
(3.20
)
 
(2.28
)
 
(1.67
)
 
   
 
Total distributions
   
(3.49
)
 
(2.55
)
 
(1.85
)
 
(0.14
)
 
(0.17
)
Redemption fees
   
(c) 
 
(c) 
 
(c) 
 
(c) 
 
(c)
Net asset value, end of year
 
$
23.88
 
$
20.60
 
$
17.84
 
$
13.98
 
$
10.80
 
Total Return (b)
   
33.05%
 
 
30.32%
 
 
41.40%
 
 
30.79%
 
 
54.45%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
5,270,497
 
$
2,744,753
 
$
1,413,671
 
$
771,598
 
$
591,514
 
Ratios to average net assets:
                               
Net expenses
   
1.20%
 
 
1.20%
 
 
1.27%
 
 
1.32%
 
 
1.29%
 
Gross expenses
   
1.20%
 
 
1.20%
 
 
1.28%
 
 
1.32%
 
 
1.29%
 
Net investment income
   
1.51%
 
 
1.67%
 
 
1.82%
 
 
1.40%
 
 
2.06%
 
Portfolio turnover rate
   
53%
 
 
46%
 
 
48%
 
 
43%
 
 
29%
 

   
Year Ended
 
Open Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
20.82
 
$
17.99
 
$
14.06
 
$
10.86
 
$
7.13
 
Income from investment operations:
                               
Net investment income (a)
   
0.29
   
0.26
   
0.20
   
0.13
   
0.15
 
Net realized and unrealized gain
   
6.47
   
5.03
   
5.51
   
3.17
   
3.70
 
Total from investment operations
   
6.76
   
5.29
   
5.71
   
3.30
   
3.85
 
Less distributions from:
                               
Net investment income
   
(0.22
)
 
(0.18
)
 
(0.14
)
 
(0.10
)
 
(0.14
)
Net realized gains
   
(3.20
)
 
(2.28
)
 
(1.67
)
 
   
 
Total distributions
   
(3.42
)  
 
(2.46
)
 
(1.81
)  
 
(0.10
)
 
(0.14
)
Redemption fees
   
0.01
   
(c) 
 
0.03
   
(c) 
 
0.02
 
Net asset value, end of year
 
$
24.17
 
$
20.82
 
$
17.99
 
$
14.06
 
$
10.86
 
Total Return (b)
   
32.71%
 
 
29.93%
 
 
41.31%
 
 
30.43%
 
 
54.29%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
1,467,458
 
$
441,673
 
$
195,944
 
$
30,536
 
$
18,649
 
Ratios to average net assets:
                               
Net expenses
   
1.47%
 
 
1.54%
 
 
1.59%
 
 
1.60%
 
 
1.60%
 
Gross expenses
   
1.48%
 
 
1.54%
 
 
1.59%
 
 
1.71%
 
 
1.76%
 
Net investment income
   
1.19%
 
 
1.30%
 
 
1.21%
 
 
1.11%
 
 
1.82%
 
Portfolio turnover rate
   
53%
 
 
46%
 
 
48%
 
 
43%
 
 
29%
 

(a)
Net investment income has been computed using the average shares method.
(b)
Total returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.
(c)
Amount is less than $0.01 per share.

The accompanying notes are an integral part of these financial statements.
 
73

 

The Lazard Funds, Inc.
Financial Highlights (concluded)
Selected data for a share of capital stock outstanding throughout each year:

LAZARD HIGH YIELD PORTFOLIO 
   
Year Ended
 
Institutional Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
5.36
 
$
5.27
 
$
5.47
 
$
5.40
 
$
4.72
 
Income (loss) from investment operations:
                               
Net investment income (a)
   
0.40
   
0.40
   
0.42
   
0.44
   
0.43
 
Net realized and unrealized gain (loss)
   
(0.21
)
 
0.09
   
(0.19
)
 
0.07
   
0.69
 
Total from investment operations
   
0.19
   
0.49
   
0.23
   
0.51
   
1.12
 
Less distributions from:
                               
Net investment income
   
(0.40
)
 
(0.40
)
 
(0.43
)
 
(0.44
)
 
(0.44
)
Total distributions
   
(0.40
)
 
(0.40
)  
 
(0.43
)  
 
(0.44
)
 
(0.44
)
Redemption fees
   
(c) 
 
   
   
(c) 
 
(c)
Net asset value, end of year
 
$
5.15
 
$
5.36
 
$
5.27
 
$
5.47
$
5.40
 
Total Return (b)
   
3.63%
 
 
9.71%
 
 
4.33%
 
 
9.88%
 
 
24.58%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
56,278
 
$
68,452
 
$
75,100
 
$
96,759
 
$
127,765
 
Ratios to average net assets:
                               
Net expenses
   
0.55%
 
 
0.55%
 
 
0.55%
 
 
0.55%
 
 
0.75%
 
Gross expenses
   
0.90%
 
 
0.90%
 
 
0.86%
 
 
0.89%
 
 
0.98%
 
Net investment income
   
7.56%
 
 
7.61%
 
 
7.89%
 
 
8.11%
 
 
8.45%
 
Portfolio turnover rate
   
20%
 
 
29%
 
 
22%
 
 
49%
 
 
68%
 

   
Year Ended
 
Open Shares
 
12/31/07
 
12/31/06
 
12/31/05
 
12/31/04
 
12/31/03
 
Net asset value, beginning of year
 
$
5.37
 
$
5.29
 
$
5.48
 
$
5.42
 
$
4.73
 
Income (loss) from investment operations:
                               
Net investment income (a)
   
0.39
   
0.39
   
0.40
   
0.42
   
0.42
 
Net realized and unrealized gain (loss)
   
(0.21
)
 
0.08
   
(0.19
)
 
0.06
   
0.68
 
Total from investment operations
   
0.18
   
0.47
   
0.21
   
0.48
   
1.10
 
Less distributions from:
                               
Net investment income
   
(0.39
)  
 
(0.39
)  
 
(0.41
)  
 
(0.42
)  
 
(0.42
)
Total distributions
   
(0.39
)
 
(0.39
)
 
(0.41
)
 
(0.42
)
 
(0.42
)
Redemption fees
   
0.01
   
   
0.01
   
   
0.01
 
Net asset value, end of year
 
$
5.17
 
$
5.37
 
$
5.29
 
$
5.48
 
$
5.42
 
Total Return (b)
   
3.53%
 
 
9.18%
 
 
4.22%
 
 
9.33%
 
 
24.41%
 
Ratios and Supplemental Data:
                               
Net assets, end of year (in thousands)
 
$
1,776
 
$
2,179
 
$
2,986
 
$
7,223
 
$
2,989
 
Ratios to average net assets:
                               
Net expenses
   
0.85%
 
 
0.85%
 
 
0.85%
 
 
0.85%
 
 
1.05%
 
Gross expenses
   
2.14%
 
 
2.12%
 
 
1.78%
 
 
1.67%
 
 
2.79%
 
Net investment income
   
7.24%
 
 
7.29%
 
 
7.47%
 
 
7.64%
 
 
8.16%
 
Portfolio turnover rate
   
20%
 
 
29%
 
 
22%
 
 
49%
 
 
68%
 

(a)
Net investment income has been computed using the average shares method.
(b)
Total returns reflect reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolio have been waived or reimbursed by the Portfolio’s Investment Manager or Administrator; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.
(c)
Amount is less than $0.01 per share.

The accompanying notes are an integral part of these financial statements.
 
74


The Lazard Funds, Inc.
Notes to Financial Statements
December 31, 2007 

 
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 fourteen no-load portfolios (each referred to as a “Portfolio”). The Fund offers two different classes of shares of the Portfolios—Institutional Shares and Open Shares. Institutional Shares and Open Shares are identical, except as to minimum investment requirements and the services offered to and expenses borne by each class of shares. Currently, only the following eleven Portfolios, each of which is “diversified”, as defined in the Act, are offered: Lazard U.S. Equity Value Portfolio, Lazard U.S. Strategic Equity Portfolio, Lazard Mid Cap Portfolio, Lazard Small Cap Portfolio, Lazard U.S. Small Cap Equity Growth Portfolio, Lazard International Equity Portfolio, Lazard International Equity Select Portfolio, Lazard International Strategic Equity Portfolio, Lazard International Small Cap Portfolio, Lazard Emerging Markets Portfolio and Lazard High Yield Portfolio. Each of the other three Portfolios had not commenced operations as of December 31, 2007.
 
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 generally 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. The Fund values NASDAQ-traded securities at the NASDAQ Official Closing Price, which may not be the last reported sales price in certain instances. 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 except as described below; securities listed on foreign exchanges that are not traded on the valuation date are valued at the last quoted 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. 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.
 
If a significant event materially affecting the value of securities occurs between the close of the exchange or market
 
on which the security is principally traded and the time when a Portfolio’s net asset value is calculated, or when current market quotations otherwise are determined not to be readily available or reliable, such securities will be valued at their fair values as determined by, or in accordance with procedures approved by, the Board of Directors. The Valuation Committee of Lazard Asset Management LLC, the Fund’s investment manager (the “Investment Manager”) and a wholly-owned subsidiary of Lazard Frères & Co. LLC, may evaluate a variety of factors to determine the fair value of securities for which market quotations are determined not to be readily available or reliable. These factors include, but are not limited to, the type of security, the value of comparable securities, observations from financial institutions and relevant news events. Input from the Investment Manager’s analysts will also be considered. Fair valuing of foreign securities may be determined with the assistance of a pricing service, using correlations between the movement of prices of such securities and indices of domestic securities and other appropriate indicators, such as closing market prices of relevant ADRs or futures contracts. The effect of using fair value pricing is that the net asset value of a Portfolio will reflect the affected securities’ values as determined in the judgment of the Board of Directors, or its designee, instead of being determined by the market. Using a fair value pricing methodology to price securities may result in a value that is different from the most recent closing price of a security and from the prices used by other investment companies to calculate their portfolios’ net asset values.  
 
(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 exdividend date and interest income is accrued daily.The Portfolios amortize premiums and accrete discounts on fixed-income securities using the effective yield method.
 
The Portfolios may be subject to taxes imposed by foreign countries in which they invest. Such taxes are generally based upon income earned or capital gains, realized or unrealized. The Portfolios accrue and apply such taxes to net investment income, net realized gains and net unrealized gains concurrent with the recognition of income or capital gains (realized and unrealized) from the applicable portfolio securities.
 
(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

75



The Lazard Funds, Inc.
Notes to Financial Statements (continued)
December 31, 2007 


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 Bank and Trust Company (“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, 2007, the value of the securities on loan and corresponding collateral received were as follows:
Portfolio
 
Securities
Loaned
 
Collateral
 
Small Cap
 
$
31,955,483
 
$
32,831,036
 
International Equity
   
36,434,722
   
38,094,586
 
International Small Cap
   
40,672,539
   
42,914,058
 
Emerging Markets
   
290,501,548
   
301,756,315
 
High Yield
   
14,013,451
   
14,511,128
 
 
All collateral for securities on loan held by the Portfolios was in the form of cash, except for $183,845 in U.S. Treasury obligations held by International Small Cap Portfolio.
 
In accordance with U.S. generally accepted accounting principles, cash received as collateral for securities lending transactions which is invested in income producing securities is included in the respective Portfolio of Investments. The related amount payable upon the return of the securities on loan, where cash is received as collateral, is shown on the respective Statement of Assets and Liabilities.
 
(e) Foreign Currency Translation—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 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) arises from changes in the value of assets and liabilities, other than investments in securities, as a result of changes in exchange rates.
 
(f) Federal Income Taxes—The Fund’s policy is to continue to have each Portfolio qualify as a regulated investment company under Subchapter M of the Internal Revenue Code (the “Code”) and to distribute all of its taxable income, including any net realized capital gains, to shareholders.Therefore, no federal income tax provision is required.
 
At December 31, 2007, 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 2008
 
Expiring 2009
 
High Yield
 
$
6,354,236
 
$
20,597,061
 
               
Portfolio
 
Expiring 2010
 
Expiring 2011
 
International Equity
 
$
 
$
11,175,692
 
High Yield
 
15,965,273
 
2,546,543
 
               
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, 2007, the following portfolios elected to defer net capital losses arising between November 1, 2007 and December 31, 2007 as follows:
Portfolio
 
Amount
 
U.S. Equity Value
 
$
62,573
 
Mid Cap
   
75,086
 
Small Cap
   
468,324
 
U.S. Small Cap Equity Growth
   
181,553
 
International Equity
   
67,760
 
High Yield
   
106,820
 
 
(g) Dividends and Distributions—The Fund intends to declare dividends from net investment income daily on shares of High Yield Portfolio and to pay such dividends monthly. Dividends from net investment income, if any, on shares of the other Portfolios 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.
 
The International Small Cap Portfolio intends, on its 2007 tax return, to treat as a distribution of investment company taxable income and net capital gain the portion of redemption proceeds paid to redeeming shareholders that represents the redeeming shareholders’ portion of the Portfolio’s undistributed investment company taxable income and net capital gain. This practice, which involves
 
76



The Lazard Funds, Inc.
Notes to Financial Statements (continued)
December 31, 2007

 
the use of equalization accounting, will have the effect of reducing the amount of income and gains that the Portfolio would otherwise be required to distribute as dividends to shareholders in order for the Portfolio to avoid federal income and excise taxes. This practice reduces the amount of distributions required to be made to nonredeeming shareholders and defers the recognition of taxable income by such shareholders. However, since the amount of any undistributed income will be reflected in the value of the Portfolio’s shares, the total return on a shareholder’s investment is not affected by the Portfolio’s use of equalization.
 
Income dividends and capital gains distributions are determined in accordance with federal income tax regulations which may differ from U.S. generally accepted accounting principles. These book/tax differences, which may result in distribution reclassifications, are primarily due to differing treatments of foreign currency transactions and wash sales. 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 years ended December 31, was as follows:
   
Ordinary Income
 
Long-Term
Capital Gain
 
Portfolio
 
2007
 
2006
 
2007
 
2006
 
U.S. Equity Value
                         
Institutional
  
$
478,858
 
$
23,756
 
$
16,463
 
$
336
 
Open
   
20,920
   
12,653
   
831
   
205
 
U.S. Strategic Equity
                         
Institutional
   
6,472,019
   
2,056,398
   
7,706,590
   
 
Open
   
777,959
   
9,605
   
1,004,993
   
 
Mid Cap
                         
Institutional
   
13,603,976
   
3,771,786
   
18,065,282
   
8,500,613
 
Open
   
7,406,132
   
1,013,890
   
10,423,248
   
2,740,511
 
Small Cap
                         
Institutional
   
3,711,506
   
12,090,219
   
15,787,035
   
27,444,471
 
Open
   
738,642
   
2,238,108
   
3,500,516
   
5,124,625
 
U.S. Small Cap
                         
Equity Growth 
                         
Institutional
   
168,230
   
29,145
   
34,493
   
8,382
 
Open
   
6,719
   
2,236
   
1,516
   
643
 
International
                         
Equity
   
Institutional
   
10,448,711
   
36,929,653
   
   
 
Open
   
823,251
   
2,164,261
   
   
 
International
   
Equity Select
Institutional
   
346,293
   
346,264
   
2,019,574
   
1,194,049
 
Open
   
334,109
   
224,680
   
2,109,343
   
922,360
 
International
                         
Strategic Equity
Institutional
   
13,278,825
   
13,102,640
   
26,754,808
   
10,930,280
 
Open
   
462,069
   
364,215
   
1,033,836
   
333,896
 
International
                         
Small Cap
Institutional
   
5,758,113
   
17,322,066
   
134,152,162
   
104,903,991
 
Open
   
3,367,712
   
3,073,315
   
67,409,848
   
20,418,476
 
   
Ordinary Income
 
Long-Term
Capital Gain
 
Portfolio
 
2007
 
2006
 
2007
 
2006
 
Emerging
                         
Markets
Institutional
 
$
214,063,713
 
$
113,107,940
 
$
453,898,008
 
$
187,542,160
 
Open
   
55,695,763
   
16,059,158
   
126,188,094
   
28,758,777
 
High Yield
                         
Institutional
   
5,035,000
   
5,376,099
   
   
 
Open
   
164,579
   
173,335
   
   
 
 
As of December 31, 2007, the components of distributable earnings (excluding unrealized appreciation (depreciation)) on a tax basis were as follows:
Portfolio
 
Undistributed
Ordinary Income
 
Undistributed
Long-T erm
Capital Gain
 
U.S. Equity Value
 
$
 
$
 
U.S. Strategic Equity
   
92,370
   
1,051,640
 
Mid Cap
   
   
 
Small Cap
   
   
 
U.S. Small Cap Equity Growth
   
62,406
   
 
International Equity
   
   
 
International Equity Select
   
272,988
   
845,655
 
International Strategic Equity
   
31,464
   
704,994
 
International Small Cap
   
   
10,636,976
 
Emerging Markets
   
51,201,218
   
205,155,529
 
High Yield
   
   
 
 
(h) 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.
 
(i) 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.
 
(j) 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 are retained by each Portfolio and are included as paid in capital on its Statement of Assets and Liabilities. The fees are also shown on its Statement of Changes in Net Assets.
 
(k) Estimates—The preparation of financial statements in conformity with U.S. 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


77



The Lazard Funds, Inc.
Notes to Financial Statements (continued)
December 31, 2007


operations during the reporting period. Actual results could differ from those estimates.
 
3.   Investment Management, Administrative and Distribution Agreements
The Fund, on behalf of the Portfolios, has entered into investment management agreements (the “Management Agreement”) with the Investment Manager. Pursuant to the Management Agreement, the Investment Manager regularly provides each Portfolio with investment research, advice and supervision and furnishes continuously an investment program for each Portfolio consistent with its investment objective and policies, including the purchase, retention and disposition of securities. For its services provided to the Fund, the Investment Manager earns a management fee, accrued daily and payable by each Portfolio monthly, at the annual rate set forth below as a percentage of its average daily net assets:

Portfolio
 
Annual Rate
 
U.S. Equity Value
   
0.75
%
U.S. Strategic Equity
   
0.75
 
Mid Cap
   
0.75
 
Small Cap
   
0.75
 
U.S. Small Cap Equity Growth
   
1.00
 
International Equity
   
0.75
 
International Equity Select
   
0.85
 
International Strategic Equity
   
0.75
 
International Small Cap
   
0.75
 
Emerging Markets
   
1.00
 
High Yield
   
0.55
 

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:

Portfolio
 
Institutional Shares
 
Open Shares
 
U.S. Equity Value
   
1.00
%
 
1.30
%
U.S. Strategic Equity
   
1.05
   
1.35
 
Mid Cap
   
1.05
   
1.35
 
U.S. Small Cap Equity Growth
   
1.25
   
1.55
 
International Equity Select
   
1.15
   
1.45
 
International Strategic Equity
   
N/A
   
1.45
 
International Small Cap
   
N/A
   
1.43
 
Emerging Markets
   
N/A
   
1.60
 
High Yield
   
0.55
   
0.85
 

During the year ended December 31, 2007, the Investment Manager waived its management fee and reimbursed the following Portfolios for other expenses as follows:

Portfolio
 
Institutional Shares
 
Open Shares
 
U.S. Equity Value
 
$
174,019
 
$
45,231
 
U.S. Strategic Equity
   
   
6,531
 
U.S. Small Cap Equity Growth
   
156,526
   
27,686
 
International Equity Select
   
84,777
   
68,390
 
High Yield
   
233,666
   
29,219
 
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 $42,500, 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 has agreed to waive $18,750 of its fee annually for U.S. Equity Value and U.S. Small Cap Equity Growth Portfolios until the respective Portfolios’ net assets reach $25 million.
 
The Fund has a distribution agreement with Lazard Asset Management Securities LLC (the “Distributor”), a wholly-owned subsidiary of the Investment Manager, to serve as the distributor for shares of each Portfolio, and bears the cost of printing and mailing prospectuses to potential investors and of certain expenses in connection with the offering of Portfolio shares.

Under a Distribution and Servicing Plan in accordance with Rule 12b-1 under the Act, each Portfolio pays a monthly fee to the Distributor, at an annual rate of 0.25% of the average daily net assets of its Open Shares, for distribution and servicing of accounts. The Distributor may make payments to certain financial institutions, securities dealers and other industry professionals for providing these services.
 
During the year ended December 31, 2007, the Investment Manager reimbursed the U.S. Small Cap Equity Growth Portfolio $12,944 for trading losses incurred due to a trade entry error.

4.   Directors’ Compensation
Certain Directors of the Fund are officers of the Investment Manager. The Fund pays each Director who is not an employee or an affiliated person of the Investment Manager (the “Independent Directors”) its allocated portion of a fixed fee of $60,000 per year, plus $4,000 per meeting attended ($1,500 per meeting attended by telephone and $1,000 for committee, subcommittee or certain other special meetings not held in conjunction with a Board meeting) for the Fund, Lazard Retirement Series, Inc., Lazard Global Total Return and Income Fund, Inc. and Lazard World Dividend & Income Fund, Inc. (collectively, the “Lazard Funds”), each a registered management investment company advised by the Investment Manager, and reimburses such Directors for travel and other out of pocket expenses. In addition, the Chairman of the Audit Committees for the Lazard Funds also receives an annual fee of $5,000.

5.   Securities Transactions and Transactions with Affiliates
Purchases and sales of portfolio securities (excluding shortterm securities) for the year ended December 31, 2007 were as follows:

Portfolio
 
Purchases
 
Sales
 
U.S. Equity Value
 
$
14,646,655
 
$
6,445,082
 
U.S. Strategic Equity
   
68,677,147
   
99,089,819
 

78

 

The Lazard Funds, Inc.
Notes to Financial Statements (concluded)
December 31, 2007


Portfolio
 
Purchases
 
Sales
 
Mid Cap
 
$
540,549,639
 
$
390,928,893
 
Small Cap
   
184,957,379
   
266,923,024
 
U.S. Small Cap Equity Growth
   
19,517,096
   
8,852,653
 
International Equity
   
248,142,099
   
664,298,595
 
International Equity Select
   
14,679,986
   
20,839,650
 
International Strategic Equity
   
387,275,263
   
344,634,317
 
International Small Cap
   
334,125,185
   
906,416,188
 
Emerging Markets
   
4,599,542,884
   
2,420,540,711
 
High Yield
   
13,198,531
   
21,487,515
 

For the year ended December 31, 2007, U.S. Small Cap Equity Growth Portfolio paid brokerage commissions of $100 to affiliates of the Investment Manager or other affiliates of the Fund for portfolio transactions executed on behalf of the Fund.
 
6.   Line of Credit
The Fund has a $50 million Line of Credit Agreement (the “Agreement”) with State Street, 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, 2007, the Fund had borrowings under the Agreement as follows:

Portfolio
 
Average Daily
Loan Balance
 
Maximum
Daily Loan
Outstanding
 
Weighted
Average
Interest Rate
 
U.S. Strategic Equity
 
$
1,757,143
 
$
2,050,000
   
4.87
%
Small Cap
   
2,696,429
   
10,750,000
   
4.91
 
International Equity
   
8,104,348
   
19,000,000
   
5.41
 
International Equity Select
   
1,300,000
   
3,000,000
   
5.09
 
International Small Cap
   
4,468,421
   
10,700,000
   
4.86
 

7.   Foreign Securities Investment Risks
Certain Portfolios invest in securities of foreign entities and instruments denominated in foreign currencies which involve risks not typically involved in domestic investments. Foreign investments carry special risks, such as exposure to currency fluctuations, less developed or less efficient trading markets, political instability, a lack of company information, differing auditing and legal standards and, potentially, less liquidity. A Portfolio’s investments in emerging markets are exposed to additional volatility. A Portfolio’s performance will be influenced by political, social and economic factors affecting emerging markets. Emerging market countries generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.
8.   Reorganization
On December 28, 2006, U.S. Strategic Equity Portfolio acquired the net assets of Lazard Equity Portfolio (“Equity Portfolio”) pursuant to a plan of reorganization approved by Equity Portfolio shareholders on December 28, 2006. The acquisition was accomplished by a tax-free exchange of 4,357,985 Institutional Shares (valued at $51,729,353) and 974,199 Open Shares (valued at $11,583,237) of U.S. Strategic Equity Portfolio for the 3,046,572 Institutional Shares and 680,270 Open Shares of Equity Portfolio outstanding on December 28, 2006. Equity Portfolio’s net assets at that date, including $7,391,365 of unrealized appreciation and $314,647 of accumulated realized net loss, were combined with those of U.S. Strategic Equity Portfolio. The aggregate net assets of U.S. Strategic Equity Portfolio and Equity Portfolio immediately before the reorganization were $66,320,519 and $63,312,590, respectively. The aggregate net assets of U.S. Strategic Equity Portfolio immediately after the reorganization were $129,633,109.

9.   Recent Accounting Pronouncements
In June 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109 (“FIN 48”)—was issued and is effective for fiscal years beginning after December 15, 2006. The Securities and Exchange Commission (the “SEC”) has issued guidance that when applying FIN 48 in computing the net asset value (“NAV”) of the Portfolios on a daily basis, the first day the daily NAV would be impacted would be the last business day in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. FIN 48 prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return, and requires certain expanded disclosures. Management has evaluated the application of FIN 48 to the Portfolios, and has determined that there is no impact resulting from the adoption of FIN 48 on the Portfolios’ financial statements.
 
On September 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Management is evaluating the application of FAS 157 to the Portfolios, and believes the impact resulting from the adoption of FAS 157 will be limited to expanded disclosures in the Fund’s financial statements.
 
79

 

The Lazard Funds, Inc.
Report of Independent Registered Public Accounting Firm
 


The Board of Directors and Shareholders
The Lazard Funds, Inc.

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Lazard Funds, Inc. (the “Fund”, comprised of Lazard U.S. Equity Value Portfolio, Lazard U.S. Strategic Equity Portfolio, Lazard Mid Cap Portfolio, Lazard Small Cap Portfolio, Lazard U.S. Small Cap Equity Growth Portfolio, Lazard International Equity Portfolio, Lazard International Equity Select Portfolio, Lazard International Strategic Equity Portfolio, Lazard International Small Cap Portfolio, Lazard Emerging Markets Portfolio and Lazard High Yield Portfolio) as of December 31, 2007 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, 2006, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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, 2007, the results of their operations for the year then ended, the 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, 2006, and the financial highlights for the periods presented in conformity with U.S. generally accepted accounting principles.

ANCHIN, BLOCK & ANCHIN LLP

New York, New York
February 25, 2008
 
80



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


A special meeting of shareholders was held on April 26, 2007, to vote on the following proposal. The proposal received the required number of votes of shareholders and was adopted.

Proposal 1: 
To elect each of Mr. Ashish Bhutani, Ms. Nancy A. Eckl and Mr. Leon M. Pollack as a Fund Director, each to serve for an indefinite term and until his or her successor is duly elected and qualified.
 
Director
 
For
 
Withhold Authority
Ashish Bhutani
 
218,017,674
 
3,605,487
Nancy A. Eckl
 
218,435,275
 
3,187,886
Leon M. Pollack
 
218,505,148
 
3,118,012
 
81



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

 
Name (Age)
Address(1) 
Position(s) with the
Fund (Since) and Term(2) 
Principal Occupation(s) During Past 5 Years 
and Other Directorships Held 
Non-Interested Directors:
   
     
Kenneth S. Davidson (62)
Director
(August 1995)
President, Davidson Capital Management Corporation; President, Aquiline Advisors LLC; Trustee, The Juilliard School; Chairman of the Board, Bridgehampton Chamber Music Festival; Trustee, American Friends of the National Gallery, London.
     
Nancy A. Eckl (45)
Director
(April 2007)
Former Vice President, Trust Investments, American Beacon Advisers, Inc. (“American Beacon”) and Vice President of certain funds advised by American Beacon; Trustee, College Retirement Equities Fund; Trustee, TIAA-CREF Institutional Mutual Funds, TIAA-CREF Life Funds and TIAA Separate Account VA-1.
     
Lester Z. Lieberman (77)
Director
(October 1991)
Private Investor; Chairman, Healthcare Foundation of New Jersey; Director, Cives Steel Co.; Director, Northside Power Transmission Co.; Advisory Trustee, New Jersey Medical School; Director, Public Health Research Institute; Trustee Emeritus, Clarkson University; Council of Trustees, New Jersey Performing Arts Center.
     
Leon M. Pollack (67)
Director
(August 2006)
Former Managing Director, Donaldson, Lufkin & Jenrette; Vice-Chairman of the Board of Trustees, Adelphi University.
     
Richard Reiss, Jr. (63)
Director
(May 1991)
Chairman, Georgica Advisors LLC, an investment manager; Director, O’Charley’s, Inc., a restaurant chain.
     
Robert M. Solmson (60)
Director
(September 2004)
Director, Colonial Williamsburg Co.; Former Chief Executive Officer and Chairman, RFS Hotel Investors, Inc.; Former Director, Morgan Keegan & Co., Inc.; Former Director, Independent Bank, Memphis.
     
Interested Directors(3):
   
     
Charles Carroll (47)
Chief Executive Officer,
President and Director
(June 2004)
Deputy Chairman and Head of Global Marketing of the Investment Manager.
     
Ashish Bhutani (47)
Director
(July 2005)
Chief Executive Officer of the Investment Manager.

(1)
The address of each Director is Lazard Asset Management LLC, 30 Rockefeller Plaza, New York, New York 10112-6300.
(2)
Each Director also serves as a Director for each of the Lazard Funds (comprised of 20 investment portfolios). All of the Independent Directors, except Mr. Lieberman, are also board members of Lazard Alternative Strategies Fund, LLC, a privately-offered fund registered under the Act that is advised by an affiliate of the Investment Manager. Each Director serves an indefinite term, until his successor is elected.
(3)
Messrs. Bhutani and Carroll are “interested persons” (as defined in the Act) of the Fund because of their positions 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.

82

 

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


Name (Age)
Address(1)
Position(s) with the
Fund (Since) and Term(2)
Principal Occupation(s) During Past 5 Years
Officers:
   
     
Nathan A. Paul (35)
Vice President
and Secretary
(April 2002)
Managing Director and General Counsel of the Investment Manager.
     
Stephen St. Clair (49)
Treasurer
(May 2003)
Vice President of the Investment Manager.
     
Brian Kawakami (58)
Chief Compliance Officer
(August 2006)
Senior Vice President and Chief Compliance Officer of the Investment Manager; Chief Compliance Officer at INVESCO, from July 2002 to April 2006.
     
Brian D. Simon (45)
Assistant Secretary
(November 2002)
Director of the Investment Manager.
     
David A. Kurzweil (33)
Assistant Secretary
(April 2005)
Vice President of the Investment Manager.
     
Cesar A. Trelles (33)
Assistant Treasurer
(December 2004)
Fund Administration Manager of the Investment Manager; Manager for Mutual Fund Finance Group at UBS Global Asset Management, from August 1998 to August 2004.

The address of each officer is Lazard Asset Management LLC, 30 Rockefeller Plaza, New York, New York 10112-6300.
(2)
Each officer serves for an indefinite term, until his successor is elected and qualified, and serves in the same capacity for the other Lazard Funds.
 
83

 

The Lazard Funds, Inc.
Other Information
(unaudited)


Proxy Voting
 
A description of the policies and procedures used to determine how proxies relating to Fund portfolio securities are voted is available (1) without charge, upon request, by calling (800) 823-6300 or (2) on the SEC’s website at http://www.sec.gov.

The Fund’s proxy voting record for the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 823-6300 or (2) on the SEC’s website at http://www.sec.gov. Information as of June 30 each year will generally be available by the following August 31.

Form N-Q

The Fund files a complete schedule of each Portfolio’s holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The Fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330.

Board Consideration of Management Agreement

At the meeting of the Fund’s Board of Directors held on December 17, 2007, the Board considered the approval, for an additional annual period, of the Management Agreement. The Independent Directors were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Investment Manager.

Services Provided

Representatives of the Investment Manager gave a presentation to the Board about the nature, extent and quality of services that the Investment Manager provides the Fund, including a discussion of the Investment Manager and its clients (of which the Lazard Funds complex of 20 funds comprises approximately $9 billion of the approximately $128 billion of total assets under the management of the Investment Manager and its global affiliates). The representatives of the Investment Manager noted that the Investment Manager provides realized benefits to the Fund through substantial investment in the Investment Manager’s global investment advisory business, including technology and operational support and significant marketing infrastructure across broad distribution channels. The Directors also considered information provided by the Investment Manager regarding its personnel, resources, business reputation, financial condition and experience. The Directors agreed that the Fund benefits from the extensive services of the Investment Manager’s global platforms, and that such services are greater than those typically provided to a $9 billion fund complex. The representatives of the Investment Manager reviewed the Fund’s distribution channels and the relationships the Investment Manager has with various intermediaries and the different needs of each. The representatives of the Investment Manager reviewed the asset growth or decline in each Portfolio.

Representatives of the Investment Manager discussed the nature, extent and quality of the services provided by the Investment Manager to each Portfolio. The Directors considered the various services provided by the Investment Manager to each Portfolio and considered the Investment Manager’s research and portfolio management capabilities and that the Investment Manager also provides oversight of day-to-day operations of the Fund and its Portfolios, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Directors also considered the Investment Manager’s extensive administrative, accounting and compliance infrastructure and agreed that the Fund benefits from the extensive services of the Investment Manager’s global platforms, and that such services are greater than those typically provided to a fund if it were not managed by a large, global firm such as the Investment Manager.

Comparative Performance and Advisory Fees and Expense Ratios

The Directors reviewed the relative performance and advisory fees and expense ratios for each Portfolio, including comparative information prepared by Lipper Inc. (“Lipper”), an independent provider of investment company data. Lipper’s materials stated that Lipper’s reports are specifically designed to provide boards of directors the necessary fee, expense and investment performance information to help fulfill their advisory contract renewal responsibilities under Section 15(c) of the Act.

Performance. The Directors noted that, except as discussed below, the Portfolios generally were at or above the median ranges of the relevant Lipper comparison group (“Group”) and/or Lipper category (“Category”) over most measurement periods.

The performance of the Mid Cap and Emerging Markets Portfolios was competitive for longer time periods although performance had declined in the most recent one year period. Performance of the Small Cap, International Equity, International Equity Select, International Strategic Equity and International Small Cap Portfolios was below the Group and Category medians for the performance periods reported by Lipper, but more recent relative performance for shorter
 
84



The Lazard Funds, Inc.
Other Information (continued)
(unaudited)


time periods showed improvement. The Directors received regular updates on the Investment Manager’s efforts to improve performance, and recently a special Board meeting was convened to receive a special presentation from one of the international equity portfolio managers, who described the Investment Manager’s strategy and efforts to improve performance in that area.

Advisory Fees and Expense Ratios. The Directors also discussed the advisory fees and current expense ratios for each Portfolio, noting the assumptions used in the comparisons, and it was noted that, except for the U.S. Equity Value Portfolio, they are generally within the median ranges of each Portfolio’s Group for at least one share class. It was noted that for several of the Portfolios the Investment Manager was waiving all or part of its advisory fees and/or reimbursing expenses. The Directors considered that the Investment Manager continues to voluntarily enter into fee waiver and expense reimbursement arrangements for certain Portfolios. A discussion of the fees charged and services provided under the Management Agreement ensued.

The Directors also considered advisory fees paid to the Investment Manager by funds advised or sub-advised by the Investment Manager in the same Lipper category as the Portfolios, as well as the Investment Manager’s separately managed accounts with similar investment objectives, policies and strategies (for each Portfolio, collectively with such funds, “Similar Accounts”). For each Portfolio, the Directors discussed the fee paid to the Investment Manager compared to the fee paid to the Investment Manager by Similar Accounts. For each Portfolio the Directors reviewed the nature of the Similar Accounts and the differences, from the Investment Manager’s perspective, in services provided to the different types of Similar Accounts as compared to the services provided to the Portfolio. The Directors considered the relevance of the fee information provided for Similar Accounts managed by the Investment Manager to evaluate the appropriateness and reasonableness of each Portfolio’s advisory fees. A discussion ensued with respect to each Portfolio, as a consequence of which the Board recognized that any differences in fees paid by Similar Accounts was consistent with the differences in the services provided.
 
Investment Manager Profitability and Economies of Scale

The Directors reviewed information prepared by the Investment Manager for each Portfolio concerning the expenses incurred, and profits realized, by the Investment Manager and its affiliates resulting from the Management Agreement, including the projected dollar amount of expenses allocated and profit received by the Investment Manager and the method used to determine such expenses and profits. The representatives of the Investment Manager stated that neither the Investment Manager nor its affiliates, receive any significant indirect benefits from managing the Portfolios. The Investment Manager’s representatives stated that the Investment Manager’s broker-dealer affiliate is currently used for brokerage purposes on only a very limited basis and that there is no ability for the Investment Manager to benefit from any money flow (float) in connection with transactions in the Portfolios’ shares. The Investment Manager’s representatives noted that the Investment Manager does obtain soft dollar research, as reviewed by the Board each quarter. The Directors agreed that the information provided substantiated statements of the Investment Manager’s representatives.

The representatives of the Investment Manager reminded the Board that the Investment Manager is continuing to support distribution relationships through direct payments from its own resources to third parties in connection with shareholder servicing and other administrative and recordkeeping services and noted that the Fund does not bear any related costs other than the 0.25% 12b-1fee pursuant to the Distribution and Servicing Plan adopted for the Portfolios’ Open Shares.

It was noted that for each Portfolio the profitability percentages were within ranges determined by appropriate court cases not to be so disproportionately large that they bore no reasonable relationship to the services rendered and, given the overall service levels, were thought not to be excessive, and the Board concurred with this analysis.

The Directors considered the Investment Manager’s profitability (projected for the 2007 calendar year) with respect to each Portfolio as part of their evaluation of whether the Portfolio’s fee under the Management Agreement bears a reasonable relationship to the mix of services provided by the Investment Manager, including the nature, extent and quality of such services. The Directors evaluated the costs of the services to be provided and profits to be realized by the Investment Manager and its affiliates from the relationship with the Fund in light of the relevant circumstances for each Portfolio, including the trend in asset growth or decline, the extent to which economies of scale would be realized as the Portfolio grows and whether economies of scale are shared with the Portfolio. It was noted that a discussion of economies of scale should be predicated on increasing assets and that if a Portfolio’s assets had been decreasing, the extent to which the Investment Manager may have realized any economies of scale would be muted. The Directors determined that they would revisit potential economies of scale no later than when they next reviewed the investment advisory fee in connection with renewal of the Management Agreement.

At the conclusion of these discussions, each of the Directors expressed the opinion that he or she had been furnished
 
85



The Lazard Funds, Inc.
Other Information (concluded)
(unaudited)


with sufficient information to make an informed business decision with respect to the renewal of the Management Agreement. Based on its discussions and considerations as described above, the Board made the following conclusions and determinations.

The Board concluded that the nature, extent and quality of the services provided by the Investment Manager are adequate and appropriate, especially including the benefits of advisory and research services associated with a $128 billion global asset management business.

While the Board was satisfied with the Investment Manager’s efforts to improve performance of Small Cap, International Equity, International Equity Select, International Strategic Equity and International Small Cap Portfolios, the Board would continue to monitor these Portfolios’ performance. The Board was satisfied with the other Portfolios’ overall performance, which was generally within the median ranges of the relevant Group and/or Category.

The Board concluded that each Portfolio’s fee paid to the Investment Manager was reasonable in light of the services provided, comparative advisory fee and expense ratio information, costs of the services provided and profits to be realized and other benefits derived or anticipated to be derived by the Investment Manager from the relationship with the Fund.

The Board recognized that economies of scale may be realized as the assets of the Portfolios increase. They believed, based on relatively stable profitability levels and the Investment Manager’s investment in the Fund’s business, that the Fund’s fee schedules are reasonable in light of current economies of scale considerations and current asset levels. In addition, the Board considered that it intends to continue to evaluate whether any material asset growth by the Portfolios has created, or would create, material economies of scale for the Investment Manager.

The Board considered these conclusions and determinations in their totality and, without any one factor being dispositive, determined that approval of the Management Agreement for the Fund was in the best interests of the Fund and its shareholders.
 
86

 
Tax Information (unaudited)
The Lazard Funds, Inc.
Year Ended December 31, 2007
 

The following tax information represents year end disclosures of the tax benefits passed through to shareholders for 2007:

Of the dividends paid by the Portfolios, the corresponding percentage represents the amount of each dividend which will be subject to a maximum tax rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The same information will be reported in conjunction with your 2007 1099-DIV.

             
   
Portfolio 
Percentage
 
   
U.S. Equity Value
   
34.95
%
   
U.S. Strategic Equity
   
28.23
 
   
Mid Cap
   
22.48
 
   
Small Cap
   
7.71
 
   
U.S. Small Cap Equity Growth
   
16.19
 
   
International Equity
   
85.10
 
   
International Equity Select
   
100.00
 
   
International Strategic Equity
   
71.60
 
   
International Small Cap
   
96.15
 
   
Emerging Markets
   
25.70
 
   
High Yield
   
 
             
Of the dividends paid by the Portfolios, the corresponding percentage represents the amount of each dividend which will qualify for the dividends received deduction available to corporate shareholders.
             
   
Portfolio
   
Percentage
 
   
U.S. Equity Value
   
35.49
%
   
U.S. Strategic Equity
   
32.19
 
   
Mid Cap
   
27.09
 
   
Small Cap
   
7.95
 
   
U.S. Small Cap Equity Growth
   
13.84
 
   
International Equity
   
 
   
International Equity Select
   
 
   
International Strategic Equity
   
 
   
International Small Cap
   
 
   
Emerging Markets
   
 
   
High Yield
   
 
             
Pursuant to Section 871 of the Code, the corresponding amounts have been designated as qualified short-term gains for purposes of exempting withholding of tax on such distributions to U.S. nonresident shareholders.
             
   
Portfolio
   
Amount
 
   
U.S. Equity Value
 
$
383,450
 
   
U.S. Strategic Equity
   
4,977,772
 
   
Mid Cap
   
15,423,164
 
   
Small Cap
   
19,720
 
   
U.S. Small Cap Equity Growth
   
198,051
 
   
International Equity
   
 
   
International Equity Select
   
456,676
 
   
International Strategic Equity
   
3,066,451
 
   
International Small Cap
   
1,244,481
 
   
Emerging Markets
   
245,063,890
 
   
High Yield
   
 
             
Pursuant to Section 852 of the Code, the International Small Cap Portfolio has designated aggregate ordinary income distributions of $8,436,912 and dividends paid through share redemptions of $688,913 as ordinary income distributions and has designated aggregate capital gain distributions of $79,745,837 and dividends paid through share redemptions of $121,816,173 as capital gain distributions for the fiscal year ended December 31, 2007.
 
87

 
[This Page Intentionally Left Blank]

 
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 Asset Management Securities LLC
30 Rockefeller Plaza
New York, New York 10112-6300

Custodian
State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111

Transfer Agent and Dividend Disbursing Agent
Boston Financial Data Services, Inc.
P.O. Box 8514
Boston, Massachusetts 02266-8514
Telephone: 800-986-3455

Independent Registered Public Accounting Firm
Anchin, Block & Anchin LLP
1375 Broadway
New York, New York 10018
http://www.anchin.com

Legal Counsel
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
http://www.stroock.com


 
Lazard Logo
 
Lazard Logo
Performance information as of the most recent month end is available online at www.LazardNet.com.

Lazard Asset Management LLC
30 Rockefeller Plaza
New York, NY 10112-6300
800-823-6300

www.LazardNet.com
© 2007 Lazard Asset Management LLC

12/07 LZDPS013

Lazard Logo
 

 


ITEM 2. CODE OF ETHICS.

          The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

          The Registrant's Board of Directors (the “Board”) has determined that Lester Z. Lieberman and Robert M. Solmson, members of the Audit Committee of the Board, are audit committee financial experts as defined by the Securities and Exchange Commission (the "SEC"). Mr. Lieberman and Mr. Solmson are "independent" as defined by the SEC for purposes of audit committee financial expert determinations.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) Audit Fees. The aggregate fees billed for each of the last two fiscal years (the "Reporting Periods") for professional services rendered by the Registrant's principal accountant (the "Auditor") for the audit of the Registrant's annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $431,900 in 2006 and $437,700 in 2007.

(b) Audit-Related Fees. There were no fees billed in the Reporting Periods by the Auditor to the Registrant for assurance and related services that are reasonably related to the performance of the audit of the Registrant's financial statements and are not reported under paragraph (a) of this Item 4. There were no fees billed in the Reporting Periods for assurance and related services by the Auditor to the Registrant's investment adviser or any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant ("Service Affiliates").

(c) Tax Fees. The aggregate fees billed in the Reporting Periods by the Auditor to the Registrant for professional services rendered by the Auditor for tax compliance, tax advice and tax planning ("Tax Services") were $69,800 in 2006 and $67,200 in 2007. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.

There were no fees billed in the Reporting Periods for Tax Services by the Auditor to Service Affiliates.

(d) All Other Fees. There were no fees billed in the Reporting Periods by the Auditor to the Registrant for products and services other than the services reported in paragraphs (a) through (c) of this Item.

There were no fees billed in the Reporting Periods by the Auditor to Service Affiliates.

(e) Audit Committee Pre-Approval Policies and Procedures. The Registrant's Audit Committee pre-approves the Auditor's engagements for audit and non-audit services to the Registrant and, as required, non-audit services to Service Affiliates on a case-by-case basis. Pre-approval considerations include whether the



proposed services are compatible with maintaining the Auditor's independence. There were no services provided by the Auditor that were approved pursuant to (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) None.

(g) Non-Audit Fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant for the Reporting Periods were $69,800 in 2006 and $67,200 in 2007. There were no fees billed in the Reporting Periods by the Auditor to Service Affiliates.

(h) Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

          Not applicable.

ITEM 6. SCHEDULE OF INVESTMENTS

          Not applicable.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END MANAGEMENT INVESTMENT COMPANIES.

          Not applicable.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

          Not applicable.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

          Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          The Registrant has a Nominating Committee (the "Committee") of the Board, which is currently comprised of all of the Directors who are not "interested persons" (as defined in the Investment Company Act of 1940) of the Registrant. The Committee's function is to select and nominate candidates for election to the Board. The Committee will consider recommendations for nominees from stockholders sent to the Secretary of the Registrant, 30 Rockefeller Plaza, New York, New York 10112. Nominations may be submitted only by a stockholder or group of stockholders that, individually or as a group, has beneficially owned the lesser of (a) 1% of the Registrant's outstanding shares or (b) $500,000 of the Registrant's shares for at least one year prior to the date such stockholder or group submits a candidate for nomination. Not more than one nominee for Director may be submitted by such a stockholder or group each calendar year.

In evaluating potential nominees, including any nominees recommended by stockholders, the Committee takes into consideration the factors listed in the Nominating Committee Charter and



Procedures, including character and integrity, business and professional experience, and whether the Committee believes that the person has the ability to apply sound and independent business judgment and would act in the interests of the Registrant and its stockholders. A nomination submission must include all information relating to the recommended nominee that is required to be disclosed in solicitations or proxy statements for the election of Directors, as well as information sufficient to evaluate the factors listed above. Nomination submissions must be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected by the stockholders, and such additional information must be provided regarding the recommended nominee as reasonably requested by the Committee.

ITEM 11. CONTROLS AND PROCEDURES.

(a)      The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b)      There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

ITEM 12. EXHIBITS.

(a)(1) Code of Ethics referred to in Item 2.
   
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. 
   
(a)(3) Not applicable.
   
(b)    Certifications of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

The Lazard Funds, Inc.

By   /s/ Charles Carroll
    Charles Carroll
    Chief Executive Officer
 
Date   March 7, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By   /s/ Charles Carroll
    Charles Carroll
    Chief Executive Officer
 
Date   March 7, 2008
 
By   /s/ Stephen St. Clair
    Stephen St. Clair
    Chief Financial Officer
 
Date   March 7, 2008


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[EX-99.CODE ETH]
Exhibit (a)(1)

THE LAZARD FUNDS

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE
AND SENIOR FINANCIAL OFFICERS

I. Covered Officers/Purpose of the Code

       This code of ethics (this "Code") for the Fund applies to the Fund's Principal Executive Officer and Principal Financial Officer (the "Covered Officers") for the purpose of promoting:

  • honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

  • full, fair, accurate, timely and understandable disclosure in reports and documents that the Fund files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by the Fund;

  • compliance with applicable laws and governmental rules and regulations;

  • the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and

  • accountability for adherence to the Code.

       Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.

II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest

       Overview. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Fund.

       Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" of the Fund. The



compliance programs and procedures of the Fund and the Fund's investment adviser (the "Adviser") are designed to prevent, or identify and correct, violations of these provisions. The Code does not, and is not intended to, repeat or replace these programs and procedures, and the circumstances they cover fall outside of the parameters of this Code.

       Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Fund and the Adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers, in the ordinary course of their duties (whether formally for the Fund or for the Adviser, or for both), will be involved in establishing policies and implementing decisions that will have different effects on the Adviser and the Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the Adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Fund and, if addressed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, will be deemed to have been handled ethically. In addition, it is recognized by the Fund's Board of Directors (the "Board") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes of ethics.

       Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle of the Code is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund.

       Each Covered Officer must:

  • not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally to the detriment of the Fund;

  • not cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Fund;

  • report at least annually any affiliations or other relationships related to conflicts of interest indicated in the Fund's Directors and Officers Questionnaire; and

  • disclose any material ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than the Adviser or any affiliated person thereof.

III. Disclosure and Compliance

  • Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the Fund;



  • each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund's Board members and auditors, and to governmental regulators and self-regulatory organizations;

  • each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Fund and the Adviser and take other appropriate steps with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Fund files with, or submits to, the SEC and in other public communications made by the Fund; and

  • it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by laws, rules and regulations applicable to the Fund.

IV. Reporting and Accountability

       Each Covered Officer must:

  • upon adoption of the Code (or thereafter, as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he has received, read, and understands the Code;

  • annually thereafter affirm to the Board that he has complied with the requirements of the Code;

  • not retaliate against any other Covered Officer or any employee of the Fund or their affiliated persons for reports of potential violations that are made in good faith; and

  • notify the Fund's Chief Legal Officer (the "CLO") promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code.

       The Fund will follow these procedures in investigating and enforcing this Code:

  • the CLO will take all appropriate action to investigate any potential violations reported to it;

  • if, after such investigation, the CLO believes that no violation has occurred, the CLO is not required to take any further action;

  • any matter that the CLO believes is a violation will be reported to the Board;

  • if the Board concurs that a violation has occurred, it will consider appropriate action, which may include: review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Adviser or its board; or a recommendation to dismiss the Covered Officer;

  • the CLO will be responsible for granting waivers, as appropriate; and



  • any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

V.     Other Policies and Procedures

       This Code shall be the sole code of ethics adopted by the Fund for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies and procedures of the Fund, the Adviser, the principal underwriter or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Fund's and the Adviser's codes of ethics under Rule 17j-1 under the Investment Company Act and the Adviser's additional policies and procedures are separate requirements applying to the Covered Officers and others, and are not part of this Code.

VI.    Amendments

        Any amendments to this Code must be approved or ratified by a majority vote of the Fund's Board, including a majority of independent Board members.

VII.  Confidentiality

       All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Fund and its Board and the Adviser and each of their respective counsel.

VIII.  Internal Use

       The Code is intended solely for the internal use by the Fund and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion.

Adopted: February 24, 2004


EX-99.CERT 20 c52278_ex99-cert.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

[EX-99.CERT]
Exhibit (a)(2)

Rule 30a-2(a) CERTIFICATIONS

I, Charles Carroll, certify that:

1. I have reviewed this report on Form N-CSR of The Lazard Funds, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 7, 2008    
    /s/ Charles Carroll
    Charles Carroll
    Chief Executive Officer



Rule 30a-2(a) CERTIFICATIONS

I, Stephen St. Clair, certify that:

1. I have reviewed this report on Form N-CSR of The Lazard Funds, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 7, 2008    
 
    /s/ Stephen St. Clair
    Stephen St. Clair
    Chief Financial Officer


EX-99.906CERT 21 c52278_ex99-906.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

[EX-99.906CERT]
Exhibit (b)

SECTION 906 CERTIFICATIONS

          In connection with this report on Form N-CSR for the Registrant as furnished to the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

          (1)      the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and

          (2)      the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

  By: /s/ Charles Carroll
    Charles Carroll
    Chief Executive Officer
 
  Date:   March 7, 2008
 
 
  By: /s/ Stephen St. Clair
    Stephen St. Clair
    Chief Financial Officer
 
  Date: March 7, 2008

This certificate is furnished pursuant to the requirements of Form N-CSR and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act of 1934.


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