0000930413-10-001858.txt : 20110415 0000930413-10-001858.hdr.sgml : 20110415 20100409151449 ACCESSION NUMBER: 0000930413-10-001858 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 24 FILED AS OF DATE: 20100409 DATE AS OF CHANGE: 20100430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAZARD FUNDS INC CENTRAL INDEX KEY: 0000874964 IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-40682 FILM NUMBER: 10742470 BUSINESS ADDRESS: STREET 1: 30 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10112 BUSINESS PHONE: 2126326000 MAIL ADDRESS: STREET 1: 30 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAZARD FUNDS INC CENTRAL INDEX KEY: 0000874964 IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06312 FILM NUMBER: 10742471 BUSINESS ADDRESS: STREET 1: 30 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10112 BUSINESS PHONE: 2126326000 MAIL ADDRESS: STREET 1: 30 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10112 0000874964 S000010263 Lazard International Small Cap Equity Portfolio C000028358 Open Shares LZSMX C000028359 Institutional Shares LZISX 0000874964 S000010264 Lazard Emerging Markets Equity Portfolio C000028360 Open Shares LZOEX C000028361 Institutional Shares LZEMX 0000874964 S000010265 Lazard U.S. High Yield Portfolio C000028362 Open Shares LZHOX C000028363 Institutional Shares LZHYX 0000874964 S000010266 Lazard U.S. Strategic Equity Portfolio C000028364 Open Shares LZUOX C000028365 Institutional Shares LZUSX 0000874964 S000010267 Lazard U.S. Equity Value Portfolio C000028366 Open Shares LEVOX C000028367 Institutional Shares LEVIX 0000874964 S000010268 Lazard U.S. Mid Cap Equity Portfolio C000028368 Open Shares LZMOX C000028369 Institutional Shares LZMIX 0000874964 S000010269 Lazard U.S. Small-Mid Cap Equity Portfolio C000028370 Open Shares LZCOX C000028371 Institutional Shares LZSCX 0000874964 S000010271 Lazard International Equity Portfolio C000028374 Open Shares LZIOX C000028375 Institutional Shares LZIEX 0000874964 S000010272 Lazard International Equity Select Portfolio C000028376 Open Shares LZESX C000028377 Institutional Shares LZSIX 0000874964 S000010273 Lazard International Strategic Equity Portfolio C000028378 Open Shares LISOX C000028379 Institutional Shares LISIX 0000874964 S000020883 Lazard Capital Allocator Opportunistic Strategies Portfolio C000058929 Institutional Shares C000058930 Open Shares 0000874964 S000023480 Lazard Developing Markets Equity Portfolio C000069022 Institutional Shares C000069023 Open Shares 0000874964 S000027245 Lazard Global Listed Infrastructure Portfolio C000082231 Institutional Shares C000082232 Open Shares 0000874964 S000028827 Lazard Emerging Markets Equity Select Portfolio C000088402 Institutional Shares C000088403 Open Shares 0000874964 S000028828 Lazard Emerging Markets Equity Blend Portfolio C000088404 Institutional Shares C000088405 Open Shares 485APOS 1 c60963_485apos.htm

 

Securities Act File No. 33-40682

Investment Company Act File No. 811-06312

 

 

 

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM N-1A

 

 

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

/X/

 

 

Post-Effective Amendment No. 53

/X/

 

 

and

 


REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

/X/

 

 

Amendment No. 53

/X/

 

 

(Check appropriate box or boxes)

 

 

THE LAZARD FUNDS, INC.

 

 

(Exact Name of Registrant as Specified in Charter)

 

(212) 632-6000

 

 

(Registrant’s Telephone Number, including Area Code)

 

30 Rockefeller Plaza, New York, New York 10112

 

 

(Address of Principal Executive: Number, Street, City, State, Zip Code)

 

Nathan A. Paul, Esq.

30 Rockefeller Plaza

New York, New York 10112

(Name and Address of Agent for Services)

 

Copy to:

Janna Manes, Esq.

Stroock & Stroock & Lavan LLP

180 Maiden Lane

New York, New York 10038-4982

 

                    It is proposed that this filing will become effective (check appropriate box)


 

 

 

 

 

immediately upon filing pursuant to paragraph (b)

 

 

on (DATE) pursuant to paragraph (b)

X

 

60 days after filing pursuant to paragraph (a)(1)

 

 

on (DATE) pursuant to paragraph (a)(1)

 

 

75 days after filing pursuant to paragraph (a)(2)

 

 

on (DATE) pursuant to paragraph (a)(2) of Rule 485.

     If appropriate, check the following box:

 

 

this post-effective amendment designates a new effective date for a previously filed post-effective amendment.




(FRONT COVER)

April 30, 2010

Lazard Funds Prospectus

 

 

 

 

 

Institutional
Shares

 

Open
Shares

U.S. Equity

 

 

 

Lazard U.S. Equity Value Portfolio

LEVIX

 

LEVOX

Lazard U.S. Strategic Equity Portfolio

LZUSX

 

LZUOX

Lazard U.S. Mid Cap Equity Portfolio

LZMIX

 

LZMOX

Lazard U.S. Small-Mid Cap Equity Portfolio

LZSCX

 

LZCOX

 

 

 

 

International Equity

 

 

 

Lazard International Equity Portfolio

LZIEX

 

LZIOX

Lazard International Equity Select Portfolio

LZSIX

 

LZESX

Lazard International Strategic Equity Portfolio

LISIX

 

LISOX

Lazard International Small Cap Equity Portfolio

LZISX

 

LZSMX

 

 

 

 

 

 

 

 

 

 

 

 

The Securities and Exchange Commission has not approved or disapproved the shares described in this Prospectus or determined whether this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

 

 

Institutional
Shares

 

Open
Shares

Global Equity

 

 

 

Lazard Global Listed Infrastructure Portfolio

GLIFX

 

GLFOX

 

 

 

 

Emerging Markets

 

 

 

Lazard Emerging Markets Equity Portfolio

LZEMX

 

LZOEX

Lazard Emerging Markets Equity Select Portfolio

LESIX

 

LESOX

Lazard Developing Markets Equity Portfolio

LDMIX

 

LDMOX

Lazard Emerging Markets Equity Blend Portfolio

EMBIX

 

EMBOX

 

 

 

 

Fixed Income

 

 

 

Lazard U.S. High Yield Portfolio

LZHYX

 

LZHOX

 

 

 

 

Capital Allocator

 

 

 

Lazard Capital Allocator Opportunistic

LCAIX

 

LCAOX

    Strategies Portfolio

 

 

 

Lazard Funds



 Lazard Funds Table of Contents

p

 

 

 

 

 

2

 

Summary Section

 

Carefully review this important section for

2

 

Lazard U.S. Equity Value Portfolio

 

information on the Portfolios’ investment

6

 

Lazard U.S. Strategic Equity Portfolio

 

objectives, fees and past performance and a

10

 

Lazard U.S. Mid Cap Equity Portfolio

 

summary of the Portfolios’ principal investment

14

 

Lazard U.S. Small-Mid Cap Equity Portfolio

 

strategies and risks.

18

 

Lazard International Equity Portfolio

 

 

22

 

Lazard International Equity Select Portfolio

 

 

26

 

Lazard International Strategic Equity Portfolio

 

 

30

 

Lazard International Small Cap Equity Portfolio

 

 

34

 

Lazard Global Listed Infrastructure Portfolio

 

 

37

 

Lazard Emerging Markets Equity Portfolio

 

 

41

 

Lazard Emerging Markets Equity Select Portfolio

 

 

44

 

Lazard Developing Markets Equity Portfolio

 

 

48

 

Lazard Emerging Markets Equity Blend Portfolio

 

 

51

 

Lazard U.S. High Yield Portfolio

 

 

55

 

Lazard Capital Allocator Opportunistic Strategies Portfolio

 

 

60

 

Additional Information about the Portfolios

 

 

61

 

Overview

 

 

63

 

Investment Objective, Strategies and Risks

 

Review this section for additional information

63

 

Lazard U.S. Equity Value Portfolio

 

on the Portfolios’ principal investment

64

 

Lazard U.S. Strategic Equity Portfolio

 

strategies and risks.

65

 

Lazard U.S. Mid Cap Equity Portfolio

 

 

66

 

Lazard U.S. Small-Mid Cap Equity Portfolio

 

 

68

 

Lazard International Equity Portfolio

 

 

69

 

Lazard International Equity Select Portfolio

 

 

71

 

Lazard International Strategic Equity Portfolio

 

 

73

 

Lazard International Small Cap Equity Portfolio

 

 

75

 

Lazard Global Listed Infrastructure Portfolio

 

 

78

 

Lazard Emerging Markets Equity Portfolio

 

 

79

 

Lazard Emerging Markets Equity Select Portfolio

 

 

80

 

Lazard Developing Markets Equity Portfolio

 

 

82

 

Lazard Emerging Markets Equity Blend Portfolio

 

 

84

 

Lazard U.S. High Yield Portfolio

 

 

86

 

Lazard Capital Allocator Opportunistic Strategies Portfolio

 

 

88

 

Fund Management

 

Review this section for details on the people and

88

 

Investment Manager

 

organizations who oversee the Portfolios.

89

 

Portfolio Management

 

 

89

 

Biographical Information of Principal Portfolio Managers

 

 

92

 

Advisory Board

 

 

92

 

Administrator

 

 

93

 

Distributor

 

 

92

 

Custodian

 

 

93

 

Shareholder Information

 

Review this section for details on how shares

93

 

General

 

are valued, how to purchase, sell and exchange

94

 

How to Buy Shares

 

shares, related charges and payments of

96

 

Distribution and Servicing Arrangements

 

dividends and distributions.

97

 

How to Sell Shares

 

 

98

 

Investor Services

 

 

98

 

General Policies

 

 

99

 

Account Policies, Dividends and Taxes

 

 

101

 

Financial Highlights

 

Review this section for recent financial information.

115

 

Other Performance of the Investment Manager

 

 

 

 

Back Cover

 

Where to learn more about the Portfolios.

Prospectus1


 Lazard Funds Summary Section

p

Lazard U.S. Equity Value Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio, a series of The Lazard Funds, Inc. (the “Fund”).

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)
Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

.75%

 

.75%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

2.69%

 

4.52%

 

Total Annual Portfolio Operating Expenses

 

3.44%

 

5.52%

 

Fee Waiver and Expense Reimbursement*

 

2.44%

 

4.22%

 

Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement*

 

1.00%

 

1.30%

 

 

*

 

 

 

Reflects a contractual agreement by Lazard Asset Management LLC (the “Investment Manager”) to waive its fee and, if necessary, reimburse the Portfolio through April 30, 2011, to the extent Total Annual Portfolio Operating Expenses exceed 1.00% and 1.30% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively, and from May 1, 2011 through April 30, 2020, to the extent Total Annual Portfolio Operating Expenses exceed 1.10% and 1.40% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively, exclusive of taxes, brokerage, interest on borrowings, fees and expenses of “Acquired Funds” and extraordinary expenses, and excluding shareholder redemption fees or other transaction fees. This agreement can only be amended by agreement of the Fund and the Investment Manager to lower the net amount shown and will terminate automatically in the event of termination of the Investment Management Agreement between the Investment Manager and the Fund, on behalf of the Portfolio.

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same, giving effect to the fee waivers described above. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$102

 

$340

 

$597

 

$1,332

 

Open Shares

 

$132

 

$434

 

$757

 

$1,672

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 62% of the average value of its portfolio.

2Prospectus


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of relatively large U.S. companies with market capitalizations generally in the range of companies included in the Russell 1000® Value Index (ranging from approximately $101 million to $326 billion as of March 24, 2010) at the time of initial purchase by the Portfolio that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of U.S. companies. The Portfolio may invest up to 10% of its total assets in securities of non-U.S. companies that trade in U.S. markets.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Non-domestic securities 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.

Prospectus3


 

Performance Bar Chart and Table
Year-by-Year Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard U.S. Equity Value Portfolio by showing the Portfolio’s year-by-year and average annual performance. The bar chart shows how the performance of the Portfolio’s Institutional Shares has varied from year to year. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  19.10%
 
Worst Quarter:

12/31/08  -21.54%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

Life of
Fund

 

Institutional Shares:

 

9/30/05

 

 

 

 

 

Returns Before Taxes

 

 

 

24.81%

 

0.44%

 

Returns After Taxes on Distributions

 

 

 

24.56%

 

-0.57%

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

16.46%

 

0.01%

 

Open Shares

 

9/30/05

 

24.49%

 

0.18%

 

Russell 1000 Value Index

     

19.69%

 

-1.59%
(Institutional)
-1.59%
(Open)

 

4Prospectus


 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

Andrew D. Lacey, portfolio manager/analyst on various of the Investment Manager’s U.S. Equity and Global Equity teams, has been with the Portfolio since inception.

Nicholas Sordoni, portfolio manager/analyst on the Investment Manager’s U.S. Equity Value team, has been with the Portfolio since inception.

Ronald Temple, portfolio manager/analyst on various of the Investment Manager’s U.S. Equity teams, has been with the Portfolio since February 2009.

J. Richard Tutino, portfolio manager/analyst on the Investment Manager’s U.S. Equity Value and U.S. Equity Select teams, has been with the Portfolio since inception.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

Prospectus5


 Lazard Funds Summary Section

p

Lazard U.S. Strategic Equity Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)
Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

.75%

 

.75%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

.34%

 

.39%

 

Total Annual Portfolio Operating Expenses

 

1.09%

 

1.39%

 

Fee Waiver and Expense Reimbursement*

 

.04%

 

.04%

 

Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement*

 

1.05%

 

1.35%

 

 

*

 

 

 

Reflects a contractual agreement by the Investment Manager to waive its fee and, if necessary, reimburse the Portfolio through April 30, 2011, to the extent Total Annual Portfolio Operating Expenses exceed 1.05% and 1.35% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively, exclusive of taxes, brokerage, interest on borrowings, fees and expenses of “Acquired Funds” and extraordinary expenses, and excluding shareholder redemption fees or other transaction fees. This agreement can only be amended by agreement of the Fund and the Investment Manager to lower the net amount shown and will terminate automatically in the event of termination of the Investment Management Agreement between the Investment Manager and the Fund, on behalf of the Portfolio.

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same, giving effect to the fee waiver in year one only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$107

 

$343

 

$597

 

$1,325

 

Open Shares

 

$137

 

$436

 

$757

 

$1,665

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 76% of the average value of its portfolio.

6Prospectus


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of U.S. companies that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. Although the Portfolio generally focuses on large cap companies, the market capitalizations of issuers in which the Portfolio invests may vary with market conditions and the Portfolio also may invest in mid cap and small cap companies.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of U.S. companies. The Portfolio may invest up to 15% of its total assets in securities of non-U.S. companies, including American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”).

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Small and mid cap companies carry additional risks because their earnings tend to be less predictable, their share prices more volatile and their securities less liquid than larger, more established companies. The shares of small and mid cap companies tend to trade less frequently than those of larger companies, which can have an adverse effect on the pricing of these securities and on the ability to sell these securities when the Investment Manager deems it appropriate.

Non-domestic securities 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.

Prospectus7


 

Performance Bar Chart and Table
Year-by-Year Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard U.S. Strategic Equity Portfolio by showing the Portfolio’s year-by-year and average annual performance. The bar chart shows how the performance of the Portfolio’s Institutional Shares has varied from year to year. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  16.46%
 
Worst Quarter:

12/31/08  -23.06%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

 

 

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

5 Years

 

Life of
Fund

 

Institutional Shares:

 

 

 

12/30/04

 

 

 

 

 

 

 

 

Returns Before Taxes

 

 

 

 

 

28.12

%

 

 

 

 

0.46%

   

0.46%

 

Returns After Taxes on Distributions

 

 

 

 

28.12

%

 

 

-0.48%

 

-0.48%

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

 

18.27

%

 

 

 

0.25%

   

0.25%

 

Open Shares

 

 

 

12/30/04

   

 

 

27.71

%

 

 

 

 

0.18%

   

0.18%

 

S&P 500® Index

     

 

 

26.46

%

 

 

 

 

0.42%

   

0.39%
(Institutional)
0.39%
(Open)

 

8Prospectus


 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

Christopher H. Blake, portfolio manager/analyst on the Investment Manager’s U.S. Strategic Equity and U.S. Mid Cap Equity teams, has been with the Portfolio since inception.

Robert A. Failla, portfolio manager/analyst on the Investment Manager’s U.S. Strategic Equity, U.S. Mid Cap Equity and Global Equity teams, has been with the Portfolio since inception.

Andrew D. Lacey, portfolio manager/analyst on various of the Investment Manager’s U.S. Equity and Global Equity teams, has been with the Portfolio since inception.

Ronald Temple, portfolio manager/analyst on various of the Investment Manager’s U.S. Equity teams, has been with the Portfolio since February 2009.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

Prospectus9


 Lazard Funds Summary Section

p

Lazard U.S. Mid Cap Equity Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)
Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

.75%

 

.75%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

.16%

 

.17%

 

Total Annual Portfolio Operating Expenses

 

.91%

 

1.17%

 

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$93

 

$290

 

$504

 

$1,120

 

Open Shares

 

$119

 

$372

 

$644

 

$1,420

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 77% of the average value of its portfolio.

10Prospectus


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of mid cap U.S. companies that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. The Investment Manager considers “mid cap companies” to be those companies that, at the time of initial purchase by the Portfolio, have market capitalizations within the range of companies included in the Russell Midcap® Index (ranging from approximately $101 million to $18 billion as of March 24, 2010). Because “mid cap companies” are defined in part by reference to an index, the market capitalization of companies in which the Portfolio may invest may vary with market conditions.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of medium-size (mid cap) U.S. companies. The Portfolio may invest up to 20% of its assets in equity securities of larger or smaller U.S. companies. The Portfolio also may invest up to 15% of its assets in equity securities of non-U.S. companies, including ADRs and GDRs.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Mid and small cap companies carry additional risks because their earnings tend to be less predictable, their share prices more volatile and their securities less liquid than larger, more established companies. The shares of mid and small cap companies tend to trade less frequently than those of larger companies, which can have an adverse effect on the pricing of these securities and on the ability to sell these securities when the Investment Manager deems it appropriate.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Non-domestic securities 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.

Prospectus11


 

Performance Bar Chart and Table
Year-by-Year Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard U.S. Mid Cap Equity Portfolio by showing the Portfolio’s year-by-year and average annual performance. The bar chart shows how the performance of the Portfolio’s Institutional Shares has varied from year to year over the past 10 calendar years. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  21.18%
 
Worst Quarter:

12/31/08  -26.54%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

 

 

 

 

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

5 Years

 

10 Years

 

Life of
Fund

 

Institutional Shares:

 

11/4/97

 

 

 

 

 

 

 

 

 

Returns Before Taxes

 

 

 

38.49%

 

0.73%

 

7.05%

 

6.69%

 

Returns After Taxes on Distributions

 

 

 

38.33%

 

-0.46%

 

4.88%

 

4.80%

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

25.22%

 

0.33%

 

5.01%

 

4.86%

 

Open Shares

 

11/4/97

 

38.26%

 

0.46%

 

6.74%

 

6.38%

 

Russell Midcap Index

     

40.48%

 

2.43%

 

4.98%

 

6.62%
(Institutional)
6.62%
(Open)

 

12Prospectus


 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

Christopher H. Blake, portfolio manager/analyst on the Investment Manager’s U.S. Strategic Equity and U.S. Mid Cap Equity teams, has been with the Portfolio since November 2001.

Robert A. Failla, portfolio manager/analyst on the Investment Manager’s U.S. Strategic Equity, U.S. Mid Cap Equity and Global Equity teams, has been with the Portfolio since July 2005.

Andrew D. Lacey, portfolio manager/analyst on various of the Investment Manager’s U.S. Equity and Global Equity teams, has been with the Portfolio since January 2001.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

Prospectus13


 Lazard Funds Summary Section

p

Lazard U.S. Small-Mid Cap Equity Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)
Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

.75%

 

.75%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

.48%

 

.52%

 

Total Annual Portfolio Operating Expenses

 

1.23%

 

1.52%

 

Fee Waiver and Expense Reimbursement*

 

.08%

 

.07%

 

Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement*

 

1.15%

 

1.45%

 

 

*

 

 

 

Reflects a contractual agreement by the Investment Manager to waive its fee and, if necessary, reimburse the Portfolio through April 30, 2011, to the extent Total Annual Portfolio Operating Expenses exceed 1.15% and 1.45% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively, exclusive of taxes, brokerage, interest on borrowings, fees and expenses of “Acquired Funds” and extraordinary expenses, and excluding shareholder redemption fees or other transaction fees. This agreement can only be amended by agreement of the Fund and the Investment Manager to lower the net amount shown and will terminate automatically in the event of termination of the Investment Management Agreement between the Investment Manager and the Fund, on behalf of the Portfolio.

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same, giving effect to the fee waiver in year one only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$117

 

$383

 

$669

 

$1,487

 

Open Shares

 

$148

 

$474

 

$823

 

$1,812

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 195% of the average value of its portfolio.

14Prospectus


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of small to mid capitalization U.S. companies. The Investment Manager considers “small-mid cap companies” to be those companies that, at the time of initial purchase by the Portfolio, have market capitalizations within the range of companies included in the Russell 2500® Index (ranging from approximately $10.8 million to $10.4 billion as of March 24, 2010).

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of small-mid cap U.S. companies. The Investment Manager focuses on relative value in seeking to construct a diversified portfolio of investments for the Portfolio that maintains sector and industry balance, using investment opportunities identified through bottom-up fundamental research conducted by the Investment Manager’s small cap, mid cap and global research platforms.

The Portfolio may invest up to 20% of its assets in equity securities of larger U.S. companies and may invest up to 10% of its total assets in securities of non-U.S. equity companies, including ADRs and GDRs.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Small and mid cap companies carry additional risks because their earnings tend to be less predictable, their share prices more volatile and their securities less liquid than larger, more established companies. The shares of small and mid cap companies tend to trade less frequently than those of larger companies, which can have an adverse effect on the pricing of these securities and on the ability to sell these securities when the Investment Manager deems it appropriate.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Non-domestic securities 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.

Prospectus15


 

Performance Bar Chart and Table
Year-by-Year Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard U.S. Small-Mid Cap Equity Portfolio by showing the Portfolio’s year-by-year and average annual performance. The bar chart shows how the performance of the Portfolio’s Institutional Shares has varied from year to year over the past 10 calendar years. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  28.30%
 
Worst Quarter:

12/31/08  -25.00%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. The Russell 2000/2500 Linked Index shown in the table is an unmanaged index created by the Investment Manager, which links the performance of the Russell 2000® Index for all periods prior to August 25, 2008 and the Russell 2500 Index for all periods thereafter.

16Prospectus


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

5 Years

 

10 Years

 

LIfe of
Fund

 

Institutional Shares:

 

10/30/91

 

 

 

 

 

 

 

 

 

Returns Before Taxes

 

 

 

55.47%

 

3.11%

 

7.67%

 

10.58%

 

Returns After Taxes on Distributions

 

 

 

55.47%

 

0.68%

 

5.32%

 

8.16%

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

36.05%

 

2.00%

 

5.86%

 

8.33%

 

Open Shares

 

1/30/97

 

54.96%

 

2.77%

 

7.39%

 

6.54%

 

Russell 2500 Index

 

 

 

34.39%

 

1.58%

 

4.91%

 

9.91%
(Institutional)
7.14%
(Open)

 

Russell 2000/2500 Linked Index

 

 

 

34.39%

 

1.10%

 

3.82%

 

8.65%
(Institutional)
5.76%
(Open)

 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

Daniel Breslin, portfolio manager/analyst on the Investment Manager’s U.S. Small-Mid Cap Equity team, has been with the Portfolio since May 2007.

Andrew D. Lacey, portfolio manager/analyst on various of the Investment Manager’s U.S. Equity and Global Equity teams, has been with the Portfolio since May 2003.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

Prospectus17


 Lazard Funds Summary Section

p

Lazard International Equity Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)
Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

.75%

 

.75%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

.24%

 

.27%

 

Total Annual Portfolio Operating Expenses

 

.99%

 

1.27%

 

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$101

 

$315

 

$547

 

$1,213

 

Open Shares

 

$129

 

$403

 

$697

 

$1,534

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 66% of the average value of its portfolio.

18Prospectus


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of relatively large non-U.S. companies with market capitalizations in the range of companies included in the Morgan Stanley Capital International (“MSCI®”) Europe, Australasia and Far East (“EAFE®”) Index (ranging from approximately $1.2 billion to $185 billion as of March 24, 2010) that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values.

In choosing stocks for the Portfolio, the Investment Manager looks for established companies in economically developed countries and may invest up to 30% of the Portfolio’s assets in securities of companies whose principal business activities are located in emerging market countries. Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Prospectus19


 

Performance Bar Chart and Table
Year-by-Year Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard International Equity Portfolio by showing the Portfolio’s year-by-year and average annual performance. The bar chart shows how the performance of the Portfolio’s Institutional Shares has varied from year to year over the past 10 calendar years. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  21.90%
 
Worst Quarter:

9/30/02  -17.29%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

 

 

 

 

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

5 Years

 

10 Years

 

Life of
Fund

 

Institutional Shares:

 

10/29/91

 

 

 

 

 

 

 

 

 

Returns Before Taxes

 

 

 

25.19%

 

3.41%

 

0.68%

 

5.94%

 

Returns After Taxes on Distributions

 

 

 

25.50%

 

3.05%

 

0.13%

 

4.93%

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

16.69%

 

3.02%

 

0.49%

 

4.83%

 

Open Shares

 

1/23/97

 

24.91%

 

3.10%

 

0.39%

 

4.18%

 

MSCI EAFE Index

     

31.78%

 

3.54%

 

1.17%

 

5.37%
(Institutional)
4.66%
(Open)

 

20Prospectus


 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

Michael A. Bennett, portfolio manager/analyst on the Investment Manager’s International Equity teams, has been with the Portfolio since May 2003.

Michael G. Fry, portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams, has been with the Portfolio since November 2005.

Michael Powers, portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams, has been with the Portfolio since May 2003.

John R. Reinsberg, portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams, has been with the Portfolio since inception.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

Prospectus21


 Lazard Funds Summary Section

p

Lazard International Equity Select Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)

 

 

 

 

Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

.85%

 

.85%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

2.61%

 

2.52%

 

Total Annual Portfolio Operating Expenses

 

3.46%

 

3.62%

 

Fee Waiver and Expense Reimbursement*

 

2.31%

 

2.17%

 

Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement*

 

1.15%

 

1.45%

 

 

*

 

 

 

Reflects a contractual agreement by the Investment Manager to waive its fee and, if necessary, reimburse the Portfolio through April 30, 2011, to the extent Total Annual Portfolio Operating Expenses exceed 1.15% and 1.45% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively, exclusive of taxes, brokerage, interest on borrowings, fees and expenses of “Acquired Funds” and extraordinary expenses, and excluding shareholder redemption fees or other transaction fees. This agreement can only be amended by agreement of the Fund and the Investment Manager to lower the net amount shown and will terminate automatically in the event of termination of the Investment Management Agreement between the Investment Manager and the Fund, on behalf of the Portfolio.

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same, giving effect to the fee waiver in year one only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$117

 

$847

 

$1,599

 

$3,584

 

Open Shares

 

$148

 

$908

 

$1,689

 

$3,738

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 67% of the average value of its portfolio.

22Prospectus


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities of relatively large non-U.S. companies with market capitalizations in the range of companies included in the MSCI EAFE Index (ranging from approximately $1.2 billion to $185 billion as of March 24, 2010) that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values.

The Investment Manager currently intends to hold securities, including ADRs, GDRs and common stocks, of between approximately 30 and 55 different issuers on a long-term basis.

In choosing stocks for the Portfolio, the Investment Manager looks for established companies in economically developed countries. Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities.

The Portfolio may invest up to 30% of its assets in securities of companies whose principal business activities are located in emerging market countries, although the allocation of the Portfolio’s assets to emerging market countries may vary from time to time.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Because the Portfolio will invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s net asset value (“NAV”) may be relatively more susceptible to adverse effects from any single corporate, economic, market, political or regulatory occurrence than if the Portfolio’s investments consisted of a larger number of securities.

Prospectus23


 

Performance Bar Chart and Table
Year-by-Year Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard International Equity Select Portfolio by showing the Portfolio’s year-by-year and average annual performance. The bar chart shows how the performance of the Portfolio’s Institutional Shares has varied from year to year. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  18.73%
 
Worst Quarter:

9/30/02  -20.82%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

 

 

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

5 Years

 

Life of
Fund

 

Institutional Shares:

 

5/31/01

 

 

 

 

 

 

 

Returns Before Taxes

 

 

 

20.86%

 

1.62%

 

2.99%

 

Returns After Taxes on Distributions

 

 

 

21.10%

 

0.51%

 

2.30%

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

13.91%

 

1.80%

 

2.88%

 

Open Shares

 

5/31/01

 

20.49%

 

1.28%

 

2.70%

 

MSCI EAFE Index

     

31.78%

 

3.54%

 

4.60%
(Institutional)
4.60%
(Open)

 

24Prospectus


 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

Michael A. Bennett, portfolio manager/analyst on the Investment Manager’s International Equity teams, has been with the Portfolio since May 2003.

Gabrielle M. Boyle, portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams, has been with the Portfolio since May 2003.

Adam Cohen, portfolio manager/analyst on the Investment Manager’s Global, International and European Equity Select teams, has been with the Portfolio since April 2008.

Michael Powers, portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams, has been with the Portfolio since May 2003.

John R. Reinsberg, portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams, has been with the Portfolio since inception.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

Prospectus25


 Lazard Funds Summary Section

p

Lazard International Strategic Equity Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)

 

 

 

 

Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

.75%

 

.75%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

.16%

 

.21%

 

Total Annual Portfolio Operating Expenses

 

.91%

 

1.21%

 

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$93

 

$290

 

$504

 

$1,120

 

Open Shares

 

$123

 

$384

 

$665

 

$1,466

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 129% of the average value of its portfolio.

26Prospectus


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of non-U.S. companies whose principal activities are located in countries represented by the MSCI EAFE Index that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. The Portfolio may invest up to 30% of its assets in securities of companies whose principal business activities are located in emerging market countries, although the allocation of the Portfolio’s assets to emerging market countries may vary from time to time.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities. The Investment Manager currently intends to hold securities of between approximately 30 to 55 different issuers.

The countries represented by the MSCI EAFE Index currently include: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Because the Portfolio will invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single corporate, economic, market, political or regulatory occurrence than if the Portfolio’s investments consisted of a larger number of securities.

Prospectus27


 

Performance Bar Chart and Table
Year-by-Year Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard International Strategic Equity Portfolio by showing the Portfolio’s year-by-year and average annual performance. The bar chart shows how the performance of the Portfolio’s Institutional Shares has varied from year to year. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  23.21%
 
Worst Quarter:

9/30/08  -18.44%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

Life of
Fund

 

Institutional Shares:

 

10/31/05

 

 

 

 

 

Returns Before Taxes

 

 

 

27.76%

 

4.02%

 

Returns After Taxes on Distributions

 

 

 

27.63%

 

3.24%

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

18.78%

 

3.58%

 

Open Shares

 

2/3/06

 

27.38%

 

0.24%

 

MSCI EAFE Index

 

 

 

31.78%

 

2.84%
(Institutional)
-0.33%
(Open)

 

28Prospectus


 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

Michael A. Bennett, portfolio manager/analyst on the Investment Manager’s International Equity teams, has been with the Portfolio since September 2008.

Robin O. Jones, portfolio manager/analyst on the Investment Manager’s International Strategic Equity team, has been with the Portfolio since May 2009.

Mark Little, portfolio manager/analyst on the Investment Manager’s International Strategic Equity team, has been with the Portfolio since inception.

Brian Pessin, portfolio manager/analyst on the Investment Manager’s Global, International and European Small Cap Equity teams, has been with the Portfolio since inception.

John R. Reinsberg, portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams, has been with the Portfolio since inception.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

Prospectus29


 Lazard Funds Summary Section

p

Lazard International Small Cap Equity Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)
Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

.75%

 

.75%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

.46%

 

.48%

 

Total Annual Portfolio Operating Expenses

 

1.21%

 

1.48%

 

Fee Waiver and Expense Reimbursement*

 

.08%

 

.05%

 

Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement*

 

1.13%

 

1.43%

 

 

*

 

 

 

Reflects a contractual agreement by the Investment Manager to waive its fee and, if necessary, reimburse the Portfolio through April 30, 2011, to the extent Total Annual Portfolio Operating Expenses exceed 1.13% and 1.43% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively, exclusive of taxes, brokerage, interest on borrowings, fees and expenses of “Acquired Funds” and extraordinary expenses, and excluding shareholder redemption fees or other transaction fees. This agreement can only be amended by agreement of the Fund and the Investment Manager to lower the net amount shown and will terminate automatically in the event of termination of the Investment Management Agreement between the Investment Manager and the Fund, on behalf of the Portfolio.

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same, giving effect to the fee waiver in year one only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$115

 

$376

 

$658

 

$1,464

 

Open Shares

 

$146

 

$463

 

$803

 

$1,764

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 51% of the average value of its portfolio.

30Prospectus


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of relatively small non-U.S. companies that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. The Investment Manager considers “small non-U.S. companies” to be those non-U.S. companies with market capitalizations, at the time of initial purchase by the Portfolio, below $5 billion or in the range of the smallest 10% of companies included in the MSCI EAFE Index (based on market capitalization of the Index as a whole, which ranged from approximately $1.2 billion to $185 billion as of March 24, 2010).

In choosing stocks for the Portfolio, the Investment Manager looks for smaller, well-managed non-U.S. companies that have the potential to grow. Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of small cap companies.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Small cap companies carry additional risks because their earnings tend to be less predictable, their share prices more volatile and their securities less liquid than larger, more established companies. The shares of small cap companies tend to trade less frequently than those of larger companies, which can have an adverse effect on the pricing of these securities and on the ability to sell these securities when the Investment Manager deems it appropriate.

Non-domestic securities 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.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Prospectus31


 

Performance Bar Chart and Table
Year-by-Year Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard International Small Cap Equity Portfolio by showing the Portfolio’s year-by-year and average annual performance. The bar chart shows how the performance of the Portfolio’s Institutional Shares has varied from year to year over the past 10 calendar years. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  31.53%
 
Worst Quarter:

12/31/08  -27.07%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

 

 

 

 

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

5 Years

 

10 Years

 

Life of
Fund

 

Institutional Shares:

 

 

 

12/1/93

 

 

 

 

 

 

 

 

 

 

Returns Before Taxes

 

 

 

 

 

39.17%

   

 

-0.70%

   

 

 

4.60%

   

 

 

6.13%

 

 

Returns After Taxes on Distributions

 

 

 

 

39.17%

   

 

-3.35%

   

 

2.83%

   

 

4.75%

 

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

 

25.46%

   

 

0.06%

   

 

4.21%

   

 

5.44%

 

 

Open Shares

 

 

 

2/13/97

   

 

 

39.00%

   

 

-0.96%

   

 

 

4.25%

   

 

 

5.42%

 

 

MSCI EAFE Small Cap Index

     

 

 

46.78%

   

 

 

3.50%  

   

 

 

6.45%

 

 

 

 

4.32%
(Institutional)
4.49%
(Open)

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

   

 

32Prospectus


 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

Brian Pessin, portfolio manager/analyst on the Investment Manager’s Global, International and European Small Cap Equity teams, has been with the Portfolio since January 2003.

John R. Reinsberg, portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams, has been with the Portfolio since inception.

Edward Rosenfeld, portfolio manager/analyst on the Investment Manager’s Global, International and European Small Cap Equity teams, has been with the Portfolio since May 2007.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

Prospectus33


 Lazard Funds Summary Section

p

Lazard Global Listed Infrastructure Portfolio

Investment Objective

The Portfolio seeks total return.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Fees (fees paid directly from your investment)
Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

 

 

 

 

 

Management Fees

 

.90%

 

.90%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses*

 

.53%

 

.58%

 

Total Annual Portfolio Operating Expenses*

 

1.43%

 

1.73%

 

Fee Waiver and Expense Reimbursement**

 

.13%

 

.13%

 

Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement**

 

1.30%

 

1.60%

 

 

*

 

 

 

“Other Expenses” are based on estimated amounts for the current fiscal year.

 

**

 

 

 

Reflects a contractual agreement by the Investment Manager to waive its fee and, if necessary, reimburse the Portfolio through April 30, 2011, to the extent Total Annual Portfolio Operating Expenses exceed 1.30% and 1.60% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively, exclusive of taxes, brokerage, interest on borrowings, fees and expenses of “Acquired Funds” and extraordinary expenses, and excluding shareholder redemption fees or other transaction fees. This agreement can only be amended by agreement of the Fund and the Investment Manager to lower the net amount shown and will terminate automatically in the event of termination of the Investment Management Agreement between the Investment Manager and the Fund, on behalf of the Portfolio.

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same, giving effect to the fee waiver in year one only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

1 Year

 

3 Years

 

Institutional Shares

 

$132

 

$440

 

Open Shares

 

$163

 

$533

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance.

34Prospectus


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of infrastructure companies and concentrates its investments in industries represented by infrastructure companies. The Investment Manager focuses on companies with a minimum market capitalization of $250 million that own physical infrastructure and which the Investment Manager believes are undervalued.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of infrastructure companies, which consist of utilities, pipelines, toll roads, airports, railroads, ports, telecommunications and other infrastructure companies, with securities listed on a national or other recognized securities exchange.

Under normal market conditions, the Portfolio invests significantly (at least 40%—unless market conditions are not deemed favorable by the Investment Manager, in which case the Portfolio would invest at least 30%) in infrastructure companies organized or located outside the U.S. or doing a substantial amount of business outside the U.S. The Portfolio allocates its assets among various regions and countries, including the United States (but in no less than three different countries). The Portfolio may invest in equity securities of companies with some business activities located in emerging market countries. The allocation of the Portfolio’s assets to emerging market countries may shift from time to time based on the Investment Manager’s judgment and analysis of market conditions.

The Investment Manager generally seeks to substantially hedge foreign currency exposure in the Portfolio back to the U.S. dollar by entering into foreign currency forward contracts, although the Portfolio’s total foreign currency exposure may not be fully hedged at all times.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Securities and instruments of infrastructure companies are more susceptible to adverse economic or regulatory occurrences affecting their industries. Infrastructure companies may be subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction programs, high leverage, costs associated with environmental and other regulations, the effects of economic slowdown, surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors. Infrastructure companies also may be affected by or subject to:

 

 

 

 

regulation by various government authorities, including rate regulation;

 

 

 

 

service interruption due to environmental, operational or other mishaps;

 

 

 

 

the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards; and

 

 

 

 

general changes in market sentiment towards infrastructure and utilities assets.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Irrespective of any foreign currency exposure hedging, the Portfolio may experience a decline in the value of its portfolio securities, in U.S. dollar terms, due solely to fluctuations in currency exchange rates.

Forward currency contracts may reduce returns or increase volatility, perhaps substantially. These contracts can be

Prospectus35


 

illiquid and highly sensitive to changes in the value of the related currency. Forward currency contracts also are subject to the risk of default by the counterparty to the contract.

Performance Bar Chart and Table

Because the Portfolio did not have a full calendar year of performance as of the date of this Prospectus, no performance returns are presented in this part of the Prospectus. Annual performance returns provide some indication of the risks of investing in the Portfolio by showing changes in performance from year to year. Comparison of Portfolio performance to an appropriate index indicates how the Portfolio’s average annual returns compare with those of a broad measure of market performance. Performance information will be available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

John Mulquiney, portfolio manager/analyst on the Investment Manager’s Global Listed Infrastructure team, has been with the Portfolio since inception.

Warryn Robertson, portfolio manager/analyst on the Investment Manager’s Global Listed Infrastructure team, has been with the Portfolio since inception.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolio” on page 60.

36Prospectus


 Lazard Funds Summary Section

p

This Portfolio is currently closed to investment by certain new investors. See pages 93-94 for more information.

Lazard Emerging Markets Equity Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)
Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

1.00%

 

1.00%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

.15%

 

.30%

 

Total Annual Portfolio Operating Expenses

 

1.15%

 

1.55%

 

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$117

 

$365

 

$633

 

$1,398

 

Open Shares

 

$158

 

$490

 

$845

 

$1,845

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 49% of the average value of its portfolio.

Prospectus37


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of non-U.S. companies whose principal activities are located in emerging market countries and that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values.

Emerging market countries include all countries represented by the MSCI Emerging Markets (“EM®”) Index, which currently includes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of companies whose principal business activities are located in emerging market countries.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

38Prospectus


 

Performance Bar Chart and Table
Year-by-Year Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard Emerging Markets Equity Portfolio by showing the Portfolio’s year-by-year and average annual performance. The bar chart shows how the performance of the Portfolio’s Institutional Shares has varied from year to year over the past 10 calendar years. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  34.12%
 
Worst Quarter:

12/31/08  -30.50%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

 

 

 

 

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

5 Years

 

10 Years

 

Life of
Fund

 

Institutional Shares:

 

7/15/94

 

 

 

 

 

 

 

 

 

Returns Before Taxes

 

 

 

69.82%

 

16.76%

 

11.54%

 

8.78%

 

Returns After Taxes on Distributions

 

 

 

69.10%

 

14.62%

 

10.45%

 

7.78%

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

46.16%

 

14.14%

 

10.02%

 

7.48%

 

Open Shares

 

1/8/97

 

69.14%

 

16.43%

 

11.22%

 

8.93%

 

MSCI EM Index

 

 

 

78.51%

 

15.51%

 

9.78%

 

6.91%
(Institutional)
8.14%
(Open)

 

Prospectus39


 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

Rohit Chopra, portfolio manager/analyst on the Investment Manager’s Emerging Markets Equity team, has been with the Portfolio since May 2007.

James M. Donald, portfolio manager/analyst on the Investment Manager’s Emerging Markets Equity team, has been with the Portfolio since November 2001.

Erik McKee, portfolio manager/analyst on the Investment Manager’s Emerging Markets Equity team, has been with the Portfolio since July 2008.

John R. Reinsberg, portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams, has been with the Portfolio since inception.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

40Prospectus


 Lazard Funds Summary Section

p

Lazard Emerging Markets Equity Select Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)
Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

1.00%

 

1.00%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses*

 

.30%

 

.35%

 

Total Annual Portfolio Operating Expenses*

 

1.30%

 

1.60%

 

 

*

 

 

 

“Other Expenses” are based on estimated amounts for the current fiscal year.

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same, giving effect to the fee waiver in year one only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

1 Year

 

3 Years

 

Institutional Shares

 

$132

 

$412

 

Open Shares

 

$163

 

$505

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance.

Prospectus41


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, including common stocks, ADRs and GDRs, of non-U.S. companies whose principal activities are located in emerging market countries and that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. The Portfolio typically focuses on companies with a market capitalization of greater than $3 billion.

Emerging market countries include all countries represented by the MSCI EM Index, which currently includes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey. The Investment Manager currently intends to hold securities of between approximately 30 and 55 different issuers.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of companies whose principal business activities are located in emerging market countries.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Because the Portfolio will invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single corporate, economic, market, political or regulatory occurrence than if the Portfolio’s investments consisted of a larger number of securities.

42Prospectus


 

Performance Bar Chart and Table

Because the Portfolio has not commenced investment operations prior to the date of this Prospectus, no performance returns are presented in this part of the Prospectus. Annual performance returns provide some indication of the risks of investing in the Portfolio by showing changes in performance from year to year. Comparison of Portfolio performance to an appropriate index indicates how the Portfolio’s average annual returns compare with those of a broad measure of market performance. After the Portfolio commences investment operations, performance information will be available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance is not necessarily an indication of how the Portfolio will perform in the future.

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

Rohit Chopra, portfolio manager/analyst on the Investment Manager’s Emerging Markets Equity team

James M. Donald, portfolio manager/analyst on the Investment Manager’s Emerging Markets Equity team

Erik McKee, portfolio manager/analyst on the Investment Manager’s Emerging Markets Equity team

John R. Reinsberg, portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

Prospectus43


 Lazard Funds Summary Section

p

Lazard Developing Markets Equity Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)

 

 

 

 

Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

1.00%

 

1.00%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

1.81%

 

1.29%

 

Total Annual Portfolio Operating Expenses

 

2.81%

 

2.54%

 

Fee Waiver and Expense Reimbursement*

 

1.51%

 

.94%

 

Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement*

 

1.30%

 

1.60%

 

 

*

 

 

 

Reflects a contractual agreement by the Investment Manager to waive its fee and, if necessary, reimburse the Portfolio through April 30, 2011, to the extent Total Annual Portfolio Operating Expenses exceed 1.30% and 1.60% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively, exclusive of taxes, brokerage, interest on borrowings, fees and expenses of “Acquired Funds” and extraordinary expenses, and excluding shareholder redemption fees or other transaction fees. This agreement can only be amended by agreement of the Fund and the Investment Manager to lower the net amount shown and will terminate automatically in the event of termination of the Investment Management Agreement between the Investment Manager and the Fund, on behalf of the Portfolio.

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same, giving effect to the fee waiver in year one only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$132

 

$735

 

$1,366

 

$3,069

 

Open Shares

 

$163

 

$705

 

$1,275

 

$2,828

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 96% of the average value of its portfolio.

44Prospectus


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of non-U.S. companies whose principal activities are located in emerging market countries (also known as “developing markets”).

Emerging market countries include all countries represented by the MSCI EM Index, which currently includes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

The Investment Manager employs a relative growth investment philosophy that is based on value creation through the process of bottom-up stock selection. The Investment Manager’s approach consists of an analytical framework, accounting validation, fundamental analysis and portfolio construction parameters. The Investment Manager’s selection process focuses on growth and considers the sustainability of growth and the trade off between valuation and growth. A premium may be paid for higher, sustainable growth.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of companies whose principal business activities are located in emerging market countries.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to have the potential for growth, but that may not realize such perceived potential for extended periods of time or may never realize such perceived growth potential. Such stocks may be more volatile than other stocks because they can be more sensitive to investor perceptions of the issuing company’s growth potential. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Prospectus45


 

Performance Bar Chart and Table
Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard Developing Markets Equity Portfolio by showing the Portfolio’s performance for the first complete calendar year of operation. The bar chart shows the performance of the Portfolio’s Institutional Shares. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  56.64%
 
Worst Quarter:

3/31/09  -4.43%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

Life of
Fund

 

Institutional Shares:

 

9/30/08

 

 

 

 

 

Returns Before Taxes

 

 

 

108.53%

 

28.22%

 

Returns After Taxes on Distributions

 

 

 

106.37%

 

27.14%

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

70.82%

 

23.52%

 

Open Shares

 

9/30/08

 

108.17%

 

27.95%

 

MSCI EM Index

 

 

 

78.51%

 

22.78%
(Institutional)
22.78%
(Open)

 

46Prospectus


 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

James M. Donald, portfolio manager/analyst on the Investment Manager’s Emerging Markets Equity team, has been with the Portfolio since inception.

Peter Gillespie, portfolio manager/analyst on the Investment Manager’s Developing Markets Equity team, has been with the Portfolio since inception.

Kevin O’Hare, portfolio manager/analyst on the Investment Manager’s Developing Markets Equity team, has been with the Portfolio since inception.

John R. Reinsberg, portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams, has been with the Portfolio since inception.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

Prospectus47


 Lazard Funds Summary Section

p

Lazard Emerging Markets Equity Blend Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)
Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

1.05%

 

1.05%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses*

 

.25%

 

.30%

 

Total Annual Portfolio Operating Expenses*

 

1.30%

 

1.60%

 

 

*

 

 

 

“Other Expenses” are based on estimated amounts for the current fiscal year.

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same, giving effect to the fee waiver in year one only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

1 Year

 

3 Years

 

Institutional Shares

 

$132

 

$412

 

Open Shares

 

$163

 

$505

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance.

48Prospectus


 

Principal Investment Strategies

The Portfolio invests primarily in equity securities, including common stocks, ADRs and GDRs, of non-U.S. companies whose principal activities are located in emerging market countries.

Emerging market countries include all countries represented by the MSCI EM Index, which currently includes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

The Investment Manager will allocate the Portfolio’s assets between the Investment Manager’s Emerging Markets Equity Select and Developing Markets Equity investment strategies. In the Emerging Markets Equity Select strategy, assets are invested in companies that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. The strategy typically focuses on companies with a market capitalization of greater than $3 billion. In the Developing Markets Equity strategy, the Investment Manager employs a relative growth investment philosophy that is based on value creation through the process of bottom-up stock selection. The Investment Manager’s approach consists of an analytical framework, accounting validation, fundamental analysis and portfolio construction parameters.

The Investment Manager currently intends to maintain an allocation of approximately 40%-60% of the Portfolio’s assets in each strategy, but the allocation ranges could change in the future without prior notice to shareholders. The Investment Manager will make allocation decisions between the Emerging Markets Equity Select and Developing Markets Equity strategies based on quantitative and qualitative analysis through proprietary software models. Quantitative analysis includes, among others, statistical analysis of portfolio risks, factor dependencies and trading tendencies. Qualitative analysis includes, among others, analysis of the global economic environment as well as internal and external research on individual securities, portfolio holdings, attribution factors, behavioral patterns and overall market views and scenarios. The Investment Manager will periodically review the allocation of Portfolio assets between the strategies and modify the relative weightings to emphasize risk or to seek to mitigate risk exposures.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of companies whose principal business activities are located in emerging market countries.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests a portion of its assets in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

The Portfolio invests a portion of its assets in stocks believed by the Investment Manager to have the potential for growth, but that may not realize such perceived potential for extended periods of time or may never realize such perceived growth potential. Such stocks may be more volatile than other stocks because they can be more sensitive to investor perceptions of the issuing company’s growth potential. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

The Portfolio’s ability to achieve its investment objective depends in part on the Investment Manager’s skill in determining the Portfolio’s allocation between the investment strategies. The Investment Manager’s evaluations and assumptions underlying its allocation decisions may differ from actual market conditions.

Prospectus49


 

Performance Bar Chart and Table

Because the Portfolio has not commenced investment operations prior to the date of this Prospectus, no performance returns are presented in this part of the Prospectus. Annual performance returns provide some indication of the risks of investing in the Portfolio by showing changes in performance from year to year. Comparison of Portfolio performance to an appropriate index indicates how the Portfolio’s average annual returns compare with those of a broad measure of market performance. After the Portfolio commences investment operations, performance information will be available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance is not necessarily an indication of how the Portfolio will perform in the future.

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analyst

Jai Jacob, portfolio manager/analyst on the Investment Manager’s Multi-Strategy investment team

James M. Donald, portfolio manager/analyst on the Investment Manager’s Emerging Markets Equity team

Kevin O’Hare, portfolio manager/analyst on the Investment Manager’s Developing Markets Equity team

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

50Prospectus


 Lazard Funds Summary Section

p

Lazard U.S. High Yield Portfolio

Investment Objective

The Portfolio seeks maximum total return from a combination of capital appreciation and current income.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)

 

 

 

 

Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

.55%

 

.55%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

.34%

 

.41%

 

Total Annual Portfolio Operating Expenses

 

.89%

 

1.21%

 

Fee Waiver and Expense Reimbursement*

 

.34%

 

.36%

 

Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement*

 

.55%

 

.85%

 

 

*

 

 

 

Reflects a contractual agreement by the Investment Manager to waive its fee and, if necessary, reimburse the Portfolio through April 30, 2011, to the extent Total Annual Portfolio Operating Expenses exceed .55% and .85% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively, exclusive of taxes, brokerage, interest on borrowings, fees and expenses of “Acquired Funds” and extraordinary expenses, and excluding shareholder redemption fees or other transaction fees. This agreement can only be amended by agreement of the Fund and the Investment Manager to lower the net amount shown and will terminate automatically in the event of termination of the Investment Management Agreement between the Investment Manager and the Fund, on behalf of the Portfolio.

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same, giving effect to the fee waiver in year one only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$56

 

$250

 

$460

 

$1,065

 

Open Shares

 

$87

 

$348

 

$630

 

$1,434

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 17% of the average value of its portfolio.

Prospectus51


 

Principal Investment Strategies

The Portfolio invests primarily in high-yielding U.S. corporate fixed-income securities which, at the time of purchase, are rated below investment grade (lower than Baa by Moody’s Investors Service, Inc. (“Moody’s”) or lower than BBB by Standard & Poor’s Ratings Group (“S&P”) (“junk bonds”). The Portfolio may invest in non-U.S. securities, including, to a limited extent, in companies in, or governments of, emerging market countries.

Under normal circumstances, the Portfolio invests at least 80% of its assets in bonds and other fixed-income securities of U.S. companies rated, at the time of purchase, below investment grade by S&P or Moody’s and as low as the lowest rating assigned by S&P or Moody’s, or the unrated equivalent as determined by the Investment Manager. The Portfolio focuses its investments in high-yielding securities that may be considered “better quality” (B+ or higher by Moody’s or S&P or the unrated equivalent as determined by the Investment Manager). Although the Portfolio may invest in fixed-income securities without regard to their maturity, the Portfolio’s average weighted maturity is expected to range between two and ten years.

Securities are evaluated based on their fundamental and structural characteristics. Valuation analysis is tailored to the specific asset class, but may include credit research, prepayment or call options, maturity, duration, coupon, currency and country risks.

Principal Investment Risks

While bonds are designed to produce a stable stream of income, their prices move inversely with changes in interest rates. Interest rate risk is usually greater for fixed-income securities with longer maturities or durations. The Portfolio’s investments in lower-rated, higher-yielding bonds are subject to greater credit risk than its higher-rated investments. Junk bonds tend to be more volatile, less liquid and are considered speculative. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Other risk factors could have an effect on the Portfolio’s performance, including:

 

 

 

 

if an issuer fails to make timely interest or principal payments

 

 

 

 

if there is a decline in the credit quality of a bond, or a perception of a decline, the bond’s value could fall, potentially lowering the Portfolio’s share price

 

 

 

 

the price and yield of non-U.S. debt securities could be affected by factors ranging from political and economic instability to changes in currency exchange rates

 

 

 

 

during unusual market conditions, the Portfolio may not be able to sell certain securities at the time and price it would like

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

52Prospectus


 

Performance Bar Chart and Table
Year-by-Year Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard U.S. High Yield Portfolio by showing the Portfolio’s year-by-year and average annual performance. The bar chart shows how the performance of the Portfolio’s Institutional Shares has varied from year to year over the past 10 calendar years. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  13.08%
 
Worst Quarter:

12/31/08  -15.96%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

 

 

 

 

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

5 Years

 

10 Years

 

Life of
Fund

 

Institutional Shares:

 

1/2/98

 

 

 

 

 

 

 

 

 

Returns Before Taxes

 

 

 

34.66%

 

4.96%

 

2.98%  

 

2.97%  

 

Returns After Taxes on Distributions

 

 

 

30.96%

 

2.12%

 

-0.40%

 

-0.48%

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

22.25%

 

2.54%

 

0.39%  

 

0.35%  

 

Open Shares

 

2/24/98

 

34.40%

 

4.75%

 

2.72%  

 

2.32%  

 

Merrill Lynch High Yield Master II® Index

     

57.51%

 

6.35%

 

6.52%  

 

5.88%  
(Institutional)  
5.76%  
(Open)  

 

Prospectus53


 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

J. William Charlton, portfolio manager/analyst on the Investment Manager’s U.S. High Yield Fixed Income team, has been with the Portfolio since November 2002.

Thomas M. Dzwil, portfolio manager/analyst on the Investment Manager’s U.S. High Yield Fixed Income team, has been with the Portfolio since May 2003.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

54Prospectus


 Lazard Funds Summary Section

p

Lazard Capital Allocator Opportunistic Strategies Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio.

 

 

 

 

 

 

 

Institutional
Shares

 

Open
Shares

 

Shareholder Transaction Fees (fees paid directly from your investment)

 

 

 

 

Maximum Redemption Fee (as a % of amount redeemed,
on shares owned for 30 days or less)

 

1.00%

 

1.00%

 

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)

 

 

 

 

 

Management Fees

 

1.00%

 

1.00%

 

Distribution and Service (12b-1) Fees

 

None

 

.25%

 

Other Expenses

 

.16%

 

.19%

 

Acquired Fund Fees and Expenses (Underlying Funds)

 

.47%

 

.47%

 

Total Annual Portfolio Operating Expenses

 

1.63%

 

1.91%

 

Fee Waiver and Expense Reimbursement*

 

.14%

 

.12%

 

Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement*

 

1.49%

 

1.79%

 

 

*

 

 

 

Reflects a contractual agreement by the Investment Manager to waive its fee and, if necessary, reimburse the Portfolio through April 30, 2011, to the extent Total Annual Portfolio Operating Expenses exceed 1.02% and 1.32% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively, exclusive of taxes, brokerage, interest on borrowings, fees and expenses of “Acquired Funds” and extraordinary expenses, and excluding shareholder redemption fees or other transaction fees. This agreement can only be amended by agreement of the Fund and the Investment Manager to lower the net amount shown and will terminate automatically in the event of termination of the Investment Management Agreement between the Investment Manager and the Fund, on behalf of the Portfolio.

Example

This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio’s operating expenses remain the same, giving effect to the fee waiver in year one only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Years

 

5 Years

 

10 Years

 

Institutional Shares

 

$152

 

$501

 

$874

 

$1,923

 

Open Shares

 

$182

 

$589

 

$1,021

 

$2,225

 

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in annual portfolio operating expenses or in the Example, affect the Portfolio’s performance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 113% of the average value of its portfolio.

Prospectus55


 

Principal Investment Strategies

The Portfolio utilizes an asset allocation strategy to invest in a global portfolio of uncorrelated assets that can include exposure, through underlying vehicles, to stocks, bonds, commodities and other investments.

The Portfolio invests primarily in common stock of exchange-traded open-end management investment companies and similar products, which generally pursue a passive index-based strategy (commonly known as exchange-traded funds or “ETFs”), as well as actively managed closed-end management investment companies (“closed-end funds”) (collectively, “Underlying Funds”). ETFs in which the Portfolio may invest include both ETFs designed to correlate directly with an index and ETFs designed to correlate inversely with an index. The Portfolio, through Underlying Funds in which it invests, may invest in non- U.S. companies (including those in emerging markets), and the Portfolio also may invest directly in equity and debt securities in addition to its investments in Underlying Funds. The Portfolio’s investment portfolio is concentrated in a relatively small number of holdings (generally 10 to 30). Investors can invest directly in Underlying Funds and do not need to invest in Underlying Funds through mutual funds or separately managed accounts.

The Portfolio may engage in derivatives transactions, including certain foreign currency transactions (which may include forward currency contracts, swap agreements and options), entering into equity and total return swap agreements and writing put and covered call options on securities (including ETFs), indexes and currencies, for hedging purposes or to seek to increase returns.

Principal Investment Risks

While stocks (including those in which the Underlying Funds invest) have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Shares of Underlying Funds in which the Portfolio invests may trade at prices that vary from their NAVs, sometimes significantly. The shares of Underlying Funds may trade at prices at, below or above their most recent NAV. Shares of closed-end funds, in particular, frequently trade at persistent discounts to their NAV. In addition, the performance of an ETF pursuing a passive index-based strategy may diverge from the performance of the index. The Portfolio’s investments in Underlying Funds are subject to the risks of Underlying Funds’ investments, as well as to the general risks of investing in Underlying Funds. Portfolio shares will bear not only the Portfolio’s management fees and operating expenses, but also their proportional share of the management fees and operating expenses of Underlying Funds in which the Portfolio invests.

The Portfolio may be limited by the 1940 Act in the amount of its assets that may be invested in Underlying Funds unless an Underlying Fund has received an exemptive order from the Securities and Exchange Commission (the “SEC”) on which the Portfolio may rely or an exemption is available.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The market value of debt securities is affected by changes in prevailing interest rates and the perceived credit quality of the issuer. When prevailing interest rates fall or perceived credit quality improves, the market value of the affected debt securities generally rises. Conversely, when interest rates rise or perceived credit quality weakens, the market value of the affected debt securities generally declines.

Because the Portfolio will invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single economic or market occurrence than if the Portfolio’s investments consisted of a larger number of securities.

Derivatives transactions, including those entered into for hedging purposes, may reduce returns or increase volatility. Many derivatives, such as those used in forward currency contracts, swap agreements and certain options, are subject to the risk of default by the counterparty, in addition to risks of changes in the value of the related

56Prospectus


 

currency, security, securities or index. These derivatives also can be illiquid and highly sensitive to changes in the related currency, security, securities or index. As such, a small investment in certain derivatives could have a potentially large impact on the Portfolio’s performance.

Performance Bar Chart and Table
Total Returns for Institutional Shares

As of 12/31

The accompanying bar chart and table provide some indication of the risks of investing in Lazard Capital Allocator Opportunistic Strategies Portfolio by showing the Portfolio’s performance for the first complete calendar year of operation. The bar chart shows the performance of the Portfolio’s Institutional Shares. Performance information is available at www.LazardNet.com or by calling (800) 823-6300. The Portfolio’s past performance (before and after taxes) is not necessarily an indication of how the Portfolio will perform in the future.

 

 

 

 

Best Quarter:
6/30/09  14.66%
 
Worst Quarter:

3/31/09  -5.43%

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

After-tax returns for the Open Shares vary from those of Institutional Shares. After-tax returns are calculated using the historical highest individual marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. The Global Market Exposure Index shown in the table is an unmanaged, blended index constructed by the Investment Manager, which is comprised of 36% Barclays Capital U.S. Aggregate Bond Index, 19.5% S&P 500 Index, 15% MSCI Europe Index, 9% MSCI Pacific Index, 6% MSCI EM Index, 6% S&P MidCap 400 Index, 4.5% S&P SmallCap 600 Index and 4% Three Month London Interbank Offered Rate.

Prospectus57


 

 

 

 

 

 

 

 

 

 

Inception
Date

 

1 Year

 

Life of
Fund

 

Institutional Shares:

 

3/26/08

 

 

 

 

 

Returns Before Taxes

 

 

 

21.21%

 

-4.28%

 

Returns After Taxes on Distributions

 

 

 

20.78%

 

-5.10%

 

Returns After Taxes on Distributions and
Sale of Portfolio Shares

 

 

 

13.93%

 

-4.08%

 

Open Shares

 

3/31/08

 

20.71%

 

-4.40%

 

MSCI World Index

 

 

 

29.99%

 

-9.16%
(Institutional)
-9.03%
(Open)

 

Global Market Exposure Index

 

 

 

22.92%

 

-1.21%

(Institutional)
-1.21%
(Open)

 

 

 

 

 

 

 

58Prospectus


 

Management

Investment Manager

Lazard Asset Management LLC

Portfolio Manager/Analysts

David R. Cleary, portfolio manager/analyst on the Investment Manager’s Capital Allocator Series team, has been with the Portfolio since inception.

Christopher Komosa, portfolio manager/analyst on the Investment Manager’s Capital Allocator Series team, has been with the Portfolio since inception.

Additional Information

For important information about the purchase and sale of Portfolio shares, tax information and financial intermediary compensation, please turn to “Additional Information about the Portfolios” on page 60.

Prospectus59


 Lazard Funds Additional Information about the Portfolios

p

Purchase and Sale of Fund Shares

The initial investment minimums are:

 

 

 

Institutional Shares

 

 

$

 

100,000

 

 

Open Shares

 

 

$

 

2,500

 

 

IRA Rollover/Transfer (Open Shares only)

 

 

$

 

2,500

 

 

The subsequent investment minimum is $50.

Portfolio shares are redeemable through the Fund’s transfer agent, Boston Financial Data Services, Inc. (the “Transfer Agent”), on any business day by telephone, mail or overnight delivery. Clients of financial intermediaries may be subject to the intermediaries’ procedures.

Tax Information

All dividends and short-term capital gains distributions are generally taxable to you as ordinary income, and long-term capital gains are generally taxable as such, whether you receive the distribution in cash or reinvest it in additional shares.

Financial Intermediary Compensation

Payments to Broker-Dealers and Other Financial Intermediaries

If you purchase shares of a Portfolio through a broker-dealer or other financial intermediary (such as a bank), the Portfolio and the Investment Manager and its affiliates may pay the intermediary for the sale of Portfolio shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Portfolio over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.

60Prospectus


 Lazard Funds Overview

p

The Portfolios

The Fund consists of fifteen separate Portfolios. Each Portfolio offers Institutional Shares and Open Shares. Institutional Shares and Open Shares have different investment minimums and different expense ratios. Each Portfolio has its own investment objective, strategies, and risk/return and expense profile. Because you could lose money by investing in a Portfolio, be sure to read all risk disclosures carefully before investing.

Each Portfolio other than Lazard Capital Allocator Opportunistic Strategies Portfolio has adopted a policy to invest at least 80% of its assets in specified securities appropriate to its name and to provide its shareholders with at least 60 days’ prior notice of any change with respect to this policy.

Information on the recent strategies and holdings of each Portfolio that has commenced operations can be found in the current annual/semi-annual report (see back cover).

EQUITY PORTFOLIOS

Except as otherwise indicated, these Portfolios invest primarily in equity securities, including common stocks, preferred stocks and convertible securities. Under adverse market conditions, a Portfolio could pursue a defensive strategy by investing some or all of its assets in money market securities to seek to avoid or mitigate losses. In pursuing such a strategy, a Portfolio may forgo more profitable investment strategies and, as a result, may not achieve its stated investment objective.

Lazard U.S. Equity Value Portfolio
Lazard U.S. Strategic Equity Portfolio
Lazard U.S. Mid Cap Equity Portfolio
Lazard U.S. Small-Mid Cap Equity Portfolio
Lazard International Equity Portfolio
Lazard International Equity Select Portfolio
Lazard International Strategic Equity Portfolio
Lazard International Small Cap Equity Portfolio
Lazard Global Listed Infrastructure Portfolio
Lazard Emerging Markets Equity Portfolio
Lazard Emerging Markets Equity Select Portfolio
Lazard Developing Markets Equity Portfolio
Lazard Emerging Markets Equity Blend Portfolio

Lazard Emerging Markets Equity Portfolio is currently closed to investment by certain new investors. See pages 93-94 for more information.

Who May Want to Invest?

Consider investing in these Portfolios if you are:

 

 

 

 

pursuing a long-term goal such as retirement

 

 

 

 

looking to add an equity component to your investment portfolio

 

 

 

 

willing to accept the higher risks of investing in the stock market in exchange for potentially higher long-term returns

These Portfolios may not be appropriate if you are:

 

 

 

 

pursuing a short-term goal or investing emergency reserves

 

 

 

 

uncomfortable with an investment that will fluctuate in value

You should be aware that the Portfolios:

 

 

 

 

are not bank deposits

 

 

 

 

are not guaranteed, endorsed or insured by any bank, financial institution or government entity, such as the Federal Deposit Insurance Corporation

 

 

 

 

are not guaranteed to achieve their stated goals

FIXED-INCOME PORTFOLIO

Lazard U.S. High Yield Portfolio

This Portfolio invests in a variety of U.S. fixed-income securities. The Portfolio is constructed using a bottom-up discipline in which the Investment Manager follows a systematic process to seek out undervalued opportunities within each sector.

Who May Want to Invest?

Consider investing in this Portfolio if you are:

 

 

 

 

looking to add a monthly income component to your investments

 

 

 

 

seeking potentially higher returns than those offered by money market funds

 

 

 

 

willing to accept the risks of price and dividend rate fluctuations

Prospectus61


 

This Portfolio may not be appropriate if you are:

 

 

 

 

investing emergency reserves

 

 

 

 

uncomfortable with an investment that will fluctuate in value

You should be aware that the Portfolio:

 

 

 

 

is not a bank deposit

 

 

 

 

is not guaranteed, endorsed or insured by any bank, financial institution or government entity, such as the Federal Deposit Insurance Corporation

 

 

 

 

is not guaranteed to achieve its stated goal

CAPITAL ALLOCATOR PORTFOLIO

Lazard Capital Allocator Opportunistic Strategies Portfolio

This Portfolio invests primarily in other investment companies. Under adverse market conditions, the Portfolio could invest some or all of its assets in money market securities. The Portfolio might do this to seek to avoid or mitigate losses, but it may result in the Portfolio not achieving its investment objective.

Who May Want to Invest?

Consider investing in this Portfolio if you are:

 

 

 

 

pursuing a long-term goal such as retirement

 

 

 

 

looking to add an equity component to your investment portfolio

 

 

 

 

willing to accept the higher risks of investing in the stock market in exchange for potentially higher long-term returns

This Portfolio may not be appropriate if you are:

 

 

 

 

pursuing a short-term goal or investing emergency reserves

 

 

 

 

uncomfortable with an investment that will fluctuate in value

You should be aware that the Portfolio:

 

 

 

 

is not a bank deposit

 

 

 

 

is not guaranteed, endorsed or insured by any bank, financial institution or government entity, such as the Federal Deposit Insurance Corporation

 

 

 

 

is not guaranteed to achieve its stated goal

62Prospectus


 Lazard Funds Investment Objective, Strategies and Risks

p

Lazard U.S. Equity Value Portfolio

     

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of relatively large U.S. companies with market capitalizations generally in the range of companies included in the Russell 1000 Value Index (ranging from approximately $101 million to $326 billion as of March 24, 2010) at the time of initial purchase by the Portfolio that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. The Portfolio typically invests in 55 to 100 securities.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of U.S. companies. The Portfolio may invest up to 10% of its total assets in securities of non-U.S. companies that trade in U.S. markets.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Because the Portfolio may invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single corporate, economic, market, political or regulatory occurrence than if the Portfolio’s investments consisted of a larger number of securities.

Non-domestic securities 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.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

Prospectus63


 Lazard Funds Investment Objective, Strategies and Risks

p

Lazard U.S. Strategic Equity Portfolio

     

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of U.S. companies that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. Although the Portfolio generally focuses on large cap companies, the market capitalizations of issuers in which the Portfolio invests may vary with market conditions and the Portfolio also may invest in mid cap and small cap companies. Ordinarily, the market capitalizations of the Portfolio’s investments will be within the range of companies included in the S&P 500 Index (ranging from approximately $1.25 billion to $316 billion as of March 24, 2010).

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of U.S. companies. The Portfolio may invest up to 15% of its total assets in securities of non-U.S. equity companies, including ADRs and GDRs. The Investment Manager currently intends to invest the Portfolio’s assets in a relatively small number of issuers (generally 55 to 75).

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Small and mid cap companies carry additional risks because their earnings tend to be less predictable, their share prices more volatile and their securities less liquid than larger, more established companies. The shares of small and mid cap companies tend to trade less frequently than those of larger companies, which can have an adverse effect on the pricing of these securities and on the ability to sell these securities when the Investment Manager deems it appropriate. Some of the Portfolio’s investments will rise and fall based only on investor perception.

Because the Portfolio will invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single corporate, economic, market, political or regulatory occurrence than if the Portfolio’s investments consisted of a larger number of securities.

Non-domestic securities 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.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

64Prospectus


 Lazard Funds Investment Objective, Strategies and Risks

p

Lazard U.S. Mid Cap Equity Portfolio

     

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of mid cap U.S. companies that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. The Investment Manager considers “mid cap companies” to be those companies that, at the time of initial purchase by the Portfolio, have market capitalizations within the range of companies included in the Russell Midcap Index (ranging from approximately $101 million to $18 billion as of March 24, 2010). Because “mid cap companies” are defined in part by reference to an index, the market capitalization of companies in which the Portfolio may invest may vary with market conditions. The Investment Manager is not required to sell a company’s securities from the Portfolio’s holdings when the capitalization of the company increases or decreases so that the company no longer meets the definition of a “mid cap company.”

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of medium-size (mid cap) U.S. companies. The Portfolio may invest up to 20% of its assets in the equity securities of larger capitalization companies. The Portfolio also may invest up to 15% of its assets in equity securities of non-U.S. companies, including ADRs and GDRs.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Mid cap companies carry additional risks because their earnings tend to be less predictable, their share prices more volatile and their securities less liquid than larger, more established, companies. The shares of mid cap companies tend to trade less frequently than those of larger companies, which can have an adverse effect on the pricing of these securities and on the ability to sell these securities when the Investment Manager deems it appropriate.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Some of the Portfolio’s investments will rise and fall based only on investor perception. And, while investments in value stocks may limit downside risk over time, the Portfolio may, as a trade-off, produce smaller gains than riskier stock funds.

Non-domestic securities 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.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

Prospectus65


 Lazard Funds Investment Objective, Strategies and Risks

p

Lazard U.S. Small-Mid Cap Equity Portfolio

     

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of small to mid capitalization U.S. companies. The Investment Manager considers “small-mid cap companies” to be those companies that, at the time of initial purchase by the Portfolio, have market capitalizations within the range of companies included in the Russell 2500 Index (ranging from approximately $10.8 million to $10.4 billion as of March 24, 2010). Because “small-mid cap companies” are defined in part by reference to an index, the market capitalization of companies in which the Portfolio may invest may vary with market conditions. The Investment Manager is not required to sell a company’s securities from the Portfolio’s holdings when the capitalization of that company increases such that the company no longer meets the definition of a “small-mid cap company.”

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of small-mid cap U.S. companies. The Investment Manager focuses on relative value in seeking to construct a diversified portfolio of investments for the Portfolio that maintains sector and industry balance, using investment opportunities identified through bottom-up fundamental research conducted by the Investment Manager’s small cap, mid cap and global research platforms. The Investment Manager believes that contribution of ideas from multiple sources within the firm benefits the generation of investment ideas for consideration by the Portfolio’s portfolio management team. Companies selected for investment in the Portfolio generally have, in the Investment Manager’s opinion, one or more of the following characteristics:

 

 

 

 

sustainable returns

 

 

 

 

strong free cash flow with balance sheet flexibility

 

 

 

 

attractive valuation, utilizing peer group and historical comparisons

The Portfolio may invest up to 20% of its assets in equity securities of larger U.S. companies and may invest up to 10% of its total assets in securities of non-U.S. equity companies, including ADRs and GDRs.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Small and mid cap companies carry additional risks because their earnings tend to be less predictable, their share prices more volatile and their securities less liquid than larger, more established companies. The shares of small and mid cap companies tend to trade less frequently than those of larger companies, which can have an adverse effect on the pricing of these securities and on the ability to sell these securities when the Investment Manager deems it appropriate. Some of the Portfolio’s investments will rise and fall based only on investor perception.

66Prospectus


 

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Because the Portfolio may invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single corporate, economic, market, political or regulatory occurrence than if the Portfolio’s investments consisted of a larger number of securities.

Non-domestic securities 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.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

Prospectus67


 Lazard Funds Investment Objective, Strategies and Risks

p

Lazard International Equity Portfolio

     

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of relatively large non-U.S. companies with market capitalizations in the range of companies included in the MSCI EAFE Index (ranging from approximately $1.2 billion to $185 billion as of March 24, 2010) that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values.

In choosing stocks for the Portfolio, the Investment Manager looks for established companies in economically developed countries and may invest up to 30% of the Portfolio’s assets in securities of companies whose principal business activities are located in emerging market countries. The allocation of the Portfolio’s assets among geographic sectors, and between developed and emerging market countries, may shift from time to time based on the Investment Manager’s judgment. Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

68Prospectus


 Lazard Funds Investment Objective, Strategies and Risks

p

Lazard International Equity Select Portfolio

     

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities of relatively large non-U.S. companies with market capitalizations in the range of companies included in the MSCI EAFE Index (ranging from approximately $1.2 billion to $185 billion as of March 24, 2010) that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values.

The Investment Manager currently intends to hold securities, including ADRs, GDRs and common stocks, of between approximately 30 and 55 different issuers on a long-term basis. This strategy could result in lower brokerage costs to the Portfolio and lower taxable distributions. Although the Investment Manager does not anticipate frequent trading in the Portfolio’s securities, the Investment Manager will sell portfolio positions when it considers such action appropriate.

In choosing stocks for the Portfolio, the Investment Manager looks for established companies in economically developed countries. The allocation of the Portfolio’s assets among geographic sectors may shift from time to time based on the Investment Manager’s judgment. Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities.

The Portfolio may invest up to 30% of its assets in securities of companies whose principal business activities are located in emerging market countries, although the allocation of the Portfolio’s assets to emerging market countries may vary from time to time.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

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Because the Portfolio will invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single corporate, economic, market, political or regulatory occurrence than if the Portfolio’s investments consisted of a larger number of securities.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

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 Lazard Funds Investment Objective, Strategies and Risks

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Lazard International Strategic Equity Portfolio

     

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of non-U.S. companies whose principal activities are located in countries represented by the MSCI EAFE Index that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. The Portfolio may invest up to 30% of its assets in securities of companies whose principal business activities are located in emerging market countries, although the allocation of the Portfolio’s assets to emerging market countries may vary from time to time. The Portfolio may invest in companies of any size, and the market capitalizations of companies in which the Portfolio invests may vary with market conditions.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities. The Investment Manager currently intends to hold securities of between approximately 30 to 55 different issuers. The allocation of the Portfolio’s assets among geographic sectors may shift from time to time based on the Investment Manager’s judgment.

The countries represented by the MSCI EAFE Index currently include: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

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Because the Portfolio will invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single corporate, economic, market, political or regulatory occurrence than if the Portfolio’s investments consisted of a larger number of securities.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

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 Lazard Funds Investment Objective, Strategies and Risks

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Lazard International Small Cap Equity Portfolio

     

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of relatively small non-U.S. companies that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. The Investment Manager considers “small non-U.S. companies” to be those non-U.S. companies with market capitalizations, at the time of initial purchase by the Portfolio, below $5 billion or in the range of the smallest 10% of companies included in the MSCI EAFE Index (based on market capitalization of the Index as a whole, which ranged from approximately $1.2 billion to $185 billion as of March 24, 2010). Because “small non-U.S. companies” are defined in part by reference to an index, the market capitalization of companies in which the Portfolio may invest may vary with market conditions. The Investment Manager is not required to sell a company’s securities from the Portfolio’s holdings when the capitalization of the company increases so that the company no longer meets the definition of a “small non-U.S. company.”

In choosing stocks for the Portfolio, the Investment Manager looks for smaller, well-managed non-U.S. companies that have the potential to grow. The percentage of the Portfolio’s assets invested in particular geographic sectors may shift from time to time based on the Investment Manager’s judgment. Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of small cap companies.

These securities generally have one or more of the following characteristics:

 

 

 

 

the potential to become a larger factor in the company’s business sector

 

 

 

 

significant debt but high levels of free cash flow

 

 

 

 

a relatively short corporate history with the expectation that the business may grow

The Portfolio may invest up to 20% of its assets in equity securities of larger companies.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Small cap companies carry additional risks because their earnings tend to be less predictable, their share prices more volatile and their securities less liquid than larger, more established companies. The shares of small cap companies tend to trade less frequently than those of larger companies, which can have an adverse effect on the pricing of these securities and on the ability to sell these securities when the Investment Manager deems it appropriate. Some of the Portfolio’s investments will rise and fall based only on investor perception.

Non-domestic securities 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

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and legal standards, and, potentially, less liquidity.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

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 Lazard Funds Investment Objective, Strategies and Risks

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Lazard Global Listed Infrastructure Portfolio

Investment Objective

The Portfolio seeks total return.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of infrastructure companies and concentrates its investments in industries represented by infrastructure companies. The Investment Manager focuses on companies with a minimum market capitalization of $250 million that own physical infrastructure and which the Investment Manager believes are undervalued.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of infrastructure companies, which consist of utilities, pipelines, toll roads, airports, railroads, ports, telecommunications and other infrastructure companies, with securities listed on a national or other recognized securities exchange. Infrastructure companies typically derive at least 50% of their revenues from, or have at least 50% of their assets committed to, the generation, production, transmission, sale or distribution of energy or natural resources used to produce energy; distribution, purification and treatment of water; provision of communications services and media; management, ownership and/or operation of infrastructure assets or construction, development or financing of infrastructure assets, such as pipelines, toll roads, airports, railroads or ports. Infrastructure companies also include energy-related companies organized as master limited partnerships (“MLPs”) and their affiliates, and the Portfolio may invest up to 25% of its net assets in these energy-related MLPs and their affiliates.

The Portfolio seeks to focus its investments in a subset of infrastructure securities that are considered “preferred infrastructure” securities by the Investment Manager. Generally, the Investment Manager considers securities that are more likely to exhibit certain desirable characteristics, such as longevity of the issuer, lower risk of capital loss and revenues linked to inflation, to be “preferred infrastructure” securities.

Under normal market conditions, the Portfolio invests significantly (at least 40%—unless market conditions are not deemed favorable by the Investment Manager, in which case the Portfolio would invest at least 30%) in infrastructure companies organized or located outside the U.S. or doing a substantial amount of business outside the U.S. The Portfolio allocates its assets among various regions and countries, including the United States (but in no less than three different countries). The Portfolio considers a company that derives at least 50% of its revenue from business outside the U.S. or has at least 50% of its assets outside the U.S. as doing a substantial amount of business outside the U.S. The Portfolio may invest in equity securities of companies with some business activities located in emerging market countries. The allocation of the Portfolio’s assets to emerging market countries may shift from time to time based on the Investment Manager’s judgment and analysis of market conditions.

The Investment Manager generally seeks to substantially hedge foreign currency exposure in the Portfolio back to the U.S. dollar by entering into foreign currency forward contracts, although the Portfolio’s total foreign currency exposure may not be fully hedged at all times.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

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Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Securities and instruments of infrastructure companies are more susceptible to adverse economic or regulatory occurrences affecting their industries. Infrastructure companies may be subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction programs, high leverage, costs associated with environmental and other regulations, the effects of economic slowdown, surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors. Infrastructure companies also may be affected by or subject to:

 

 

 

 

regulation by various government authorities, including rate regulation;

 

 

 

 

service interruption due to environmental, operational or other mishaps;

 

 

 

 

the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards;

 

 

 

 

general changes in market sentiment towards infrastructure and utilities assets;

 

 

 

 

difficulty in raising capital in adequate amounts on reasonable terms in periods of high inflation and unsettled capital markets;

 

 

 

 

inexperience with and potential losses resulting from a developing deregulatory environment;

 

 

 

 

costs associated with compliance with and changes in environmental and other regulations; and

 

 

 

 

technological innovations that may render existing plants, equipment or products obsolete.

An investment in MLP units involves some risks that differ from an investment in the common stock of a corporation. Investing in MLPs involves certain risks related to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs holding credit-related investments are subject to interest rate risk and the risk of default on payment obligations by debt issuers.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market

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and other developments than other types of stocks.

Because the Portfolio may invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single corporate, economic, market, political or regulatory occurrence than if the Portfolio’s investments consisted of a larger number of securities.

Irrespective of any foreign currency exposure hedging, the Portfolio may experience a decline in the value of its portfolio securities, in U.S. dollar terms, due solely to fluctuations in currency exchange rates.

Forward currency contracts may reduce returns or increase volatility, perhaps substantially. These contracts can be illiquid and highly sensitive to changes in the value of the related currency. Forward currency contracts also are subject to the risk of default by the counterparty to the contract.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

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 Lazard Funds Investment Objective, Strategies and Risks

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This Portfolio is currently closed to investment by certain new investors. See pages 93-94 for more information.

Lazard Emerging Markets Equity Portfolio

     

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of non-U.S. companies whose principal activities are located in emerging market countries and that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values.

Emerging market countries include all countries represented by the MSCI EM Index, which currently includes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of companies whose principal business activities are located in emerging market countries. The allocation of the Portfolio’s assets among emerging market countries may shift from time to time based on the Investment Manager’s judgment and its analysis of market conditions.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

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 Lazard Funds Investment Objective, Strategies and Risks

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Lazard Emerging Markets Equity Select Portfolio

     

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, including common stocks, ADRs and GDRs, of non-U.S. companies whose principal activities are located in emerging market countries and that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. The Portfolio typically focuses on companies with a market capitalization of greater than $3 billion.

Emerging market countries include all countries represented by the MSCI EM Index, which currently includes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey. The Investment Manager currently intends to hold securities of between approximately 30 and 55 different issuers.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of companies whose principal business activities are located in emerging market countries. The allocation of the Portfolio’s assets among emerging market countries may shift from time to time based on the Investment Manager’s judgment and its analysis of market conditions.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

Because the Portfolio will invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single corporate, economic, market, political or regulatory occurrence than if the Portfolio’s investments consisted of a larger number of securities.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

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 Lazard Funds Investment Objective, Strategies and Risks

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Lazard Developing Markets Equity Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, principally common stocks, of non-U.S. companies whose principal activities are located in emerging market countries (also known as “developing markets”).

Emerging market countries include all countries represented by the MSCI EM Index, which currently includes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey. The Portfolio’s investments will generally consist of a portfolio of approximately 60 to 90 securities.

The Investment Manager employs a relative growth investment philosophy that is based on value creation through the process of bottom-up stock selection. The Investment Manager’s approach consists of an analytical framework, accounting validation, fundamental analysis and portfolio construction parameters. The Investment Manager’s selection process focuses on growth and considers the sustainability of growth and the trade off between valuation and growth. A premium may be paid for higher, sustainable growth.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of companies whose principal business activities are located in emerging market countries. The allocation of the Portfolio’s assets among emerging market countries may shift from time to time based on the Investment Manager’s judgment and its analysis of market conditions.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests in stocks believed by the Investment Manager to have the potential for growth, but that may not realize such perceived potential for extended periods of time or may never realize such perceived growth potential. Such stocks may be more volatile than other stocks because they can be more sensitive to investor perceptions of the issuing company’s growth potential. The stocks in which the Portfolio invests may

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respond differently to market and other developments than other types of stocks.

Because the Portfolio will invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single corporate, economic, market, political or regulatory occurrence than if the Portfolio’s investments consisted of a larger number of securities.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

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 Lazard Funds Investment Objective, Strategies and Risks

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Lazard Emerging Markets Equity Blend Portfolio

     

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio invests primarily in equity securities, including common stocks, ADRs and GDRs, of non-U.S. companies whose principal activities are located in emerging market countries.

Emerging market countries include all countries represented by the MSCI EM Index, which currently includes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

The Investment Manager will allocate the Portfolio’s assets between the Investment Manager’s Emerging Markets Equity Select and Developing Markets Equity investment strategies. In the Emerging Markets Equity Select strategy, assets are invested in companies that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. The strategy typically focuses on companies with a market capitalization of greater than $3 billion. In the Developing Markets Equity strategy, the Investment Manager employs a relative growth investment philosophy that is based on value creation through the process of bottom-up stock selection. The Investment Manager’s approach consists of an analytical framework, accounting validation, fundamental analysis and portfolio construction parameters. The allocation among emerging market countries within each strategy may shift from time to time based on the Investment Manger’s judgment and its analysis of market conditions.

The Investment Manager currently intends to maintain an allocation of approximately 40%-60% of the Portfolio’s assets in each strategy, but the allocation ranges could change in the future without prior notice to shareholders. The Investment Manager will make allocation decisions between the Emerging Markets Equity Select and Developing Markets Equity strategies based on quantitative and qualitative analysis through proprietary software models. Quantitative analysis includes, among others, statistical analysis of portfolio risks, factor dependencies and trading tendencies. Qualitative analysis includes, among others, analysis of the global economic environment as well as internal and external research on individual securities, portfolio holdings, attribution factors, behavioral patterns and overall market views and scenarios. The Investment Manager will periodically review the allocation of Portfolio assets between the strategies and modify the relative weightings to emphasize risk or to seek to mitigate risk exposures.

Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities of companies whose principal business activities are located in emerging market countries.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

82Prospectus


 

Non-domestic securities carry special risks, such as exposure to currency fluctuations, less efficient trading markets, political instability, a lack of company information, differing auditing and legal standards, and, potentially, less liquidity.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The Portfolio invests a portion of its assets in stocks believed by the Investment Manager to be undervalued, but that may not realize their perceived value for extended periods of time or may never realize their perceived value. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

The Portfolio invests a portion of its assets in stocks believed by the Investment Manager to have the potential for growth, but that may not realize such perceived potential for extended periods of time or may never realize such perceived growth potential. Such stocks may be more volatile than other stocks because they can be more sensitive to investor perceptions of the issuing company’s growth potential. The stocks in which the Portfolio invests may respond differently to market and other developments than other types of stocks.

The Portfolio’s ability to achieve its investment objective depends in part on the Investment Manager’s skill in determining the Portfolio’s allocation between the investment strategies. The Investment Manager’s evaluations and assumptions underlying its allocation decisions may differ from actual market conditions.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

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 Lazard Funds Investment Objective, Strategies and Risks

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Lazard U.S. High Yield Portfolio

Investment Objective

The Portfolio seeks maximum total return from a combination of capital appreciation and current income.

Principal Investment Strategies

The Portfolio invests primarily in high-yielding U.S. corporate fixed-income securities which, at the time of purchase, are rated below investment grade (lower than Baa by Moody’s or lower than BBB by S&P (“junk bonds”). The Portfolio may invest in non-U.S. securities, including, to a limited extent, in companies in, or governments of, emerging market countries.

Under normal circumstances, the Portfolio invests at least 80% of its assets in bonds and other fixed-income securities of U.S. companies rated, at the time of purchase, below investment grade by S&P or Moody’s and as low as the lowest rating assigned by S&P or Moody’s, or the unrated equivalent as determined by the Investment Manager. The Portfolio focuses its investments in high-yielding securities that may be considered “better quality” (B+ or higher by Moody’s or S&P or the unrated equivalent as determined by the Investment Manager). Although the Portfolio may invest in fixed-income securities without regard to their maturity, the Portfolio’s average weighted maturity is expected to range between two and ten years.

Securities are evaluated based on their fundamental and structural characteristics. Valuation analysis is tailored to the specific asset class, but may include credit research, prepayment or call options, maturity, duration, coupon, currency and country risks.

The Investment Manager assigns a relative yield spread target to each security purchased, which reflects the trading level at which the Investment Manager believes the security is fully valued. Targets are reviewed periodically, and performance is evaluated on an ongoing basis. The Investment Manager typically sells a security for any of the following reasons:

 

 

 

 

the yield spread declines to a level at which the Investment Manager believes the security no longer reflects relative value

 

 

 

 

the original underlying investment conditions are no longer valid, including a change in the fundamental rationale for the purchase

 

 

 

 

in the opinion of the Investment Manager, the security’s respective asset category or sector has become overvalued relative to investment risks

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While bonds are designed to produce a stable stream of income, their prices move inversely with changes in interest rates. Interest rate risk is usually greater for fixed-income securities with longer maturities or durations. The Portfolio’s investments in lower-rated, higher-yielding bonds are subject to greater credit risk than its higher-rated investments. Junk bonds tend to be more volatile, less liquid and are considered speculative. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

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Other risk factors could have an effect on the Portfolio’s performance, including:

 

 

 

 

if an issuer fails to make timely interest or principal payments

 

 

 

 

if there is a decline in the credit quality of a bond, or a perception of a decline, the bond’s value could fall, potentially lowering the Portfolio’s share price

 

 

 

 

the price and yield of non-U.S. debt securities could be affected by factors ranging from political and economic instability to changes in currency exchange rates

 

 

 

 

during unusual market conditions, the Portfolio may not be able to sell certain securities at the time and price it would like

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

At times, the Portfolio may engage in short-term trading, which could produce higher brokerage costs and taxable distributions.

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 Lazard Funds Investment Objective, Strategies and Risks

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Lazard Capital Allocator Opportunistic Strategies Portfolio

Investment Objective

The Portfolio seeks long-term capital appreciation.

Principal Investment Strategies

The Portfolio utilizes an asset allocation strategy to invest in a global portfolio of uncorrelated assets that can include exposure, through underlying vehicles, to stocks, bonds, commodities and other investments. The Investment Manager believes that over the long term, and on a risk-adjusted basis, there is no one size fits all approach to asset allocation and that historical relationships coupled with market insights can help develop a global view to identify and anticipate certain secular and cyclical changes. The Investment Manager employs a multi-variable investment strategy incorporating both quantitative and qualitative factors to generate the Portfolio’s asset allocation decisions.

The Portfolio invests primarily in common stock of exchange-traded open-end management investment companies and similar products, which generally pursue a passive index-based strategy (commonly known as ETFs), as well as actively managed closed-end funds. ETFs in which the Portfolio may invest include both ETFs designed to correlate directly with an index and ETFs designed to correlate inversely with an index. The Portfolio, through Underlying Funds in which it invests, may invest in non-U.S. companies (including those in emerging markets), and the Portfolio also may invest directly in equity and debt securities in addition to its investments in Underlying Funds. The Portfolio’s investment portfolio is concentrated in a relatively small number of holdings (generally 10 to 30). Investors can invest directly in Underlying Funds and do not need to invest in Underlying Funds through mutual funds or separately managed accounts.

The Portfolio’s investments generally are categorized by the Investment Manager as falling within the following four categories: thematic, diversifying assets, discounted assets and contrarian/opportunistic.

The Investment Manager makes allocation changes in the Portfolio’s investments based on a forward looking assessment of capital markets using a risk/reward and probability methodology.

The Portfolio may engage in derivatives transactions, including certain foreign currency transactions (which may include forward currency contracts, swap agreements and options), entering into equity and total return swap agreements and writing put and covered call options on securities (including ETFs), indexes and currencies, for hedging purposes or to seek to increase returns.

The Portfolio may engage, to a limited extent, in various investment techniques, such as lending portfolio securities.

Principal Investment Risks

While stocks (including those in which the Underlying Funds invest) have historically been a leading choice of long-term investors, they do fluctuate in price, often based on factors unrelated to the issuer’s value. The value of your investment in the Portfolio will fluctuate, which means you could lose money.

Shares of Underlying Funds in which the Portfolio invests may trade at prices that vary from their NAVs, sometimes significantly. The shares of Underlying Funds may trade at prices at, below or above their most recent NAV. Shares of closed-end funds, in particular, frequently trade at persistent discounts to their NAV. In addition, the performance of an ETF pursuing a passive index-based strategy may diverge from the performance of the index. The Portfolio’s investments in Underlying Funds are subject to the risks of Underlying Funds’ investments, as well

86Prospectus


 

as to the general risks of investing in Underlying Funds. Portfolio shares will bear not only the Portfolio’s management fees and operating expenses, but also their proportional share of the management fees and operating expenses of Underlying Funds in which the Portfolio invests.

The Portfolio may be limited by the 1940 Act in the amount of its assets that may be invested in Underlying Funds unless an Underlying Fund has received an exemptive order from the SEC on which the Portfolio may rely or an exemption is available. Many ETFs have received such an exemptive order, and the Portfolio’s reliance is conditioned on compliance with certain conditions of the order. If an exemptive order has not been received and an exemption is not available under the 1940 Act, the Portfolio will be limited in the amount it can invest in Underlying Funds that are registered investment companies to: (1) 3% or less of an Underlying Fund’s voting shares, (2) an Underlying Fund’s shares in value equal to or less than 5% of the Portfolio’s assets and (3) shares of Underlying Funds in the aggregate in value equal to or less than 10% of the Portfolio’s total assets.

Non-domestic securities 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.

The securities markets of emerging market countries can be extremely volatile. The Portfolio’s performance will be influenced by political, social and economic factors affecting companies in emerging market countries. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries.

The market value of debt securities is affected by changes in prevailing interest rates and the perceived credit quality of the issuer. When prevailing interest rates fall or perceived credit quality improves, the market value of the affected debt securities generally rises. Conversely, when interest rates rise or perceived credit quality weakens, the market value of the affected debt securities generally declines.

Because the Portfolio will invest in a smaller number of issuers than other, more diversified, investment portfolios, the Portfolio’s NAV may be relatively more susceptible to adverse effects from any single economic or market occurrence than if the Portfolio’s investments consisted of a larger number of securities.

A contrarian/opportunistic strategy is susceptible to the risk that the Investment Manager’s determinations of opportunities in market anomalies do not materialize as expected so that investments using this strategy do not increase in value (and may lose value).

Derivatives transactions, including those entered into for hedging purposes, may reduce returns or increase volatility. Many derivatives, such as those used in forward currency contracts, swap agreements and certain options, are subject to the risk of default by the counterparty, in addition to risks of changes in the value of the related currency, security, securities or index. These derivatives also can be illiquid and highly sensitive to changes in the related currency, security, securities or index. As such, a small investment in certain derivatives could have a potentially large impact on the Portfolio’s performance.

When the Portfolio lends securities to brokers, dealers and other financial institutions, there is a risk that the loaned securities may not be returned during normal settlement periods if the borrower defaults.

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 Lazard Funds Fund Management

p

Investment Manager

Lazard Asset Management LLC, 30 Rockefeller Plaza, New York, New York 10112-6300, serves as the Investment Manager of each Portfolio. The Investment Manager provides day-to-day management of each Portfolio’s investments and assists in the overall management of the Fund’s affairs. The Investment Manager and its global affiliates provide investment management services to client discretionary accounts with assets totaling approximately $116.5 billion as of December 31, 2009. Its clients are both individuals and institutions, some of whose accounts have investment policies similar to those of several of the Portfolios.

The Fund has agreed to pay the Investment Manager an investment management fee at the annual rate set forth below as a percentage of the relevant Portfolio’s average daily net assets. The investment management fees are accrued daily and paid monthly. For the fiscal year ended December 31, 2009, the Investment Manager waived all or a portion of its management fees with respect to certain Portfolios, which resulted in such Portfolios paying the Investment Manager an investment management fee at the effective annual rate set forth below as a percentage of the relevant Portfolio’s average daily net assets.

 

 

 

 

 

 

 

Name of Portfolio

 

Investment
Management
Fee Payable

 

Effective
Annual Rate
of Investment
Management
Fee Paid

 

 

 

U.S. Equity Value Portfolio

 

.75%

 

.00%

 

 

 

U.S. Strategic Equity Portfolio

 

.75%

 

.71%

 

 

 

U.S. Mid Cap Equity Portfolio

 

.75%

 

.75%

 

 

 

U.S. Small-Mid Cap Equity Portfolio

 

.75%

 

.74%

 

 

 

International Equity Portfolio

 

.75%

 

.75%

 

 

 

International Equity Select Portfolio

 

.85%

 

.00%

 

 

 

International Strategic Equity Portfolio

 

.75%

 

.75%

 

 

 

International Small Cap Equity Portfolio

 

.75%

 

.71%

 

 

 

Global Listed Infrastructure Portfolio

 

.90%

 

.00%

*

 

 

Emerging Markets Equity Portfolio

 

1.00%

 

1.00%

 

 

 

Emerging Markets Equity Select Portfolio

 

1.00%

 

N/A%

 

 

Developing Markets Equity Portfolio

 

1.00%

 

.43%

 

 

 

Emerging Markets Equity Blend Portfolio

 

1.05%

 

N/A%

 

 

U.S. High Yield Portfolio

 

.55%

 

.21%

 

 

 

Capital Allocator Opportunistic
Strategies Portfolio

 

1.00%

 

.88%

 

 

 

 

*

 

 

 

The Portfolio commenced investment operations on December 31, 2009.

 

 

 

 

The Portfolio had not commenced investment operations as of December 31, 2009.

A discussion regarding the basis for the approval of the investment management agreement between the Fund, on behalf of the Portfolios, and the Investment Manager is available in the Fund’s annual report to shareholders for the year ended December 31, 2009.


The Investment Manager has a contractual agreement to waive its fee and, if necessary, reimburse each Portfolio through April 30, 2011, to the extent Total Annual Portfolio Operating Expenses exceed the amounts shown below (expressed as a percentage of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares), exclusive of taxes, brokerage, interest on borrowings, fees and expenses of “Acquired Funds” and extraordinary expenses, and excluding shareholder redemption fees or other transaction fees. This agreement can only be amended by agreement of the Fund and the Investment Manager to lower the net amount shown and will terminate automatically in the event of termination of the Investment Management Agreement between the Investment Manager and the Fund, on behalf of the Portfolios.

 

 

 

 

 

Name of Portfolio

 

Institutional
Shares

 

Open
Shares

 

U.S. Equity Value Portfolio*

 

1.00%

 

1.30%

 

U.S. Strategic Equity Portfolio

 

1.05%

 

1.35%

 

U.S. Mid Cap Equity Portfolio

 

1.05%

 

1.35%

 

U.S. Small-Mid Cap Equity Portfolio

 

1.15%

 

1.45%

 

International Equity Portfolio

 

1.05%

 

1.35%

 

International Equity Select Portfolio

 

1.15%

 

1.45%

 

International Strategic Equity Portfolio

 

1.15%

 

1.45%

 

International Small Cap Equity Portfolio

 

1.13%

 

1.43%

 

Global Listed Infrastructure Portfolio

 

1.30%

 

1.60%

 

Emerging Markets Equity Portfolio

 

1.30%

 

1.60%

 

Emerging Markets Equity Select Portfolio

 

1.30%

 

1.60%

 

Developing Markets Equity Portfolio

 

1.30%

 

1.60%

 

Emerging Markets Equity Blend Portfolio

 

1.35%

 

1.65%

 

U.S. High Yield Portfolio

 

.55%

 

.85%

 

Capital Allocator Opportunistic Strategies Portfolio**

 

1.02%

 

1.32%

 

 

*

 

 

 

This agreement continues in effect from May 1, 2011 through April 30, 2020, at levels of 1.10% and 1.40% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively.

 

**

 

 

 

The addition of Acquired Fund Fees and Expenses will cause Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement to exceed the maximum amounts of 1.02% and 1.32% for Institutional Shares and Open Shares, respectively, agreed to by the Investment Manager.

88Prospectus


 

Portfolio Management

The Investment Manager manages the Portfolios on a team basis. The team is involved in all levels of the investment process. This team approach allows for every portfolio manager to benefit from the views of his or her peers. Each portfolio management team is comprised of multiple team members. Although their roles and the contributions they make may differ, each member of the team participates in the management of the respective Portfolio. Members of each portfolio management team discuss the portfolio, including making investment recommendations, overall portfolio composition, and the like. Research analysts perform fundamental research on companies (based on, for example, sectors or geographic regions) in which the Portfolio may invest.

The names of the persons who are primarily responsible for the day-to-day management of the assets of the Portfolios are as follows:

U.S. Equity Value PortfolioAndrew D. Lacey#, Nicholas Sordoni, Ronald Temple (since February 2009) and J. Richard Tutino

U.S. Strategic Equity PortfolioChristopher H. Blake, Robert A. Failla and Andrew D. Lacey# and Ronald Temple (since February 2009)

U.S. Mid Cap Equity PortfolioChristopher H. Blake (since November 2001), Robert A. Failla (since July 2005) and Andrew D. Lacey# (since January 2001)

U.S. Small-Mid Cap Equity PortfolioDaniel Breslin (since May 2007) and Andrew D. Lacey* (since May 2003)

International Equity PortfolioMichael A. Bennett (since May 2003), Michael G. Fry (since November 2005), Michael Powers (since May 2003) and John R. Reinsberg#

International Equity Select PortfolioMichael A. Bennett, Gabrielle M. Boyle and Michael Powers (each since May 2003), Adam Cohen (since April 2008) and John R. Reinsberg*

International Strategic Equity PortfolioMichael A. Bennett (since September 2008), Robin O. Jones (since May 2009), Mark Little, Brian Pessin and John R. Reinsberg#

International Small Cap Equity PortfolioBrian Pessin (since January 2003), John R. Reinsberg* and Edward Rosenfeld (since May 2007)

Global Listed Infrastructure PortfolioJohn Mulquiney and Warryn Robertson

Emerging Markets Equity PortfolioRohit Chopra (since May 2007), James M. Donald (since November 2001), Erik McKee (since July 2008) and John R. Reinsberg*

Emerging Markets Equity Select PortfolioRohit Chopra, James M. Donald, Erik McKee and John R. Reinsberg*

Developing Markets Equity PortfolioJames M. Donald†, Peter Gillespie, Kevin O’ Hare and John R. Reinsberg*

Emerging Markets Equity Blend PortfolioJai Jacob, James M. Donald and Kevin O’Hare

U.S. High Yield PortfolioJ. William Charlton (since November 2002) and Thomas M. Dzwil (since May 2003)

Capital Allocator Opportunistic Strategies PortfolioDavid R. Cleary and Christopher Komosa

 

#

 

 

 

In addition to his oversight responsibility, Mr. Lacey or Mr. Reinsberg, as the case may be, is a member of the portfolio management team.

 

*

 

 

 

As a Deputy Chairman of the Investment Manager, Mr. Lacey or Mr. Reinsberg, as the case may be, is ultimately responsible for overseeing this Portfolio but is not responsible for its day-to-day management.

 

 

 

 

As head of the Emerging Markets Group, Mr. Donald is ultimately responsible for overseeing this Portfolio but is not responsible for its day-to-day management.

Unless otherwise indicated, each portfolio manager has served in that capacity since the relevant Portfolio’s inception (for Portfolios that have not yet commenced operations, the listed portfolio managers are anticipated to serve upon commencement of operations).

Biographical Information of Principal Portfolio Managers

Michael A. Bennett, a Managing Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s International Equity teams. Prior to joining the Investment Manager in 1992, Mr. Bennett was an international equity analyst with General Electric Investment Corporation and worked at Keith Lippert Associates and Arthur Andersen & Company. Mr. Bennett has been working in the investment field since 1987 and is a Chartered Financial Analyst (“CFA”) Charterholder.

Christopher H. Blake, a Managing Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s U.S. Strategic Equity and U.S. Mid Cap Equity teams. Mr. Blake joined the Investment Manager in 1995, when he began working in the investment field as a research analyst for the Investment Manager.

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Gabrielle M. Boyle, a Senior Managing Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams. Prior to joining the Investment Manager in 1993, she worked with Royal Insurance Asset Management. Ms. Boyle has been working in the investment field since 1990 and is a member of the UK Society of Investment Professionals.

Daniel Breslin, a Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s U.S. Small-Mid Cap Equity team. He began working in the investment field in 1992. Prior to joining the Investment Manager in 2002, Mr. Breslin was with Guardian Life and New York Life.

J. William Charlton, a Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s U.S. High Yield Fixed Income team. Prior to joining the Investment Manager in 2002, Mr. Charlton worked at Offitbank.

Rohit Chopra, a Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Emerging Markets Equity team, focusing on consumer and telecommunications research and analysis. He began working in the investment field in 1996. Prior to joining the Investment Manager in 1999, Mr. Chopra was with Financial Resources Group, Deutsche Bank and Morgan Stanley.

David R. Cleary, a Managing Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Capital Allocator Series team and provides oversight to the U.S. Fixed Income platform. Prior to joining the Investment Manager in 1994, Mr. Cleary was with Union Bank of Switzerland and IBJ Schroeder. Mr. Cleary is a CFA Charterholder.

Adam Cohen, a Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Global, International and European Equity Select teams. He began working in the investment field in 1989. Prior to joining the Investment Manager in 2007, Mr. Cohen was a specialist financials broker with Fox Pitt-Kelton and a Pan European Equity Research salesperson at Lehman Brothers, Salomon Brothers and at JP Morgan Chase.

James M. Donald, a Managing Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Emerging Markets Equity team and Head of the Emerging Markets Group. Prior to joining the Investment Manager in 1996, Mr. Donald was a portfolio manager with Mercury Asset Management. Mr. Donald is a CFA Charterholder.

Thomas M. Dzwil, a Senior Vice President of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s U.S. High Yield Fixed Income team. Prior to joining the Investment Manager in 2002, Mr. Dzwil worked at Offitbank.

Robert A. Failla, a Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s U.S. Strategic Equity, U.S. Mid Cap Equity and Global Equity teams. Prior to joining the Investment Manager in 2003, he was a portfolio manager with AllianceBernstein. He began working in the investment field in 1993 and is a CFA Charterholder.

Michael G. Fry, a Managing Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams. Prior to joining the Investment Manager in 2005, Mr. Fry held several positions at UBS Global Asset Management, including Head of Global Equity Portfolio Management, Global Head of Equity Research and Head of Australian Equities. Mr. Fry began working in the investment field in 1981.

Peter Gillespie, a Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Developing Markets Equity team. Prior to joining the Investment Manager in 2007, he was a portfolio manager at Newgate Capital, LLP, GE Asset Management and an analyst at Sinta Capital Corp. Mr. Gillespie is a CFA Charterholder.

Jai Jacob, a Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Global Multi-Strategy team. Mr. Jacob began working in the investment field in 1998 when he joined the Investment Manager.

Robin O. Jones, a Senior Vice President of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s International Strategic Equity team. Prior to rejoining the Investment Manager in 2007, Mr. Jones was a portfolio manager for Bluecrest Capital Management since 2006. Mr. Jones initially joined the Investment Manager in 2002, when he began working in the investment field.

Christopher Komosa, a Senior Vice President of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Capital Allocator Series team. Prior to joining the Investment Manager in 2006, Mr. Komosa

90Prospectus


 

was with Permal Asset Management, Pinnacle International Management, Caxton Associates and Graham Capital. Mr. Komosa is a CFA Charterholder.

Andrew D. Lacey, a Deputy Chairman of the Investment Manager, is responsible for oversight of U.S. and Global strategies. He also is a portfolio manager/analyst on various of the Investment Manager’s U.S. Equity and Global Equity teams. Mr. Lacey joined the Investment Manager in 1996, and has been working in the investment field since 1995.

Mark Little, a Managing Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s International Strategic Equity team. Prior to joining the Investment Manager in 1997, Mr. Little was a manager with the Coopers & Lybrand corporate finance practice. He began working in the investment field in 1992.


Erik McKee, a Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Emerging Markets Equity team, focusing on the materials and industrials sectors. He began working in the investment field in 1996. Prior to joining the Investment Manager in 1999, Mr. McKee was with Bank of America and Unibanco in Sao Paulo, Brazil.

John Mulquiney is a portfolio manager/analyst on the Investment Manager’s Global Listed Infrastructure team. Prior to joining the Investment Manager in August 2005, Mr. Mulquiney worked at Tyndall Australia and in the Asset and Infrastructure Group at Macquarie Bank, where he undertook transactions and developed valuation models for airports, electricity generators, rail projects and health infrastructure. Mr. Mulquiney is a CFA Charterholder.

Kevin O’Hare, a Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Developing Markets Equity team, focusing on the technology, health care, telecommunications and consumer discretionary sectors. He began working in the investment field in 1991. Prior to joining the Investment Manager in 2001, Mr. O’Hare was with Merrill Lynch and Moore Capital Management. Mr. O’Hare is a CFA Charterholder.

Brian Pessin, a Managing Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Global, International and European Small Cap Equity teams. Prior to joining the Investment Manager in 1999, Mr. Pessin was associated with Dawson, Samberg Capital Management, Gabelli & Company and Auerbach, Grayson & Co. He has been working in the investment field since 1994 and is a CFA Charterholder.

Michael Powers, a Managing Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams. He began working in the investment field in 1990 when he joined the Investment Manager.

John R. Reinsberg, a Deputy Chairman of the Investment Manager, is responsible for oversight of International and Global strategies. He also is a portfolio manager/analyst on the Investment Manager’s Global Equity and International Equity teams. Prior to joining the Investment Manager in 1992, he served as Executive Vice President of General Electric Investment Corporation and Trustee of the General Electric Pension Trust. Mr. Reinsberg began working in the investment field in 1981.

Warryn Robertson is a portfolio manager/analyst on the Investment Manager’s Global Listed Infrastructure team. Prior to joining the Investment Manager in April 2001, Mr. Robertson spent three years with Capital Partners, an independent advisory house, where he was an associate director developing business valuations for infrastructure assets and other alternative equity investments including airports, toll roads, timber plantations, power stations and coal mines. Mr. Robertson is a member of the Securities Institute of Australia and the Institute of Chartered Accountants.

Edward Rosenfeld, a Senior Vice President of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s Global, International and European Small Cap Equity teams. He began working in the investment industry in 1996. Prior to joining the Investment Manager in 2001, Mr. Rosenfeld was an analyst with J.P. Morgan.

Nicholas Sordoni, a Senior Vice President of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s U.S. Equity Value team. Prior to joining the Investment Manager in 2002, Mr. Sordoni was an Equity Research Associate at Credit Suisse First Boston covering the health care industry. Mr. Sordoni began working in the investment field in 1997. Mr. Sordoni is a CFA Charterholder.

Ronald Temple, a Managing Director of the Investment Manager, is a portfolio manager/analyst on various of the Investment Manager’s U.S. Equity teams. In addition, Mr. Temple is a Co-Director of Research and a Research Analyst on the Global Research Platform, primarily covering the financials sector. Mr. Temple joined the Investment Manager in 2001 and has been working in the investment field since 1991.

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J. Richard Tutino, a Managing Director of the Investment Manager, is a portfolio manager/analyst on the Investment Manager’s U.S. Equity Value and U.S. Equity Select teams. Prior to joining the Investment Manager in 1997, Mr. Tutino was associated with Thorsell, Parker Partners and Dreman Value Management. He is a member of the New York Society of Security Analysts and a CFA Charterholder.

Additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of shares of the Portfolios is contained in the Fund’s Statement of Additional Information (“SAI”).

Advisory Board

An Advisory Board of three external advisors assists the portfolio managers in formulating policy for management of Lazard Capital Allocator Opportunistic Strategies Portfolio. The members of this team are Herbert W. Gullquist, Senior Advisor of the Investment Manager, Victor A. Canto, PhD, founder and chairman of La Jolla Economics (an economics consulting firm), and John Reese, a former Managing Director of the Investment Manager. The Advisory Board is not responsible for managing the Portfolio on a day-to-day basis.

Administrator

State Street Bank and Trust Company (“State Street”), located at One Lincoln Street, Boston, Massachusetts 02111, serves as each Portfolio’s administrator.

Distributor


Lazard Asset Management Securities LLC (the “Distributor”) acts as distributor for the Fund’s shares.

Custodian

State Street acts as custodian of the Portfolios’ investments. State Street may enter into subcustodial arrangements on behalf of the Portfolios for the holding of non-domestic securities.

92Prospectus


 Lazard Funds Shareholder Information

p

General

Portfolio shares are sold and redeemed, without a sales charge, on a continuous basis at the NAV next determined after an order in proper form is received by the Transfer Agent or another authorized entity.

The Fund determines the NAV of each Portfolio’s share classes as of the close of regular session trading on the New York Stock Exchange (the “NYSE”) (normally 4:00 p.m. Eastern time) on each day the NYSE is open for trading. The Fund values equity securities for which market quotations are readily available at market value. Securities and other assets for which current market quotations are not readily available are valued at fair value as determined in good faith in accordance with procedures approved by the Board of Directors (the “Board”).

Calculation of NAV may not take place contemporaneously with the determination of the prices of portfolio assets used in such calculation. 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 NAV 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 value as determined by, or in accordance with procedures approved by, the Board. Fair valuing of non-domestic 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 NAV will reflect the affected securities’ values as determined in the judgment of the Board 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’ NAVs. Non-domestic securities may trade on days when a Portfolio is not open for business, thus affecting the value of the Portfolio’s assets on days when Portfolio shareholders may not be able to buy or sell Portfolio shares.

Minimum Investment

All purchases made by check should be in U.S. Dollars and made payable to “The Lazard Funds, Inc.” Third party checks will not be accepted. The Fund will not accept cash or cash equivalents (such as currency, money orders or travelers checks) for the purchase of Fund shares. Please note the following minimums in effect for initial investments:

 

 

 

Institutional Shares

 

 

$

 

100,000

 

 

Open Shares

 

 

$

 

2,500

 

 

IRA Rollover/Transfer (Open Shares only)

 

 

$

 

2,500

 

 

The subsequent investment minimum is $50.

The minimum investment requirements may be waived or lowered for investments effected through banks and other institutions that have entered into arrangements with the Fund or the Distributor and for investments effected on a group basis by certain other entities and their employees, such as pursuant to a payroll deduction plan and asset-based or wrap programs. Please consult your financial intermediary for information about minimum investment requirements. The Fund reserves the right to change or waive the minimum initial, and subsequent, investment requirements at any time.

Lazard Emerging Markets Equity Portfolio Currently Closed to Certain New Investors

The Portfolio was closed to investment by most new investors as of September 30, 2008. A shareholder that was a direct shareholder of the Portfolio (in the shareholder’s own name or as a beneficial owner of shares held in another name) on September 30, 2008, which account remains open, may make additional investments in the Portfolio or open additional accounts in the Portfolio under the same primary social security number or tax identification number. In addition, the shareholder may continue to reinvest dividends and capital gains distributions in shares of the Portfolio.

The following categories of investors may continue to invest in the Portfolio or open a new account:

 

 

 

 

financial advisors, planners, consultants, institutions and intermediaries with existing clients in the Portfolio on September 30, 2008,

Prospectus93


 

 

 

 

 

sponsor fee-based programs with existing clients in or allocations to the Portfolio on September 30, 2008,

 

 

 

 

retirement or employee benefit plans (including 401(k) and other defined contribution plans), and their participants, that could have invested in the Portfolio on September 30, 2008,

 

 

 

 

shareholders who are transferring or “rolling over” into an IRA account from an employee benefit plan through which they held shares of the Portfolio on September 30, 2008,

 

 

 

 

employees of the Investments Manager or its affiliates, or an immediate family member of either,

 

 

 

 

investors receiving shares of the Portfolio transferred from an existing shareholder or received as a gift from an existing shareholder of the Portfolio, and

 

 

 

 

Fund Directors.

The Portfolio may ask a shareholder to verify meeting one of the guidelines prior to permitting the shareholder to open a new account in the Portfolio. The Fund also reserves the right to close a Portfolio to investors at any time (including closing a Portfolio to one or more of the above categories of investors) or to re-open a closed Portfolio to all investors at any future date.

For questions about qualifying to purchase shares of Lazard Emerging Markets Equity Portfolio, please call 800-823-6300.

How to Buy Shares

Through the Transfer Agent:

Shareholders who do not execute trades through a brokerage account should submit their purchase requests to the Transfer Agent by telephone or mail, as follows:

Initial Purchase

By Mail

 

1.

 

 

 

Complete a Purchase Application. Indicate the services to be used.

 

2.

 

 

 

Send the Purchase Application and a check for $2,500 or more for Open Shares, or $100,000 or more for Institutional Shares, payable to “The Lazard Funds, Inc.” to:

regular mail
The Lazard Funds, Inc.
P.O. Box 8514
Boston, Massachusetts 02266-8514
Attention: (Name of Portfolio and Class of Shares)

overnight delivery
The Lazard Funds, Inc.
30 Dan Road
Canton, Massachusetts 02021-2809

By Wire

Your bank may charge you a fee for this service.

 

1.

 

 

 

Call (800) 986-3455 toll-free from any state and provide the following:

 

 

 

 

the Portfolio(s) and Class of shares to be invested in

 

 

 

 

name(s) in which shares are to be registered

 

 

 

 

address

 

 

 

 

social security or tax identification number

 

 

 

 

dividend payment election

 

 

 

 

amount to be wired

 

 

 

 

name of the wiring bank, and

 

 

 

 

name and telephone number of the person to be contacted in connection with the order.

An account number will then be assigned.

 

2.

 

 

 

Instruct the wiring bank to transmit the specified amount in federal funds, giving the wiring bank the account name(s) and assigned account number, to State Street:

ABA #: 011000028
State Street Bank and Trust Company
Boston, Massachusetts
Custody and Shareholder Services Division
DDA 9905-2375
Attention: (Name of Portfolio and Class of Shares)
The Lazard Funds, Inc.
Shareholder’s Name and Account Number

 

3.

 

 

 

Complete a Purchase Application. Indicate the services to be used. Mail the Purchase Application to the address set forth in Item 2 under “Initial Purchase–By Mail” above.

Additional Purchases

By Mail

 

1.

 

 

 

Make a check payable to “The Lazard Funds, Inc.” Write the shareholder’s account number on the check.

94Prospectus


 

 

2.

 

 

 

Mail the check and the detachable stub from the Statement of Account (or a letter providing the account number) to the address set forth in Item 2 under “Initial Purchase–By Mail” above.

By Wire

Instruct the wiring bank to transmit the specified amount in federal funds to State Street, as instructed in Item 2 under “Initial Purchase–By Wire” above.

By ACH

Shareholders may purchase additional shares of a Portfolio by automated clearing house (“ACH”). To set up the ACH purchases option, call (800) 986-3455. ACH is similar to making Automatic Investments (described below under “Shareholder Information—Investor Services—Automatic Investments”), except that shareholders may choose the date on which to make the purchase. The Fund will need a voided check or deposit slip before shareholders may purchase by ACH.

By Exchange

Shareholders may purchase additional shares of a Portfolio by exchange from another Portfolio, as described below under “Shareholder Information—Investor Services—Exchange Privilege.”

Through a Lazard Brokerage Account

Shareholders who have a brokerage account with Lazard Capital Markets LLC should contact their account representative for specific instructions on how to purchase Portfolio shares.

Purchases through the Automatic Investment Plan
(Minimum $50)

Investors may participate in the Automatic Investment Plan by making subsequent investments in Open Shares of a Portfolio at regular intervals selected by the investor. The Automatic Investment Plan enables an investor to make regularly scheduled investments and may provide investors with a convenient way to invest for long-term financial goals. To enroll in the Automatic Investment Plan, call (800) 986-3455.

Individual Retirement Accounts (Open Shares Only)

The Fund may be used as an investment for IRAs. Completion of a Lazard Funds IRA application is required. For a Direct IRA Account (an account other than an IRA rollover) a $5 establishment fee and a $15 annual maintenance and custody fee is payable to State Street for each IRA Fund account; in addition, a $10 termination fee will be charged and paid to State Street when the account is closed. For more information on IRAs, call (800) 986-3455.

Market Timing/Excessive Trading

Each Portfolio is intended to be a long-term investment vehicle and is not designed to provide investors with a means of speculating on short-term market movements. Excessive trading, market timing or other abusive trading practices may disrupt investment management strategies and harm performance and may create increased transaction and administrative costs that must be borne by the Portfolios and their shareholders, including those not engaged in such activity. In addition, such activity may dilute the value of Portfolio shares held by long-term investors. The Fund’s Board has approved policies and procedures with respect to frequent purchases and redemptions of Portfolio shares that are intended to discourage and prevent these practices, including regular monitoring of trading activity in Portfolio shares. The Fund will not knowingly accommodate excessive trading, market timing or other abusive trading practices.

The Fund routinely reviews Portfolio share transactions and seeks to identify and deter abusive trading practices. The Fund monitors for transactions that may be harmful to a Portfolio, either on an individual basis or as part of a pattern of abusive trading practices. Each Portfolio reserves the right to refuse, with or without notice, any purchase or exchange request that could adversely affect the Portfolio, its operations or its shareholders, including those requests from any individual or group who, in the Fund’s view, is likely to engage in excessive trading, market timing or other abusive trading practices, and where a particular account appears to be engaged in abusive trading practices, the Fund will seek to restrict future purchases of Portfolio shares by that account or may temporarily or permanently terminate the availability of the exchange privilege, or reject in whole or part any exchange request, with respect to such investor’s account. The Fund may deem a shareholder to be engaged in abusive trading practices without advance notice and based on information unrelated to the specific trades in the shareholder’s account. For instance, the Fund may determine that the shareholder’s account is linked to another account that was previously restricted or a third party intermediary may provide information to the Fund with respect to a particular account that is of concern to the Fund. Accounts under common ownership, control or perceived affiliation may be considered together for

Prospectus95


 

purposes of determining a pattern of excessive trading practices. An investor who makes more than six exchanges per Portfolio during any twelve-month period, or who makes exchanges that appear to coincide with a market timing strategy, may be deemed to be engaged in excessive trading. In certain cases, the Fund may deem a single “roundtrip” trade or exchange (redeeming or exchanging a Portfolio’s shares followed by purchasing or exchanging into shares of that Portfolio) as a violation of the Fund’s policy against abusive trading practices. The Fund’s actions may not be subject to appeal.

Each Portfolio deducts a 1.00% redemption fee on sales of shares owned for 30 days or less (not charged on shares acquired through reinvestment of dividends or distributions), except that no redemption fee will be charged with respect to shares purchased through certain omnibus account and other service arrangements established by certain brokers and other financial intermediaries and approved by the Distributor and under certain other circumstances. See “Shareholder Information—How to Sell Shares—Redemption Fee” below.

Redemption fees are only one way for the Fund to deter abusive trading practices. To discourage attempts to arbitrage pricing of international securities (among other reasons), the Board has adopted policies and procedures providing that if events materially affecting the value of securities occur between the close of the exchange or market on which the security is principally traded and the time when a Portfolio’s NAV is calculated, such securities will be valued at their fair value as determined by, or in accordance with procedures approved by, the Board. See “Shareholder Information—General.” The codes of ethics of the Fund, the Investment Manager and the Distributor in respect of personal trading contain limitations on trading in Portfolio shares.

As described below, the Fund may take up to seven days to pay redemption proceeds. This may occur when, among other circumstances, the investor redeeming shares is engaged in excessive trading or if the redemption request otherwise would be disruptive to efficient portfolio management or would otherwise adversely affect the Portfolio.

All of the policies described in this section apply uniformly to all Portfolio accounts. However, while the Fund and the Investment Manager will take reasonable steps to prevent trading practices deemed to be harmful to a Portfolio by monitoring Portfolio share trading activity, they may not be able to prevent or identify such trading. If the Fund is not able to prevent abusive trading practices, such trading may disrupt investment strategies, harm performance and increase costs to all Portfolio investors, including those not engaged in such activity. The Fund’s policy on abusive trading practices does not apply to automatic investment or automatic exchange privileges.

Securities trading in foreign markets are particularly susceptible to time zone arbitrage. As a result, Portfolios investing in securities trading in non-U.S. markets, including Lazard Capital Allocator Opportunistic Strategies Portfolio, which may invest in Underlying Funds that invest in securities trading in non- U.S. markets, may be at greater risk for market timing than funds that invest in securities trading in U.S. markets.

Distribution and Servicing Arrangements

The Fund has adopted a plan under rule 12b-1 (the “12b-1 plan”) that allows each Portfolio to pay the Distributor a fee, at the annual rate of 0.25% of the value of the average daily net assets of each Portfolio’s Open Shares, for distribution and services provided to holders of Open Shares. Because these fees are paid out of each Portfolio’s assets on an on-going basis, over time these recurring fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Institutional Shares do not pay a rule 12b-1 fee. Third parties may receive payments pursuant to the 12b-1 plan.

The Investment Manager or the Distributor may provide additional cash payments out of its own resources to financial intermediaries that sell shares and/or provide marketing, shareholder servicing, account administration or other services. Such payments are in addition to any fees paid by the Fund under rule 12b-1.

The receipt of such payments pursuant to the 12b-1 plan or from the Investment Manager or Distributor could create an incentive for the third parties to offer a Portfolio instead of other mutual funds where such payments are not received. Further information is contained in the SAI, and you should consult your financial intermediary for further details.

96Prospectus


 

How to Sell Shares

General

Checks for sale proceeds ordinarily will be mailed within seven days. Where the shares to be sold have been purchased by check or through the Automatic Investment Plan, the sale proceeds, net of any applicable redemption fee, will be transmitted to you promptly upon bank clearance of your purchase check, which may take up to 15 calendar days. Redemption requests also may be satisfied, in whole or in part, through a redemption-in-kind (a payment in portfolio securities instead of cash).

Redemption Fee

Each Portfolio will impose a redemption fee equal to 1.00% of the NAV of Portfolio shares acquired by purchase or exchange and redeemed or exchanged within 30 days after such shares were acquired. This fee will be calculated based on the shares’ NAV at redemption and deducted from the redemption proceeds. The fee will be retained by each Portfolio and used primarily to offset the transaction costs that short-term trading imposes on each Portfolio and its remaining shareholders. The redemption fee will not apply to shares acquired through the reinvestment of dividends or distributions. For purposes of calculating the 30-day holding period, the Fund will first redeem shares acquired through the reinvestment of dividends or distributions and then will employ the “first in, first out” method, which assumes that the shares redeemed or exchanged are the ones held the longest.

The Fund, in its discretion, may waive or reverse the redemption fee for Portfolio shares redeemed or exchanged: (1) through systematic, nondiscretionary rebalancing or asset allocation programs that have been approved by the Distributor and the Transfer Agent; (2) in connection with the Fund’s Systematic Withdrawal Plan, described below; (3) by a fund-of-funds; (4) involuntarily, such as a redemption resulting from failure to maintain a minimum investment or due to a Portfolio merger or liquidation; (5) in connection with a conversion from one share class to another share class of the same Portfolio; (6) in the event of shareholder death or post-purchase disability; (7) to return an excess contribution in an IRA or qualified plan account; (8) in connection with required minimum distributions from an IRA or qualified plan account; (9) in programs with financial intermediaries that include on their platforms qualified default investment alternatives for participant-directed individual account plans (with respect to which Department of Labor regulations restrict the imposition of redemption fees and similar fees) and where adequate systems designed to deter abusive trading practices are in place; (10) by certain accounts under situations deemed appropriate by the Fund, including where the capability to charge a fee does not exist or is not practical and where adequate systems designed to deter abusive trading practices are in place; or (11) in the event of transactions documented as inadvertent or prompted by bona fide emergencies or other exigent circumstances. In certain situations, a financial intermediary, wrap sponsor or other omnibus account holder may apply the Portfolios’ redemption fees to the accounts of their underlying shareholders. If this is the case, the Portfolios will rely in part on the account holder to monitor and assess the redemption fee on the underlying shareholder accounts in accordance with this Prospectus. The redemption fee may be waived, modified or terminated at any time, or from time to time, without advance notice.

Selling Shares

Through the Transfer Agent:

Shareholders who do not execute trades through a brokerage account should submit their sale requests to the Transfer Agent by telephone or mail, as follows:

By Telephone:

A shareholder may redeem shares by calling the Transfer Agent. To redeem shares by telephone, the shareholder must have properly completed and submitted to the Transfer Agent either a Purchase Application authorizing such redemption. To place a redemption request, or to have the telephone redemption privilege added to your account, please call the Transfer Agent’s toll-free number, (800) 986-3455. In order to confirm that telephone instructions for redemptions are genuine, the Fund has established reasonable procedures to be employed by the Fund and the Transfer Agent, including the requirement that a form of personal identification be provided.

By Mail:

 

1.

 

 

 

Write a letter of instruction to the Fund. Indicate the dollar amount or number of shares to be sold, the Portfolio and Class, the shareholder’s account number, and social security or taxpayer identification number.

Prospectus97


 

 

2.

 

 

 

Sign the letter in exactly the same way the account is registered. If there is more than one owner of the account, all must sign.

 

3.

 

 

 

If shares to be sold have a value of $50,000 or more, the signature(s) must be guaranteed by a domestic bank, savings and loan institution, domestic credit union, member bank of the Federal Reserve System, broker-dealer, registered securities association or clearing agency, or other participant in a signature guarantee program. Signature guarantees by a notary public are not acceptable. Further documentation may be requested to evidence the authority of the person or entity making the redemption request. In addition, all redemption requests that include instructions for redemption proceeds to be sent somewhere other than the address on file must be signature guaranteed.

 

4.

 

 

 

Send the letter to the Transfer Agent at the following address:

regular mail
The Lazard Funds, Inc.
P.O. Box 8514
Boston, Massachusetts 02266-8514
Attention: (Name of Portfolio and Class of Shares)

overnight delivery
The Lazard Funds, Inc.
30 Dan Road
Canton, Massachusetts 02021-2809

Through a Lazard Brokerage Account:

Shareholders who have a brokerage account with Lazard Capital Markets LLC should contact their account representative for specific instructions on how to sell Portfolio shares.

Investor Services

Automatic Reinvestment Plan allows your dividends and capital gain distributions to be reinvested in additional shares of your Portfolio or another Portfolio.

Automatic Investments allows you to purchase Open Shares through automatic deductions from a designated bank account.

Systematic Withdrawal Plan allows you to receive payments at regularly scheduled intervals if your account holds at least $10,000 in Portfolio shares at the time plan participation begins. The maximum regular withdrawal amount for monthly withdrawals is 1% of the value of your Portfolio shares at the time plan participation begins.

Exchange Privilege allows you to exchange shares of one Portfolio that have been held for seven days or more for shares of the same Class of another Portfolio in an identically registered account. Shares will be exchanged at the next determined NAV, subject to any applicable redemption fee. There is no other cost associated with this service. All exchanges are subject to the minimum initial investment requirements.

A shareholder may exchange shares by writing or calling the Transfer Agent. To exchange shares by telephone, the shareholder must have properly completed and submitted to the Transfer Agent either a Purchase Application authorizing such exchanges or a signed letter requesting that the exchange privilege be added to the account. The Transfer Agent’s toll-free number for exchanges is (800) 986-3455. In order to confirm that telephone instructions for exchanges are genuine, the Fund has established reasonable procedures to be employed by the Fund and the Transfer Agent, including the requirement that a form of personal identification be provided.

The Fund reserves the right to limit the number of times shares may be exchanged between Portfolios, to reject any telephone exchange order, or to otherwise modify or discontinue the exchange privilege at any time. If an exchange request is refused, the Fund will take no other action with respect to the shares until it receives further instructions from the investor. See “Shareholder Information—How to Buy Shares—Market Timing/ Excessive Trading” for more information about restrictions on exchanges.

General Policies

In addition to the policies described above, the Fund reserves the right to:

 

 

 

 

redeem an account, with notice, if the value of the account falls below $1,000 due to redemptions

 

 

 

 

convert Institutional Shares held by a shareholder whose account is less than $100,000 to Open Shares, upon written notice to the shareholder

98Prospectus


 

 

 

 

 

suspend redemptions or postpone payments when the NYSE is closed for any reason other than its usual weekend or holiday closings or when trading is restricted by the SEC

 

 

 

 

change or waive the required minimum investment amounts

 

 

 

 

delay sending out redemption proceeds for up to seven days (this usually applies to very large redemptions received without notice, excessive trading, or during unusual market conditions)

 

 

 

 

make a redemption-in-kind (a payment in portfolio securities instead of in cash) if it is determined that a redemption is too large and/or may cause harm to a Portfolio and its shareholders

Also in addition to the policies described above, the Fund may refuse or restrict purchase or exchange requests for Portfolio shares by any person or group if, in the judgment of the Fund’s management:

 

 

 

 

a Portfolio would be unable to invest the money effectively in accordance with its investment objective and policies or could otherwise be adversely affected

 

 

 

 

a Portfolio receives or anticipates receiving simultaneous orders that may significantly affect the Portfolio (e.g., amounts equal to 1% or more of the Portfolio’s total assets)

The Fund also reserves the right to close a Portfolio to investors at any time.

Account Policies, Dividends and Taxes

Account Statements

You will receive quarterly statements detailing your account activity. All investors will also receive an annual statement detailing the tax characteristics of any dividends and distributions that you have received in your account. You will also receive confirmations of each trade executed in your account.

To reduce expenses, only one copy of the most recent annual and semi-annual reports of the Fund may be mailed to your household, even if you have more than one account with the Fund. Call (800) 542-1061 if you need additional copies of annual or semi-annual reports. Call the Transfer Agent at the telephone number listed on the back cover if you need account information.

Dividends and Distributions

Income dividends are normally declared each business day and paid monthly for U.S. High Yield Portfolio. For Global Listed Infrastructure Portfolio, income dividends, if any, are anticipated to be paid quarterly. For all other Portfolios, income dividends are anticipated to be paid annually. Net capital gains, if any, are normally distributed annually, but may be distributed more frequently. Annual year end distribution estimates are expected to be available on or about November 18, 2010 at www.LazardNet.com or by calling (800) 823-6300. Estimates for any “spillback” distributions (income and/or net capital gains from the 2009 fiscal year that were not distributed by December 31, 2009) are expected to be available on or about August 10, 2010 at www.LazardNet.com or by calling (800) 823-6300.

Dividends and distributions of a Portfolio will be reinvested in additional shares of the same Class of the Portfolio at the NAV on the ex-dividend date, and credited to the shareholder’s account on the payment date or, at the shareholder’s election, paid in cash. Each share Class of the Portfolio will generate a different dividend because each has different expenses. Dividend checks and account statements will be mailed approximately two business days after the payment date.

Tax Information

Please be aware that the following tax information is general and refers to the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), which are in effect as of the date of this Prospectus. You should consult a tax adviser about the status of your distributions from your Portfolio.

All dividends and short-term capital gains distributions are generally taxable to you as ordinary income, and long-term capital gains are generally taxable as such, whether you receive the distribution in cash or reinvest it in additional shares. An exchange of a Portfolio’s shares for shares of another Portfolio will be treated as a sale of the Portfolio’s shares, and any gain on the transaction may be subject to income taxes.

Keep in mind that distributions may be taxable to you at different rates which depend on the length of time a

Prospectus99


 

Portfolio held the applicable investment, not the length of time that you held your Portfolio shares. The tax status of any distribution is the same regardless of how long you have been in a Portfolio and whether you reinvest your distributions or take them in cash. High portfolio turnover and more volatile markets can result in taxable distributions to shareholders, regardless of whether their shares increased in value. When you do sell your Portfolio shares, a taxable capital gain or loss may be realized, except for IRA or other tax-deferred accounts.

Federal law requires a Portfolio to withhold taxes on distributions paid to shareholders who:

 

 

 

 

fail to provide a social security number or taxpayer identification number

 

 

 

 

fail to certify that their social security number or taxpayer identification number is correct

 

 

 

 

fail to certify that they are exempt from withholding

100Prospectus


 Lazard Funds Financial Highlights

p

Financial Highlights

The financial highlights tables are intended to help you understand each Portfolio’s financial performance for the past five years or, if shorter, the period of each Portfolio’s operations. Certain information reflects financial results for a single Portfolio share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in the Portfolio (assuming reinvestment of all dividends and distributions), if any. This information has been audited by Anchin, Block & Anchin LLP, whose report, along with each Portfolio’s financial statements, is included in the annual report, which is available upon request.

Prospectus101


 

LAZARD U.S. EQUITY VALUE PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Year Ended

 

For the Period
9/30/05* to
12/31/05

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

Institutional Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

 

$

 

7.00

   

 

$

 

11.25

   

 

$  

11.73

   

 

$  

10.02

   

 

$  

10.00

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.12

   

 

 

0.18

   

 

 

0.17

   

 

 

0.18

   

 

 

0.03

 

Net realized and unrealized gain (loss)

 

 

 

1.62

   

 

 

(4.26

)

 

 

 

 

0.05

   

 

 

2.33

   

 

 

0.02

 

 

 

 

Total from investment operations

 

 

 

1.74

   

 

 

(4.08

)

 

 

 

 

0.22

   

 

 

2.51

   

 

 

0.05

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(0.12)

   

 

 

(0.17

)

 

 

 

 

(0.15

)

 

 

 

 

(0.62

)

 

 

 

 

(0.03

)

 

Net realized gains

 

 

 

   

 

 

   

 

 

(0.55

)

 

 

 

 

(0.18

)

 

 

 

 

 

 

 

 

Total distributions

 

 

 

(0.12)

   

 

 

(0.17

)

 

 

 

 

(0.70

)

 

 

 

 

(0.80

)

 

 

 

 

(0.03

)

 

 

 

 

Redemption fees

 

 

 

   

 

 

   

 

 

(c)

 

 

 

 

   

 

 

 

 

 

 

Net asset value, end of period

 

 

$  

8.62

   

 

$

 

7.00

   

 

$

 

11.25

   

 

$

 

11.73

   

 

$

 

10.02

 

 

 

 

Total Return (b)

 

 

 

24.81%

   

 

 

(36.18)%

   

 

 

1.65%

   

 

 

25.23%

   

 

 

0.48%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of period (in thousands)

 

 

$  

8,464

   

 

$

 

6,554

   

 

$

 

8,488

   

 

$

 

390

   

 

$

 

 90

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses (d)

 

 

 

1.00%

   

 

 

1.00%

   

 

 

1.00%

   

 

 

1.00%

   

 

 

1.00%

 

Gross expenses (d)

 

 

 

3.44%

   

 

 

3.21%

   

 

 

3.56%

   

 

 

112.90%

   

 

 

388.31%

 

Net investment income (d)

 

 

 

1.60%

   

 

 

1.90%

   

 

 

1.40%

   

 

 

1.57%

   

 

 

1.17%

 

Portfolio turnover rate

 

 

 

62%

   

 

 

97%

   

 

 

83%

   

 

 

95%

   

 

 

13%

 

 

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

 

Year Ended

 

For the Period
9/30/05* to
12/31/05

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

 

 

 

 

 

 

 

 

 

 

 

Open Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

 

$  

7.04

   

 

$

 

11.31

   

 

$

 

11.77

   

 

$

 

10.02

   

 

$

 

10.00

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.09

   

 

 

0.15

   

 

 

0.13

   

 

 

0.12

   

 

 

0.02

 

Net realized and unrealized gain (loss)

 

 

 

1.64

   

 

 

(4.28

)

 

 

 

 

0.06

   

 

 

2.37

   

 

 

0.02

 

 

 

 

Total from investment operations

 

 

 

1.73

   

 

 

(4.13

)

 

 

 

 

0.19

   

 

 

2.49

   

 

 

0.04

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(0.10)

   

 

 

(0.14

)

 

 

 

 

(0.11

)

 

 

 

 

(0.56

)

 

 

 

 

(0.02

)

 

Net realized gains

 

 

 

   

 

 

   

 

 

(0.55

)

 

 

 

 

(0.18

)

 

 

 

 

 

 

 

 

Total distributions

 

 

 

(0.10)

   

 

 

(0.14

)

 

 

 

 

(0.66

)

 

 

 

 

(0.74

)

 

 

 

 

(0.02

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

   

 

 

0.01

   

 

 

   

 

 

 

 

 

 

Net asset value, end of period

 

 

$  

8.67

   

 

$

 

7.04

   

 

$

 

11.31

   

 

$

 

11.77

   

 

$

 

10.02

 

 

 

 

Total Return (b)

 

 

 

 24.49%

   

(36.43)%

 

 

 

1.59%

   

 

 

24.83%

   

 

 

0.41%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of period (in thousands)

 

 

$  

300

   

 

$

 

134

   

 

$

 

341

   

 

$

 

240

   

 

$

 

 10

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses (d)

 

 

 

1.30%

   

 

 

1.30%

   

 

 

1.30%

   

 

 

1.30%

   

 

 

1.30%

 

Gross expenses (d)

 

 

 

5.52%

   

 

 

12.10%

   

 

 

9.40%

   

 

 

138.32%

   

 

 

596.46%

 

Net investment income (d)

 

 

 

1.15%

   

 

 

1.56%

   

 

 

1.02%

   

 

 

1.05%

   

 

 

0.86%

 

Portfolio turnover rate

 

 

 

62%

   

 

 

97%

   

 

 

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 State Street; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower. A period of less than one year is not annualized.

 

(c)

 

 

 

Amount is less than $0.01 per share.

 

(d)

 

 

 

Annualized for a period of less than one year.

102Prospectus


 

LAZARD U.S. STRATEGIC EQUITY PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

Institutional Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$  

6.26

   

 

$  

10.03

   

 

$  

11.81

   

 

$  

10.38

   

 

$  

10.00

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.08

   

 

 

0.12

   

 

 

0.11

   

 

 

0.08

   

 

 

0.09

 

Net realized and unrealized gain (loss)

 

 

 

1.68

   

 

 

(3.65

)

 

 

 

 

(0.04

)

 

 

 

 

1.73

   

 

 

0.41

 

 

 

 

Total from investment operations

 

 

 

1.76

   

 

 

(3.53

)

 

 

 

 

0.07

   

 

 

1.81

   

 

 

0.50

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

   

 

 

(0.12

)

 

 

 

 

(0.12

)

 

 

 

 

(0.07

)

 

 

 

 

(0.03

)

 

Net realized gains

 

 

 

   

 

 

(0.12

)

 

 

 

 

(1.73

)

 

 

 

 

(0.31

)

 

 

 

 

(0.09

)

 

 

 

 

Total distributions

 

 

 

   

 

 

(0.24

)

 

 

 

 

(1.85

)

 

 

 

 

(0.38

)

 

 

 

 

(0.12

)

 

 

 

 

Redemption fees

 

 

 

   

 

 

   

 

 

   

 

 

(c)

 

 

 

 

 

 

 

 

Net asset value, end of year

 

 

$  

8.02

   

 

$

 

6.26

   

 

$

 

10.03

   

 

$

 

11.81

   

 

$

 

10.38

 

 

 

 

Total Return (b)

 

 

 

28.12%

   

 

 

(35.43)%

   

 

 

0.33%

   

 

 

17.44%

   

 

 

4.99%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$  

66,153

   

 

$

 

54,749

   

 

$  

88,242

   

 

$

 

117,194

   

 

$

 

15,085

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.05%

   

1.05%

 

 

 

0.98%

   

 

 

1.05%

   

 

 

1.16%

 

Gross expenses

 

 

 

1.09%

   

1.06%

 

 

 

0.98%

   

 

 

1.35%

   

 

 

13.80%

 

Net investment income

 

 

 

1.26%

   

1.45%

 

 

 

0.86%

   

 

 

0.71%

   

 

 

0.90%

 

Portfolio turnover rate

 

 

 

76%

   

82%

 

 

 

58%

   

 

 

82%

   

 

 

53%

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

 

 

 

 

 

 

 

 

 

 

 

Open Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$  

6.28

   

 

$

 

10.05

   

 

$

 

11.83

   

 

$

 

10.39

   

 

$

 

10.00

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.07

   

 

 

0.10

   

 

 

0.06

   

 

 

(c)

 

 

 

 

0.06

 

Net realized and unrealized gain (loss)

 

 

 

1.67

   

 

 

(3.65

)

 

 

 

 

(0.03

)

 

 

 

 

1.79

   

 

 

0.35

 

 

 

 

Total from investment operations

 

 

 

1.74

   

 

 

(3.55

)

 

 

 

 

0.03

   

 

 

1.79

   

 

 

0.41

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

   

 

 

(0.10

)

 

 

 

 

(0.08

)

 

 

 

 

(0.04

)

 

 

 

 

 

Net realized gains

 

 

 

   

 

 

(0.12

)

 

 

 

 

(1.73

)

 

 

 

 

(0.31

)

 

 

 

 

(0.09

)

 

 

 

 

Total distributions

 

 

 

   

 

 

(0.22

)

 

 

 

 

(1.81

)

 

 

 

 

(0.35

)

 

 

 

 

(0.09

)

 

 

 

 

Redemption fees

 

 

 

   

 

 

   

 

 

(c)

 

 

 

 

   

 

 

0.07

 

 

 

 

Net asset value, end of year

 

 

$

 

8.02

   

 

$

 

6.28

   

 

$

 

10.05

   

 

$

 

11.83

   

 

$

 

10.39

 

 

 

 

Total Return (b)

 

 

 

27.71%

   

(35.63)%

 

(0.07)%

 

 

 

17.20%

   

 

 

4.79%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$  

8,945

   

 

$

 

7,218

   

 

$

 

11,558

   

 

$

 

11,836

   

 

$

 

234

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.35%

   

 

 

1.35%

   

 

 

1.35%

   

 

 

1.35%

   

 

 

1.50%

 

Gross expenses

 

 

 

1.39%

   

 

 

1.51%

   

 

 

1.40%

   

 

 

7.38%

   

 

 

33.06%

 

Net investment income

 

 

 

0.96%

   

 

 

1.15%

   

 

 

0.50%

   

 

 

0.03%

   

 

 

0.58%

 

Portfolio turnover rate

 

 

 

76%

   

 

 

82%

   

 

 

58%

   

 

 

82%

   

 

 

53%

 

 

(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 State Street; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

 

(c)

 

 

 

Amount is less than $0.01 per share.

Prospectus103


 

LAZARD U.S. MID CAP EQUITY PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

Institutional Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

7.50

   

 

$

 

12.46

   

 

$

 

14.41

   

 

$

 

13.23

   

 

$

 

13.20

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.08

   

 

 

0.15

   

 

 

0.12

   

 

 

0.09

   

 

 

0.09

 

Net realized and unrealized gain (loss)

 

 

 

2.81

   

 

 

(4.93

)

 

 

 

 

(0.51

)

 

 

 

 

1.88

   

 

 

1.07

 

 

 

 

Total from investment operations

 

 

 

2.89

   

 

 

(4.78

)

 

 

 

 

(0.39

)

 

 

 

 

1.97

   

 

 

1.16

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(0.08

)

 

 

 

 

(0.18

)

 

 

 

 

(0.11

)

 

 

 

 

(0.08

)

 

 

 

 

(0.07

)

 

Net realized gains

 

 

 

   

 

 

   

 

 

(1.45

)

 

 

 

 

(0.71

)

 

 

 

 

(1.06

)

 

 

 

 

Total distributions

 

 

 

(0.08

)

 

 

 

 

(0.18

)

 

 

 

 

(1.56

)

 

 

 

 

(0.79

)

 

 

 

 

(1.13

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

 

 

 

 

Net asset value, end of year

 

 

$

 

10.31

   

 

$

 

7.50

   

 

$

 

12.46

   

 

$

 

14.41

   

 

$

 

13.23

 

 

 

 

Total Return (b)

 

 

 

38.49%

   

 

 

(38.33)%

   

(2.93)%

 

 

 

14.85%

   

 

 

8.89%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

143,267

   

 

$  

103,650

   

 

$

 

277,953

   

 

$

 

235,367

   

 

$

 

171,912

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

0.91%

   

 

 

0.89%

   

 

 

0.87%

   

 

 

0.89%

   

 

 

0.93%

 

Gross expenses

 

 

 

0.91%

   

 

 

0.89%

   

 

 

0.87%

   

 

 

0.89%

   

 

 

0.93%

 

Net investment income

 

 

 

0.90%

   

 

 

1.41%

   

 

 

0.81%

   

 

 

0.66%

   

 

 

0.67%

 

Portfolio turnover rate

 

 

 

77%

   

 

 

81%

   

 

 

100%

   

 

 

76%

   

 

 

80%

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

 

 

 

 

 

 

 

 

 

 

 

Open Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

7.40

   

 

$  

12.29

   

 

$  

14.23

   

 

$  

13.07

   

 

$  

13.06

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.05

   

 

 

0.13

   

 

 

0.09

   

 

 

0.05

   

 

 

0.05

 

Net realized and unrealized gain (loss)

 

 

 

2.78

   

 

 

(4.87

)

 

 

 

 

(0.51

)

 

 

 

 

1.86

   

 

 

1.05

 

 

 

 

Total from investment operations

 

 

 

2.83

   

 

 

(4.74

)

 

 

 

 

(0.42

)

 

 

 

 

1.91

   

 

 

1.10

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(0.05

)

 

 

 

 

(0.15

)

 

 

 

 

(0.07

)

 

 

 

 

(0.04

)

 

 

 

 

(0.03

)

 

Net realized gains

 

 

 

   

 

 

   

 

 

(1.45

)

 

 

 

 

(0.71

)

 

 

 

 

(1.06

)

 

 

 

 

Total distributions

 

 

 

(0.05

)

 

 

 

 

(0.15

)

 

 

 

 

(1.52

)

 

 

 

 

(0.75

)

 

 

 

 

(1.09

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

Net asset value, end of year

 

 

$

 

10.18

   

 

$

 

7.40

   

 

$

 

12.29

   

 

$

 

14.23

   

 

$

 

13.07

 

 

 

 

Total Return (b)

 

 

 

38.26%

   

(38.53)%

 

(3.17)%

 

 

 

14.57%

   

 

 

8.53%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

69,737

   

 

$

 

64,372

   

 

$

 

158,062

   

 

$

 

80,410

   

 

$

 

54,370

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.17%

   

 

 

1.15%

   

 

 

1.13%

   

 

 

1.18%

   

 

 

1.23%

 

Gross expenses

 

 

 

1.17%

   

 

 

1.15%

   

 

 

1.13%

   

 

 

1.18%

   

 

 

1.23%

 

Net investment income

 

 

 

0.64%

   

 

 

1.17%

   

 

 

0.58%

   

 

 

0.37%

   

 

 

0.35%

 

Portfolio turnover rate

 

 

 

77%

   

 

 

81%

   

 

 

100%

   

 

 

76%

   

 

 

80%

 

 

(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.

104Prospectus


 

LAZARD U.S. SMALL-MID CAP EQUITY PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

Institutional Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

7.59

   

 

$  

11.58

   

 

$  

14.44

   

 

$  

15.40

   

 

$  

18.84

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (loss) (a)

 

 

 

(0.01

)

 

 

 

 

0.01

   

 

 

0.04

   

 

 

0.02

   

 

 

0.02

 

Net realized and unrealized gain (loss)

 

 

 

4.22

   

 

 

(4.00

)

 

 

 

 

(0.87

)

 

 

 

 

2.60

   

 

 

0.76

 

 

 

 

Total from investment operations

 

 

 

4.21

   

 

 

(3.99

)

 

 

 

 

(0.83

)

 

 

 

 

2.62

   

 

 

0.78

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

   

 

 

   

 

 

(0.04

)

 

 

 

 

(0.01

)

 

 

 

 

(0.02

)

 

Net realized gains

 

 

 

   

 

 

   

 

 

(1.99

)

 

 

 

 

(3.57

)

 

 

 

 

(4.20

)

 

 

 

 

Total distributions

 

 

 

   

 

 

   

 

 

(2.03

)

 

 

 

 

(3.58

)

 

 

 

 

(4.22

)

 

 

 

 

Redemption fees

 

 

 

   

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

Net asset value, end of year

 

 

$

 

11.80

   

 

$

 

7.59

   

 

$

 

11.58

   

 

$

 

14.44

   

 

$

 

15.40

 

 

 

 

Total Return (b)

 

 

 

55.47%

   

 

 

(34.46)%

   

(6.38)%

 

 

 

17.11%

   

 

 

4.31%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

56,042

   

 

$

 

36,934

   

 

$

 

109,853

   

 

$

 

196,483

   

 

$

 

253,236

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.22%

   

 

 

1.13%

   

 

 

0.93%

   

 

 

0.91%

   

 

 

0.88%

 

Gross expenses

 

 

 

1.23%

   

 

 

1.13%

   

 

 

0.93%

   

 

 

0.91%

   

 

 

0.88%

 

Net investment income (loss)

 

 

 

(0.12)%

   

 

 

0.08%

   

 

 

0.24%

   

 

 

0.10%

   

 

 

0.10%

 

Portfolio turnover rate

 

 

 

195%

   

 

 

138%

   

 

 

98%

   

 

 

86%

   

 

 

87%

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

 

 

 

 

 

 

 

 

 

 

 

Open Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

7.46

   

 

$  

11.43

   

 

$  

14.27

   

 

$  

15.29

   

 

$  

18.78

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment loss (a)

 

 

 

(0.04

)

 

 

 

 

(0.03

)

 

 

 

 

(0.01

)

 

 

 

 

(0.03

)

 

 

 

 

(0.04

)

 

Net realized and unrealized gain (loss)

 

 

 

4.14

   

 

 

(3.94

)

 

 

 

 

(0.84

)

 

 

 

 

2.58

   

 

 

0.75

 

 

 

 

Total from investment operations

 

 

 

4.10

   

 

 

(3.97

)

 

 

 

 

(0.85

)

 

 

 

 

2.55

   

 

 

0.71

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gains

 

 

 

   

 

 

   

 

 

(1.99

)

 

 

 

 

(3.57

)

 

 

 

 

(4.20

)

 

 

 

 

Total distributions

 

 

 

   

 

 

   

 

 

(1.99

)

 

 

 

 

(3.57

)

 

 

 

 

(4.20

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

Net asset value, end of year

 

 

$

 

11.56

   

 

$

 

7.46

   

 

$

 

11.43

   

 

$

 

14.27

   

 

$

 

15.29

 

 

 

 

Total Return (b)

 

 

 

54.96%

   

(34.73)%

 

(6.60)%

 

 

 

16.77%

   

 

 

3.93%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

19,531

   

 

$  

10,500

   

 

$  

25,203

   

 

$

 

35,627

   

 

$

 

37,057

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.51%

   

 

 

1.49%

   

 

 

1.25%

   

 

 

1.23%

   

 

 

1.19%

 

Gross expenses

 

 

 

1.52%

   

 

 

1.49%

   

 

 

1.25%

   

 

 

1.23%

   

 

 

1.19%

 

Net investment loss

 

 

 

(0.40)%

   

(0.26)%

 

(0.07)%

 

(0.21)%

 

(0.21)%

Portfolio turnover rate

 

 

 

195%

   

 

 

138%

   

 

 

98%

   

 

 

86%

   

 

 

87%

 

 

(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; without such waiver/reimbursement of expenses, the Porffolio’s returns would have been lower.

 

(c)

 

 

 

Amount is less than $0.01 per share.

Prospectus105


 

LAZARD INTERNATIONAL EQUITY PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

Institutional Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

10.50

   

 

$

 

17.55

   

 

$

 

16.31

   

 

$

 

14.00

   

 

$

 

12.91

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.26

   

 

 

0.36

   

 

 

0.36

   

 

 

0.33

   

 

 

0.26

 

Net realized and unrealized gain (loss)

 

 

 

2.38

   

 

 

(7.00

)

 

 

 

 

1.42

   

 

 

2.83

   

 

 

1.16

 

 

 

 

Total from investment operations

 

 

 

2.64

   

 

 

(6.64

)

 

 

 

 

1.78

   

 

 

3.16

   

 

 

1.42

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(c)

 

 

 

 

(0.41

)

 

 

 

 

(0.54

)

 

 

 

 

(0.85

)

 

 

 

 

(0.33

)

 

 

 

 

Total distributions

 

 

 

(c)

 

 

 

 

(0.41

)

 

 

 

 

(0.54

)

 

 

 

 

(0.85

)

 

 

 

 

(0.33

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

Net asset value, end of year

 

 

$

 

13.14

   

 

$

 

10.50

   

 

$

 

17.55

   

 

$

 

16.31

   

 

$

 

14.00

 

 

 

 

Total Return (b)

 

 

 

25.19%

   

 

 

(37.75)%

   

 

 

10.96%

   

 

 

22.92%

   

 

 

11.25%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

139,070

   

 

$

 

119,870

   

 

$

 

335,323

   

 

$

 

701,145

   

 

$

 

1,035,346

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

0.99%

   

 

 

0.93%

   

 

 

0.89%

   

 

 

0.84%

   

 

 

0.89%

 

Gross expenses

 

 

 

0.99%

   

 

 

0.93%

   

 

 

0.89%

   

 

 

0.84%

   

 

 

0.89%

 

Net investment income

 

 

 

2.33%

   

 

 

2.47%

   

 

 

2.08%

   

 

 

2.14%

   

 

 

2.03%

 

Portfolio turnover rate

 

 

 

66%

   

 

 

44%

   

 

 

50%

   

 

 

68%

   

 

 

60%

 

 

 

 

 

 

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

 

 

 

 

 

 

 

 

 

 

 

Open Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

10.60

   

 

$

 

17.69

   

 

$

 

16.40

   

 

$

 

14.03

   

 

$

 

12.94

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.22

   

 

 

0.31

   

 

 

0.32

   

 

 

0.25

   

 

 

0.23

 

Net realized and unrealized gain (loss)

 

 

 

2.42

   

 

 

(7.04

)

 

 

 

 

1.41

   

 

 

2.87

   

 

 

1.16

 

 

 

 

Total from investment operations

 

 

 

2.64

   

 

 

(6.73

)

 

 

 

 

1.73

   

 

 

3.12

   

 

 

1.39

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

   

 

 

(0.36

)

 

 

 

 

(0.44

)

 

 

 

 

(0.75

)

 

 

 

 

(0.30

)

 

 

 

 

Total distributions

 

 

 

   

 

 

(0.36

)

 

 

 

 

(0.44

)

 

 

 

 

(0.75

)

 

 

 

 

(0.30

)

 

 

 

 

Redemption fees

 

 

 

   

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

Net asset value, end of year

 

 

$

 

13.24

   

 

$

 

10.60

   

 

$

 

17.69

   

 

$

 

16.40

   

 

$

 

14.03

 

 

 

 

Total Return (b)

 

 

 

24.91%

   

 

 

(37.98)%

   

 

 

10.57%

   

 

 

22.59%

   

 

 

10.93%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

19,520

   

 

$

 

14,829

   

 

$

 

32,449

   

 

$

 

49,657

   

 

$

 

48,770

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.27%

   

 

 

1.28%

   

 

 

1.19%

   

 

 

1.15%

   

 

 

1.18%

 

Gross expenses

 

 

 

1.27%

   

 

 

1.28%

   

 

 

1.19%

   

 

 

1.15%

   

 

 

1.18%

 

Net investment income

 

 

 

1.98%

   

 

 

2.16%

   

 

 

1.89%

   

 

 

1.63%

   

 

 

1.78%

 

Portfolio turnover rate

 

 

 

66%

   

 

 

44%

   

 

 

50%

   

 

 

68%

   

 

 

60%

 

 

(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.

106Prospectus


 

LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

Institutional Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

6.39

   

 

$

 

11.78

   

 

$

 

13.07

   

 

$

 

11.73

   

 

$

 

11.25

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.17

   

 

 

0.30

   

 

 

0.22

   

 

 

0.25

   

 

 

0.18

 

Net realized and unrealized gain (loss)

 

 

 

1.16

   

 

 

(4.73

)

 

 

 

 

0.97

   

 

 

2.43

   

 

 

0.82

 

 

 

 

Total from investment operations

 

 

 

1.33

   

 

 

(4.43

)

 

 

 

 

1.19

   

 

 

2.68

   

 

 

1.00

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(0.02)

   

 

 

(0.33

)

 

 

 

 

(0.25

)

 

 

 

 

(0.23

)

 

 

 

 

(0.16

)

 

Net realized gains

 

 

 

   

 

 

(0.63

)

 

 

 

 

(2.23

)

 

 

 

 

(1.11

)

 

 

 

 

(0.36

)

 

 

 

 

Total distributions

 

 

 

(0.02)

   

 

 

(0.96

)

 

 

 

 

(2.48

)

 

 

 

 

(1.34

)

 

 

 

 

(0.52

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

 

 

 

 

Net asset value, end of year

 

 

$

 

7.70

   

 

$

 

6.39

   

 

$

 

11.78

   

 

$

 

13.07

   

 

$

 

11.73

 

 

 

 

Total Return (b)

 

 

 

20.86%

   

 

 

(38.74)%

   

 

 

9.25%

   

 

 

23.01%

   

 

 

8.90%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

3,925

   

 

$

 

3,860

   

 

$

 

12,103

   

 

$

 

16,677

   

 

$

 

12,262

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.15%

   

 

 

1.15%

   

 

 

1.15%

   

 

 

1.15%

   

 

 

1.15%

 

Gross expenses

 

 

 

3.46%

   

 

 

2.24%

   

 

 

1.67%

   

 

 

1.85%

   

 

 

1.97%

 

Net investment income

 

 

 

2.52%

   

 

 

3.06%

   

 

 

1.58%

   

 

 

1.90%

   

 

 

1.55%

 

Portfolio turnover rate

 

 

 

67%

   

 

 

52%

   

 

 

50%

   

 

 

40%

   

 

 

33%

 

 

 

 

 

 

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

 

 

 

 

 

 

 

 

 

 

 

Open Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

6.41

   

 

$

 

11.81

   

 

$

 

13.10

   

 

$

 

11.75

   

 

$

 

11.28

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.14

   

 

 

0.26

   

 

 

0.16

   

 

 

0.21

   

 

 

0.12

 

Net realized and unrealized gain (loss)

 

 

 

1.17

   

 

 

(4.73

)

 

 

 

 

0.99

   

 

 

2.44

   

 

 

0.83

 

 

 

 

Total from investment operations

 

 

 

1.31

   

 

 

(4.47

)

 

 

 

 

1.15

   

 

 

2.65

   

 

 

0.95

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(c)

 

 

 

 

(0.30

)

 

 

 

 

(0.21

)

 

 

 

 

(0.19

)

 

 

 

 

(0.12

)

 

Net realized gains

 

 

 

   

 

 

(0.63

)

 

 

 

 

(2.23

)

 

 

 

 

(1.11

)

 

 

 

 

(0.36

)

 

 

 

 

Total distributions

 

 

 

(c)

 

 

 

 

(0.93

)

 

 

 

 

(2.44

)

 

 

 

 

(1.30

)

 

 

 

 

(0.48

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

Net asset value, end of year

 

 

$

 

7.72

   

 

$

 

6.41

   

 

$

 

11.81

   

 

$

 

13.10

   

 

$

 

11.75

 

 

 

 

Total Return (b)

 

 

 

20.49%

   

 

 

(39.00)%

   

 

 

8.92%

   

 

 

22.72%

   

 

 

8.46%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

4,530

   

 

$

 

5,853

   

 

$

 

13,916

   

 

$

 

12,545

   

 

$

 

10,026

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.45%

   

 

 

1.45%

   

 

 

1.45%

   

 

 

1.45%

   

 

 

1.45%

 

Gross expenses

 

 

 

3.62%

   

 

 

2.47%

   

 

 

1.95%

   

 

 

2.13%

   

 

 

2.28%

 

Net investment income

 

 

 

2.11%

   

 

 

2.67%

   

 

 

1.21%

   

 

 

1.65%

   

 

 

1.05%

 

Portfolio turnover rate

 

 

 

67%

   

 

 

52%

   

 

 

50%

   

 

 

40%

   

 

 

33%

 

 

(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; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

 

(c)

 

 

 

Amount is less than $0.01 per share.

Prospectus107


 

LAZARD INTERNATIONAL STRATEGIC EQUITY PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Year Ended

 

For the Period
10/31/05* to
12/31/05

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

Institutional Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

 

$

 

7.51

   

 

$

 

12.92

   

 

 

$12.66

   

 

 

$10.79

   

 

$  

10.00

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (loss) (a)

 

 

 

0.20

   

 

 

0.26

   

 

 

0.23

   

 

 

0.19

   

 

 

(c)

 

Net realized and unrealized gain (loss)

 

 

 

1.88

   

 

 

(5.43

)

 

 

 

 

1.36

   

 

 

2.64

   

 

 

0.79

 

 

 

 

Total from investment operations

 

 

 

2.08

   

 

 

(5.17

)

 

 

 

 

1.59

   

 

 

2.83

   

 

 

0.79

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(0.18

)

 

 

 

 

(0.22

)

 

 

 

 

(0.25)

   

 

 

(0.15

)

 

 

 

 

 

Net realized gains

 

 

 

   

 

 

(0.02

)

 

 

 

 

(1.08)

   

 

 

(0.81

)

 

 

 

 

 

 

 

 

Total distributions

 

 

 

(0.18

)

 

 

 

 

(0.24

)

 

 

 

 

(1.33)

   

 

 

(0.96

)

 

 

 

 

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

Net asset value, end of period

 

 

$

 

9.41

   

 

$

 

7.51

   

 

$

 

12.92

   

 

$

 

12.66

   

 

$

 

10.79

 

 

 

 

Total Return (b)

 

 

 

27.76%

   

 

 

(39.98)%

   

 

 

12.88%

   

 

 

26.22%

   

 

 

7.90%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of period (in thousands)

 

 

$

 

311,570

   

 

$

 

245,604

   

 

$

 

418,584

   

 

$

 

343,931

   

 

$

 

135,690

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses (d)

 

 

 

0.91%

   

 

 

0.90%

   

 

 

0.88%

   

 

 

0.94%

   

 

 

1.46%

 

Gross expenses (d)

 

 

 

0.91%

   

 

 

0.90%

   

 

 

0.88%

   

 

 

0.94%

   

 

 

1.46%

 

Net investment income (loss) (d)

 

 

 

2.42%

   

 

 

2.48%

   

 

 

1.70%

   

 

 

1.57%

   

(0.20)%

Portfolio turnover rate

 

 

 

129%

   

 

 

72%

   

 

 

84%

   

 

 

68%

   

 

 

12%

 

 

 

 

 

 

 

 

 

 

 

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

 

Year Ended

 

For the Period
2/3/06* to
12/31/06

 

12/31/09

 

12/31/08

 

12/31/07

 

Open Shares

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

 

$  

7.51

   

 

$  

12.90

   

 

$  

12.64

   

 

$  

11.49

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.16

   

 

 

0.23

   

 

 

0.17

   

 

 

0.12

 

Net realized and unrealized gain (loss)

 

 

 

1.90

   

 

 

(5.42

)

 

 

 

 

1.37

   

 

 

1.93

 

 

 

 

Total from investment operations

 

 

 

2.06

   

 

 

(5.19

)

 

 

 

 

1.54

   

 

 

2.05

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(0.14

)

 

 

 

 

(0.18

)

 

 

 

 

(0.20

)

 

 

 

 

(0.09

)

 

Net realized gains

 

 

 

   

 

 

(0.02

)

 

 

 

 

(1.08

)

 

 

 

 

(0.81

)

 

 

 

 

Total distributions

 

 

 

(0.14

)

 

 

 

 

(0.20

)

 

 

 

 

(1.28

)

 

 

 

 

(0.90

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

   

 

 

(c)

 

 

 

 

Net asset value, end of period

 

 

$

 

9.43

   

 

$

 

7.51

   

 

$

 

12.90

   

 

$

 

12.64

 

 

 

 

Total Return (b)

 

 

 

27.38%

   

 

 

(40.18)%

   

 

 

12.37%

   

 

 

17.90%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

Net assets, end of period (in thousands)

 

 

$

 

19,446

   

 

$

 

13,627

   

 

$

 

16,342

   

 

$

 

10,669

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

Net expenses (d)

 

 

 

1.21%

   

 

 

1.24%

   

 

 

1.28%

   

 

 

1.45%

 

Gross expenses (d)

 

 

 

1.21%

   

 

 

1.24%

   

 

 

1.28%

   

 

 

1.63%

 

Net investment income (d)

 

 

 

1.98%

   

 

 

2.23%

   

 

 

1.29%

   

 

 

1.10%

 

Portfolio turnover rate

 

 

 

129%

   

 

 

72%

   

 

 

84%

   

 

 

68%

 

 

*

 

 

 

Commencement of operations.

 

(a)

 

 

 

Beginning with the fiscal year ended 12/31/06, 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; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower. A period of less than one year is not annualized.

 

(c)

 

 

 

Amount is less than $0.01 per share.

 

(d)

 

 

 

Annualized for a period of less than one year.

108Prospectus


 

LAZARD INTERNATIONAL SMALL CAP EQUITY PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

Institutional Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$  

4.80

   

 

$  

10.49

   

 

$  

17.80

   

 

$  

17.10

   

 

$  

19.24

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.08

   

 

 

0.15

   

 

 

0.27

   

 

 

0.22

   

 

 

0.24

 

Net realized and unrealized gain (loss)

 

 

 

1.80

   

 

 

(5.19

)

 

 

 

 

(1.20

)

 

 

 

 

4.16

   

 

 

2.45

 

 

 

 

Total from investment operations

 

 

 

1.88

   

 

 

(5.04

)

 

 

 

 

(0.93

)

 

 

 

 

4.38

   

 

 

2.69

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

   

 

 

(0.14

)

 

 

 

 

(0.63

)

 

 

 

 

(0.25

)

 

 

 

 

(0.22

)

 

Net realized gains

 

 

 

   

 

 

(0.51

)

 

 

 

 

(5.75

)

 

 

 

 

(3.43

)

 

 

 

 

(4.61

)

 

 

 

 

Total distributions

 

 

 

   

 

 

(0.65

)

 

 

 

 

(6.38

)

 

 

 

 

(3.68

)

 

 

 

 

(4.83

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

Net asset value, end of year

 

 

$

 

6.68

   

 

$

 

4.80

   

 

$

 

10.49

   

 

$

 

17.80

   

 

$

 

17.10

 

 

 

 

Total Return (b)

 

 

 

39.17%

   

 

 

(49.84)%

   

 

 

(4.61)%

   

 

 

26.31%

   

 

 

14.77%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

40,243

   

 

$

 

74,640

   

 

$

 

129,725

   

 

$

 

698,166

   

 

$

 

582,909

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.17%

   

 

 

0.98%

   

 

 

0.91%

   

 

 

0.86%

   

 

 

0.93%

 

Gross expenses

 

 

 

1.21%

   

 

 

0.98%

   

 

 

0.91%

   

 

 

0.86%

   

 

 

0.93%

 

Net investment income

 

 

 

1.55%

   

 

 

1.81%

   

 

 

1.48%

   

 

 

1.20%

   

 

 

1.24%

 

Portfolio turnover rate

 

 

 

51%

   

 

 

61%

   

 

 

59%

   

 

 

49%

   

 

 

33%

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

 

 

 

 

 

 

 

 

 

 

 

Open Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

4.82

   

 

$

 

10.51

   

 

$

 

17.77

   

 

$

 

17.09

   

 

$

 

19.22

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.07

   

 

 

0.13

   

 

 

0.21

   

 

 

0.17

   

 

 

0.18

 

Net realized and unrealized gain (loss)

 

 

 

1.81

   

 

 

(5.20

)

 

 

 

 

(1.17

)

 

 

 

 

4.13

   

 

 

2.45

 

 

 

 

Total from investment operations

 

 

 

1.88

   

 

 

(5.07

)

 

 

 

 

(0.96

)

 

 

 

 

4.30

   

 

 

2.63

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

   

 

 

(0.11

)

 

 

 

 

(0.55

)

 

 

 

 

(0.19

)

 

 

 

 

(0.16

)

 

Net realized gains

 

 

 

   

 

 

(0.51

)

 

 

 

 

(5.75

)

 

 

 

 

(3.43

)

 

 

 

 

(4.61

)

 

 

 

 

Total distributions

 

 

 

   

 

 

(0.62

)

 

 

 

 

(6.30

)

 

 

 

 

(3.62

)

 

 

 

 

(4.77

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

0.01

 

 

 

 

Net asset value, end of year

 

 

$

 

6.70

   

 

$

 

4.82

   

 

$

 

10.51

   

 

$

 

17.77

   

 

$

 

17.09

 

 

 

 

Total Return (b)

 

 

 

39.00%

   

 

 

(50.02)%

   

 

 

(4.79)%

   

 

 

25.83%

   

 

 

14.47%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

27,920

   

 

$

 

30,052

   

 

$

 

89,779

   

 

$

 

137,358

   

 

$

 

62,020

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.43%

   

 

 

1.31%

   

 

 

1.20%

   

 

 

1.19%

   

 

 

1.27%

 

Gross expenses

 

 

 

1.48%

   

 

 

1.31%

   

 

 

1.20%

   

 

 

1.19%

   

 

 

1.27%

 

Net investment income

 

 

 

1.28%

   

 

 

1.56%

   

 

 

1.17%

   

 

 

0.89%

   

 

 

0.93%

 

Portfolio turnover rate

 

 

 

51%

   

 

 

61%

   

 

 

59%

   

 

 

49%

   

 

 

33%

 

 

(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; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

 

(c)

 

 

 

Amount is less than $0.01 per share.

Prospectus109


 

LAZARD GLOBAL LISTED INFRASTRUCTURE PORTFOLIO

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout the period

 

Period Ended
12/31/09*

 

 

 

Institutional Shares

 

 

 

 

Net asset value, beginning of period

 

 

$  

10.00

   

 

 

 

 

Loss from investment operations:

 

 

 

 

Net investment loss

 

 

 

(a)

 

 

 

 

 

 

Total from investment operations

 

 

 

(a)

 

 

 

 

 

 

Net asset value, end of period

 

 

$

 

10.00

   

 

 

 

 

Total Return

 

 

 

0.00%

   

 

Ratios and Supplemental Data:

 

 

 

 

Net assets, end of period (in thousands)

 

 

$

 

74

   

 

Ratios to average net assets:

 

 

 

 

Net expenses (b)

 

 

 

1.30%

   

 

Gross expenses (b)

 

 

 

1,825.00%

(c)

 

 

 

Net investment loss (b)

 

 

 

(1.30)%

   

 

Portfolio turnover rate

 

 

 

0%

   

 

 

Selected data for a share of capital
stock outstanding throughout the period

 

Period Ended
12/31/09*

 

 

 

 

 

 

 

 

Open Shares

 

 

 

 

Net asset value, beginning of period

 

 

$  

10.00

   

 

 

 

 

Loss from investment operations:

 

 

 

 

Net investment loss

 

 

 

(a)

 

 

 

 

 

 

Total from investment operations

 

 

 

(a)

 

 

 

 

 

 

Net asset value, end of period

 

 

$

 

10.00

   

 

 

 

 

Total Return

 

 

 

0.00%

   

 

Ratios and Supplemental Data:

 

 

 

 

Net assets, end of period (in thousands)

 

 

$

 

50

   

 

Ratios to average net assets:

 

 

 

 

Net expenses (b)

 

 

 

1.60%

   

 

Gross expenses (b)

 

 

 

1,825.00%

(c)

 

 

 

Net investment loss (b)

 

(1.60)%

 

 

Portfolio turnover rate

 

 

 

0%

   

 

 

*

 

 

 

Portfolio commenced operations on December 31, 2009.

 

(a)

 

 

 

Amount is less than $0.01 per share.

 

(b)

 

 

 

Annualized for a period of less than one year.

 

(c)

 

 

 

Gross expense ratio was the result of the Portfolio being in existence for one day during the period ended 12/31/09.

110Prospectus


 

LAZARD EMERGING MARKETS EQUITY PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

Institutional Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$  

10.88

   

 

$  

23.88

   

 

$  

20.60

   

 

$  

17.84

   

 

$  

13.98

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.35

   

 

 

0.61

   

 

 

0.36

   

 

 

0.33

   

 

 

0.29

 

Net realized and unrealized gain (loss)

 

 

 

7.24

   

 

 

(11.78

)

 

 

 

 

6.41

   

 

 

4.98

   

 

 

5.42

 

 

 

 

Total from investment operations

 

 

 

7.59

   

 

 

(11.17

)

 

 

 

 

6.77

   

 

 

5.31

   

 

 

5.71

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(0.46

)

 

 

 

 

(0.49

)

 

 

 

 

(0.29

)

 

 

 

 

(0.27

)

 

 

 

 

(0.18

)

 

Net realized gains

 

 

 

   

 

 

(1.34

)

 

 

 

 

(3.20

)

 

 

 

 

(2.28

)

 

 

 

 

(1.67

)

 

 

 

 

Total distributions

 

 

 

(0.46

)

 

 

 

 

(1.83

)

 

 

 

 

(3.49

)

 

 

 

 

(2.55

)

 

 

 

 

(1.85

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

Net asset value, end of year

 

 

$

 

18.01

   

 

$

 

10.88

   

 

$

 

23.88

   

 

$

 

20.60

   

 

$

 

17.84

 

 

 

 

Total Return (b)

 

 

 

69.82%

   

 

 

(47.88)%

   

 

 

33.05%

   

 

 

30.32%

   

 

 

41.40%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

8,497,341

   

 

$

 

3,295,983

   

 

$

 

5,270,497

   

 

$

 

2,744,753

   

 

$

 

1,413,671

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.15%

   

 

 

1.17%

   

 

 

1.20%

   

 

 

1.20%

   

 

 

1.27%

(d)

 

Gross expenses

 

 

 

1.15%

   

 

 

1.17%

   

 

 

1.20%

   

 

 

1.20%

   

 

 

1.28%

 

Net investment income

 

 

 

2.40%

   

 

 

3.16%

   

 

 

1.51%

   

 

 

1.67%

   

 

 

1.82%

 

Portfolio turnover rate

 

 

 

49%

   

 

 

43%

   

 

 

53%

   

 

 

46%

   

 

 

48%

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

 

 

 

 

 

 

 

 

 

 

 

Open Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

11.05

   

 

$

 

24.17

   

 

$

 

20.82

   

 

$

 

17.99

   

 

$

 

14.06

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.29

   

 

 

0.52

   

 

 

0.29

   

 

 

0.26

   

 

 

0.20

 

Net realized and unrealized gain (loss)

 

 

 

7.35

   

 

 

(11.87

)

 

 

 

 

6.47

   

 

 

5.03

   

 

 

5.51

 

 

 

 

Total from investment operations

 

 

 

7.64

   

 

 

(11.35

)

 

 

 

 

6.76

   

 

 

5.29

   

 

 

5.71

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(0.41

)

 

 

 

 

(0.43

)

 

 

 

 

(0.22

)

 

 

 

 

(0.18

)

 

 

 

 

(0.14

)

 

Net realized gains

 

 

 

   

 

 

(1.34

)

 

 

 

 

(3.20

)

 

 

 

 

(2.28

)

 

 

 

 

(1.67

)

 

 

 

 

Total distributions

 

 

 

(0.41

)

 

 

 

 

(1.77

)

 

 

 

 

(3.42

)

 

 

 

 

(2.46

)

 

 

 

 

(1.81

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

0.01

   

 

 

(c)

 

 

 

 

0.03

 

 

 

 

Net asset value, end of year

 

 

$

 

18.28

   

 

$

 

11.05

   

 

$

 

24.17

   

 

$

 

20.82

   

 

$

 

17.99

 

 

 

 

Total Return (b)

 

 

 

69.14%

   

 

 

(48.09)%

   

 

 

32.71%

   

 

 

29.93%

   

 

 

41.31%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

3,478,654

   

 

$

 

1,135,042

   

 

$

 

1,467,458

   

 

$

 

441,673

   

 

$

 

195,944

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

1.55%

   

 

 

1.53%

(d)

 

 

 

 

1.47%

(d)

 

 

 

 

1.54%

   

 

 

1.59%

 

Gross expenses

 

 

 

1.55%

   

 

 

1.54%

   

 

 

1.48%

   

 

 

1.54%

   

 

 

1.59%

 

Net investment income

 

 

 

1.94%

   

 

 

2.72%

   

 

 

1.19%

   

 

 

1.30%

   

 

 

1.21%

 

Portfolio turnover rate

 

 

 

49%

   

 

 

43%

   

 

 

53%

   

 

 

46%

   

 

 

48%

 

 

(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.

 

(d)

 

 

 

Portfolios leaving excess cash in demand deposit accounts may receive credits that are available to offset custody expenses. As a result of these credits, the net expenses were reduced by 0.01%.

Prospectus111


 

LAZARD DEVELOPING MARKETS EQUITY PORTFOLIO

 

 

 

 

 

 

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

 

Year Ended

 

For the Period
9/30/08* to
12/31/08

 

12/31/09

 

Institutional Shares

 

 

 

 

Net asset value, beginning of period

 

 

$

 

6.54

   

 

$  

10.00

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

Net investment income (a)

 

 

 

0.01

   

 

 

0.01

 

Net realized and unrealized gain (loss)

 

 

 

7.09

   

 

 

(3.46

)

 

 

 

 

Total from investment operations

 

 

 

7.10

   

 

 

(3.45

)

 

 

 

 

Less distributions from:

 

 

 

 

Net investment income

 

 

 

(0.04

)

 

 

 

 

(0.01

)

 

Net realized gains

 

 

 

(0.42

)

 

 

 

 

 

 

 

 

Total distributions

 

 

 

(0.46

)

 

 

 

 

(0.01

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

 

 

 

 

Net asset value, end of period

 

 

$

 

13.18

   

 

$

 

6.54

 

 

 

 

Total Return (b)

 

 

 

108.53%

   

 

 

(34.54)%

 

Ratios and Supplemental Data:

 

 

 

 

Net assets, end of period (in thousands)

 

 

$

 

20,002

   

 

$

 

6,539

 

Ratios to average net assets:

 

 

 

 

Net expenses (d)

 

 

 

1.30%

   

 

 

1.30%

 

Gross expenses (d)

 

 

 

2.81%

   

 

 

11.98%

 

Net investment income (d)

 

 

 

0.07%

   

 

 

0.34%

 

Portfolio turnover rate

 

 

 

96%

   

 

 

72%

 

 

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

 

Year Ended

 

For the Period
9/30/08* to
12/31/08

 

12/31/09

 

 

 

 

 

 

Open Shares

 

 

 

 

Net asset value, beginning of period

 

 

$

 

6.55

   

 

$  

10.00

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

Net investment loss (a)

 

 

 

(0.08

)

 

 

 

 

(c)

 

Net realized and unrealized gain (loss)

 

 

 

7.13

   

 

 

(3.45

)

 

 

 

 

Total from investment operations

 

 

 

7.05

   

 

 

(3.45

)

 

 

 

 

Less distributions from:

 

 

 

 

Net investment income

 

 

 

(c)

 

 

 

 

 

Net realized gains

 

 

 

(0.42

)

 

 

 

 

 

 

 

 

Total distributions

 

 

 

(0.42

)

 

 

 

 

 

 

 

 

Redemption fees

 

 

 

0.01

   

 

 

 

 

 

 

Net asset value, end of period

 

 

$

 

13.19

   

 

$

 

6.55

 

 

 

 

Total Return (b)

 

 

 

108.17%

   

 

 

(34.60)%

 

Ratios and Supplemental Data:

 

 

 

 

Net assets, end of period (in thousands)

 

 

$

 

42,975

   

 

$

 

357

 

Ratios to average net assets:

 

 

 

 

Net expenses (d)

 

 

 

1.60%

   

 

 

1.60%

 

Gross expenses (d)

 

 

 

2.54%

   

 

 

28.95%

 

Net investment loss (d)

 

 

 

(0.63)%

   

(0.09)%

Portfolio turnover rate

 

 

 

96%

   

 

 

72%

 

 

*

 

 

 

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 State Street; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower. A period of less than one year is not annualized.

 

(c)

 

 

 

Amount is less than $0.01 per share.

 

(d)

 

 

 

Annualized for a period of less than one year.

112Prospectus


 

LAZARD U.S. HIGH YIELD PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

Institutional Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

3.78

   

 

$

 

5.15

   

 

$  

5.36

   

 

$  

5.27

   

 

$  

5.47

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.34

   

 

 

0.38

   

 

 

0.40

   

 

 

0.40

   

 

 

0.42

 

Net realized and unrealized gain (loss)

 

 

 

0.92

   

 

 

(1.37

)

 

 

 

 

(0.21

)

 

 

 

 

0.09

   

 

 

(0.19

)

 

 

 

 

Total from investment operations

 

 

 

1.26

   

 

 

(0.99

)

 

 

 

 

0.19

   

 

 

0.49

   

 

 

0.23

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(0.34)

   

 

 

(0.38

)

 

 

 

 

(0.40

)

 

 

 

 

(0.40

)

 

 

 

 

(0.43

)

 

 

 

 

Total distributions

 

 

 

(0.34)

   

 

 

(0.38

)

 

 

 

 

(0.40

)

 

 

 

 

(0.40

)

 

 

 

 

(0.43

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

   

 

 

 

 

 

 

Net asset value, end of year

 

 

$

 

4.70

   

 

$

 

3.78

   

 

$

 

5.15

   

 

$

 

5.36

   

 

$

 

5.27

 

 

 

 

Total Return (b)

 

 

 

34.66%

   

 

 

(20.24)%

   

 

 

3.63%

   

 

 

9.71%

   

 

 

4.33%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

87,568

   

 

$

 

34,262

   

 

$

 

56,278

   

 

$

 

68,452

   

 

$

 

75,100

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

0.55%

   

 

 

0.55%

   

 

 

0.55%

   

 

 

0.55%

   

 

 

0.55%

 

Gross expenses

 

 

 

0.89%

   

 

 

1.00%

   

 

 

0.90%

   

 

 

0.90%

   

 

 

0.86%

 

Net investment income

 

 

 

7.96%

   

 

 

8.10%

   

 

 

7.56%

   

 

 

7.61%

   

 

 

7.89%

 

Portfolio turnover rate

 

 

 

17%

   

 

 

33%

   

 

 

20%

   

 

 

29%

   

 

 

22%

 

 

 

 

 

 

 

 

 

 

 

 

Selected data for a share of capital
stock outstanding throughout each year

 

Year Ended

 

12/31/09

 

12/31/08

 

12/31/07

 

12/31/06

 

12/31/05

 

 

 

 

 

 

 

 

 

 

 

 

Open Shares

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

 

$

 

3.79

   

 

$

 

5.17

   

 

$

 

5.37

   

 

$

 

5.29

   

 

$

 

5.48

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

Net investment income (a)

 

 

 

0.33

   

 

 

0.37

   

 

 

0.39

   

 

 

0.39

   

 

 

0.40

 

Net realized and unrealized gain (loss)

 

 

 

0.94

   

 

 

(1.38

)

 

 

 

 

(0.21

)

 

 

 

 

0.08

   

 

 

(0.19

)

 

 

 

 

Total from investment operations

 

 

 

1.27

   

 

 

(1.01

)

 

 

 

 

0.18

   

 

 

0.47

   

 

 

0.21

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

(0.33)

   

 

 

(0.37

)

 

 

 

 

(0.39

)

 

 

 

 

(0.39

)

 

 

 

 

(0.41

)

 

 

 

 

Total distributions

 

 

 

(0.33)

   

 

 

(0.37

)

 

 

 

 

(0.39

)

 

 

 

 

(0.39

)

 

 

 

 

(0.41

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

0.01

   

 

 

   

 

 

0.01

 

 

 

 

Net asset value, end of year

 

 

$

 

4.73

   

 

$

 

3.79

   

 

$

 

5.17

   

 

$

 

5.37

   

 

$

 

5.29

 

 

 

 

Total Return (b)

 

 

 

34.40%

   

 

 

(20.35)%

   

 

 

3.53%

   

 

 

9.18%

   

 

 

4.22%

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in thousands)

 

 

$

 

6,126

   

 

$

 

5,220

   

 

$

 

1,776

   

 

$

 

2,179

   

 

$

 

2,986

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

Net expenses

 

 

 

0.85%

   

 

 

0.85%

   

 

 

0.85%

   

 

 

0.85%

   

 

 

0.85%

 

Gross expenses

 

 

 

1.21%

   

 

 

1.74%

   

 

 

2.14%

   

 

 

2.12%

   

 

 

1.78%

 

Net investment income

 

 

 

7.74%

   

 

 

7.89%

   

 

 

7.24%

   

 

 

7.29%

   

 

 

7.47%

 

Portfolio turnover rate

 

 

 

17%

   

 

 

33%

   

 

 

20%

   

 

 

29%

   

 

 

22%

 

 

(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; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower.

 

(c)

 

 

 

Amount is less than $0.01 per share.

Prospectus113


 

LAZARD CAPITAL ALLOCATOR OPPORTUNISTIC STRATEGIES PORTFOLIO

 

 

 

 

 

 

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

 

Year Ended

 

For the Period
3/26/08* to
12/31/08

 

12/31/09

 

Institutional Shares

 

 

 

 

Net asset value, beginning of period

 

 

$

 

7.36

   

 

$  

10.00

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

Net investment income (a)

 

 

 

0.14

   

 

 

0.21

 

Net realized and unrealized gain (loss)

 

 

 

1.42

   

 

 

(2.59

)

 

 

 

 

Total from investment operations

 

 

 

1.56

   

 

 

(2.38

)

 

 

 

 

Less distributions from:

 

 

 

 

Net investment income

 

 

 

(0.12

)

 

 

 

 

(0.26

)

 

 

 

 

Total distributions

 

 

 

(0.12

)

 

 

 

 

(0.26

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

 

 

Net asset value, end of period

 

 

$

 

8.80

   

 

$

 

7.36

 

 

 

 

Total Return (b)

 

 

 

21.21%

   

 

 

(23.64)%

 

Ratios and Supplemental Data:

 

 

 

 

Net assets, end of period (in thousands)

 

 

$

 

195,939

   

 

$

 

110,757

 

Ratios to average net assets:

 

 

 

 

Net expenses (d)

 

 

 

1.02%

   

 

 

1.02%

 

Gross expenses (d)

 

 

 

1.16%

   

 

 

1.27%

 

Net investment income (d)

 

 

 

1.72%

   

 

 

3.01%

 

Portfolio turnover rate

 

 

 

113%

   

 

 

94%

 

 

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

 

Year Ended

 

For the Period
3/31/08* to
12/31/08

 

12/31/09

 

 

 

 

 

 

Open Shares

 

 

 

 

Net asset value, beginning of period

 

 

$

 

7.37

   

 

$  

9.95

 

 

 

 

Income (loss) from investment operations:

 

 

 

 

Net investment income (a)

 

 

 

0.12

   

 

 

0.30

 

Net realized and unrealized gain (loss)

 

 

 

1.41

   

 

 

(2.64

)

 

 

 

 

Total from investment operations

 

 

 

1.53

   

 

 

(2.34

)

 

 

 

 

Less distributions from:

 

 

 

 

Net investment income

 

 

 

(0.10

)

 

 

 

 

(0.24

)

 

 

 

 

Total distributions

 

 

 

(0.10

)

 

 

 

 

(0.24

)

 

 

 

 

Redemption fees

 

 

 

(c)

 

 

 

 

(c)

 

 

 

 

Net asset value, end of period

 

 

$

 

8.80

   

 

$

 

7.37

 

 

 

 

Total Return (b)

 

 

 

20.71%

   

(23.44)%

Ratios and Supplemental Data:

 

 

 

 

Net assets, end of period (in thousands)

 

 

$

 

16,856

   

 

$

 

9,319

 

Ratios to average net assets:

 

 

 

 

Net expenses (d)

 

 

 

1.32%

   

 

 

1.32%

 

Gross expenses (d)

 

 

 

1.44%

   

 

 

1.93%

 

Net investment income (d)

 

 

 

1.44%

   

 

 

4.68%

 

Portfolio turnover rate

 

 

 

113%

   

 

 

94%

 

 

*

 

 

 

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; without such waiver/reimbursement of expenses, the Portfolio’s returns would have been lower. A period of less than one year is not annualized.

 

(c)

 

 

 

Amount is less than $0.01 per share.

 

(d)

 

 

 

Annualized for a period of less than one year.

114Prospectus


 Lazard Funds Other Performance of the Investment Manager

p

Lazard U.S. Equity Value Composite (Prior Performance of Similar Accounts)

This is not the Portfolio’s Performance

Lazard U.S. Equity Value Portfolio’s investment objective, policies and strategies are substantially similar to those used by the Investment Manager in advising certain discretionary accounts (the “Other Accounts”). The chart below shows the historical investment performance for a composite (the “U.S. Equity Value Composite”) of the Other Accounts (consisting of all similarly managed, fully discretionary and fee paying accounts) and for the Portfolio’s benchmark index. The U.S. Equity Value Composite should not be interpreted as indicative of the Portfolio’s future performance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Total Returns
for the Year Ended December 31,

 

2002

 

2003

 

2004

 

2005

 

2006

 

2007

 

2008

 

2009

 

U.S. Equity Value Composite

 

-13.3%

 

25.5%

 

16.4%

 

4.4%

 

22.3%

 

2.5%

 

-35.5%

 

26.4%

 

Russell 1000 Value Index*

 

-15.5%

 

30.0%

 

16.5%

 

7.1%

 

22.2%

 

-0.2%

 

-36.9%

 

19.7%

 

 

 

 

 

 

 

 

 

 

 

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

 

Inception
Date

 

One Year

 

Three Years

 

Five Years

 

Since
Inception

 

U.S. Equity Value Composite

 

10/1/01

 

26.4%

 

-5.8%

 

1.3%

 

4.8%

 

Russell 1000 Value Index*

 

N/A

 

19.7%

 

-9.0%

 

-0.3%

 

3.8%

 

 

*

 

 

 

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.

Certain Other Accounts are not subject to certain investment limitations, diversification requirements and other restrictions imposed by the 1940 Act and the Code which, if applicable, may have adversely affected the performance of the U.S. Equity Value Composite. The performance results of the U.S. Equity Value Composite reflect actual fees charged to Other Accounts, except custodian fees of separately managed accounts. However, the Portfolio bears fees and operational expenses not typically borne by managed accounts (including distribution and servicing fees of Open Shares). The U.S. Equity Value Composite performance would have been lower than that shown above if the Other Accounts had been subject to the fees and expenses of the Portfolio.

Additionally, although it is anticipated that the Portfolio and the Other Accounts will hold similar securities, their investment results are expected to differ. In particular, differences in asset size and cash flows may result in different securities selections, differences in the relative weightings of securities or differences in the prices paid for particular portfolio holdings. However, such differences do not alter the conclusion that the Portfolio and the Other Accounts have substantially similar investment objectives, policies and strategies.

The returns of the U.S. Equity Value Composite are dollar-weighted based upon beginning period market values. This calculation methodology differs from guidelines of the SEC for calculating performance of mutual funds.

Prospectus115


 

Lazard U.S. Strategic Equity Composite (Prior Performance of Similar Accounts)

This is not the Portfolio’s Performance

Lazard U.S. Strategic Equity Portfolio’s investment objective, policies and strategies are substantially similar to those used by the Investment Manager in advising certain Other Accounts. The chart below shows the historical investment performance for a composite (the “U.S. Strategic Equity Composite”) of the Other Accounts (consisting of all similarly managed, fully discretionary and fee paying accounts) and for the Portfolio’s benchmark index. The U.S. Strategic Equity Composite should not be interpreted as indicative of the Portfolio’s future performance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Total Returns
for the Year Ended December 31,

 

2000

 

2001

 

2002

 

2003

 

2004

 

2005

 

2006

 

2007

 

2008

 

2009

 

U.S. Strategic Equity Composite

 

-9.0%

 

-3.1%

 

-17.2%

 

29.4%

 

19.9%

 

6.3%

 

18.1%

 

1.2%

 

-34.5%

 

29.2%

 

S&P 500 Index*

 

-9.1%

 

-11.9%

 

-22.1%

 

28.7%

 

10.9%

 

4.9%

 

15.8%

 

5.5%

 

-37.0%

 

26.5%

 

 

 

 

 

 

 

 

 

 

 

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

 

Inception
Date

 

One Year

 

Three Years

 

Five Years

 

Ten Years

 

U.S. Strategic Equity Composite

 

3/1/98

 

29.2%

 

-5.0%

 

1.5%

 

2.0%

 

S&P 500 Index*

 

N/A

 

26.5%

 

-5.6%

 

0.4%

 

-1.0%

 

 

*

 

 

 

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.

Certain Other Accounts are not subject to certain investment limitations, diversification requirements and other restrictions imposed by the 1940 Act and the Code, which, if applicable, may have adversely affected the performance of the U.S. Strategic Equity Composite. The performance results of the U.S. Strategic Equity Composite reflect actual fees charged to the Other Accounts, except custodian fees of separately managed accounts. However, the Portfolio bears fees and operational expenses not typically borne by managed accounts (including distribution and servicing fees of Open Shares). The U.S. Strategic Equity Composite performance would have been lower than that shown above if the Other Accounts had been subject to the fees and expenses of the Portfolio.

Additionally, although it is anticipated that the Portfolio and the Other Accounts will hold similar securities, their investment results are expected to differ. In particular, differences in asset size and cash flow may result in different securities selections, differences in the relative weightings of securities or differences in the prices paid for particular portfolio holdings. However, such differences do not alter the conclusion that the Portfolio and the Other Accounts have substantially similar investment objectives, policies and strategies.

The returns of the U.S. Strategic Equity Composite are dollar-weighted based upon beginning period market values. This calculation methodology differs from guidelines of the SEC for calculating performance of mutual funds.

116Prospectus


 

Lazard U.S. Small-Mid Cap Equity Composite (Prior Performance of Similar Accounts)

This is not the Portfolio’s Performance

Lazard U.S. Small-Mid Cap Equity Portfolio’s investment objective, policies and strategies are substantially similar to those used by the Investment Manager in advising certain Other Accounts. The chart below shows the historical investment performance for a composite (the “U.S. Small-Mid Cap Equity Composite”) of the Other Accounts (consisting of all similarly managed, fully discretionary and fee paying accounts) and for the Portfolio’s benchmark index. The U.S. Small-Mid Cap Equity Composite should not be interpreted as indicative of the Portfolio’s future performance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Total Returns
for the Year Ended December 31,

 

2001

 

2002

 

2003

 

2004

 

2005

 

2006

 

2007

 

2008

 

2009

 

U.S. Small-Mid Cap Equity Composite

 

15.2%

 

-19.0%

 

33.2%

 

19.8%

 

9.0%

 

20.8%

 

0.2%

 

-36.2%

 

55.5%

 

Russell 2500 Index*

 

1.3%

 

-17.8%

 

45.5%

 

18.3%

 

8.1%

 

16.2%

 

1.4%

 

-36.8%

 

34.4%

 

 

 

 

 

 

 

 

 

 

 

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

 

Inception
Date

 

One Year

 

Three Years

 

Five Years

 

Since
Inception

 

U.S. Small-Mid Cap Equity Composite

 

5/1/00

 

55.5%

 

-0.2%

 

5.5%

 

7.9%

 

Russell 2500 Index*

 

N/A

 

34.4%

 

-4.9%

 

1.6%

 

4.6%

 

 

*

 

 

 

The Russell 2500 Index is comprised of the 2,500 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.

Certain Other Accounts are not subject to certain investment limitations, diversification requirements and other restrictions imposed by the 1940 Act and the Code which, if applicable, may have adversely affected the performance of the U.S. Small-Mid Cap Equity Composite. The performance results of the U.S. Small-Mid Cap Equity Composite reflect actual fees charged to Other Accounts, except custodian fees of separately managed accounts. However, the Portfolio bears fees and operational expenses not typically borne by managed accounts (including distribution and servicing fees of Open Shares). The U.S. Small-Mid Cap Equity Composite performance would have been lower than that shown above if the Other Accounts had been subject to the fees and expenses of the Portfolio.

Additionally, although it is anticipated that the Portfolio and the Other Accounts will hold similar securities, their investment results are expected to differ. In particular, differences in asset size and cash flows may result in different securities selections, differences in the relative weightings of securities or differences in the prices paid for particular portfolio holdings. However, such differences do not alter the conclusion that the Portfolio and the Other Accounts have substantially similar investment objectives, policies and strategies.

The returns of the U.S. Small-Mid Cap Equity Composite are dollar-weighted based upon beginning period market values. This calculation methodology differs from guidelines of the SEC for calculating performance of mutual funds.

Prospectus117


 

Lazard International Equity Select Composite (Prior Performance of Similar Accounts)

This is not the Portfolio’s Performance

Lazard International Equity Select Portfolio’s investment objective, policies and strategies are substantially similar to those used by the Investment Manager in advising certain Other Accounts. The chart below shows the historical investment performance for a composite (the “International Equity Select Composite”) of the Other Accounts (consisting of all similarly managed, fully discretionary and fee paying accounts) and for the Portfolio’s benchmark index. The International Equity Select Composite should not be interpreted as indicative of the Portfolio’s future performance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Total Returns
for the Year Ended December 31,

 

2000

 

2001

 

2002

 

2003

 

2004

 

2005

 

2006

 

2007

 

2008

 

2009

 

International Equity Select Composite

 

3.2%

 

-19.2%

 

-11.2%

 

31.0%

 

16.5%

 

9.1%

 

23.1%

 

10.2%

 

-36.4%

 

22.9%

 

MSCI EAFE Index*

 

-14.2%

 

-21.4%

 

-15.9%

 

38.6%

 

20.2%

 

13.5%

 

26.3%

 

11.2%

 

-43.4%

 

31.8%

 

 

 

 

 

 

 

 

 

 

 

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

 

Inception
Date

 

One Year

 

Three Years

 

Five Years

 

Ten Years

 

International Equity Select Composite

 

1/1/94

 

22.9%

 

-4.9%

 

2.9%

 

2.7%

 

MSCI EAFE Index*

 

N/A

 

31.8%

 

-6.0%

 

3.5%

 

1.2%

 

 

*

 

 

 

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.

Certain Other Accounts are not subject to certain investment limitations, diversification requirements and other restrictions imposed by the 1940 Act and the Code, which, if applicable, may have adversely affected the performance of the International Equity Select Composite. The performance results of the International Equity Select Composite reflect actual fees charged to the Other Accounts, except custodian fees of separately managed accounts. However, the Portfolio bears fees and operational expenses not typically borne by managed accounts (including distribution and servicing fees of Open Shares). The International Equity Select Composite performance would have been lower than that shown above if the Other Accounts had been subject to the fees and expenses of the Portfolio.

Additionally, although it is anticipated that the Portfolio and the Other Accounts will hold similar securities, their investment results are expected to differ. In particular, differences in asset size and cash flow may result in different securities selections, differences in the relative weightings of securities or differences in the prices paid for particular portfolio holdings. However, such differences do not alter the conclusion that the Portfolio and the Other Accounts have substantially similar investment objectives, policies and strategies.

The returns of the International Equity Select Composite are dollar-weighted based upon beginning period market values on a monthly basis. This calculation method differs from guidelines of the SEC for calculating performance of mutual funds.

118Prospectus


 

Lazard International Strategic Equity Composite (Prior Performance of Similar Accounts)

This is not the Portfolio’s Performance

Lazard International Strategic Equity Portfolio’s investment objective, policies and strategies are substantially similar to those used by the Investment Manager in advising certain Other Accounts. The chart below shows the historical investment performance for a composite (the “International Strategic Equity Composite”) of the Other Accounts (consisting of all similarly managed, fully discretionary and fee paying accounts) and for the Portfolio’s benchmark index. The International Strategic Equity Composite should not be interpreted as indicative of the Portfolio’s future performance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Total Returns
for the Year Ended December 31,

 

2002

 

2003

 

2004

 

2005

 

2006

 

2007

 

2008

 

2009

 

International Strategic Equity Composite

 

-6.7%

 

35.7%

 

25.8%

 

18.6%

 

26.1%

 

12.4%

 

-40.5%

 

28.9%

 

MSCI EAFE Index*

 

-15.9%

 

38.6%

 

20.2%

 

13.5%

 

26.3%

 

11.2%

 

-43.4%

 

31.8%

 

 

 

 

 

 

 

 

 

 

 

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

 

Inception
Date

 

One Year

 

Three Years

 

Five Years

 

Since
Inception

 

International Strategic Equity Composite

 

10/1/01

 

28.9%

 

-4.8%

 

5.2%

 

10.1%

 

MSCI EAFE Index*

 

N/A

 

31.8%

 

-6.0%

 

3.5%

 

7.3%

 

 

*

 

 

 

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.

Certain Other Accounts are not subject to certain investment limitations, diversification requirements and other restrictions imposed by the 1940 Act and the Code which, if applicable, may have adversely affected the performance of the International Strategic Equity Composite. The performance results of the International Strategic Equity Composite reflect actual fees charged to the Other Accounts, except custodian fees of separately managed accounts. However, the Portfolio bears fees and operational expenses not typically borne by managed accounts (including distribution and servicing fees of Open Shares). The International Strategic Equity Composite performance would have been lower than that shown above if the Other Accounts had been subject to the fees and expenses of the Portfolio.

Additionally, although it is anticipated that the Portfolio and the Other Accounts will hold similar securities, their investment results are expected to differ. In particular, differences in asset size and cash flows may result in different securities selections, differences in the relative weightings of securities or differences in the prices paid for particular portfolio holdings. However, such differences do not alter the conclusion that the Portfolio and the Other Accounts have substantially similar investment objectives, policies and strategies.

The returns of the International Strategic Equity Composite are dollar-weighted based upon beginning period market values. This calculation methodology differs from guidelines of the SEC for calculating performance of mutual funds.

Prospectus119


 

Lazard Global Listed Infrastructure Composite (Prior Performance of Similar Accounts)

This is not the Portfolio’s Performance

Lazard Global Listed Infrastructure Portfolio’s investment objective, policies and strategies are substantially similar to those used by the Investment Manager in advising certain Other Accounts. The chart below shows the historical investment performance for a composite (the “Global Listed Infrastructure Composite”) of the Other Accounts (consisting of all similarly managed, fully discretionary and fee paying accounts) and for the Portfolio’s benchmark indices. The Global Listed Infrastructure Composite should not be interpreted as indicative of the Portfolio’s future performance.

 

 

 

 

 

 

 

Annual Total Returns for the Year Ended December 31,

 

2007

 

2008

 

2009

 

Global Listed Infrastructure Composite

 

4.9%

 

-31.5%

 

21.4%

 

UBS Global 50/50 Infrastructure & Utilities Index*

 

13.6%

 

-32.6%

 

14.9%

 

MSCI World Index**

 

4.7%

 

-38.7%

 

25.7%

 

 

 

 

 

 

 

 

 

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

 

Inception Date

 

One Year

 

Three Years

 

Since
Inception

 

Global Listed Infrastructure Composite

 

9/1/06

 

21.4%

 

-4.4%

 

-0.3%

 

UBS Global 50/50 Infrastructure & Utilities Index*

 

N/A

 

14.9%

 

-4.2%

 

-0.8%

 

MSCI World Index**

 

N/A

 

25.7%

 

-6.9%

 

-3.8%

 

 

*

 

 

 

The UBS Global 50/50 Infrastructure & Utilities Index tracks a 50% exposure to the global developed-market utilities sector and a 50% exposure to the global developed-market infrastructure sector. The index is unmanaged, has no fees or costs and is not available for investment.

 

**

 

 

 

The MSCI World Index is a market capitalization-weighted index of companies representative of the market structure of 23 developed market countries in North America, Europe and the Asia/Pacific region. The index is unmanaged, has no fees or costs and is not available for investment.

Certain Other Accounts are not subject to certain investment limitations, diversification requirements and other restrictions imposed by the 1940 Act and the Code which, if applicable, may have adversely affected the performance of the Global Listed Infrastructure Composite. The performance results of the Global Listed Infrastructure Composite reflect actual fees charged to the Other Accounts, except custodian fees of separately managed accounts. However, the Portfolio bears fees and operational expenses not typically borne by managed accounts (including distribution and servicing fees of Open Shares). The Global Listed Infrastructure Composite performance would have been lower than that shown above if the Other Accounts had been subject to the fees and expenses of the Portfolio.

Additionally, although it is anticipated that the Portfolio and the Other Accounts will hold similar securities, their investment results are expected to differ. In particular, differences in asset size and cash flows may result in different securities selections, differences in the relative weightings of securities or differences in the prices paid for particular portfolio holdings. However, such differences do not alter the conclusion that the Portfolio and the Other Accounts have substantially similar investment objectives, policies and strategies.

The returns of the Global Listed Infrastructure Composite are dollar-weighted based upon beginning period market values. This calculation methodology differs from guidelines of the SEC for calculating performance of mutual funds.

120Prospectus


 

Lazard Capital Allocator Opportunistic Strategies Composite (Prior Performance of Similar Accounts)

This is not the Portfolio’s Performance

Lazard Capital Allocator Opportunistic Strategies Portfolio’s investment objective, policies and strategies are substantially similar to those used by the Investment Manager in advising certain Other Accounts. The chart below shows the historical investment performance for a composite (the “Capital Allocator Opportunistic Strategies Composite”) of the Other Accounts (consisting of all similarly managed, fully discretionary and fee paying accounts) and for the Portfolio’s benchmark indices. The Capital Allocator Opportunistic Strategies Composite should not be interpreted as indicative of the Portfolio’s future performance.

 

 

 

 

 

 

 

 

 

Annual Total Returns for the Year Ended December 31,

 

2006

 

2007

 

2008

 

2009

 

Capital Allocator Opportunistic Strategies Composite

 

18.4%

 

16.6%

 

-27.8%

 

21.2%

 

MSCI World Index*

 

20.1%

 

9.0%

 

-40.7%

 

30.0%

 

Global Market Exposure Index**

 

13.9%

 

8.9%

 

-24.1%

 

22.9%

 

 

 

 

 

 

 

 

 

 

Average Annual Total Returns
(for the periods ended December 31, 2009)

 

Inception Date

 

One Year

 

Three Years

 

Since
Inception

 

Capital Allocator Opportunistic Strategies Composite

 

9/1/05

 

21.2%

 

0.7%

 

4.1%

 

MSCI World Index*

 

N/A

 

30.0%

 

-5.6%

 

1.5%

 

Global Market Exposure Index**

 

N/A

 

22.9%

 

0.5%

 

4.3%

 

 

*

 

 

 

The MSCI World Index is a market capitalization-weighted index of companies representative of the market structure of 23 developed market countries in North America, Europe and the Asia/Pacific region. The index is unmanaged, has no fees or costs and is not available for investment.

 

**

 

 

 

The Global Market Exposure Index is a blended index constructed by the Investment Manager and is comprised of 36% Barclays Capital U.S. Aggregate Bond Index, 19.5% S&P 500 Index, 15% MSCI Europe Index, 9% MSCI Pacific Index, 6% MSCI Emerging Markets Index, 6% S&P MidCap 400 Index, 4.5% S&P SmallCap 600 Index and 4% Three Month London Interbank Offered Rate (LIBOR). The index is unmanaged, has no fees or costs and is not available for investment.

Certain Other Accounts are not subject to certain investment limitations, diversification requirements and other restrictions imposed by the 1940 Act and the Code which, if applicable, may have adversely affected the performance of the Capital Allocator Opportunistic Strategies Composite. The performance results of the Capital Allocator Opportunistic Strategies Composite reflect actual fees charged to the Other Accounts, except custodian fees of separately managed accounts. However, the Portfolio bears fees and operational expenses not typically borne by managed accounts (including distribution and servicing fees of Open Shares). The Capital Allocator Opportunistic Strategies Composite performance would have been lower than that shown above if the Other Accounts had been subject to the fees and expenses of the Portfolio.

Additionally, although it is anticipated that the Portfolio and the Other Accounts will hold similar securities, their investment results are expected to differ. In particular, differences in asset size and cash flows may result in different securities selections, differences in the relative weightings of securities or differences in the prices paid for particular portfolio holdings. However, such differences do not alter the conclusion that the Portfolio and the Other Accounts have substantially similar investment objectives, policies and strategies.

The returns of the Capital Allocator Opportunistic Strategies Composite are dollar-weighted based upon beginning period market values. This calculation methodology differs from guidelines of the SEC for calculating performance of mutual funds.

Prospectus121


     

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[This Page Intentionally Left Blank]



(BACK COVER)

For more information about the Portfolios, the following documents are available, free of charge, upon request:

Annual and Semi-Annual Reports (Reports):

The Fund’s annual and semi-annual reports to shareholders contain additional information on each Portfolio’s investments. In the annual report, you will find a broad discussion of the market conditions and investment strategies that significantly affected each Portfolio’s performance during its last fiscal year.

Statement of Additional Information (SAI):

The SAI provides more detailed information about the Portfolios, including their operations and investment policies. It is incorporated by reference and is legally considered a part of this Prospectus.

Disclosure of Portfolio Holdings:

Each Portfolio will publicly disclose its portfolio holdings on a calendar quarter-end basis on its website accessible from http://www.lazardnet.com/lam/us/lazardfunds.shtml, approximately 14 days after such quarter end. The information will remain accessible until the Fund files a report on Form N-Q or Form N-CSR for the period that includes the date as of which the information was current.

A description of the Fund’s policies and procedures with respect to the disclosure of the Portfolios’ portfolio holdings is available in the Fund’s SAI.

Wherever there’s opportunity, there’s Lazard.SM

You can get a free copy of the Reports and the SAI at http://www.LazardNet.com, or request the Reports and the SAI and other information and discuss your questions about the Portfolios, by contacting the Fund at:

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

You also can review the Reports and the SAI at the Public Reference Room of the SEC in Washington, D.C. For information, call (202) 551-8090. You can get text-only copies:

After paying a duplicating fee, by writing the Public Reference Branch of the SEC, 100 F Street NE, Room 1580, Washington, D.C. 20549-1520, or by e-mail request to publicinfo@sec.gov.

Free from the SEC’s website at http://www.sec.gov.

Investment Company Act file no. 811-06312

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

No person has been authorized to give any information or to make any representations not contained in this Prospectus, and information or representations not contained herein must not be relied upon as having been authorized by the Fund or the Distributor. This Prospectus does not constitute an offer of any security other than the registered securities to which it relates or an offer to any person in any jurisdiction where such offer would be unlawful.

Lazard Asset Management LLC30 Rockefeller PlazaNew York, NY 10112-6300800-823-6300www.LazardNet.com

© 2010 The Lazard Funds, Inc. and Lazard Asset Management Securities LLC

5/10 LZDPS000

Lazard Funds



THE LAZARD FUNDS, INC.
30 Rockefeller Plaza
New York, New York 10112-6300
(800) 823-6300

STATEMENT OF ADDITIONAL INFORMATION
April 30, 2010

          The Lazard Funds, Inc. (the “Fund”) is a no-load, open-end management investment company known as a mutual fund. This Statement of Additional Information, which is not a prospectus, supplements and should be read in conjunction with the current Prospectus of the Fund, dated April 30, 2010, as may be revised from time to time, relating to the following fifteen portfolios (individually, a “Portfolio” and collectively, the “Portfolios”):

 

 

 

 

Institutional Shares

Open Shares

U.S. Equity

 

 

Lazard U.S. Equity Value Portfolio

LEVIX

LEVOX

(“Equity Value Portfolio”)

 

 

Lazard U.S. Strategic Equity Portfolio

LZUSX

LZUOX

(“Strategic Equity Portfolio”)

 

 

Lazard U.S. Mid Cap Equity Portfolio

LZMIX

LZMOX

(“Mid Cap Portfolio”)

 

 

Lazard U.S. Small-Mid Cap Equity Portfolio

LZSCX

LZCOX

(“Small-Mid Cap Portfolio”)

 

 

 

 

 

International Equity

 

 

Lazard International Equity Portfolio

LZIEX

LZIOX

(“International Equity Portfolio”)

 

 

Lazard International Equity Select Portfolio

LZSIX

LZESX

(“International Equity Select Portfolio”)

 

 

Lazard International Strategic Equity Portfolio

LISIX

LISOX

(“International Strategic Portfolio”)

 

 

Lazard International Small Cap Equity Portfolio

LZISX

LZSMX

(“International Small Cap Portfolio”)

 

 

 

 

 

Global Equity

 

 

Lazard Global Listed Infrastructure Portfolio

GLIFX

GLFOX

(“Global Listed Infrastructure Portfolio”)

 

 

 

 

 

Emerging Markets

 

 

Lazard Emerging Markets Equity Portfolio

LZEMX

LZOEX

(“Emerging Markets Portfolio”)

 

 

Lazard Emerging Markets Equity Select Portfolio

LESIX

LESOX

(“Emerging Markets Select Portfolio”)

 

 

Lazard Developing Markets Equity Portfolio

LDMIX

LDMOX

(“Developing Markets Portfolio”)

 

 

Lazard Emerging Markets Equity Blend Portfolio

EMBIX

EMBOX

(“Emerging Markets Blend Portfolio”)

 

 

 

 

 

Fixed Income

 

 

Lazard U.S. High Yield Portfolio

LZHYX

LZHOX

(“High Yield Portfolio”)

 

 




 

 

 

Capital Allocator

 

 

Lazard Capital Allocator Opportunistic Strategies Portfolio
(“Capital Allocator Portfolio”)

LCAIX

LCAOX

          Each Portfolio currently offers two classes of shares—Institutional Shares and Open Shares. Institutional Shares and Open Shares are identical, except as to minimum investment requirements and the services offered to, and expenses borne by, each Class.

          To obtain a copy of the Fund’s Prospectus, please write or call the Fund at the address and telephone number above.

          The Fund’s most recent Annual Report and Semi-Annual Report to Shareholders are separate documents supplied with this Statement of Additional Information, and the financial statements, accompanying notes and report of independent registered public accounting firm appearing in the Annual Report are incorporated by reference into this Statement of Additional Information.

(ii)


TABLE OF CONTENTS

 

 

 

Page

   

 

 

Description of the Fund and Portfolios

1

 

 

Investment Restrictions

24

 

 

Management

26

 

 

Determination of Net Asset Value

43

 

 

Portfolio Transactions

44

 

 

How to Buy and How to Sell Shares

48

 

 

Distribution and Servicing Arrangements

49

 

 

Dividends and Distributions

51

 

 

Taxation

52

 

 

Additional Information About the Fund and Portfolios

55

 

 

Counsel and Independent Registered Public Accounting Firm

67

 

 

Appendix

68



DESCRIPTION OF THE FUND AND PORTFOLIOS

          The Fund is a Maryland corporation organized on May 17, 1991. Each Portfolio is a separate series of the Fund, an open-end management investment company, known as a mutual fund. Each Portfolio is a diversified investment company, which means that, with respect to 75% of its total assets, the Portfolio will not invest more than 5% of its total assets in the securities of any single issuer nor hold more than 10% of the outstanding voting securities of any single issuer.

          Lazard Asset Management LLC serves as the investment manager (the “Investment Manager”) to each of the Portfolios.

          Lazard Asset Management Securities LLC (the “Distributor”) is the distributor of each Portfolio’s shares.

Certain Portfolio Securities

          The following information supplements and should be read in conjunction with the Fund’s Prospectus.


          Common and Preferred Stocks. Stocks represent shares of ownership in a company. Generally, preferred stock has a specified dividend and ranks after bonds and before common stocks in its claim on income for dividend payments and on assets should the company be liquidated. After other claims are satisfied, common stockholders participate in company profits on a pro-rata basis; profits may be paid out in dividends or reinvested in the company to help it grow. Increases and decreases in earnings are usually reflected in a company’s stock price, so common stocks generally have the greatest appreciation and depreciation potential of all corporate securities.

          Depositary Receipts. Each Portfolio may invest in the securities of foreign issuers in the form of American Depositary Receipts and American Depositary Shares (collectively, “ADRs”) and Global Depositary Receipts and Global Depositary Shares (collectively, “GDRs”). These securities may not necessarily be denominated in the same currency as the securities into which they may be converted. ADRs are receipts typically issued by a United States bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. GDRs are receipts issued outside the United States, typically by non-United States banks and trust companies, that evidence ownership of either foreign or domestic securities. Generally, ADRs in registered form are designed for use in the United States securities markets and GDRs in bearer form are designed for use outside the United States.

          These securities may be purchased through “sponsored” or “unsponsored” facilities. A sponsored facility is established jointly by the issuer of the underlying security and a depositary. A depositary may establish an unsponsored facility without participation by the issuer of the deposited security. Holders of unsponsored depositary receipts generally bear all the costs of such facilities, and the depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting rights to the holders of such receipts in respect of the deposited securities.

          Foreign Government Obligations; Securities of Supranational Entities. Each Portfolio may invest in obligations issued or guaranteed by one or more foreign governments or any of their political subdivisions, agencies or instrumentalities that are determined by the Investment Manager to be of comparable quality to the other obligations in which the Portfolio may invest. Such securities also include debt obligations of supranational entities. Supranational entities include international organizations designated or supported by governmental entities to promote economic reconstruction or


development and international banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the World Bank), the European Coal and Steel Community, the Asian Development Bank and the InterAmerican Development Bank.

          Foreign Securities. Each Portfolio may invest in non-U.S. securities as described in the Portfolio’s Prospectus.


          Fixed-Income Securities. The High Yield and Capital Allocator Portfolios may invest in fixed-income securities as described in the Prospectus. In addition, Equity Value and Strategic Equity Portfolios each may invest up to 20% of its assets in U.S. Government securities and investment grade debt obligations of U.S. corporations; Mid Cap, Small-Mid Cap and International Small Cap Portfolios may each invest up to 20% of its assets in investment grade debt securities; and International Equity, International Equity Select, International Strategic and Global Listed Infrastructure Portfolios may each invest up to 20% of its assets in investment grade fixed-income securities and short-term money market instruments.

          Convertible Securities. Convertible securities may be converted at either a stated price or stated rate into underlying shares of common stock. Convertible securities have characteristics similar to both fixed-income and equity securities. Convertible securities generally are subordinated to other similar but non-convertible securities of the same issuer, although convertible bonds, as corporate debt obligations, enjoy seniority in right of payment to all equity securities, and convertible preferred stock is senior to common stock, of the same issuer. Because of the subordination feature, however, convertible securities typically have lower ratings than similar non-convertible securities.

          Although to a lesser extent than with fixed-income securities, the market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. In addition, because of the conversion feature, the market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stock. A unique feature of convertible securities is that as the market price of the underlying common stock declines, convertible securities tend to trade increasingly on a yield basis and so may not experience market value declines to the same extent as the underlying common stock. When the market price of the underlying common stock increases, the prices of the convertible securities tend to rise as a reflection of the value of the underlying common stock. While no securities investments are without risk, investments in convertible securities generally entail less risk than investments in common stock of the same issuer.

          Convertible securities provide for a stable stream of income with generally higher yields than common stocks, but there can be no assurance of current income because the issuers of the convertible securities may default on their obligations. A convertible security, in addition to providing fixed income, offers the potential for capital appreciation through the conversion feature, which enables the holder to benefit from increases in the market price of the underlying common stock. There can be no assurance of capital appreciation, however, because securities prices fluctuate. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality because of the potential for capital appreciation.

          Warrants. A warrant is a form of derivative that gives the holder the right to subscribe to a specified amount of the issuing corporation’s capital stock at a set price for a specified period of time. A Portfolio may invest up to 5% of its total assets in warrants, except that this limitation does not apply to warrants purchased by the Portfolio that are sold in units with, or attached to, other securities.

          Participation Interests. Each Portfolio may purchase from financial institutions participation interests in securities in which the Portfolio may invest.

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          Each Portfolio may invest in corporate obligations denominated in U.S. or foreign currencies that are originated, negotiated and structured by a syndicate of lenders (“Co-Lenders”) consisting of commercial banks, thrift institutions, insurance companies, financial companies or other financial institutions one or more of which administers the security on behalf of the syndicate (the “Agent Bank”). Co-Lenders may sell such securities to third parties called “Participants.” Each Portfolio may invest in such securities either by participating as a Co-Lender at origination or by acquiring an interest in the security from a Co-Lender or a Participant (collectively, “participation interests”). Co-Lenders and Participants interposed between the Portfolio and the corporate borrower (the “Borrower”), together with Agent Banks, are referred to herein as “Intermediate Participants.”

          Each Portfolio also may purchase a participation interest in a portion of the rights of an Intermediate Participant, which would not establish any direct relationship between the Fund, on behalf of the Portfolio, and the Borrower. A participation interest gives the Portfolio an undivided interest in the security in the proportion that the Portfolio’s participation interest bears to the total principal amount of the security. These instruments may have fixed, floating or variable rates of interest with remaining maturities of 13 months or less. If the participation interest is unrated, or has been given a rating below that which is permissible for purchase by the Portfolio, the participation interest will be collateralized by U.S. Government securities, or, in the case of unrated participation interests, the Investment Manager must have determined that the instrument is of comparable quality to those instruments in which the Portfolio may invest. The Portfolio would be required to rely on the Intermediate Participant that sold the participation interest not only for the enforcement of the Portfolio’s rights against the Borrower, but also for the receipt and processing of payments due to the Portfolio under the security. Because it may be necessary to assert through an Intermediate Participant such rights as may exist against the Borrower, if the Borrower fails to pay principal and interest when due the Portfolio may be subject to delays, expenses and risks that are greater than those that would be involved if the Portfolio were to enforce its rights directly against the Borrower. Moreover, under the terms of a participation interest, the Portfolio may be regarded as a creditor of the Intermediate Participant (rather than of the Borrower), so that the Portfolio also may be subject to the risk that the Intermediate Participant may become insolvent. Similar risks may arise with respect to the Agent Bank if, for example, assets held by the Agent Bank for the benefit of the Portfolio were determined by the appropriate regulatory authority or court to be subject to the claims of the Agent Bank’s creditors. In such case, the Portfolio might incur certain costs and delays in realizing payment in connection with the participation interest or suffer a loss of principal and/or interest. Further, in the event of the bankruptcy or insolvency of the Borrower, the obligation of the Borrower to repay the loan may be subject to certain defenses that can be asserted by such Borrower as a result of improper conduct by the Agent Bank or Intermediate Participant.

          Variable and Floating Rate Securities. Variable and floating rate securities provide for a periodic adjustment in the interest rate paid on the obligations. The terms of such obligations must provide that interest rates are adjusted periodically based upon an interest rate adjustment index as provided in the respective obligations. The adjustment intervals may be regular, and range from daily up to annually, or may be event based, such as a change in the prime rate.

          Each Portfolio may invest in floating rate debt instruments (“floaters”). The interest rate on a floater is a variable rate which is tied to another interest rate, such as a money-market index or Treasury bill rate. The interest rate on a floater resets periodically, typically every six months. Because of the interest rate reset feature, floaters provide the Portfolio with a certain degree of protection against rises in interest rates, although the Portfolio will participate in any declines in interest rates as well.

          Each Portfolio also may invest in inverse floating rate debt instruments (“inverse floaters”). The interest rate on an inverse floater resets in the opposite direction from the market rate of interest to which

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the inverse floater is indexed or inversely to a multiple of the applicable index. An inverse floating rate security may exhibit greater price volatility than a fixed rate obligation of similar credit quality.

          Municipal Obligations. (High Yield Portfolio only) Municipal obligations are debt obligations issued by states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, or multi-state agencies or authorities, to obtain funds for various public purposes, and include certain industrial development bonds issued by or on behalf of public authorities. Municipal obligations are classified as general obligation bonds, revenue bonds and notes. General obligation bonds are secured by the issuer’s pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable from the revenue derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source, but not from the general taxing power. Industrial development bonds, in most cases, are revenue bonds and generally do not carry the pledge of the credit of the issuing municipality, but generally are guaranteed by the corporate entity on whose behalf they are issued. Notes are short-term instruments which are obligations of the issuing municipalities or agencies and are sold in anticipation of a bond sale, collection of taxes or receipt of other revenues. Municipal obligations include municipal lease/purchase agreements which are similar to installment purchase contracts for property or equipment issued by municipalities. Municipal obligations bear fixed, floating or variable rates of interest which are determined in some instances by formulas under which the municipal obligation’s interest rate will change directly or inversely to changes in interest rates or an index, or multiples thereof, in many cases subject to a maximum and minimum. Certain municipal obligations are subject to redemption at a date earlier than their stated maturity pursuant to call options, which may be separated from the related municipal obligations and purchased and sold separately. High Yield Portfolio also may acquire call options on specific municipal obligations. The Portfolio generally would purchase these call options to protect it from the issuer of the related municipal obligation redeeming, or other holder of the call option from calling away, the municipal obligation before maturity.

          While, in general, municipal obligations are tax exempt securities having relatively low yields as compared to taxable, non-municipal obligations of similar quality, certain municipal obligations are taxable obligations offering yields comparable to, and in some cases greater than, the yields available on other permissible Portfolio investments. Dividends received by shareholders on Portfolio shares which are attributable to interest income received by the Portfolio from municipal obligations generally will be subject to federal income tax. High Yield Portfolio may invest in municipal obligations, the ratings of which correspond with the ratings of other permissible Portfolio investments. The Portfolio currently intends to invest no more than 25% of its assets in municipal obligations. However, this percentage may be varied from time to time without shareholder approval.

          Zero Coupon, Pay-In-Kind and Step Up Securities. (High Yield Portfolio only) High Yield Portfolio may invest in zero coupon U.S. Treasury securities, which are Treasury Notes and Bonds that have been stripped of their unmatured interest coupons, the coupons themselves and receipts or certificates representing interests in such stripped debt obligations and coupons. Zero coupon securities also are issued by corporations and financial institutions which constitute a proportionate ownership of the issuer’s pool of underlying U.S. Treasury securities. A zero coupon security pays no interest to its holder during its life and is sold at a discount to its face value at maturity. The Portfolio may invest in pay-in-kind bonds which are bonds which generally pay interest through the issuance of additional bonds. High Yield Portfolio also may purchase step up coupon bonds which are debt securities which typically do not pay interest for a specified period of time and then pay interest at a series of different rates. The market prices of these securities generally are more volatile and are likely to respond to a greater degree to changes in interest rates than the market prices of securities that pay interest periodically having similar maturities and credit qualities. In addition, unlike bonds that pay interest throughout the period to maturity, the Portfolio will realize no cash until the cash payment date unless a portion of such securities

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are sold and, if the issuer defaults, the Portfolio may obtain no return at all on its investment. Federal income tax law requires the holder of a zero coupon security or of certain pay-in-kind or step up bonds to accrue income with respect to these securities prior to the receipt of cash payments. To maintain its qualification as a regulated investment company and avoid liability for federal income taxes, High Yield Portfolio may be required to distribute such income accrued with respect to these securities and may have to dispose of portfolio securities under disadvantageous circumstances in order to generate cash to satisfy these distribution requirements.


          Mortgage-Related Securities. (High Yield Portfolio and, to a limited extent, Equity Value, Strategic Equity, Mid Cap, Small-Mid Cap and Capital Allocator Portfolios only) Mortgage-related securities are a form of derivative collateralized by pools of commercial or residential mortgages. Pools of mortgage loans are assembled as securities for sale to investors by various governmental, government-related and private organizations. These securities may include complex instruments such as those described below and including pass-through securities, adjustable rate mortgages, real estate investment trusts or other kinds of mortgage-backed securities, including those with fixed, floating and variable interest rates, those with interest rates based on multiples of changes in a specified index of interest rates and those with interest rates that change inversely to changes in interest rates, as well as those that do not bear interest.

          Residential Mortgage-Related Securities. Each of these Portfolios may invest in mortgage-related securities representing participation interests in pools of one- to four-family residential mortgage loans issued by governmental agencies or instrumentalities, such as the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”), or issued by private entities. Similar to commercial mortgage-related securities, residential mortgage-related securities have been issued using a variety of structures, including multi-class structures featuring senior and subordinated classes.

          Mortgage-related securities issued by GNMA include GNMA Mortgage Pass-Through Certificates (also know as “Ginnie Maes”) which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as “Fannie Maes”) which are solely the obligations of FNMA and are not backed by or entitled to the full faith and credit of the United States. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by FHLMC include FHLMC Mortgage Participation Certificates (also known as “Freddie Macs” or “PCs”). Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Bank and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.

          Commercial Mortgage-Related Securities. Each of these Portfolios may invest in commercial mortgage-related securities which generally are multi-class debt or pass-through certificates secured by mortgage loans on commercial properties. Similar to residential mortgage-related securities, commercial mortgage-related securities have been issued using a variety of structures, including multi-class structures featuring senior and subordinated classes. These mortgage-related securities generally are constructed to provide protection to the senior classes of investors against potential losses on the underlying mortgage loans. This protection is generally provided by having the holders of the subordinated class of securities

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(“Subordinated Securities”) take the first loss if there are defaults on the underlying commercial mortgage loans. Other protection, which may benefit all of the classes or particular classes, may include issuer guarantees, reserve funds, additional Subordinated Securities, cross-collateralization and over-collateralization.

          Subordinated Securities. Each of these Portfolios may invest in Subordinated Securities issued or sponsored by commercial banks, savings and loan institutions, mortgage bankers, private mortgage insurance companies and other non-governmental issuers. Subordinated Securities have no governmental guarantee, and are subordinated in some manner as to the payment of principal and/or interest to the holders of more senior mortgage-related securities arising out of the same pool of mortgages. The holders of Subordinated Securities typically are compensated with a higher stated yield than are the holders of more senior mortgage-related securities. On the other hand, Subordinated Securities typically subject the holder to greater risk than senior mortgage-related securities and tend to be rated in a lower rating category, and frequently a substantially lower rating category, than the senior mortgage-related securities issued in respect of the same pool of mortgages. Subordinated Securities generally are likely to be more sensitive to changes in prepayment and interest rates and the market for such securities may be less liquid than is the case for traditional fixed-income securities and senior mortgage-related securities.

          Collateralized Mortgage Obligations (“CMOs”) and Multi-Class Pass-Through Securities. Each of these Portfolios may invest in CMOs, which are multi-class bonds backed by pools of mortgage pass-through certificates or mortgage loans. CMOs may be collateralized by (a) GNMA, Fannie Mae or FHLMC pass-through certificates, (b) unsecuritized mortgage loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans’ Affairs, (c) unsecuritized conventional mortgages, (d) other mortgage-related securities or (e) any combination thereof.

          Each class of CMOs, often referred to as a “tranche,” is issued at a specific coupon rate and has a stated maturity or final distribution date. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than the stated maturities or final distribution dates. The principal and interest on the underlying mortgages may be allocated among the several classes of a series of a CMO in many ways. One or more tranches of a CMO may have coupon rates which reset periodically at a specified increment over an index, such as the London Interbank Offered Rate (“LIBOR”) (or sometimes more than one index). These floating rate CMOs typically are issued with lifetime caps on the coupon rate thereon. Each of these Portfolios also may invest in inverse floating rate CMOs. Inverse floating rate CMOs constitute a tranche of a CMO with a coupon rate that moves in the reverse direction to an applicable index such as the LIBOR. Accordingly, the coupon rate thereon will increase as interest rates decrease. Inverse floating rate CMOs are typically more volatile than fixed or floating rate tranches of CMOs. High Yield Portfolio may invest, to a limited extent, in residual interests in real estate mortgage investment conduits (“REMICs”). See “Taxation.”

          Many inverse floating rate CMOs have coupons that move inversely to a multiple of the applicable indexes. The coupon varying inversely to a multiple of an applicable index creates a leverage factor. Inverse floaters based on multiples of a stated index are designed to be highly sensitive to changes in interest rates and can subject the holders thereof to extreme reductions of yield and loss of principal. The markets for inverse floating rate CMOs with highly leveraged characteristics may at times be very thin. Each Portfolio’s ability to dispose of its positions in such securities will depend on the degree of liquidity in the markets for such securities. It is impossible to predict the amount of trading interest that may exist in such securities, and therefore the future degree of liquidity.

          Stripped Mortgage-Backed Securities. Each of these Portfolios also may invest in stripped mortgage-backed securities which are created by segregating the cash flows from underlying mortgage loans or mortgage securities to create two or more new securities, each with a specified percentage of the

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underlying security’s principal or interest payments. Mortgage securities may be partially stripped so that each investor class received some interest and some principal. When securities are completely stripped, however, all of the interest is distributed to holders of one type of security, known as an interest-only security, or IO, and all of the principal is distributed to holders of another type of security known as a principal-only security, or PO. Strips can be created in a pass-through structure or as tranches of a CMO. The yields to maturity on IOs and POs are very sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Portfolio may not fully recoup its initial investment in IOs. Conversely, if the underlying mortgage assets experience less than anticipated prepayments of principal, the yield on POs could be materially and adversely affected.

          Private Entity Securities. Each of these Portfolios may invest in mortgage-related securities issued by commercial banks, savings and loan institutions, mortgage bankers, private mortgage insurance companies and other non-governmental issuers. Timely payment of principal and interest on mortgage-related securities backed by pools created by non-governmental issuers often is supported partially by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance. The insurance and guarantees are issued by government entities, private insurers and the mortgage poolers. There can be no assurance that the private insurers or mortgage poolers can meet their obligations under the policies, so that if the issuers default on their obligations the holders of the security could sustain a loss. No insurance or guarantee covers the Portfolio or the price of the Portfolio’s shares. Mortgage-related securities issued by non-governmental issuers generally offer a higher rate of interest than government-agency and government-related securities because there are no direct or indirect government guarantees of payment.

          CMO Residuals. CMO Residuals are derivative mortgage securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing.

          The cash flow generated by the mortgage assets underlying series of CMOs is applied first to make required payments of principal of and interest on the CMOs and second to pay the related administrative expenses of the issuer. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making the foregoing payments. Each payment of such excess cash flow to a holder of the related CMO Residual represents dividend or interest income and/or a return of capital. The amount of residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage assets, the coupon rate of each class of CMOs, prevailing interest rates, the amount of administrative expenses and the prepayment experience on the mortgage assets. In particular, the yield to maturity on CMO Residuals is extremely sensitive to prepayments on the related underlying mortgage assets in the same manner as an IO class of stripped mortgage-back securities. See “Stripped Mortgage-Backed Securities” above. In addition, if a series of a CMO includes a class that bears interest at an adjustable rate, the yield to maturity on the related CMO residual will also be extremely sensitive to the level of the index upon which interest rate adjustments are based. As described above with respect to stripped mortgage-back securities, in certain circumstances, the Portfolio may fail to fully recoup its initial investment in a CMO Residual.

          CMO Residuals generally are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers. CMO Residuals may not have the liquidity of other more established securities trading in other markets. Transactions in CMO Residuals are generally completed only after careful review of the characteristics of the securities in question. In addition, whether or not registered under the Securities Act of 1933, as amended (the “Securities Act”), CMO Residuals may be subject to certain restrictions of transferability. Ownership of certain CMO Residuals

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imposes liability for certain of the expenses of the related CMO issuer on the purchaser. The Investment Manager will not purchase any CMO Residual that imposes such liability on the Portfolio.

          Other Mortgage-Related Securities. Other mortgage-related securities in which a Portfolio may invest include securities other than those described above that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property. Other mortgage-related securities may be equity or debt securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage loans, including savings and loan associations, homebuilders, mortgage banks, commercial banks, investment banks, partnerships, trusts and special purpose entities of the foregoing.

          Real Estate Investment Trusts. Each Portfolio may invest in Real Estate Investment Trusts (“REITs”). A REIT is a corporation, or a business trust that would otherwise be taxed as a corporation, which meets the definitional requirements of the Internal Revenue Code of 1986, as amended (the “Code”). The Code permits a qualifying REIT to deduct dividends paid, thereby effectively eliminating corporate level federal income tax and making the REIT a pass-through vehicle for federal income tax purposes. To meet the definitional requirements of the Code, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including mortgages and other REITs) or cash and government securities, derive most of its income from rents from real property or interest on loans secured by mortgages on real property, and distribute to shareholders annually a substantial portion of its otherwise taxable income.

          REITs are characterized as equity REITs, mortgage REITs and hybrid REITs. Equity REITs, which may include operating or finance companies, own real estate directly and the value of, and income earned by, the REITs depends upon the income of the underlying properties and the rental income they earn. Equity REITs also can realize capital gains (or losses) by selling properties that have appreciated (or depreciated) in value. Mortgage REITs can make construction, development or long-term mortgage loans and are sensitive to the credit quality of the borrower. Mortgage REITs derive their income from interest payments on such loans. Hybrid REITs combine the characteristics of both equity and mortgage REITs, generally by holding both ownership interests and mortgage interests in real estate. The values of securities issued by REITs are affected by tax and regulatory requirements and by perceptions of management skill. They also are subject to heavy cash flow dependency, defaults by borrowers or tenants, self-liquidation and the possibility of failing to qualify for tax-free status under the Code or to maintain exemption from the Investment Company Act of 1940, as amended (the “1940 Act”).

          Asset-Backed Securities. (High Yield Portfolio only) Asset-backed securities are a form of derivative. The securitization techniques used for asset-backed securities are similar to those used for mortgage-related securities. These securities include debt securities and securities with debt-like characteristics. The collateral for these securities has included credit card and automobile receivables, home equity loans, boat loans, computer leases, airplane leases, mobile home loans, recreational vehicle loans and hospital account receivables. The Portfolio may invest in these and other types of asset-backed securities that may be developed in the future.

          Asset-backed securities present certain risks that are not presented by mortgage-backed securities. Primarily, these securities may provide the Portfolio with a less effective security interest in the related collateral than do mortgage-backed securities. Therefore, there is the possibility that recoveries on the underlying collateral may not, in some cases, be available to support payments on these securities.

          Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. Most organizations that

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issue asset-backed securities relating to motor vehicle installment purchase obligations perfect their interests in their respective obligations only by filing a financing statement and by having the servicer of the obligations, which is usually the originator, take custody thereof. In such circumstances, if the servicer were to sell the same obligations to another party, in violation of its duty not to so do, there is a risk that such party could acquire an interest in the obligations superior to that of the holders of the securities. Also, although most such obligations grant a security interest in the motor vehicle being financed, in most states the security interest in a motor vehicle must be noted on the certificate of title to perfect such security interest against competing claims of other parties. Due to the large number of vehicles involved, however, the certificate of title to each vehicle financed, pursuant to the obligations underlying the securities, usually is not amended to reflect the assignment of the seller’s security interest for the benefit of the holders of the securities. Therefore, there is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on those securities. In addition, various state and federal laws give the motor vehicle owner the right to assert against the holder of the owner’s obligation certain defenses such owner would have against the seller of the motor vehicle. The assertion of such defenses could reduce payments on the related securities.

          Investment Companies. Each Portfolio, except Small-Mid Cap and International Equity Portfolios, may invest, to the extent permitted under the 1940 Act, in securities issued by investment companies which principally invest in securities of the type in which the Portfolio invests. Under the 1940 Act, a Portfolio’s investment in such securities, subject to certain exceptions, currently is limited to (i) 3% of the total voting stock of any one investment company, (ii) 5% of the Portfolio’s total assets with respect to any one investment company and (iii) 10% of the Portfolio’s total assets in the aggregate. Small-Mid Cap and International Equity Portfolios may not purchase securities of other investment companies except in connection with a merger, consolidation, acquisition or reorganization, and may purchase securities of any one closed-end fund in an amount up to 5% of the Portfolio’s total assets and may purchase securities of closed-end funds in the aggregate in an amount of up to 10% of the Portfolio’s total assets. Investments in the securities of investment companies may involve duplication of advisory fees and certain other expenses. The Portfolios do not intend to invest in investment companies affiliated with the Fund or the Investment Manager.


          For purposes of considering a Portfolio’s status as a “diversified company” under Section 5(b)(1) of the 1940 Act, investments in other investment companies are excluded from the diversification test, in accordance with the language in Section 5(b)(1). As a result, the Capital Allocator Portfolio (which invests primarily in Underlying Funds (as defined in the Prospectus)) may hold fewer securities than other diversified mutual funds not focusing on investments in other investment companies, although the Portfolio will gain additional diversification through the Underlying Funds’ portfolios of investments. However, the Capital Allocator Portfolio does not intend to limit its investments to Underlying Funds that are “diversified companies” or to otherwise monitor the diversification of the Underlying Funds’ investments. It is currently intended that the Capital Allocator Portfolio will investment in approximately 10 to 30 Underlying Funds.

          With respect to the Capital Allocator Portfolio’s investments in ETFs (defined below), the Fund may enter into an agreement with certain ETFs pursuant to Securities and Exchange Commission (“SEC”) exemptive orders obtained by the ETFs and on which the Capital Allocator Portfolio may rely. These agreements and orders also may require the Investment Manager to vote the Portfolio’s Underlying Fund shares in proportion to votes cast by other ETF stockholders. The Capital Allocator Portfolio also may invest in an Underlying Fund in excess of the limits in (i)-(iii) above if it complies with Section 12(d)(1)(F) of the 1940 Act, which limits the amount the Portfolio, the other Portfolios and other affiliated persons of the Portfolio can invest in any one Underlying Fund to 3% of the Underlying Fund’s total outstanding stock. In this case, to comply with provisions of the 1940 Act, on any matter upon which Underlying Fund stockholders are solicited to vote the Investment Manager will vote Underlying

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Fund shares in the same general proportion as shares held by other stockholders of the Underlying Fund.

          Exchange-Traded Funds. Investments in investment companies may include shares of exchange-traded funds (collectively, “ETFs”), which are designed to provide investment results generally corresponding to a securities index. ETFs usually are units of beneficial interest in an investment trust or represent undivided ownership interests in a portfolio of securities, in each case with respect to a portfolio of all or substantially all of the component securities of, and in substantially the same weighting as, the relevant benchmark index. ETFs are listed on an exchange and trade in the secondary market on a per-share basis.

          The values of ETFs are subject to change as the values of their respective component securities fluctuate according to market volatility. Investments in ETFs that are designed to correspond to an equity index, for example, involve certain inherent risks generally associated with investments in a broadly based portfolio of common stocks, including the risk that the general level of stock prices may decline, thereby adversely affecting the value of ETFs invested in by each Portfolio. Moreover, a Portfolio’s investments in ETFs may not exactly match the performance of a direct investment in the respective indices to which they are intended to correspond due to the temporary unavailability of certain index securities in the secondary market or other extraordinary circumstances, such as discrepancies with respect to the weighting of securities.

          Most ETFs are open-end investment companies, and, as a result, investments in such ETFs may not be purchased by the Small-Mid Cap or International Equity Portfolios except in connection with a merger, consolidation, acquisition or reorganization.


          Master Limited Partnerships. (Global Listed Infrastructure and Capital Allocator Portfolios only) Each of these Portfolios may invest in equity securities of master limited partnerships (“MLPs”). An MLP generally has two classes of partners, the general partner and the limited partners. The general partner normally controls the MLP through an equity interest plus units that are subordinated to the common (publicly traded) units for an initial period and then only converting to common if certain financial tests are met. As a motivation for the general partner to successfully manage the MLP and increase cash flows, the terms of most MLPs typically provide that the general partner receives a larger portion of the net income as distributions reach higher target levels. As cash flow grows, the general partner receives a greater interest in the incremental income compared to the interest of limited partners. The general partner’s incentive compensation typically increases up to 50% of incremental income. Nevertheless, the aggregate amount distributed to limited partners will increase as MLP distributions reach higher target levels. Given this incentive structure, the general partner has an incentive to streamline operations and undertake acquisitions and growth projects in order to increase distributions to all partners.

          MLP common units represent an equity ownership interest in a partnership, providing limited voting rights and entitling the holder to a share of the company’s success through distributions and/or capital appreciation. Unlike stockholders of a corporation, common unit holders do not elect directors annually and generally have the right to vote only on certain significant events, such as mergers, a sale of substantially all of the assets, removal of the general partner or material amendments to the partnership agreement. MLPs are required by their partnership agreements to distribute a large percentage of their current operating earnings. Common unit holders generally have first right to a minimum quarterly distribution prior to distributions to the convertible subordinated unit holders or the general partner (including incentive distributions). Common unit holders typically have arrearage rights if the minimum quarterly distribution is not met. In the event of liquidation, MLP common unit holders have first right to the partnership’s remaining assets after bondholders, other debt holders, and preferred unit holders have been paid in full. MLP common units trade on a national securities exchange or over-the-counter. Some limited liability companies (“LLCs”) may be treated as MLPs for federal income tax purposes. Similar to

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MLPs, LLCs typically do not pay federal income tax at the entity level and are required by their operating agreements to distribute a large percentage of their current operating earnings. In contrast to MLPs, LLCs have no general partner and there are no incentives that entitle management or other unit holders to increased percentages of cash distributions as distributions reach higher target levels. In addition, LLC common unit holders typically have voting rights with respect to the LLC, whereas MLP common units have limited voting rights. MLP common units and other equity securities can be affected by macro economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment towards MLPs or its business sector, changes in a particular issuer’s financial condition, or unfavorable or unanticipated poor performance of a particular issuer (in the case of MLPs, generally measured in terms of distributable cash flow). Prices of common units of individual MLPs and other equity securities can also be affected by fundamentals unique to the partnership or company, including earnings power and coverage ratios.

          MLP convertible subordinated units are typically issued by MLPs to founders, corporate general partners of MLPs, entities that sell assets to the MLP, and institutional investors, and may be purchased in direct placements from such persons. The purpose of the convertible subordinated units is to increase the likelihood that during the subordination period there will be available cash to be distributed to common unit holders. Convertible subordinated units generally are not entitled to distributions until holders of common units have received specified minimum quarterly distributions, plus any arrearages, and may receive less in distributions upon liquidation. Convertible subordinated unit holders generally are entitled to a minimum quarterly distribution prior to the payment of incentive distributions to the general partner, but are not entitled to arrearage rights. Therefore, they generally entail greater risk than MLP common units. They are generally convertible automatically into the senior common units of the same issuer at a one-to-one ratio upon the passage of time or the satisfaction of certain financial tests. These units do not trade on a national exchange or over-the-counter, and there is no active market for convertible subordinated units. The value of a convertible security is a function of its worth if converted into the underlying common units. Convertible subordinated units generally have similar voting rights to MLP common units. Because convertible subordinated units generally convert to common units on a one-to-one ratio, the price that the Portfolio could be expected to pay upon purchase or to realize upon resale is generally tied to the common unit price less a discount. The size of the discount varies depending on a variety of factors including the likelihood of conversion, and the length of time remaining to conversion, and the size of the block purchased.

          MLP I-Shares represent an indirect investment in MLP I-units. I-units are equity securities issued to affiliates of MLPs, typically a limited liability company, that own an interest in and manage the MLP. The issuer has management rights but is not entitled to incentive distributions. The I-Share issuer’s assets consist exclusively of MLP I-units. Distributions by MLPs to I-unit holders are made in the form of additional I-units, generally equal in amount to the cash received by common unit holders of MLPs. Distributions to I-Share holders are made in the form of additional I-Shares, generally equal in amount to the I-units received by the I-Share issuer. The issuer of the I-Share is taxed as a corporation for federal income tax purposes; however, the MLP does not allocate income or loss to the I-Share issuer. Accordingly, investors receive a Form 1099, are not allocated their proportionate share of income of the MLPs and are not subject to state income tax filing obligations. The price of I-Shares and their volatility tend to be correlated to the price of common units, although the price correlation is not precise.

          Illiquid Securities. Each Portfolio may invest up to 15% (10% in the case of Small-Mid Cap, International Equity, International Small Cap and Emerging Markets Portfolios) of the value of its net assets in securities as to which a liquid trading market does not exist, provided such investments are consistent with the Portfolio’s investment objective. These securities may include securities that are not readily marketable, such as securities that are subject to legal or contractual restrictions on resale (such as private placements and certain restricted securities), repurchase agreements providing for settlement in

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more than seven days after notice, certain mortgage-related securities, and certain privately negotiated, non-exchange traded options and securities used to cover such options. Illiquid securities may be difficult to value accurately, and a Portfolio is subject to the risk that should the Portfolio desire to sell them when a ready buyer is not available at a price that is deemed to be representative of their value, the value of the Portfolio’s net assets could be adversely affected.

          Money Market Instruments; Temporary Defensive Positions. When the Investment Manager determines that adverse market conditions exist, a Portfolio may adopt a temporary defensive position and invest some or all of its assets in money market instruments, including U.S. Government securities, repurchase agreements, bank obligations and commercial paper and other short-term obligations (“Money Market Instruments”). For Emerging Markets, Emerging Markets Select, Developing Markets and Emerging Markets Blend Portfolios, when the Investment Manager believes it is warranted for defensive purposes, each Portfolio may invest without limitation in high quality fixed-income securities or equity securities of U.S. companies. Each Portfolio also may purchase Money Market Instruments when it has cash reserves or in anticipation of taking a market position.

Investment Techniques

          The following information supplements and should be read in conjunction with the Fund’s Prospectus.

          Borrowing Money. Each Portfolio may borrow to the extent permitted under the 1940 Act, which permits an investment company to borrow in an amount up to 33⅓% of the value of its total assets (including the amount borrowed) valued at the lesser of cost or market, less liabilities (including the amount borrowed) at the time the borrowing is made. While such borrowings exceed 5% of a Portfolio’s total assets, the Portfolio will not make any additional investments. Money borrowed will be subject to interest costs. In addition, each Portfolio other than Small-Mid Cap and International Equity Portfolios may borrow for investment purposes to the extent permitted under the 1940 Act. See “Leverage” below.

          Leverage. (All Portfolios, except Small-Mid Cap and International Equity Portfolios) Leveraging (buying securities using borrowed money) exaggerates the effect on net asset value of any increase or decrease in the market value of the Portfolio’s investment. Money borrowed for leveraging is limited to 33⅓% of the value of the Portfolio’s total assets. Interest costs may or may not be recovered by appreciation of the securities purchased; in certain cases, interest costs may exceed the return received on the securities purchased. For borrowings for investment purposes, the 1940 Act requires the Portfolio to maintain continuous asset coverage (total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed. If the required coverage should decline as a result of market fluctuations or other reasons, the Portfolio may be required to sell some of its portfolio holdings within three days to reduce the amount of its borrowings and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that time. The Portfolio also may be required to maintain minimum average balances in connection with such borrowing or pay a commitment or other fee to maintain a line of credit; either of these requirements would increase the cost of borrowing over the stated interest rate.

          Each Portfolio may enter into reverse repurchase agreements with banks, brokers or dealers. This form of borrowing involves the transfer by the Portfolio of an underlying debt instrument in return for cash proceeds based on a percentage of the value of the security. Each Portfolio retains the right to receive interest and principal payments on the security. As a result of these transactions, the Portfolio is exposed to greater potential fluctuation in the value of its assets and its net asset value per share. At an agreed upon future date, the Portfolio repurchases the security at principal plus accrued interest. To the extent a Portfolio enters into a reverse repurchase agreement, the Portfolio will maintain in a segregated

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custodial account permissible liquid assets at least equal to the aggregate amount of its reverse repurchase obligations, plus accrued interest, in certain cases, in accordance with releases promulgated by the SEC. The SEC views reverse repurchase transactions as collateralized borrowing by a Portfolio. Except for these transactions, each Portfolio’s borrowings generally will be unsecured.

          Lending Portfolio Securities. Each Portfolio may lend securities from its portfolio to brokers, dealers and other financial institutions needing to borrow securities to complete certain transactions. In connection with such loans, the Portfolio remains the owner of the loaned securities and continues to be entitled to payments in amounts equal to the interest, dividends or other distributions payable on the loaned securities. The Portfolio also has the right to terminate a loan at any time. The Portfolio may call the loan to vote proxies if a material issue affecting the Portfolio’s investment is to be voted upon. Loans of portfolio securities may not exceed 33⅓% of the value of the Portfolio’s total assets. The Portfolio will receive collateral consisting of cash, U.S. Government securities or irrevocable letters of credit which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. If the collateral consists of a letter of credit or securities, the borrower will pay the Portfolio a loan premium fee. If the collateral consists of cash, the Portfolio will reinvest the cash and pay the borrower a pre-negotiated fee or “rebate” from any return earned on the investment. Should the borrower of the securities fail financially, the Portfolio may experience delays in recovering the loaned securities or exercising its rights in the collateral. Loans are made only to borrowers that are deemed by the Investment Manager to be of good financial standing. In a loan transaction, the Portfolio will also bear the risk of any decline in value of securities acquired with cash collateral.

          Derivatives. (All Portfolios, except Small-Mid Cap Portfolio) Each Portfolio may invest in, or enter into, derivatives, such as options, futures contracts, options on futures contracts and swap agreements, for a variety of reasons, including to hedge certain market risks, to provide a substitute for purchasing or selling particular securities or to increase potential income gain. Derivatives may provide a cheaper, quicker or more specifically focused way for the Portfolio to invest than “traditional” securities would.

          Derivatives can be volatile and involve various types and degrees of risk, depending upon the characteristics of the particular derivative and the portfolio as a whole. Derivatives permit a Portfolio to increase or decrease the level of risk, or change the character of the risk, to which its portfolio is exposed in much the same way as the Portfolio can increase or decrease the level of risk, or change the character of the risk, of its portfolio by making investments in specific securities. However, derivatives may entail investment exposures that are greater than their cost would suggest, meaning that a small investment in derivatives could have a large potential impact on a Portfolio’s performance.

          If a Portfolio invests in derivatives at inopportune times or judges market conditions incorrectly, such investments may lower the Portfolio’s return or result in a loss. A Portfolio also could experience losses if its derivatives were poorly correlated with its other investments, or if the Portfolio were unable to liquidate its position because of an illiquid secondary market. The market for many derivatives is, or suddenly can become, illiquid. Changes in liquidity may result in significant, rapid and unpredictable changes in the prices for derivatives.

          The Fund will not be a commodity pool (i.e., a pooled investment vehicle which trades in commodity futures contracts and options thereon and the operator of which is registered with the Commodity Futures Trading Commission (the “CFTC”)). In addition, the Fund has claimed an exclusion from the definition of commodity pool operator and, therefore, is not subject to registration or regulation as a pool operator under the Commodity Exchange Act.

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          Derivatives may be purchased on established exchanges or through privately negotiated transactions referred to as over-the-counter derivatives. Exchange-traded derivatives generally are guaranteed by the clearing agency which is the issuer or counterparty to such derivatives. This guarantee usually is supported by a daily variation margin system operated by the clearing agency in order to reduce overall credit risk. As a result, unless the clearing agency defaults, there is relatively little counterparty credit risk associated with derivatives purchased on an exchange. In contrast, no clearing agency guarantees over-the-counter derivatives. Therefore, each party to an over-the-counter derivative bears the risk that the counterparty will default. Accordingly, the Investment Manager will consider the creditworthiness of counterparties to over-the-counter derivatives in the same manner as it would review the credit quality of a security to be purchased by the Portfolio. Over-the-counter derivatives are less liquid than exchange-traded derivatives since the other party to the transaction may be the only investor with sufficient understanding of the derivative to be interested in bidding for it.

          Successful use of derivatives by a Portfolio also is subject to the Investment Manager’s ability to predict correctly movements in the direction of the relevant market and to the extent the transaction is entered into for hedging purposes, to ascertain the appropriate correlation between the transaction being hedged and the price movements of the futures contract. For example, if a Portfolio uses futures to hedge against the possibility of a decline in the market value of securities held in its portfolio and the prices of such securities instead increase, the Portfolio will lose part or all of the benefit of the increased value of securities which it has hedged because it will have offsetting losses in its futures positions. Furthermore, if in such circumstances the Portfolio has insufficient cash, it may have to sell securities to meet daily variation margin requirements. The Portfolio may have to sell such securities at a time when it may be disadvantageous to do so.

          Pursuant to regulations and/or published positions of the SEC, a Portfolio may be required to segregate permissible liquid assets to cover its obligations relating to its transactions in derivatives. To maintain this required cover, the Portfolio may have to sell securities at disadvantageous prices or times since it may not be possible to liquidate a derivative position at a reasonable price. The segregation of such assets will have the effect of limiting the Portfolio’s ability to otherwise invest those assets.

          Futures Transactions—In General. (All Portfolios, except Small-Mid Cap and International Equity Portfolios) Each Portfolio may enter into futures contracts in U.S. domestic markets, or on exchanges located outside the United States. Foreign markets may offer advantages such as trading opportunities or arbitrage possibilities not available in the United States. Foreign markets, however, may have greater risk potential than domestic markets. For example, some foreign exchanges are principal markets so that no common clearing facility exists and an investor may look only to the broker for performance of the contract. In addition, any profits a Portfolio might realize in trading could be eliminated by adverse changes in the currency exchange rate, or the Portfolio could incur losses as a result of those changes. Transactions on foreign exchanges may include both commodities which are traded on domestic exchanges and those which are not. Unlike trading on domestic commodity exchanges, trading on foreign commodity exchanges is not regulated by the CFTC.

          Engaging in these transactions involves risk of loss to the Portfolio which could adversely affect the value of the Portfolio’s net assets. Although each of these Portfolios intends to purchase or sell futures contracts only if there is an active market for such contracts, no assurance can be given that a liquid market will exist for any particular contract at any particular time. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified periods during the trading day. Futures contract prices could move to the limit for several consecutive trading days with little or no trading,

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thereby preventing prompt liquidation of futures positions and potentially subjecting the Portfolio to substantial losses.

          Specific Futures Transactions. Each Portfolio other than Small-Mid Cap, International Equity and High Yield Portfolios may purchase and sell stock index futures contracts. A stock index future obligates the Portfolio to pay or receive an amount of cash equal to a fixed dollar amount specified in the futures contract multiplied by the difference between the settlement price of the contract on the contract’s last trading day and the value of the index based on the stock prices of the securities that comprise it at the opening of trading in such securities on the next business day.

          Each Portfolio other than Mid Cap, Small-Mid Cap and International Equity Portfolios may purchase and sell interest rate futures contracts. An interest rate future obligates the Portfolio to purchase or sell an amount of a specific debt security at a future date at a specific price.

          Each Portfolio, except Small-Mid Cap and International Equity Portfolios, may buy and sell foreign currency futures. A currency future obligates the Portfolio to purchase or sell an amount of a specific currency at a future date at a specific price.

          Options—In General. (All Portfolios, except Small-Mid Cap and International Equity Portfolios) Each of these Portfolios may buy and sell (write) covered call and put options. A call option gives the purchaser of the option the right to buy, and obligates the writer to sell, the underlying security or securities at the exercise price at any time during the option period, or at a specific date. Conversely, a put option gives the purchaser of the option the right to sell, and obligates the writer to buy, the underlying security or securities at the exercise price at any time during the option period, or at a specific date.

          A covered call option written by a Portfolio is a call option with respect to which the Portfolio owns the underlying security or otherwise covers the transaction by segregating permissible liquid assets. A put option written by a Portfolio is covered when, among other things, the Portfolio segregates permissible liquid assets having a value equal to or greater than the exercise price of the option to fulfill the obligation undertaken. The principal reason for writing covered call and put options is to realize, through the receipt of premiums, a greater return than would be realized on the underlying securities alone. A Portfolio receives a premium from writing covered call or put options which it retains whether or not the option is exercised.

          There is no assurance that sufficient trading interest to create a liquid secondary market on a securities exchange will exist for any particular option or at any particular time, and for some options no such secondary market may exist. A liquid secondary market in an option may cease to exist for a variety of reasons. In the past, for example, higher than anticipated trading activity or order flow, or other unforeseen events, at times have rendered certain of the clearing facilities inadequate and resulted in the institution of special procedures, such as trading rotations, restrictions on certain types of orders or trading halts or suspensions in one or more options. There can be no assurance that similar events, or events that may otherwise interfere with the timely execution of customers’ orders, will not recur. In such event, it might not be possible to effect closing transactions in particular options. If, as a covered call option writer, a Portfolio is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise or it otherwise covers its position.

          Specific Options Transactions. Each Portfolio other than Small-Mid Cap and International Equity Portfolios may buy and sell call and put options in respect of specific securities (or groups or “baskets” of specific securities) or indices listed on national securities exchanges or traded in the over-

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the-counter market. An option on an index is similar to an option in respect of specific securities, except that settlement does not occur by delivery of the securities comprising the index. Instead, the option holder receives an amount of cash if the closing level of the index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. Thus, the effectiveness of purchasing or writing index options will depend upon price movements in the level of the index rather than the price of a particular security.

          As the writer (seller) of a call option, a Portfolio would receive cash (the premium) from the purchaser of the option, and the purchaser has the right to receive from the Portfolio the cash value of the underlying index or any appreciation in the underlying security over the exercise price on the expiration date or otherwise upon exercise. In effect, the Portfolio forgoes, during the life of the option, the opportunity to profit from increases in the market value of the underlying security or securities held by the Portfolio with respect to which the option was written above the sum of the premium and the exercise price. For index options, this will depend, in part, on the extent of correlation of the performance of the Portfolio’s portfolio securities with the performance of the relevant index. Covered call option writing will generally limit the Portfolio’s ability to benefit from the full appreciation potential of its stock investments underlying the options, and the Portfolio retains the risk of loss (less premiums received) if the value of these stock investments declines. The Portfolio’s written call options on individual stocks will be “covered” because the Portfolio will hold the underlying stock in its portfolio throughout the term of the option. The Portfolio also will “cover” its written index call option positions by either segregating liquid assets in an amount equal to the contract value of the index or by entering into offsetting positions.

          A Portfolio may write call options that are “at-the-money” (the exercise price of the option is equal to the value of the underlying index or stock when the option is written), “close-to-the-money” (with an exercise price close to the current cash value of the underlying index or the market value of the underlying security when the option is written), “out-of-the-money” (with an exercise price above the current cash value of the underlying index or the market value of the underlying security when the option is written) or “in-the-money” (with an exercise price below the current cash value of the underlying index or market value of the underlying security when the option is written), based on market conditions and other factors.

          Each Portfolio other than Small-Mid Cap and International Equity Portfolios may buy and sell call and put options on foreign currency. These options convey the right to buy or sell the underlying currency at a price which is expected to be lower or higher than the spot price of the currency at the time the option is exercised or expires.

          Each Portfolio other than Small-Mid Cap and International Equity Portfolios may purchase cash-settled options on interest rate swaps, interest rate swaps denominated in foreign currency and equity index swaps in pursuit of its investment objective. Interest rate swaps involve the exchange by a Portfolio with another party of their respective commitments to pay or receive interest (for example, an exchange of floating-rate payments for fixed-rate payments) denominated in U.S. dollars or foreign currency. Equity index swaps involve the exchange by the Portfolio with another party of cash flows based upon the performance of an index or a portion of an index of securities which usually includes dividends. A cash-settled option on a swap gives the purchaser the right, but not the obligation, in return for the premium paid, to receive an amount of cash equal to the value of the underlying swap as of the exercise date. These options typically are purchased in privately negotiated transactions from financial institutions, including securities brokerage firms.

          Successful use by a Portfolio of options will be subject to the Investment Manager’s ability to predict correctly movements in the prices of individual stocks, the stock market generally, foreign

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currencies or interest rates. To the extent the Investment Manager’s predictions are incorrect, the Portfolio may incur losses.

          Swap Agreements. To the extent consistent with the Portfolio’s investment objective and management policies as set forth herein, each Portfolio other than Small-Mid Cap and International Equity Portfolios may enter into equity, interest rate, index, total return and currency rate swap agreements. These transactions are entered into in an attempt to obtain a particular return when it is considered desirable to do so, possibly at a lower cost to the Portfolio than if the Portfolio had invested directly in the asset that yielded the desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than a year. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or “swapped” between the parties are generally calculated with respect to a “notional amount,” i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a “basket” of securities representing a particular index. Forms of swap agreements include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent interest rates exceed a specified rate or “cap”; interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent interest rates fall below a specified level or “floor”; and interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.

          Most swap agreements entered into by a Portfolio would calculate the obligations of the parties to the agreement on a “net basis.” Consequently, the Portfolio’s current obligations (or rights) under a swap agreement generally will be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the “net amount”). The risk of loss with respect to swaps is limited to the net amount of payments that the Portfolio is contractually obligated to make. If the other party to a swap defaults, the Portfolio’s risk of loss consists of the net amount of payments that the Portfolio contractually is entitled to receive.

          Future Developments. A Portfolio may take advantage of opportunities in options and futures contracts and options on futures contracts and any other derivatives which are not presently contemplated for use by the Portfolio or which are not currently available but which may be developed, to the extent such opportunities are both consistent with the Portfolio’s investment objective and legally permissible for the Portfolio. Before entering into such transactions or making any such investment, the Portfolio will provide appropriate disclosure in its Prospectus or this Statement of Additional Information.

          Foreign Currency Transactions. (All Portfolios, except Small-Mid Cap Portfolio) Foreign currency transactions may be entered into for a variety of purposes, including: to fix in U.S. dollars, between trade and settlement date, the value of a security the Portfolio has agreed to buy or sell; to hedge the U.S. dollar value of securities the Portfolio already owns, particularly if it expects a decrease in the value of the currency in which the foreign security is denominated; or to gain exposure to the foreign currency in an attempt to realize gains.

          Foreign currency transactions may involve, for example, the Portfolio’s purchase of foreign currencies for U.S. dollars or the maintenance of short positions in foreign currencies. A short position would involve the Portfolio agreeing to exchange an amount of a currency it did not currently own for another currency at a future date in anticipation of a decline in the value of the currency sold relative to the currency the Portfolio contracted to receive. The Portfolio’s success in these transactions will depend principally on the Investment Manager’s ability to predict accurately the future exchange rates between foreign currencies and the U.S. dollar.

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          Short-Selling. (All Portfolios, except Small-Mid Cap, International Equity, International Small Cap and Emerging Markets Portfolios) Each of these Portfolios may engage in short sales of securities, although the Fund has no current intention of engaging in short sales and will not do so without prior approval of the Fund’s Board of Directors (the “Board”). In these transactions, the Portfolio sells a security it does not own in anticipation of a decline in the market value of the security. To complete the transaction, the Portfolio must borrow the security to make delivery to the buyer. The Portfolio is obligated to replace the security borrowed by purchasing it subsequently at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Portfolio, which would result in a loss or gain, respectively. The Portfolio also may make short sales “against the box,” in which the Portfolio enters into a short sale of a security it owns. Securities will not be sold short if, after effect is given to any such short sale, the total market value of all securities sold short would exceed 25% of the value of the Portfolio’s net assets. A Portfolio may not make a short-sale which results in the Portfolio having sold short in the aggregate more than 5% of the outstanding securities of any class of issuer.

          Until the Portfolio closes its short position or replaces the borrowed security, it will: (a) segregate permissible liquid assets in an amount that, together with the amount deposited as collateral, always equals the current value of the security sold short; or (b) otherwise cover its short position.

          Forward Commitments. A Portfolio may purchase or sell securities on a forward commitment, when-issued or delayed delivery basis, which means that delivery and payment take place a number of days after the date of the commitment to purchase or sell. The payment obligation and the interest rate receivable on a forward commitment, when-issued or delayed-delivery security are fixed when the Portfolio enters into the commitment, but the Portfolio does not make a payment until it receives delivery from the counterparty. The Portfolio will segregate permissible liquid assets at least equal to the full notional value of its forward commitment contracts or, with respect to forward commitments that include a contractual cash settlement requirement, will segregate such assets at least equal at all times to the amount of the Portfolio’s purchase commitment. The Portfolio intends to engage in forward commitments to increase the Portfolio’s financial exposure to the types of securities in which it invests, which will increase the Portfolio’s exposure to changes in interest rates and will increase the volatility of its returns. If the Portfolio is fully or almost fully invested when forward commitment purchases are outstanding, such purchases may result in a form of leverage. At no time will the Portfolio have more than 33⅓% of its total assets committed to purchase securities on a forward commitment basis.

          Securities purchased on a forward commitment, when-issued or delayed-delivery basis are subject to changes in value (generally changing in the same way, i.e., appreciating when interest rates decline and depreciating when interest rates rise) based upon the public’s perception of the creditworthiness of the issuer and changes, real or anticipated, in the level of interest rates. Securities purchased on a forward commitment, when-issued or delayed-delivery basis may expose a Portfolio to risks because they may experience such fluctuations prior to their actual delivery. Purchasing securities on a forward commitment, when-issued or delayed-delivery basis can involve the additional risk that the yield available in the market when the delivery takes place actually may be higher than that obtained in the transaction itself. Purchasing securities on a forward commitment, when-issued or delayed-delivery basis when the Portfolio is fully or almost fully invested may result in greater potential fluctuation in the value of the Portfolio’s net assets and its net asset value per share.

Certain Investment Considerations and Risks

          Equity Securities. Equity securities, including common stock, preferred stock, convertible securities and warrants, fluctuate in value, often based on factors unrelated to the value of the issuer of the

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securities, and such fluctuations can be pronounced. Changes in the value of a Portfolio’s investments will result in changes in the value of its shares and thus the Portfolio’s total return to investors.

          Initial Public Offerings. (All Portfolios, except High Yield Portfolio) Each of these Portfolios may purchase securities of companies in initial public offerings (“IPOs”) or shortly thereafter. An IPO is a corporation’s first offering of stock to the public. Shares are given a market value reflecting expectations for the corporation’s future growth. Special rules of the Financial Industry Regulatory Authority (“FINRA”) apply to the distribution of IPOs. Corporations offering stock in IPOs generally have limited operating histories and may involve greater investment risk. The prices of these companies’ securities may be very volatile, rising and falling rapidly, sometimes based solely on investor perceptions rather than economic reasons. IPO securities will be sold when the Investment Manager believes the price has reached full value. IPO securities may be sold by a Portfolio on the same day the Portfolio receives an allocation.


          Smaller Company Securities. Each Portfolio other than International Equity, International Equity Select and High Yield Portfolios may purchase securities of smaller capitalization companies, the prices of which may be subject to more abrupt or erratic market movements than securities of larger, more established companies, because securities of smaller companies typically are traded in lower volume and the issuers typically are subject to greater changes in earnings and prospects. Smaller capitalization companies often have limited product lines, markets or financial resources. They may be dependent on management for one or a few key persons, and can be more susceptible to losses and the risk of bankruptcy. In addition, securities of the small capitalization sector may be thinly traded (and therefore may have to be sold at a discount from current market prices or sold in small lots over an extended period of time), may be followed by fewer investment research analysts and may pose a greater chance of loss than investments in securities of larger capitalization companies.

          Fixed-Income Securities. Even though interest-bearing securities are investments which promise a stable stream of income, the prices of such securities generally are inversely affected by changes in interest rates and, therefore, are subject to the risk of market price fluctuations. Certain portfolio securities, such as those with interest rates that fluctuate directly or indirectly based on multiples of a stated index, are designed to be highly sensitive to changes in interest rates and can subject the holders thereof to extreme reductions of yield and possibly loss of principal.

          The values of fixed-income securities also may be affected by changes in the credit rating or financial condition of the issuer. Certain securities, such as those rated below investment grade by Standard & Poor’s Ratings Group (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s” and together with S&P, the “Rating Agencies”), may be subject to such risk with respect to the issuing entity and to greater market fluctuations than certain lower yielding, higher rated fixed-income securities. Once the rating of a portfolio security has been changed, the Portfolio will consider all circumstances deemed relevant in determining whether to continue to hold the security.


          Mortgage-Related Securities. (High Yield Portfolio and, to a limited extent, Equity Value, Strategic Equity, Mid Cap, Small-Mid Cap and Capital Allocator Portfolios only) Mortgage-related securities are complex derivative instruments, subject to both credit and prepayment risk, and may be more volatile and less liquid, and more difficult to price accurately, than more traditional debt securities. Although certain mortgage-related securities are guaranteed by a third party (such as a U.S. Government agency or instrumentality with respect to government-related mortgage-backed securities) or otherwise similarly secured, the market value of the security, which may fluctuate, is not secured. Mortgage-related securities generally are subject to credit risks associated with the performance of the underlying mortgage properties and to prepayment risk. In certain instances, the credit risk associated with mortgage-related securities can be reduced by third party guarantees or other forms of credit support. Improved credit risk

19


does not reduce prepayment risk which is unrelated to the rating assigned to the mortgage-related security. Prepayment risk can lead to fluctuations in value of the mortgage-related security which may be pronounced. If a mortgage-related security is purchased at a premium, all or part of the premium may be lost if the market value of the security declines, whether resulting from changes in interest rates or prepayments on the underlying mortgage collateral. Certain mortgage-related securities, such as inverse floating rate collateralized mortgage obligations, have coupons that move inversely to a multiple of a specific index which may result in increased price volatility.

          As with other interest-bearing securities, the prices of certain mortgage-related securities are inversely affected by changes in interest rates. However, although the value of a mortgage-related security may decline when interest rates rise, the converse is not necessarily true, since during periods of declining interest rates the mortgages underlying the security are more likely to be prepaid. For this and other reasons, a mortgage-related security’s stated maturity may be shortened by unscheduled prepayments on the underlying mortgages, and, therefore, it is not possible to predict accurately the security’s return to the Portfolio. Moreover, with respect to certain stripped mortgage-backed securities, if the underlying mortgage securities experience greater than anticipated prepayments of principal, the Portfolio may fail to fully recoup its initial investment even if the securities are rated in the highest rating category by a nationally recognized statistical rating organization. During periods of rapidly rising interest rates, prepayments of mortgage-related securities may occur at slower than expected rates. Slower prepayments effectively may lengthen a mortgage-related security’s expected maturity, which generally would cause the value of such security to fluctuate more widely in response to changes in interest rates. Were the prepayments on the Portfolio’s mortgage-related securities to decrease broadly, the Portfolio’s effective duration, and thus sensitivity to interest rate fluctuations, would increase. Commercial real property loans, however, often contain provisions that substantially reduce the likelihood that such securities will be prepaid. The provisions generally impose significant prepayment penalties on loans and in some cases there may be prohibitions on principal prepayments for several years following origination.

          Foreign Securities. Foreign securities markets generally are not as developed or efficient as those in the United States. Securities of some foreign issuers, including depositary receipts, foreign government obligations and securities of supranational entities, are less liquid and more volatile than securities of comparable U.S. issuers. Similarly, volume and liquidity in most foreign securities markets are less than in the United States and, at times, volatility of price can be greater than in the United States.

          Because evidences of ownership of such securities usually are held outside the United States, a Portfolio will be subject to additional risks which include possible adverse political and economic developments, seizure or nationalization of foreign deposits and adoption of governmental restrictions, which might adversely affect or restrict the payment of principal and interest on the foreign securities to investors located outside the country of the issuer, whether from currency blockage or otherwise. Moreover, foreign securities held by a Portfolio may trade on days when the Portfolio does not calculate its net asset value and thus affect the Portfolio’s net asset value on days when investors have no access to the Portfolio.

          Developing countries have economic structures that generally are less diverse and mature, and political systems that are less stable, than those of developed countries. The markets of developing countries may be more volatile than the markets of more mature economies; however, such markets may provide higher rates of return to investors. Many developing countries providing investment opportunities for these Portfolios have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have adverse effects on the economies and securities markets of certain of these countries.

20



          The Portfolios consider emerging market countries to include all countries represented by the Morgan Stanley Capital International (“MSCI®”) Emerging Markets Index and other countries not considered developed countries by MSCI, and investments in emerging markets may include those companies included in the MSCI Emerging Markets Index and companies with their principal business activities located in, or that have 50% or more of their assets in or revenue or net income from, emerging market countries. The MSCI Emerging Markets Index currently includes the following countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey. For purposes of each of Emerging Markets Portfolio’s, Emerging Markets Select Portfolio’s, Developing Markets Portfolio’s and Emerging Markets Blend Portfolio’s policy to invest at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies whose principal business activities are located in emerging market countries, only countries included in the MSCI Emerging Markets Index are considered to be “emerging markets” (although the Portfolio may invest in other countries with its remaining assets). Because foreign securities often are purchased with and payable in currencies of foreign countries, the value of these assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency rates and exchange control regulations.

          Foreign Currency Transactions. (All Portfolios, except Small-Mid Cap Portfolio) Currency exchange rates may fluctuate significantly over short periods of time. They generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or perceived changes in interest rates and other complex factors, as seen from an international perspective. Currency exchange rates also can be affected unpredictably by intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the United States or abroad.

          Lower Rated Securities. (High Yield Portfolio only) High Yield Portfolio invests at least 80% of its assets in higher yielding (and, therefore, higher risk) debt securities rated as low as the lowest rating assigned by a Rating Agency (commonly known as junk bonds).

          Bond prices are inversely related to interest rate changes; however, bond price volatility also may be inversely related to coupon. Accordingly, below investment grade securities may be relatively less sensitive to interest rate changes than higher quality securities of comparable maturity, because of their higher coupon. This higher coupon is what the investor receives in return for bearing greater credit risk. The higher credit risk associated with below investment grade securities potentially can have a greater effect on the value of such securities than may be the case with higher quality issues of comparable maturity, and will be a substantial factor in the Portfolio’s relative share price volatility. The ratings of the Rating Agencies represent their opinions as to the quality of the obligations which they undertake to rate. Although ratings may be useful in evaluating the safety of interest and principal payments, they do not evaluate the market value risk of these securities. See “Appendix” for a general description of the Rating Agencies’ ratings. The Portfolio will rely on the judgment, analysis and experience of the Investment Manager in evaluating the creditworthiness of an issuer.

          Companies that issue certain of these securities often are highly leveraged and may not have available to them more traditional methods of financing. Therefore, the risk associated with acquiring the securities of such issuers generally is greater than is the case with higher rated securities and will fluctuate over time. For example, during an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of these securities may not have sufficient revenues to meet their interest payment obligations. The issuer’s ability to service its debt obligations also may be affected adversely by specific corporate developments, forecasts, or the unavailability of additional financing. The risk of loss because of default by the issuer is significantly greater for the holders of these securities because such securities generally are unsecured and often are subordinated to other creditors of the issuer.

21


          Because there is no established retail secondary market for many of these securities, the Portfolio anticipates that such securities could be sold only to a limited number of dealers or institutional investors. To the extent a secondary trading market for these securities does exist, it generally is not as liquid as the secondary market for higher rated securities. The lack of a liquid secondary market may have an adverse impact on market price and yield and the Portfolio’s ability to dispose of particular issues when necessary to meet the Portfolio’s liquidity needs or in response to a specific economic event such as a deterioration in the creditworthiness of the issuer. The lack of a liquid secondary market for certain securities also may make it more difficult for the Portfolio to obtain accurate market quotations for purposes of valuing its portfolio and calculating its net asset value and could result in the Portfolio selling such securities at lower prices than those used in calculating the Portfolio’s net asset value. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of these securities. In such cases, judgment may play a greater role in valuation because less reliable, objective data may be available.

          These securities may be particularly susceptible to economic downturns. An economic recession could adversely affect the ability of the issuers of lower rated bonds to repay principal and pay interest thereon and increase the incidence of default for such securities. It is likely that an economic recession could disrupt severely the market for such securities and may have an adverse impact on their value.

          High Yield Portfolio may acquire these securities during an initial offering. Such securities may involve special risks because they are new issues. The Portfolio does not have an arrangement with any persons concerning the acquisition of such securities, and the Investment Manager will review carefully the credit and other characteristics pertinent to such new issues.

          The credit risk factors pertaining to lower rated securities also apply to lower rated zero coupon, pay-in-kind and step up securities. In addition to the risks associated with the credit rating of the issuers, the market prices of these securities may be very volatile during the period no interest is paid.

          Simultaneous Investments; Overlapping Positions. Investment decisions for each Portfolio are made independently from those of the other Portfolios and other accounts managed by the Investment Manager. If, however, such other Portfolios or accounts desire to invest in, or dispose of, the same securities as a Portfolio, available investments or opportunities for sales will be allocated equitably to each. In some cases, this procedure may adversely affect the size of the position obtained for or disposed of by a Portfolio or the price paid or received by a Portfolio. In some cases, the Investment Manager may seek to limit the number of overlapping investments by similar Portfolios (securities of an issuer held in more than one Portfolio) so that shareholders invested in such Portfolios may achieve a more diverse investment experience. In such cases, a Portfolio may be disadvantaged by the Investment Manager’s decision to purchase or maintain an investment in one Portfolio to the exclusion of one or more other Portfolios (including a decision to sell the investment in one Portfolio so that it may be purchased by another Portfolio).

Disclosure of Portfolio Holdings

          It is the policy of the Fund to protect the confidentiality of the Portfolios’ holdings and prevent the selective disclosure of non-public information about such holdings. The Fund will publicly disclose the Portfolios’ holdings on a calendar quarter-end basis on its website accessible from http://www.lazardnet.com/lam/us/lazardfunds.shtml, approximately 14 days after such quarter end. The information will remain accessible until the Fund files a report on Form N-Q or Form N-CSR for the period that includes the date as of which the information was current.

22


          In order to avoid conflicts of interest between the Fund, on the one hand, and the Investment Manager or any affiliated person of the Fund or the Investment Manager, on the other (1) disclosure of portfolio holdings information is made only when such disclosure is in the best interest of Portfolio shareholders and the Fund has a legitimate business purpose for doing so and (2) none of the Fund or the Investment Manager or their affiliates may receive any compensation in connection with an arrangement to make portfolio holdings information available.

          In accordance with the foregoing, the Fund provides portfolio holdings information to ratings services or third party service providers who provide necessary or beneficial services when such service providers need access to this information in the performance of their services and are subject to duties of confidentiality (1) imposed by law, including a duty not to trade on non-public information, and/or (2) pursuant to an agreement that confidential information is not to be disclosed or used (including trading on such information) other than as required by law. From time to time, the Fund will communicate with these service providers to confirm that they understand the Fund’s policies and procedures regarding such disclosure. Such service providers currently include the Fund’s investment manager, administrator, custodian, auditors and legal counsel and each of their respective affiliates and advisors, as well as Institutional Shareholder Services, Inc., Lipper Inc., Morningstar, Inc., Bloomberg, BNY Mellon Analytical Services, LLC, Canterbury Consulting Incorporated and Thomson Vestek, Inc. The Fund also provides portfolio holdings information to Market Street Trust Company, Mercer Global Investments and Morgan Stanley Smith Barney pursuant to confidentiality agreements. Service providers receive holdings information at a frequency appropriate to their services, which may be as frequently as daily.


          The Investment Manager currently manages certain “multi-strat” investment strategies. Using these strategies, the Investment Manager’s Multi-Strat portfolio management team may allocate assets in a client’s account among various strategies managed by other portfolio management teams. The assets may be invested according to those underlying strategies using separate accounts, mutual funds, private investment funds or other available vehicles, as applicable. For example, the Emerging Market multi-strat strategy may allocate assets to the Emerging Markets Select Portfolio and the Developing Markets Portfolio, as well as certain private investment funds, and other emerging-market related strategies via separately managed account vehicles. The Emerging Markets Blend Portfolio invests in securities comprising the Emerging Markets Select and Developing Markets strategies, which are the same strategies pursued by the Emerging Markets Select and Developing Markets Portfolios. The Investment Manager’s Multi-Strat portfolio management team will allocate assets among the underlying strategies in its discretion, consistent with the investment objectives and guidelines associated with the relevant client’s account. In making these allocation decisions, the Multi-Strat portfolio management team will have access to detailed information related to the underlying strategies that may not be available to other investors or clients. This includes, but is not limited to, holdings information, transaction detail, performance information of the Portfolios and access to the Portfolios’ portfolio management teams. The Investment Manager has implemented procedures designed to ensure that the Multi-Strat portfolio management team does not trade in a way that disadvantages other investors in an underlying Portfolio.

          Disclosure of portfolio holdings information may be authorized only by the Fund’s Chief Compliance Officer or the General Counsel of the Investment Manager, each of whom evaluates such disclosure in light of the best interests of Portfolio shareholders and any potential conflicts of interest. The service providers that receive portfolio holdings information from the Fund as described above, and any additions to this list of service providers, are reported to the Fund’s Board for its review. Any exceptions to the Fund’s portfolio holdings disclosure policy are reported to the Board.

23


INVESTMENT RESTRICTIONS

          Each Portfolio’s investment objective is a fundamental policy, which cannot be changed without approval by the holders of a majority (as defined in the 1940 Act) of the Portfolio’s outstanding voting shares. In addition, each Portfolio (except as noted) has adopted investment restrictions numbered 1 through 9 as fundamental policies. However, the amendment of these restrictions to add an additional Portfolio, which amendment does not substantively affect the restrictions with respect to an existing Portfolio, will not require approval as described in the first sentence. Investment restrictions numbered 10 through 15 are not fundamental policies and may be changed, as to a Portfolio, by vote of a majority of the Fund’s Board at any time.


          Under normal circumstances, each of the following Portfolios will invest at least 80% of its net assets, plus any borrowings for investment purposes, as follows (or other investments with similar economic characteristics): (i) Equity Value and Strategic Equity—equity securities of U.S. companies; (ii) Mid Cap Portfolio—equity securities of medium-size U.S. companies; (iii) Small-Mid Cap Portfolio—equity securities of small-mid cap U.S. companies; (iv) International Equity, International Equity Select and International Strategic Portfolios—equity securities; (v) International Small Cap Portfolio—equity securities of small cap companies; (vi) Global Listed Infrastructure Portfolio—equity securities of infrastructure companies; (vii) Emerging Markets, Emerging Markets Select, Developing Markets and Emerging Markets Blend Portfolios—equity securities of companies whose principal business activities are located in emerging market countries as defined in the Prospectus; and (viii) High Yield Portfolio—bonds and other fixed-income securities of U.S. companies rated, at the time of purchase, below investment grade by S&P or Moody’s and as low as the lowest rating assigned by S&P or Moody’s, or the unrated equivalent as determined by the Investment Manager. Each of these Portfolios has adopted a policy to provide its shareholders with at least 60 days’ prior notice of any change with respect to its 80% policy.

          None of the Portfolios may:

 

 

1.

issue senior securities, borrow money or pledge or mortgage its assets, except that (A) each Portfolio may borrow from banks for temporary purposes, including the meeting of redemption requests which might require the untimely disposition of securities, as described in the Prospectus and (B) each of Equity Value, Strategic Equity, Mid Cap, International Equity Select, International Strategic, International Small Cap, Global Listed Infrastructure, Emerging Markets, Emerging Markets Select, Developing Markets, Emerging Markets Blend, High Yield and Capital Allocator Portfolios also may borrow money to the extent permitted under the 1940 Act; provided, however, that the Portfolio will not make new investments to the extent borrowings exceed 5% of its total assets, except for borrowings covered within the interpretations of Sections 18(f) of the 1940 Act. For purposes of this investment restriction, a Portfolio’s entry into options, forward contracts, futures contracts, including those related to indexes, shall not constitute borrowing;

 

 

2.

make loans, except loans of portfolio securities not having a value in excess of 33⅓% of a Portfolio’s total assets and except that each Portfolio may purchase debt obligations in accordance with its investment objectives and policies;

 

 

3.

for all Portfolios except Equity Value, Strategic Equity, Mid Cap, International Equity Select, International Strategic, Global Listed Infrastructure, Emerging Markets Select, Developing Markets, Emerging Markets Blend, High Yield and Capital Allocator Portfolios, invest in illiquid securities as defined in “Certain Portfolio Securities—Illiquid Securities” if immediately after such investment more than 10% of the value of the Portfolio’s net assets, taken at market value,

24



 

 

 

would be invested in such securities;

 

 

4.

for Small-Mid Cap and International Equity Portfolios, (A) purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization; and (B) Small-Mid Cap and International Equity Portfolios may purchase securities in an amount up to 5% of the value of the Portfolio’s total assets in any one closed-end fund and may purchase in the aggregate securities of closed-end funds in an amount of up to 10% of the value of the Portfolio’s total assets;

 

 

5.

purchase the securities of issuers conducting their principal business activity in the same industry if, immediately after the purchase and as a result thereof, the value of the Portfolio’s investments in that industry would exceed 25% of the current value of such Portfolio’s total assets (except that the Global Listed Infrastructure Portfolio will invest over 25% of its assets in industries represented by infrastructure companies), provided that there is no limitation with respect to investments in obligations of the U.S. Government, its agencies or instrumentalities;

 

 

6.

(A) purchase or sell real estate or real estate limited partnerships, except that a Portfolio may purchase and sell securities of companies which deal in real estate or interests therein and Equity Value, Strategic Equity, Mid Cap, International Equity Select, International Strategic, International Small Cap, Global Listed Infrastructure, Emerging Markets, Emerging Markets Select, Developing Markets, Emerging Markets Blend, High Yield and Capital Allocator Portfolios also may purchase and sell securities that are secured by real estate; (B) purchase or sell commodities or commodity contracts (except that Equity Value, Strategic Equity, Mid Cap, International Equity Select, International Strategic, International Small Cap, Global Listed Infrastructure, Emerging Markets, Emerging Markets Select, Developing Markets, Emerging Markets Blend, High Yield and Capital Allocator Portfolios may purchase and sell swaps, options, forward contracts, futures contracts, including those relating to indices, and options on futures contracts or indices, and Equity Value, Strategic Equity, Mid Cap, International Equity, International Equity Select, International Strategic, High Yield and Capital Allocator Portfolios may purchase or sell foreign currency forward exchange contracts); and (C) for all Portfolios except Equity Value, Strategic Equity, Mid Cap, International Equity Select, International Strategic, Global Listed Infrastructure, Emerging Markets Select, Developing Markets, Emerging Markets Blend, High Yield and Capital Allocator Portfolios, invest in interests in or leases relating to oil, gas, or other mineral exploration or development programs;

 

 

7.

purchase securities on margin (except for short-term credits necessary for the clearance of transactions) or, except for Equity Value, Strategic Equity, Mid Cap, International Equity Select, International Strategic, Global Listed Infrastructure, Emerging Markets Select, Developing Markets, Emerging Markets Blend, High Yield and Capital Allocator Portfolios, make short sales of securities;

 

 

8.

underwrite securities of other issuers, except to the extent that the purchase of municipal obligations or other permitted investments directly from the issuer thereof or from an underwriter for an issuer and the later disposition of such securities in accordance with the Portfolio’s investment program may be deemed to be an underwriting;

 

 

9.

for Small-Mid Cap and International Equity Portfolios, make investments for the purpose of exercising control or management;

* * *

 

 

10.

for all Portfolios other than Small-Mid Cap and International Equity Portfolios, pledge,

25



 

 

 

hypothecate, mortgage or otherwise encumber its assets other than to secure permitted borrowings;

 

 

11.

for Equity Value, Strategic Equity, Mid Cap, International Equity Select, International Strategic, Global Listed Infrastructure, Emerging Markets Select, Developing Markets, Emerging Markets Blend, High Yield and Capital Allocator Portfolios, invest in illiquid securities as defined in “Certain Portfolio Securities—Illiquid Securities” if immediately after such investment more than 15% of the value of the Portfolio’s net assets would be invested in such securities;

 

 

12.

for all Portfolios other than Small-Mid Cap and International Equity Portfolios, purchase securities of other investment companies, except to the extent permitted under the 1940 Act;

 

 

13.

for Equity Value, Strategic Equity, Mid Cap, International Equity Select, International Strategic, Global Listed Infrastructure, Emerging Markets Select, Developing Markets, Emerging Markets Blend, High Yield and Capital Allocator Portfolios, invest in interests in or leases relating to oil, gas, or other mineral exploration or development programs;

 

 

14.

for International Equity Select Portfolio, make short sales of securities; or

 

 

15.

for International Small Cap and Emerging Markets Portfolios, make investments for the purpose of exercising control or management.

* * *


          If a percentage restriction is adhered to at the time of investment, a later change in percentage resulting from a change in values or assets will not constitute a violation of such restriction. With respect to Investment Restriction No. 1, however, if borrowings exceed 33⅓% of the value of a Portfolio’s total assets as a result of a change in values or assets, the Portfolio must take steps to reduce such borrowings at least to the extent of such excess within three business days.

MANAGEMENT

Board’s Oversight Role; Board Composition and Structure

          The Board’s role in management of the Fund is oversight. As is the case with virtually all investment companies (as distinguished from operating companies), service providers to the Fund, primarily the Investment Manager and its affiliates, have responsibility for the day-to-day management of the Portfolios, which includes responsibility for risk management (including management of investment performance and investment risk, valuation risk, issuer and counterparty credit risk, compliance risk and operational risk). As part of its oversight, the Board, or its committees or delegates, interacts with and receives reports from senior personnel of service providers, including senior investment personnel of the Investment Manager, the Fund’s and the Investment Manager’s Chief Compliance Officer and portfolio management personnel with responsibility for management of the Portfolios. The Board’s Audit Committee (which consist of all of the Independent Directors) meets during its scheduled meetings with, and between meetings have access to, the Fund’s independent registered public accounting firm and the Fund’s Treasurer. The Board also receives periodic presentations from senior personnel of the Investment Manager or its affiliates regarding risk management generally, as well as periodic presentations regarding specific operational, compliance or investment areas such as trading and brokerage allocation and execution, investment research and internal audit. The Board also receives reports from counsel regarding regulatory compliance and governance matters. The Board has adopted policies and procedures designed to address certain risks to the Portfolios. In addition, the Investment Manager and other service

26



providers to the Fund have adopted a variety of policies, procedures and controls designed to address particular risks to the Portfolios. However, it is not possible to eliminate all of the risks applicable to the Portfolios. The Board’s oversight role does not make the Board a guarantor of the Portfolios’ investments or activities.

          The 1940 Act requires that at least 40% of the Fund’s Directors be Independent Directors and as such are not affiliated with the Investment Manager. To rely on certain exemptive rules under the 1940 Act, a majority of the Fund’s Directors must be Independent Directors, and for certain important matters, such as the approval of investment advisory agreements or transactions with affiliates, the 1940 Act or the rules thereunder require the approval of a majority of the Independent Directors. Currently, 75% of the Fund’s Directors are Independent Directors. The Board does not have a Chairman, but the Independent Directors have designated a lead Independent Director who chairs meetings or executive sessions of the Independent Directors, reviews and comments on Board meeting agendas and facilitates communication among the Independent Directors, their counsel and management. The Board has determined that its leadership structure, in which the Independent Directors have designated a lead Independent Director to function as described above, is appropriate in light of the services that the Investment Manager and its affiliates provide to the Fund and potential conflicts of interest that could arise from these relationships.

Directors and Officers

          Set forth in the chart below are the names and certain biographical and other information for each Director. Following the chart is additional information about the Directors’ experience, qualifications, attributes or skills.

 

 

 

 

 

Name (Age)
Address(1)

 

Position(s) with the Fund
(Since) and Term(2)

 

Principal Occupation(s) and Other Public
Company Directorships Held During the Past
Five Years(2)

         

 

 

 

 

 

Non-Interested Directors:

 

 

 

 

 

 

 

 

 

Kenneth S. Davidson (65)

 

Director
(August 1995)

 

Davidson Capital Management Corporation, President (1978 – present)

 

 

 

 

 

 

 

 

 

Aquiline Holdings LLC, Partner (2006 – present)

 

 

 

 

 

Nancy A. Eckl (47)

 

Director
(April 2007)

 

American Beacon Advisors, Inc. (“American Beacon”) and certain funds advised by American Beacon, Vice President (1990 – 2006)

 

 

 

 

 

 

 

 

 

College Retirement Equities Fund (eight accounts), Trustee (2007 – present)

 

 

 

 

 

 

 

 

 

TIAA-CREF Funds (47 funds) and TIAA-CREF Life Funds (10 funds), Trustee (2007 – present)

 

 

 

 

 

 

 

 

 

TIAA Separate Account VA-1, Member of the Management Committee (2007 – present)

 

 

 

 

 

Lester Z. Lieberman (79)

 

Director
(October 1991)

 

Private Investor

27



 

 

 

 

 

Name (Age)
Address(1)

 

Position(s) with the Fund
(Since) and Term(2)

 

Principal Occupation(s) and Other Public
Company Directorships Held During the Past
Five Years(2)

         

 

 

 

 

 

Leon M. Pollack (69)

 

Director
(August 2006)

 

Private Investor

 

 

 

 

 

Richard Reiss, Jr. (66)

 

Director
(May 1991)

 

Georgica Advisors LLC, an investment manager, Chairman (1997 – present)

 

 

 

 

 

 

 

 

 

O’Charley’s, Inc., a restaurant chain, Director (1984 – present)

 

 

 

 

 

Robert M. Solmson (62)

 

Director
(September 2004)

 

Fairwood Capital, LLC, a private investment corporation engaged primarily in real estate and hotel investments, President (2008 – present)

 

 

 

 

 

Interested Directors(3):

 

 

 

 

 

 

 

 

 

Charles L. Carroll (49)

 

Chief Executive Officer,
President and Director
(June 2004)

 

Investment Manager, Deputy Chairman and Head of Global Marketing (2004 – present)

 

 

 

 

 

Ashish Bhutani (49)

 

Director
(July 2005)

 

Investment Manager, Chief Executive Officer (2004 – present)

 

 

 

 

 

 

 

 

 

Lazard Ltd, Vice Chairman (2010 – present)


 

 

 

(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 of Lazard Retirement Series, Inc., an open-end registered management investment company, and Lazard Global Total Return and Income Fund, Inc. and Lazard World Dividend & Income Fund, Inc., closed-end registered management investment companies (collectively with the Fund, the “Lazard Funds,” in total comprised of 21 investment portfolios). Each Director serves an indefinite term, until his or her successor is elected, and each Director serves in the same capacity for the other Lazard Funds. All of the Independent Directors, except Mr. Lieberman, are also board members of Lazard Alternative Strategies Fund, L.L.C., a privately-offered fund registered under the 1940 Act and advised by an affiliate of the Investment Manager.

 

 

(3)

Messrs. Bhutani and Carroll are “interested persons” (as defined in the 1940 Act) of the Fund because of their positions with the Investment Manager.

          Additional information about each Director follows (supplementing the information provided in the chart above), which describes some of the specific experiences, qualifications, attributes or skills that each Director possesses which the Board believes has prepared them to be effective Directors. The Board believes that the significance of each Director’s experience, qualifications, attributes or skills is an individual matter (meaning that experience that is important for one Director may not have the same value for another) and that these factors are best evaluated at the Board level, with no single Director, or particular factor, being indicative of Board effectiveness. However, the Board believes that Directors need to have the ability to critically review, evaluate, question and discuss information provided to them, and to interact effectively with Fund management, service providers and counsel, in order to exercise effective business judgment in the performance of their duties; the Board believes that its members satisfy this standard. Experience relevant to having this ability may be achieved through a Director’s educational background; business, professional training or practice (e.g., accounting or law), public service or academic positions; experience from service as a board member (including the Board of the Fund) or as an executive of investment funds, public companies or significant private or not-for-profit entities or other

28



 

 

 

organizations; and/or other life experiences. The charter for the Board’s Nominating Committee contains certain other factors considered by the Committee in identifying potential Director nominees. To assist them in evaluating matters under federal and state law, the Independent Directors are counseled by their own independent legal counsel, who participates in Board meetings and interacts with the Investment Manager; Fund and independent legal counsel to the Independent Directors has significant experience advising funds and fund board members. The Board and its committees have the ability to engage other experts as appropriate. The Board evaluates its performance on an annual basis.

 

 

Charles L. Carroll is Deputy Chairman of the Investment Manager and Head of Global Marketing, responsible for oversight of the Investment Manager’s global marketing efforts in the Institutional, Financial Institutions, and Private Client arenas. Additionally, he serves as Chief Executive Officer, President and Director of the other Lazard Funds. Mr. Carroll joined Lazard in 1993 as Senior Vice President responsible for marketing Lazard investment solutions to financial institutions worldwide. Mr. Carroll is a member of the firm’s Global Management and Investment Oversight Committees. He entered the investment field in 1987, joining Shearson Asset Management in New York City as Vice President and National Product Manager. Mr. Carroll later served as First Vice President and Consulting Services Director with Shearson Lehman Brothers. Mr. Carroll attended the University of Utah and currently sits on the Board of Trustees for the Williston Northampton School.

 

 

 

 

Ashish Bhutani is the Chief Executive Officer of the Investment Manager, where from June 2003 to March 2004 he served as Head of New Products and Strategic Planning. Mr. Bhutani also serves as a Vice Chairman on the Board of Directors of Lazard Ltd. Prior to joining Lazard in 2003, he was Co-Chief Executive Officer North America of Dresdner Kleinwort Wasserstein from 2001 through 2002, and was a member of its Global Corporate and Markets Board, and its Global Executive Committee. Prior to that, Mr. Bhutani was with Wasserstein Perella Group (the predecessor firm) from 1989 to 2001, where he was Deputy Chairman of Wasserstein Perella Group and Chief Executive Officer of Wasserstein Perella Securities. Mr. Bhutani began his career at Salomon Brothers in 1985 as a Vice President in the fixed income group.

 

 

 

 

Kenneth S. Davidson is a founding member of Aquiline Holdings LLC, a New York-based global investment firm. From 1977 through 1995, Mr. Davidson was the founder and managing partner of Davidson Weil Associates, and was previously a vice president and senior portfolio manager at Oppenheimer Capital Corporation. He also serves on the boards of several prominent non-profit organizations. Mr. Davidson is a graduate of Colgate University.

 

 

 

 

Nancy A. Eckl has over 20 years of experience working in the mutual fund/investment management field in a wide range of capacities, including investment manager selection/oversight, accounting, compliance and operations. From 1990 to 2006, Ms. Eckl was Vice President of American Beacon Advisors, Inc., an investment management firm, and of the American Beacon Funds (open-end mutual funds). Ms. Eckl also served as Vice President of certain other funds advised by American Beacon Advisors. Ms. Eckl graduated from the University of Notre Dame and is a Certified Public Accountant.

 

 

 

 

Lester Z. Lieberman is Chairman of the Healthcare Foundation of New Jersey, an independent, endowed grant-making organization. He retired as the chief executive at Clarkson Industries, Inc., a publicly-held manufacturing company. Prior to joining Clarkson Industries, he founded Atmos Engineering Co., which was later sold to Clarkson Industries. Mr. Lieberman serves on the boards of a number of established non-profit organizations. He is a graduate of the Newark College of Engineering, and he has received honorary degrees

29



 

 

 

 

 

from Clarkson University and the University of Medicine and Dentistry of New Jersey.

 

 

 

 

Leon M. Pollack spent 33 years in the financial community, the last 13 as a managing director of the investment firm of Donaldson, Lufkin & Jenrette. Mr. Pollack also is a board member of non-profit organizations. Mr. Pollack received his bachelor’s degree in history from Adelphi University’s College of Arts and Sciences and earned an MA in education from New York University.

 

 

 

 

Richard Reiss, Jr. is the founder and Chairman of Georgica Advisors LLC and its affiliated entities, Reiss Capital Management and Value Insight Partners. Previously, Mr. Reiss was Managing Partner of Cumberland Associates and its three investment funds and a Senior Vice President and Director of Research at Shearson Lehman Brothers. Mr. Reiss has served on the boards of a number of companies and non-profit organizations. He received an AB, cum laude, from Dartmouth College and a JD from New York University School of Law.

 

 

 

 

Robert M. Solmson is the former Chairman and Chief Executive Officer of RFS Hotel Investors, a real estate investment trust which he formed in 1993. He also served as its President.

          Set forth below is the name and certain biographical and other information for the Fund’s officers (in addition to Mr. Carroll).

 

 

 

 

 

Name (Age)
Address(1)

 

Position(s) with the Fund
(Since) and Term(2)

 

Principal Occupation(s) During the Past
Five Years

         

 

 

 

 

 

Nathan A. Paul (37)

 

Vice President and
Secretary
(April 2002)

 

Managing Director and General Counsel of the Investment Manager

 

 

 

 

 

Stephen St. Clair (51)

 

Treasurer
(May 2003)

 

Vice President of the Investment Manager

 

 

 

 

 

Brian D. Simon (47)

 

Chief Compliance Officer
(January 2009) and
Assistant Secretary
(November 2002)

 

Director (since January 2006) and Chief Compliance Officer (since January 2009); and previously Senior Vice President (2002 to 2005) of the Investment Manager

 

 

 

 

 

Tamar Goldstein (35)

 

Assistant Secretary
(February 2009)

 

Vice President (since March 2009) and previously Counsel (October 2006 to February 2009) of the Investment Manager; Associate at Schulte Roth & Zabel LLP, a law firm, from May 2004 to October 2006

 

 

 

 

 

Cesar A. Trelles (35)

 

Assistant Treasurer
(December 2004)

 

Fund Administration Manager of the Investment Manager


 

 

   

(1)

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 or her successor is elected and qualifies or until his or her earlier resignation or removal. Each officer serves in the same capacity for the other Lazard Funds.

Board Committees, Share Ownership and Compensation

          The Fund has standing audit and nominating committees, each comprised of its Directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”).

30


          The function of the audit committee is to (1) oversee the Fund’s accounting and financial reporting processes and the audits of the Fund’s financial statements, (2) assist in Board oversight of the quality and integrity of the Fund’s financial statements and the Fund’s compliance with legal and regulatory requirements relating to accounting, financial reporting, internal control over financial reporting and independent audits, (3) approve engagement of the independent registered public accounting firm and review and evaluate the qualifications, independence and performance of the independent registered public accounting firm and (4) act as a liaison between the Fund’s independent registered public accounting firm and the Board.

          Nominations may be submitted only by a shareholder or group of shareholders that, individually or as a group, has beneficially owned the lesser of (a) 1% of the Fund’s outstanding shares or (b) $500,000 of the Fund’s shares for at least one year prior to the date such shareholder or group submits a candidate for nomination. Not more than one nominee for Director may be submitted by such a shareholder or group each calendar year. In evaluating potential nominees, including any nominees recommended by shareholders, the nominating committee takes into consideration the factors listed in the nominating committee charter, 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 interest of the Fund and its shareholders. 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 shareholders, and such additional information must be provided regarding the recommended nominee as reasonably requested by the nominating committee.

          The audit committee met three times and the nominating committee did not meet during the fiscal year ended December 31, 2009.

          The table below indicates the dollar range of each Director’s ownership of Portfolio shares and aggregate holdings of all of the Lazard Funds, in each case as of December 31, 2009.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio

Ashish
Bhutani

 

Charles L.
Carroll

 

Kenneth S.
Davidson

 

Nancy A.
Eckl

 

Lester Z.
Lieberman

 

Leon M.
Pollack

 

Richard
Reiss, Jr.

 

Robert M.
Solmson

 

                                 

Equity Value Portfolio

None

 

None

 

None

 

$1 -
$10,000

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Strategic Equity Portfolio

None

 

None

 

None

 

$1 -
$10,000

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid Cap Portfolio

None

 

None

 

None

 

$1 -
$10,000

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Small-Mid Cap Portfolio

None

 

None

 

None

 

None

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International Equity Portfolio

None

 

None

 

None

 

$10,001-
$50,000

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International Equity Select Portfolio

None

 

None

 

None

 

None

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International Strategic Portfolio

None

 

None

 

None

 

None

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International Small Cap Portfolio

None

 

$10,001-
$50,000

 

None

 

None

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Listed Infrastructure Portfolio*

None

 

None

 

None

 

None

 

None

 

None

 

None

 

None

 

31



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio

Ashish
Bhutani

 

Charles L.
Carroll

 

Kenneth S.
Davidson

 

Nancy A.
Eckl

 

Lester Z.
Lieberman

 

Leon M.
Pollack

 

Richard
Reiss, Jr.

 

Robert M.
Solmson

 

                                 

Emerging Markets Portfolio

None

 

Over
$100,000

 

None

 

$10,001-
$50,000

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Developing Markets Portfolio

None

 

$50,001-
$100,000

 

None

 

None

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High Yield Portfolio

None

 

Over
$100,000

 

None

 

None

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Allocator Portfolio

None

 

Over
$100,000

 

None

 

None

 

None

 

None

 

None

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregate Holdings of all Lazard Funds

Over
$100,000

 

Over
$100,000

 

None

 

$10,001-
$50,000

 

None

 

None

 

None

 

None

 


 

 

*

Global Listed Infrastructure Portfolio commenced operations on December 31, 2009.

          Emerging Markets Select Portfolio and Emerging Markets Blend Portfolio will commence operations in 2010, so no holdings information is provided for these Portfolios.

          As of December 31, 2009, none of the Directors or his or her immediate family members owned securities of the Investment Manager or the Distributor or any person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with the Investment Manager or the Distributor.


          Each Director who is not an affiliated person of the Investment Manager or any of its affiliates is paid an annual aggregate fee of $60,000, plus $4,000 per meeting attended in person ($1,500 per meeting attended by telephone) for the Fund and the other Lazard Funds, and is reimbursed for travel and other out-of-pocket expenses for attending Board and committee meetings. The Independent Directors also are paid $1,000 for each committee, subcommittee or other special meetings not held in conjunction with a Board meeting, as specifically authorized by the Board and held in connection with delegated Fund business. No additional compensation is provided in respect of committee meetings held in conjunction with a meeting of the Board. Compensation is divided among the Lazard Funds based on relative net assets. The Directors do not receive benefits from the Fund pursuant to any pension, retirement or similar arrangement. The Chairman of the Audit Committees of the Boards of the Lazard Funds, Lester Z. Lieberman, also receives an additional annual fee of $5,000. The aggregate amount of compensation paid to each Director for the year ended December 31, 2009, was as follows:

 

 

 

 

 

Director

 

Aggregate Compensation from the
Fund

 

Total Compensation from
the Lazard Funds

         

 

Ashish Bhutani

 

None

 

None

Charles L. Carroll

 

None

 

None

Kenneth S. Davidson

 

$73,853

 

$85,000

Nancy A. Eckl

 

$73,853

 

$85,000

Lester Z. Lieberman

 

$77,041

 

$87,000

Leon M. Pollack

 

$71,215

 

$82,000

Richard Reiss, Jr.

 

$72,353

 

$83,500

Robert M. Solmson

 

$73,853

 

$85,000

          The Fund does not compensate officers or Directors who are employees or affiliated persons of the Investment Manager. As of the date of this Statement of Additional Information, the Fund’s officers and Directors, as a group, owned less than 1% of the shares of each Portfolio.

32


Portfolio Managers

          Team Management. Portfolio managers at the Investment Manager manage multiple accounts for a diverse client base, including private clients, institutions and investment funds. The Investment Manager manages all portfolios on a team basis. The team is involved at all levels of the investment process. This team approach allows for every portfolio manager to benefit from his/her peers, and for clients to receive the firm’s best thinking, not that of a single portfolio manager. The Investment Manager manages all like investment mandates against a model portfolio. Specific client objectives, guidelines or limitations then are applied against the model, and any necessary adjustments are made.

          Material Conflicts Related to Management of Similar Accounts. Although the potential for conflicts of interest exist when an investment adviser and portfolio managers manage other accounts that invest in securities in which a Portfolio may invest or that may pursue a strategy similar to one of the Portfolio’s component strategies (collectively, “Similar Accounts”), the Investment Manager has procedures in place that are designed to ensure that all accounts are treated fairly and that the Portfolio is not disadvantaged, including procedures regarding trade allocations and “conflicting trades” (e.g., long and short positions in the same security, as described below). In addition, each Portfolio, as a series of a registered investment company, is subject to different regulations than certain of the Similar Accounts, and, consequently, may not be permitted to engage in all the investment techniques or transactions, or to engage in such techniques or transactions to the same degree, as the Similar Accounts.

          Potential conflicts of interest may arise because of the Investment Manager’s management of a Portfolio and Similar Accounts, including the following:

          1. Conflicts of interest may arise with both the aggregation and allocation of securities transactions and allocation of limited investment opportunities, as the Investment Manager may be perceived as causing accounts it manages to participate in an offering to increase the Investment Manager’s overall allocation of securities in that offering, or to increase the Investment Manager’s ability to participate in future offerings by the same underwriter or issuer. Allocations of bunched trades, particularly trade orders that were only partially filled due to limited availability, and allocation of investment opportunities generally, could raise a potential conflict of interest, as the Investment Manager may have an incentive to allocate securities that are expected to increase in value to preferred accounts. Initial public offerings, in particular, are frequently of very limited availability. A potential conflict of interest may be perceived to arise if transactions in one account closely follow related transactions in a different account, such as when a purchase increases the value of securities previously purchased by the other account, or when a sale in one account lowers the sale price received in a sale by a second account. These potential allocation and trading conflicts are relevant primarily for all portfolio managers of the Portfolios focusing on small capitalization companies, whose shares tend to have more limited and volatile trading than those of companies with larger market capitalizations (Small-Mid Cap and International Small Cap Portfolios).


          2. Portfolio managers may be perceived to have a conflict of interest because of the large number of Similar Accounts, in addition to the Portfolios, that they are managing on behalf of the Investment Manager. Although the Investment Manager does not track each individual portfolio manager’s time dedicated to each account, the Investment Manager periodically reviews each portfolio manager’s overall responsibilities to ensure that he or she is able to allocate the necessary time and resources to effectively manage a Portfolio. As illustrated in the table below, all of the portfolio managers of the Portfolios except Messrs. Charlton, Dzwil, Gillespie and O’Hare manage a significant number of Similar Accounts (10 or more) in addition to the Portfolio(s) managed by them.

          3. Generally, the Investment Manager and/or some or all of a Portfolio’s portfolio managers have

33


investments in Similar Accounts. This could be viewed as creating a potential conflict of interest, since certain of the portfolio managers do not invest in the Portfolios.

          4. The portfolio managers noted in footnote (#) to the table below manage Similar Accounts with respect to which the advisory fee is based on the performance of the account, which could give the portfolio managers and the Investment Manger an incentive to favor such Similar Accounts over the corresponding Portfolios. In addition, certain hedge funds managed by the Investment Manager (but not the Portfolios’ portfolio managers) may also be permitted to sell securities short. When the Investment Manager engages in short sales of securities of the type in which a Portfolio invests, the Investment Manager could be seen as harming the performance of the Portfolio for the benefit of the account engaging in short sales if the short sales cause the market value of the securities to fall. As described above, the Investment Manager has procedures in place to address these conflicts.


          Other Accounts Managed by the Portfolio Managers. The chart below includes information regarding the members of the portfolio management teams responsible for managing the Portfolios. Specifically, it shows the number of other portfolios and assets managed by management teams of which each Portfolio’s portfolio manager is a member. Regardless of the number of accounts, the portfolio management team still manages each account based on a model portfolio as described above.

 

 

 

 

 

 

 

Portfolio Manager

 

Registered Investment
Companies ($*)

 

Other Pooled Investment
Vehicles ($*)

 

Other Accounts
($*)##

             

Michael A. Bennett#

 

5 (2.6 billion)

 

none

 

264 (9.6 billion)

Christopher H. Blake#

 

7 (9.5 billion)

 

3 (565.9 million)

 

68 (1.9 billion)

Gabrielle M. Boyle#

 

1 (1.8 billion)

 

1 (12.7 million)

 

249 (7 billion)

Daniel Breslin

 

1 (148.1 million)

 

1 (6.8 million)

 

17 (116.5 million)

J. William Charlton and
Thomas M. Dzwil

 

none

 

2 (36.5 million)

 

5 (211.2 million)

Rohit Chopra#

 

5 (1.7 billion)

 

94 (7 billion)

 

13 (4.2 billion)

David R. Cleary
and Christopher Komosa

 

2 (2.7 million)

 

2 (8.9 million)

 

330 (425.8 million)

Adam Cohen#

 

1 (1.8 billion)

 

1 (12.7 million)

 

249 (7 billion)

James M. Donald#

 

6 (3.5 billion)

 

14 (4.2 billion)

 

142 (8 billion)

Robert A. Failla#

 

7 (9.5 billion)

 

6 (724.6 million)

 

80 (3.5 billion)

Michael G. Fry

 

4 (816 million)

 

3 (158.7 million)

 

34 (4.3 billion)

Peter Gillespie

 

none

 

2 (63.4 million)

 

2 (1.1 million)

Jai Jacob

 

none

 

4 (158.2 million)

 

9 (11.1 million)

Robin O. Jones

 

none

 

none

 

35 (1.7 billion)

Andrew D. Lacey#

 

7 (9.5 billion)

 

7 (697.7 million)

 

237 (4.7 billion)

Mark Little

 

none

 

none

 

35 (1.7 billion)

Erik McKee#

 

5 (1.7 billion)

 

13 (4.2 billion)

 

94 (7 billion)

John Mulquiney

 

none

 

7 (601.8 million)

 

8 (1.5 billion)

Kevin O’Hare

 

none

 

2 (63.4 million)

 

2 (1.1 million)

Brian Pessin#

 

none

 

6 (734.6 million)

 

47 (2.2 billion)

Michael Powers#

 

5 (2.6 billion)

 

1 (12.7 million)

 

271 (9.7 billion)

John R. Reinsberg#

 

4 (816 million)

 

4 (102.6 million)

 

59 (4.3 billion)

Warryn Robertson

 

none

 

7 (601.8 million)

 

8 (1.5 billion)

34



 

 

 

 

 

 

 

Portfolio Manager

 

Registered Investment
Companies ($*)

 

Other Pooled Investment
Vehicles ($*)

 

Other Accounts
($*)##

             

Edward Rosenfeld#

 

none

 

6 (734.6 million)

 

12 (553.8 million)

Nicholas Sordoni

 

none

 

1 (26.5 million)

 

16 (713.5 million)

Ronald Temple#

 

3 (6.8 billion)

 

4 (592.5 million)

 

185 (2.6 billion)

J. Richard Tutino

 

none

 

1 (26.5 million)

 

158 (1.2 billion)


 

 

 

 

*

Total assets in accounts as of December 31, 2009, unless otherwise indicated.

 

#

None of the portfolio managers, except as follows, manage any accounts with respect to which the advisory fee is based on the performance of the account:

 

(1)

Messrs. Bennett, Cohen and Powers and Ms. Boyle manage one registered investment company with assets under management of approximately $1.8 billion.

 

(2)

Mr. Donald manages one registered investment company and four other accounts with assets under management of approximately $1.8 billion and $1.2 billion, respectively.

 

(3)

Messrs. Blake, Failla and Lacey manage one registered investment company with assets under management of approximately $6.3 billion.

 

(4)

Messrs. Chopra, Donald and McKee manage four other accounts with assets under management of approximately $1.2 billion.

 

(5)

Mr. Pessin manages one other pooled investment vehicle and one other account with assets under management of approximately $69.6 million and $218.4 million, respectively.

 

(6)

Mr. Reinsberg manages four other pooled investment vehicles with assets under management of approximately $102.6 million.

 

(7)

Mr. Rosenfeld manages one other pooled investment vehicle and one other account with assets under management of approximately $69.6 million and $218.4 million, respectively.

 

(8)

Mr. Temple manages one registered investment company with assets under management of approximately $6.3 billion.

##

Includes an aggregation of any Similar Accounts within managed account programs where the third party program sponsor is responsible for applying specific client objectives, guidelines and limitations against the model portfolio managed by the portfolio management team.

          Compensation for Portfolio Managers. The Investment Manager’s portfolio managers are generally responsible for managing multiple types of accounts that may, or may not, invest in securities in which the Fund may invest or pursue a strategy similar to a Portfolio’s strategies. Portfolio managers responsible for managing the Portfolios may also manage sub-advised registered investment companies, collective investment trusts, unregistered funds and/or other pooled investment vehicles, separate accounts, separately managed account programs (often referred to as “wrap accounts”) and model portfolios.

          The Investment Manager compensates portfolio managers by a competitive salary and bonus structure, which is determined both quantitatively and qualitatively. Salary and bonus are paid in cash and stock. Portfolio managers are compensated on the performance of the aggregate group of portfolios managed by the teams of which they are a member rather than for a specific fund or account. Various factors are considered in the determination of a portfolio manager’s compensation. All of the portfolios managed by a portfolio manager are comprehensively evaluated to determine his or her positive and consistent performance contribution over time. Further factors include the amount of assets in the portfolios as well as qualitative aspects that reinforce the Investment Manager’s investment philosophy.

          Total compensation is generally not fixed, but rather is based on the following factors: (i) leadership, teamwork and commitment, (ii) maintenance of current knowledge and opinions on companies owned in the portfolio; (iii) generation and development of new investment ideas, including the quality of security analysis and identification of appreciation catalysts; (iv) ability and willingness to develop and share ideas on a team basis; and (v) the performance results of the portfolios managed by the investment teams of which the portfolio manager is a member.

35


          Variable bonus is based on the portfolio manager’s quantitative performance as measured by his or her ability to make investment decisions that contribute to the pre-tax absolute and relative returns of the accounts managed by the teams of which the portfolio manager is a member, by comparison of each account to a predetermined benchmark (as set forth in the prospectus or other governing document) over the current fiscal year and the longer-term performance (3-, 5- or 10-year, if applicable) of such account, as well as performance of the account relative to peers. The variable bonus for each Portfolio’s portfolio management team in respect of its management of the Portfolio is determined by reference to the corresponding indices listed below. The portfolio manager’s bonus also can be influenced by subjective measurement of the manager’s ability to help others make investment decisions.

 

 

 

 

 

Portfolio

 

 

Index

 

 

 

 

 

 

Equity Value Portfolio

 

Russell 1000® Value Index

Strategic Equity Portfolio

 

S&P 500® Index

Mid Cap Portfolio

 

Russell Midcap® Index

Small-Mid Cap Portfolio

 

Russell 2500® Index

International Equity Portfolio

 

MSCI Europe, Australasia and Far East (EAFE®) Index

International Equity Select Portfolio

 

MSCI EAFE Index

International Strategic Portfolio

 

MSCI EAFE Index

International Small Cap Portfolio

 

MSCI EAFE Small Cap Index

Global Listed Infrastructure Portfolio

 

UBS Global 50/50 Infrastructure & Utilities Index

Emerging Markets Portfolio

 

MSCI Emerging Markets Index

Emerging Markets Select Portfolio

 

MSCI Emerging Markets Index

Developing Markets Portfolio

 

MSCI Emerging Markets Index

Emerging Markets Blend Portfolio

 

MSCI Emerging Markets Index

High Yield Portfolio

 

Merrill Lynch High Yield Master II® Index

Capital Allocator Portfolio

 

MSCI World Index

          In addition, effective May 4, 2005, the Lazard Ltd 2005 Equity Incentive Plan was adopted and approved by the Board of Directors of Lazard Ltd. The purpose of this plan is to give the company a competitive advantage in attracting, retaining and motivating officers, employees, directors, advisors and/or consultants and to provide the company and its subsidiaries and affiliates with a stock plan providing incentives directly linked to shareholder value.

          Ownership of Securities. As of December 31, 2009, except as noted, the portfolio managers owned the following shares of the Portfolios:

 

 

 

 

Portfolio/Portfolio Manager

 

Market Value of Shares

 

 

 

 

 

Equity Value Portfolio

 

 

 

Andrew D. Lacey

 

$100,001-$500,000

 

Nicholas Sordoni

 

$10,001-$50,000

 

Ronald Temple

 

$10,001-$50,000

 

J. Richard Tutino

 

$10,001-$50,000

 

 

 

 

Strategic Equity Portfolio

 

 

 

Christopher H. Blake

 

$10,001-$50,000

 

Robert A. Failla

 

$50,001-$100,000

 

Andrew D. Lacey

 

$100,001-$500,000

 

Ronald Temple

 

$50,001-$100,000

 

 

 

 

Mid Cap Portfolio

 

 

 

Christopher H. Blake

 

$10,001-$50,000

 

Robert A. Failla

 

None

36



 

 

 

 

Portfolio/Portfolio Manager

 

Market Value of Shares

 

 

 

 

 

 

Andrew D. Lacey

 

$100,001-$500,000

 

 

 

 

Small-Mid Cap Portfolio

 

 

 

Daniel Breslin

 

None

 

Andrew D. Lacey

 

$50,001-$100,000

International Equity Portfolio

 

 

 

Michael A. Bennett

 

$100,001-$500,000

 

Michael G. Fry

 

None

 

Michael Powers

 

$50,001-$100,000

 

John R. Reinsberg

 

$100,001-$500,000

 

 

 

 

International Equity Select Portfolio

 

 

 

Michael A. Bennett

 

$100,001-$500,000

 

Gabrielle M. Boyle

 

None

 

Adam Cohen

 

None

 

Michael Powers

 

$50,001-$100,000

 

John R. Reinsberg

 

None

 

 

 

 

International Strategic Portfolio

 

 

 

Michael A. Bennett

 

$10,001-$50,000

 

Robin O. Jones

 

None

 

Mark Little

 

None

 

Brian Pessin

 

None

 

John R. Reinsberg

 

None

 

 

 

 

International Small Cap Portfolio

 

 

 

Brian Pessin

 

$100,001-$500,000

 

John R. Reinsberg

 

$100,001-$500,000

 

Edward Rosenfeld

 

$1-$10,000

 

 

 

 

Global Listed Infrastructure Portfolio

 

 

 

John Mulquiney*

 

None

 

Warryn Robertson*

 

None

 

 

 

 

Emerging Markets Portfolio

 

 

 

Rohit Chopra

 

$10,001-$50,000

 

James M. Donald

 

$500,001-$1,000,000

 

Erik McKee

 

$50,001-$100,000

 

John R. Reinsberg

 

$500,001-$1,000,000

 

 

 

 

Developing Markets Portfolio

 

 

 

James M. Donald

 

$500,001-$1,000,000

 

Peter Gillespie

 

$10,001-$50,000

 

Kevin O’Hare

 

$100,001-$500,000

 

John R. Reinsberg

 

$100,001-$500,000

 

 

 

 

High Yield Portfolio

 

 

 

J. William Charlton

 

$100,001-$500,000

 

Thomas M. Dzwil

 

None

 

 

 

 

Capital Allocator Portfolio

 

 

 

David R. Cleary

 

$500,001-$1,000,000

 

Christopher Komosa

 

$10,001-$50,000


 

 

37



 

 

*

Global Listed Infrastructure Portfolio commenced operations on December 31, 2009.

          Emerging Markets Select Portfolio and Emerging Markets Blend Portfolio will commence operations in 2010, so no ownership information is provided for these Portfolios.

Investment Manager and Investment Management Agreements

          The Investment Manager, located at 30 Rockefeller Plaza, New York, NY 10112-6300, has entered into an investment management agreement (the “Management Agreement”) with the Fund on behalf of the Portfolios. 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.

          The Investment Manager, a wholly-owned subsidiary of Lazard, is registered as an investment adviser with the SEC. The Investment Manager provides day-to-day management of the Portfolios’ investments and assists in the overall management of the Fund’s affairs. Its clients are both individuals and institutions, some of whose accounts have investment policies similar to those of several of the Portfolios.

          The Fund, the Investment Manager and the Distributor each have adopted a Code of Ethics pursuant to Rule 17j-1 under the 1940 Act that permits its personnel, subject to such Code of Ethics, to invest in securities, including securities that may be purchased or held by a Portfolio. The Codes of Ethics restrict the personal securities transactions of employees and require portfolio managers and other investment personnel to comply with the preclearance and disclosure procedures. The primary purpose of the Codes of Ethics is to ensure that personal trading by employees does not disadvantage any Portfolio.

          Under the terms of the Management Agreement, the Investment Manager will pay the compensation of all personnel of the Fund, except the fees of Directors of the Fund who are not employees or affiliated persons of the Investment Manager. The Investment Manager will make available to the Portfolios such of the Investment Manager’s members, officers and employees as are reasonably necessary for the operations of each Portfolio, or as may be duly elected officers or directors of the Fund. Under the Management Agreement, the Investment Manager also pays each Portfolio’s office rent and provides investment advisory research and statistical facilities and all clerical services relating to research, statistical and investment work. The Investment Manager, including its employees who serve the Portfolios, may render investment advice, management and other services to other clients.

          As compensation for its services, the Fund has agreed to pay the Investment Manager an investment management fee, accrued daily and payable monthly, at the annual rates set forth below as a percentage of the average daily net asset value of the relevant Portfolio:

 

 

 

 

 

Portfolio

 

Management Fee Rate

 

 

 

 

 

Equity Value Portfolio

 

.75

%

 

Strategic Equity Portfolio

 

.75

 

 

Mid Cap Portfolio

 

.75

 

 

Small-Mid Cap Portfolio

 

.75

 

 

International Equity Portfolio

 

.75

 

 

International Equity Select Portfolio

 

.85

 

 

International Strategic Portfolio

 

.75

 

 

International Small Cap Portfolio

 

.75

 

 

Global Listed Infrastructure Portfolio

 

.90

 

 

Emerging Markets Portfolio

 

1.00

 

 

Emerging Markets Select Portfolio

 

1.00

 

 

Developing Markets Portfolio

 

1.00

 

 

Emerging Markets Blend Portfolio

 

1.05

 

 

High Yield Portfolio

 

.55

 

 

Capital Allocator Portfolio

 

1.00

 

 

38


          Through April 30, 2011 (except as noted), the Investment Manager has agreed to waive its management fees and, if necessary, reimburse the Portfolio, to the extent Total Annual Portfolio Operating Expenses exceed the percentage of the value of the Portfolio’s average daily net assets set forth opposite the Portfolio’s name, exclusive of taxes, brokerage, interest on borrowings, fees and expenses of “Acquired Funds” (investments in other investment companies) and extraordinary expenses, and excluding shareholder redemption fees or other transaction fees:

 

 

 

 

 

 

 

 

 

 

Maximum Total Portfolio Operating Expenses

 

 

 

 

 

 

 

 

Portfolio

 

Institutional Shares

 

Open Shares

 

 

 

 

 

 

 

Equity Value Portfolio*

 

1.00

%

 

1.30

%

 

Strategic Equity Portfolio

 

1.05

 

 

1.35

 

 

Mid Cap Portfolio

 

1.05

 

 

1.35

 

 

Small-Mid Cap Portfolio

 

1.15

 

 

1.45

 

 

International Equity Portfolio

 

1.05

 

 

1.35

 

 

International Equity Select Portfolio

 

1.15

 

 

1.45

 

 

International Strategic Portfolio

 

1.15

 

 

1.45

 

 

International Small Cap Portfolio

 

1.13

 

 

1.43

 

 

Global Listed Infrastructure Portfolio

 

1.30

 

 

1.60

 

 

Emerging Markets Portfolio

 

1.30

 

 

1.60

 

 

Emerging Markets Select Portfolio

 

1.30

 

 

1.60

 

 

Developing Markets Portfolio

 

1.30

 

 

1.60

 

 

Emerging Markets Blend Portfolio

 

1.35

 

 

1.65

 

 

High Yield Portfolio

 

.55

 

 

.85

 

 

Capital Allocator Portfolio**

 

1.02

 

 

1.32

 

 


 

 

*

This agreement continues in effect from May 1, 2011 through April 30, 2020, at levels of 1.10% and 1.40% of the average daily net assets of the Portfolio’s Institutional Shares and Open Shares, respectively.

**

The addition of Acquired Fund Fees and Expenses will cause Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement to exceed the maximum amounts of 1.02% and 1.32% for Institutional Shares and Open Shares, respectively.

          For the fiscal years ended December 31, 2007, 2008 and 2009, the management fees payable by each Portfolio, the amounts waived (and reimbursed), by the Investment Manager and the net fees paid to the Investment Manager were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Fee Payable For Fiscal
Year Ended
December 31, 2007

 

Fee Payable For Fiscal
Year Ended
December 31, 2008

 

Fee Payable For Fiscal
Year Ended
December 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Value Portfolio

 

 

$

60,517

 

 

 

$

64,432

 

 

 

$

54,555

 

 

Strategic Equity Portfolio

 

 

 

920,426

 

 

 

 

611,937

 

 

 

 

491,605

 

 

Mid Cap Portfolio

 

 

 

3,175,248

 

 

 

 

2,137,519

 

 

 

 

1,352,713

 

 

Small-Mid Cap Portfolio

 

 

 

1,470,195

 

 

 

 

637,288

 

 

 

 

408,402

 

 

International Equity Portfolio

 

 

 

3,802,457

 

 

 

 

1,679,042

 

 

 

 

1,031,583

 

 

International Equity Select Portfolio

 

 

 

256,934

 

 

 

 

154,613

 

 

 

 

75,359

 

 

39



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Fee Payable For Fiscal
Year Ended
December 31, 2007

 

Fee Payable For Fiscal
Year Ended
December 31, 2008

 

Fee Payable For Fiscal
Year Ended
December 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International Strategic Portfolio

 

 

 

3,202,170

 

 

 

 

2,682,287

 

 

 

 

2,060,777

 

 

International Small Cap Portfolio

 

 

 

4,519,629

 

 

 

 

1,275,372

 

 

 

 

541,008

 

 

Global Listed Infrastructure Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

Emerging Markets Portfolio

 

 

 

48,169,061

 

 

 

 

64,375,771

 

 

 

 

76,191,090

 

 

Developing Markets Portfolio

 

 

 

 

 

 

 

13,948

 

 

 

 

244,566

 

 

High Yield Portfolio

 

 

 

378,909

 

 

 

 

278,680

 

 

 

 

391,385

 

 

Capital Allocator Portfolio

 

 

 

 

 

 

 

1,156,510

 

 

 

 

1,649,073

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Reduction in
Fee For Fiscal
Year Ended
December 31, 2007

 

Reduction in
Fee For Fiscal
Year Ended
December 31, 2008

 

Reduction in
Fee For Fiscal
Year Ended
December 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Value Portfolio

 

 

$

219,250

 

 

 

$

191,470

 

 

 

$

162,664

 

 

Strategic Equity Portfolio

 

 

 

6,531

 

 

 

 

18,725

 

 

 

 

25,105

 

 

Mid Cap Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

Small-Mid Cap Portfolio

 

 

 

 

 

 

 

 

 

 

 

8,032

 

 

International Equity Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

International Equity Select Portfolio

 

 

 

153,167

 

 

 

 

191,531

 

 

 

 

197,383

 

 

International Strategic Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

International Small Cap Portfolio

 

 

 

 

 

 

 

 

 

 

 

34,170

 

 

Global Listed Infrastructure Portfolio

 

 

 

 

 

 

 

 

 

 

 

4,996

 

 

Emerging Markets Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

Developing Markets Portfolio

 

 

 

 

 

 

 

150,953

 

 

 

 

284,576

 

 

High Yield Portfolio

 

 

 

262,885

 

 

 

 

247,532

 

 

 

 

243,692

 

 

Capital Allocator Portfolio

 

 

 

 

 

 

 

254,999

 

 

 

 

234,202

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Net Fee Paid For
Fiscal Year Ended
December 31, 2007

 

Net Fee Paid For
Fiscal Year Ended
December 31, 2008

 

Net Fee Paid For
Fiscal Year Ended
December 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Value Portfolio

 

 

$

(158,733

)

 

 

$

(127,038

)

 

 

$

(108,109

)

 

Strategic Equity Portfolio

 

 

 

913,895

 

 

 

 

593,212

 

 

 

 

466,500

 

 

Mid Cap Portfolio

 

 

 

3,175,248

 

 

 

 

2,137,519

 

 

 

 

1,352,713

 

 

Small-Mid Cap Portfolio

 

 

 

1,470,195

 

 

 

 

637,288

 

 

 

 

400,370

 

 

International Equity Portfolio

 

 

 

3,802,457

 

 

 

 

1,679,042

 

 

 

 

1,031,583

 

 

International Equity Select Portfolio

 

 

 

103,767

 

 

 

 

(36,918

)

 

 

 

(122,024

)

 

International Strategic Portfolio

 

 

 

3,202,170

 

 

 

 

2,682,287

 

 

 

 

2,060,777

 

 

International Small Cap Portfolio

 

 

 

4,519,629

 

 

 

 

1,275,372

 

 

 

 

506,838

 

 

Global Listed Infrastructure Portfolio

 

 

 

 

 

 

 

 

 

 

 

(4,996

)

 

Emerging Markets Portfolio

 

 

 

48,169,061

 

 

 

 

64,375,771

 

 

 

 

76,191,090

 

 

Developing Markets Portfolio

 

 

 

 

 

 

 

(137,005

)

 

 

 

(40,010

)

 

High Yield Portfolio

 

 

 

116,024

 

 

 

 

31,148

 

 

 

 

147,693

 

 

Capital Allocator Portfolio

 

 

 

 

 

 

 

901,511

 

 

 

 

1,414,871

 

 

40



          Emerging Markets Select Portfolio and Emerging Markets Blend Portfolio will commence operations in 2010, so no fee information is provided for these Portfolios.

          The Management Agreement provides that each Portfolio pays all of its expenses that are not specifically assumed by the Investment Manager. Expenses attributable to each Portfolio will be charged against the assets of that Portfolio. Other expenses of the Fund will be allocated among the Portfolios in a manner which may, but need not, be proportionate in relation to the net assets of each Portfolio. Expenses payable by each of the Portfolios include, but are not limited to, brokerage and other expenses of executing portfolio transactions; legal, auditing or accounting expenses; trade association dues; taxes or governmental fees; the fees and expenses of any person providing administrative services to the Fund; the fees and expenses of the custodian and transfer agent of the Fund; clerical expenses of issue, redemption or repurchase of shares of the Portfolio; the expenses and fees for registering and qualifying securities for sale; the fees of Directors of the Fund who are not employees or affiliated persons of the Investment Manager or its affiliates; travel expenses of all Directors, officers and employees; insurance premiums; and the cost of preparing and distributing reports and notices to shareholders. In addition, Open Shares of each Portfolio are subject to an annual distribution and servicing fee. See “Distribution and Servicing Arrangements.”

          As to each Portfolio, the Management Agreement is subject to annual approval by (i) the Fund’s Board or (ii) vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the relevant Portfolio, provided that in either event the continuance also is approved by a majority of the Independent Directors of the Fund or the Investment Manager, by vote cast in person at a meeting called for the purpose of voting on such approval. As to each Portfolio, the Management Agreement is terminable without penalty, on 60 days’ notice, by the Fund’s Board or by vote of the holders of a majority of the shares of such Portfolio, or, upon not less than 90 days’ notice, by the Investment Manager. The Management Agreement will terminate automatically, as to the relevant Portfolio, in the event of its assignment (as defined in the 1940 Act). The Management Agreement provides that in the absence of willful misfeasance, bad faith or gross negligence on the part of the Investment Manager, or of reckless disregard of its obligations thereunder, the Investment Manager shall not be liable for any action or failure to act in accordance with its duties thereunder.

Proxy Voting

          The Fund has delegated voting of proxies in respect of portfolio holdings to the Investment Manager, to vote the Fund’s proxies in accordance with the Investment Manager’s proxy voting policy and guidelines (the “Voting Guidelines”) that provide as follows:

 

 

 

 

The Investment Manager votes proxies in the best interests of its clients.

 

 

 

 

Unless the Investment Manager’s Proxy Committee otherwise determines, the Investment Manager votes proxies in a manner consistent with the Voting Guidelines.

 

 

 

 

To avoid conflicts of interest, the Investment Manager votes proxies where a material conflict has been deemed to exist in accordance with specific proxy voting guidelines regarding various standard proxy proposals (“Approved Guidelines”) or, if the Approved Guideline is to vote case-by-case, in accordance with the recommendation of an independent source.

 

 

 

 

The Investment Manager also may determine not to vote proxies in respect of securities of any issuer if it determines that it would be in the client’s overall best interests not to vote.

41


          The Voting Guidelines address how it will vote proxies on particular types of matters such as the election for directors, adoption of option plans and anti-takeover proposals. For example, the Investment Manager generally will:

 

 

 

vote as recommended by management in routine election or re-election of directors;

 

 

 

 

favor programs intended to reward management and employees for positive, long-term performance, evaluating whether the Investment Manager believes, under the circumstances, that the level of compensation is appropriate or excessive; and

 

 

 

 

vote against anti-takeover measures, such as adopting supermajority voting requirements, shareholder rights plans and fair price provisions.

          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.

Administrator, Custodian and Transfer Agent

          The Fund has entered into an administrative agreement with State Street Bank and Trust Company (“State Street”), One Lincoln Street, Boston, Massachusetts 02111, to provide certain administrative services to the Portfolios. 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 the $42,500 base fee for the Equity Value Portfolio until the Portfolio’s net assets reach $25 million.

          State Street also acts as the Fund’s custodian. As the Fund’s custodian, State Street, among other things, maintains a custody account or accounts in the name of each Portfolio; receives and delivers all assets for each Portfolio upon purchase and upon sale or maturity; collects and receives all income and other payments and distributions on account of the assets of each Portfolio and disburses the Portfolio’s assets in payment of its expenses. The custodian does not determine the investment policies of any Portfolio or decide which securities any Portfolio will buy or sell.

          Boston Financial Data Services, Inc. (“BFDS”), P.O. Box 8154, Boston, Massachusetts 02266-8154, is the Fund’s transfer and dividend disbursing agent. Under a transfer agency agreement with the Fund, BFDS arranges for the maintenance of shareholder account records for each Portfolio, the handling of certain communications between shareholders and the Fund and the payment of dividends and distributions payable by the Fund. For these services, BFDS receives a monthly fee computed on the basis of the number of shareholder accounts it maintains for the Fund during the month, subject to a minimum fee amount per share class in each Portfolio, and is reimbursed for certain out-of-pocket expenses.

Distributor

          Lazard Asset Management Securities LLC, 30 Rockefeller Plaza, New York, New York 10112-6300, serves as the distributor of each Portfolio’s shares and conducts a continuous offering pursuant to a “best efforts” arrangement. As the distributor, it accepts purchase and redemption orders for Portfolio shares. In addition, the distribution agreement obligates the Distributor to pay certain expenses in connection with the offering of Portfolio shares. After the Prospectus and periodic reports have been

42


prepared, set in type and mailed to shareholders, the Distributor also will pay for any printing and distribution of copies thereof used in connection with the offering to prospective investors.

DETERMINATION OF NET ASSET VALUE

          Net asset value per share for each Class of each Portfolio is determined by State Street for the Fund on each day the New York Stock Exchange (the “NYSE”) is open for business. The NYSE is ordinarily closed on the following national holidays: New Year’s Day, Martin Luther King Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Net asset value per share is determined by dividing the value of the total assets of the Portfolio represented by such Class, less all liabilities, by the total number of Portfolio shares of such Class outstanding.

          Market values for securities listed on the 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. Options on stock and stock indices traded on national securities exchanges are valued as of the close of options trading on such exchanges (which is normally 4:10 p.m., Eastern time). 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 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. Mortgage-backed securities issued by certain government-related organizations are valued using pricing services or brokers’ quotations based on a matrix system which considers such factors as other security prices, yields and maturities. Debt securities maturing in 60 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.

          Calculation of a Portfolio’s net asset value may not take place contemporaneously with the determination of the prices of portfolio assets used in such calculation. Trading on Europe, Latin and South America and Far East securities exchanges and in over-the-counter markets ordinarily is completed well before the close of business on each business day in New York (i.e., a day on which the NYSE is open). In addition, European or Far Eastern securities trading generally or in a particular country or countries may not take place on all business days in New York and on which the net asset value of a Portfolio is calculated. 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 value as determined by, or in accordance with procedures approved by, the Board. The Valuation Committee of the Investment Manager 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 also will be considered. Fair valuing of foreign securities may be determined with the assistance of a pricing service using correlations

43


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 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. Foreign securities may trade on days when a Portfolio is not open for business, thus affecting the value of the Portfolio’s assets on days when Portfolio shareholders may not be able to buy or sell Portfolio shares.

PORTFOLIO TRANSACTIONS

General

          Subject to the supervision of the Board, the Investment Manager is primarily responsible for the investment decisions and the placing of portfolio transactions for each Portfolio. In arranging for the Portfolios’ securities transactions, the Investment Manager is primarily concerned with seeking best execution, which is considered to be the most favorable combination of price and quantity that can be traded at a point in time given, among other factors, the liquidity, market conditions, and required urgency of execution. In choosing broker-dealers, the Investment Manager considers all relevant factors, including but not limited to: the ability of a broker-dealer to provide a prompt and efficient agency execution; the ability and willingness of a broker-dealer to facilitate the transactions by acting as principal and going at risk for its own accounts; the ability of a broker-dealer to provide accurate and timely settlement of the transaction; the Investment Manager’s knowledge of the negotiated commission rates currently available and other current transactions costs; the clearance and settlement capabilities of the broker; the Investment Manager’s knowledge of the financial condition of the broker or dealer selected; and any other matter relevant to the selection of a broker-dealer.

          In the over-the-counter market, securities are generally traded on a “net” basis with dealers acting as principal for their own accounts without a stated commission, although the price of the security usually includes a profit to the dealer. In underwritten offerings, securities are purchased at a fixed price that includes an amount of compensation to the underwriter, generally referred to as the underwriter’s concession or discount.

          To the extent consistent with applicable provisions of the 1940 Act and the rules adopted by the SEC thereunder, the Fund’s Board has determined that securities transactions for a Portfolio may be executed through the Distributor if, in the judgment of the Investment Manager, the use of the Distributor is likely to result in price and execution at least as favorable as those of other qualified brokers or dealers, and if, in the transaction, the Distributor charges the Portfolio a rate consistent with that charged to comparable unaffiliated customers in similar transactions.

          Purchase and sale orders for securities held by a Portfolio may be combined with those for other Portfolios in the interest of the most favorable net results for all. In some cases, this policy may adversely affect the price paid or received by an account, or the size of the position obtained or liquidated. When the Investment Manager determines that a particular security should be bought for or sold by more than one Portfolio, the Investment Manager undertakes to allocate those transactions between the participants equitably.

          IPO Allocations. (All Portfolios, except High Yield Portfolio) Under the Investment Manager’s trade allocation procedures applicable to domestic and foreign initial and secondary public offerings and Rule 144A transactions (collectively herein “IPO”), the Investment Manager will generally allocate IPO

44


shares among client accounts, including the Portfolios, pro rata based upon the aggregate asset size (excluding leverage) of the account. The Investment Manager may also allocate IPO shares on a random basis, as selected electronically, or other basis. It is often difficult for the Investment Manager to obtain a sufficient number of IPO shares to provide a full allocation to each account. The Investment Manager’s allocation procedures are designed to allocate IPO securities in a fair and equitable manner.

          The Portfolios listed below held securities of their regular brokers or dealers during the fiscal year ended December 31, 2009:

 

 

 

 

 

 

 

 

Portfolio

 

Broker/Dealer

 

Value on December 31, 2009
(in $000s)

 

 

 

 

 

 

 

 

 

 

 

Equity Value Portfolio

 

State Street Bank & Trust Company

 

 

$

41

 

 

 

Bank of America Corp.

 

 

 

310

 

 

 

The Goldman Sachs Group, Inc.

 

 

 

107

 

 

 

JPMorgan Chase & Co.

 

 

 

310

 

 

 

Morgan Stanley

 

 

 

81

 

 

 

 

 

 

 

 

 

Strategic Equity Portfolio

 

State Street Bank & Trust Company

 

 

 

965

 

 

 

Bank of America Corp.

 

 

 

569

 

 

 

JP Morgan Chase & Co.

 

 

 

1,950

 

 

 

Morgan Stanley

 

 

 

728

 

 

 

 

 

 

 

 

 

Mid Cap Portfolio

 

State Street Bank & Trust Company

 

 

 

3,137

 

 

 

 

 

 

 

 

 

Small-Mid Cap Portfolio

 

State Street Bank & Trust Company

 

 

 

3,593

 

 

 

 

 

 

 

 

 

International Equity Portfolio

 

Banco Santander SA

 

 

 

2,681

 

 

 

Credit Suisse Group AG

 

 

 

3,482

 

 

 

State Street Bank & Trust Company

 

 

 

3,198

 

 

 

UBS AG

 

 

 

1,830

 

 

 

 

 

 

 

 

 

International Equity Select Portfolio

 

Credit Suisse Group AG

 

 

 

208

 

 

 

State Street Bank & Trust Company

 

 

 

1

 

 

 

UBS AG

 

 

 

114

 

 

 

 

 

 

 

 

 

International Strategic Portfolio

 

Credit Suisse Group AG

 

 

 

4,629

 

 

 

State Street Bank & Trust Company

 

 

 

7,677

 

 

 

UBS AG

 

 

 

5,834

 

 

 

 

 

 

 

 

 

International Small Cap Portfolio

 

State Street Bank & Trust Company

 

 

 

384

 

 

 

 

 

 

 

 

 

Global Listed Infrastructure Portfolio

 

State Street Bank & Trust Company

 

 

 

100

 

 

 

 

 

 

 

 

 

Emerging Markets Portfolio

 

State Street Bank & Trust Company

 

 

 

508,821

 

 

 

 

 

 

 

 

 

Developing Markets Portfolio

 

State Street Bank & Trust Company

 

 

 

2,885

 

 

 

 

 

 

 

 

 

High Yield Portfolio

 

State Street Bank & Trust Company

 

 

 

4,802

 

 

 

 

 

 

 

 

 

Capital Allocator Portfolio

 

State Street Bank & Trust Company

 

 

 

3,332

 

          Emerging Markets Select Portfolio and Emerging Markets Blend Portfolio will commence operations in 2010, so no holdings information is provided for these Portfolios.

45


Research and Statistical Information

          Consistent with the requirements of best execution, brokerage commissions on a Portfolio’s transactions may be paid to brokers in recognition of investment research and information furnished as well as for brokerage and execution services provided by such brokers. The Investment Manager may in its discretion cause accounts to pay such broker-dealers a commission for effecting a portfolio transaction in excess of the amount of commission another broker or dealer adequately qualified to effect such transaction would have charged for effecting that transaction. This may be done where the Investment Manager has determined in good faith that such commission is reasonable in relation to the value of the brokerage and/or research to that particular transaction or to the Investment Manager’s overall responsibilities with respect to the accounts as to which it exercises investment discretion.

          The Investment Manager receives a wide range of research (including proprietary research) and brokerage services from brokers. These services include information on the economy, industries, groups of securities, and individual companies; statistical information; technical market action, pricing and appraisal services; portfolio management computer services (including trading and settlement systems); risk management analysis; and performance analysis. Broker-dealers may also supply market quotations to the Fund’s custodian for valuation purposes.

          Any research received in respect of a Portfolio’s brokerage commission may be useful to the Portfolio, but also may be useful in the management of the account of another client of the Investment Manager. Similarly, the research received for the commissions of such other client may be useful for the Portfolio.

Brokerage Commissions

          In connection with its portfolio securities transactions for the fiscal years ended December 31, 2007, 2008 and 2009, each Portfolio indicated below paid brokerage commissions as follows:

Year Ended December 31, 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Total
Brokerage
Commissions
Paid

 

Amount of
Brokerage
Commissions
Paid to Lazard

 

Percentage of
Total Brokerage
Commissions
Paid to Lazard

 

Percentage of
Total Brokerage
Transactions
Effected Through
Lazard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Value Portfolio

 

 

$

16,233

 

 

 

 

 

Strategic Equity Portfolio

 

 

 

152,966

 

 

 

 

 

Mid Cap Portfolio

 

 

 

838,492

 

 

 

 

 

Small-Mid Cap Portfolio

 

 

 

636,510

 

 

 

 

 

International Equity Portfolio

 

 

 

879,383

 

 

 

 

 

International Equity Select Portfolio

 

 

 

20,138

 

 

 

 

 

International Strategic Portfolio

 

 

 

1,112,304

 

 

 

 

 

International Small Cap Portfolio

 

 

 

1,205,870

 

 

 

 

 

Emerging Markets Portfolio

 

 

 

13,820,592

 

 

 

 

 

46



Year Ended December 31, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Total
Brokerage
Commissions
Paid

 

Amount of
Brokerage
Commissions
Paid to Lazard

 

Percentage of
Total Brokerage
Commissions
Paid to Lazard

 

Percentage of
Total Brokerage
Transactions
Effected Through
Lazard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Value Portfolio

 

 

$

17,596

 

 

 

 

 

Strategic Equity Portfolio

 

 

 

159,107

 

 

 

 

 

Mid Cap Portfolio

 

 

 

666,151

 

 

 

 

 

Small-Mid Cap Portfolio

 

 

 

386,200

 

 

 

 

 

International Equity Portfolio

 

 

 

307,710

 

 

 

 

 

International Equity Select Portfolio

 

 

 

16,980

 

 

 

 

 

International Strategic Portfolio

 

 

 

752,798

 

 

 

 

 

International Small Cap Portfolio

 

 

 

218,042

 

 

 

 

 

Emerging Markets Portfolio

 

 

 

15,501,407

 

 

 

 

 

Developing Markets Portfolio

 

 

 

11,593

 

 

 

 

 

Capital Allocator Portfolio

 

 

 

225,699

 

 

 

 

 

Year Ended December 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Total
Brokerage
Commissions
Paid

 

Amount of
Brokerage
Commissions
Paid to Lazard

 

Percentage of
Total Brokerage
Commissions
Paid to Lazard

 

Percentage of
Total Brokerage
Transactions
Effected Through
Lazard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Value Portfolio

 

 

$

9,939

 

 

 

 

 

Strategic Equity Portfolio

 

 

 

99,229

 

 

 

 

 

Mid Cap Portfolio

 

 

 

340,706

 

 

 

 

 

Small-Mid Cap Portfolio

 

 

 

226,204

 

 

 

 

 

International Equity Portfolio

 

 

 

232,045

 

 

 

 

 

International Equity Select Portfolio

 

 

 

11,889

 

 

 

 

 

International Strategic Portfolio

 

 

 

948,485

 

 

 

 

 

International Small Cap Portfolio

 

 

 

109,089

 

 

 

 

 

Global Listed Infrastructure Portfolio

 

 

 

 

 

 

 

 

Emerging Markets Portfolio

 

 

 

19,728,544

 

 

 

 

 

Developing Markets Portfolio

 

 

 

91,637

 

 

 

 

 

Capital Allocator Portfolio

 

 

 

298,625

 

 

 

 

 

          The aggregate amount of transactions during the fiscal year ended December 31, 2009 in securities effected on an agency basis through a broker for, among other things, research services, and the commissions and concessions related to such transactions were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Transaction Amount

 

Commissions and Concessions

 

 

 

 

 

 

 

Equity Value Portfolio

 

 

$

9,300,074

 

 

 

$

9,939

 

 

Strategic Equity Portfolio

 

 

 

97,558,329

 

 

 

 

99,229

 

 

Mid Cap Portfolio

 

 

 

280,496,128

 

 

 

 

340,706

 

 

Small-Mid Cap Portfolio

 

 

 

200,880,491

 

 

 

 

226,204

 

 

International Equity Portfolio

 

 

 

173,578,409

 

 

 

 

232,045

 

 

47



 

 

 

 

 

 

 

 

Portfolio

 

Transaction Amount

 

Commissions and Concessions

 

International Equity Select Portfolio

 

10,853,480

 

 

11,889

 

 

International Strategic Portfolio

 

692,223,371

 

 

948,485

 

 

International Small Cap Portfolio

 

118,498,626

 

 

109,089

 

 

Global Listed Infrastructure Portfolio

 

 

 

 

 

Emerging Markets Portfolio

 

10,122,307,424

 

 

19,728,544

 

 

Developing Markets Portfolio

 

83,402,813

 

 

91,637

 

 

Capital Allocator Portfolio

 

413,021,907

 

 

298,625

 

 

          Emerging Markets Select Portfolio and Emerging Markets Blend Portfolio will commence operations in 2010, so no transactional information is provided for these Portfolios.

HOW TO BUY AND HOW TO SELL SHARES

          General. The minimum initial investment for each Portfolio is $2,500 for Open Shares, unless the investor is a client of a securities dealer or other institution which has made an aggregate minimum initial purchase for its clients of at least $2,500 for Open Shares, and $100,000 for Institutional Shares. The minimum investment requirements may be waived or lowered for investments effected through banks and other institutions that have entered into special arrangements with the Fund or the Distributor and for investments effected on a group basis by certain other entities and their employees, such as pursuant to a payroll deduction plan. The Fund reserves the right to change or waive the minimum initial, and subsequent, investment requirements at any time.

          Securities dealers and other institutions effecting transactions in Portfolio shares for the accounts of their clients may charge their clients direct fees in connection with such transactions. The Fund and the Distributor reserve the right to reject any purchase order. All funds will be invested in full and fractional shares. Stock certificates will not be issued.

          Each Portfolio may, in its discretion, accept securities in payment for shares of the Portfolio. Securities may be accepted in payment for shares only if the securities are, in the judgment of the Investment Manager, appropriate investments for the Portfolio. In addition, securities accepted in payment for Portfolio shares must: (i) meet the Portfolio’s investment objective and policies; (ii) be acquired by the Portfolio for investment and not for resale; and (iii) be liquid securities with readily available market prices on the NYSE, The NASDAQ Stock Market, a recognized non-U.S. exchange or non-NASDAQ listing with at least two market makers. These securities are valued by the same method used to value the Portfolio’s portfolio holdings. The contribution of securities to the Portfolio may be a taxable transaction to the shareholder.

          Purchases through the Transfer Agent. Orders for Portfolio shares will become effective at the net asset value per share next determined after receipt by the Transfer Agent or other agent of a check drawn on any member of the Federal Reserve System or after receipt by the Custodian or other agent of a bank wire or Federal Reserve Wire. Checks must be payable in United States dollars and will be accepted subject to collection at full face value.

          By investing in a Portfolio, a shareholder appoints the Transfer Agent, as agent, to establish an account to which all shares purchased will be credited, together with any dividends and capital gain distributions that are paid in additional shares.

          Service Agents. The Fund has authorized one or more brokers and other financial intermediaries (“Service Agents”) to accept on its behalf purchase and redemption orders. Service Agents are authorized to designate other intermediaries to accept purchase and redemption orders on the Fund’s behalf. The

48


Fund will be deemed to have received a purchase or redemption order when a Service Agent or, if applicable, a Service Agent’s authorized designee, accepts the order. Customer orders will be priced at the respective Portfolio’s net asset value next computed after such orders are accepted by a Service Agent or its authorized designee. Service Agents may charge their clients fees which would not apply to shares purchased through the Distributor.

          The Fund, may, in its discretion, approve a request to exchange Open Shares in a Portfolio for Institutional Shares of the same Portfolio, or to exchange Institutional Shares in a Portfolio for Open Shares of the same Portfolio, when a shareholder is no longer a client of a Service Agent that is authorized (or whose designee is so authorized) to accept on the Fund’s behalf purchase and redemption orders in the relevant class of shares of the Portfolio. For federal income tax purposes, no gain or loss will be recognized upon any such exchange within the same Portfolio (although the Fund does not give tax advice and you should consult your own tax advisor).

          Redemption Fee. Each Portfolio will impose a redemption fee equal to 1.00% of the net asset value of shares acquired by purchase or exchange and redeemed or exchanged within 30 days after such shares were acquired, calculated as described in the Prospectus. The fee will be retained by the Portfolio and used primarily to offset the transaction costs that short-term trading imposes on the Portfolio and its remaining shareholders. The redemption fee may be waived, modified or terminated at any time, or from time to time.

          Redemption Commitment. The Fund has committed to pay in cash all redemption requests by any shareholder of record, limited in amount during any 90-day period to the lesser of $250,000 or 1% of the value of a Portfolio’s net assets at the beginning of such period. Such commitment is irrevocable without the prior approval of the SEC. In the case of requests for redemption in excess of such amount, the Fund’s Board reserves the right to make payments, in whole or in part in portfolio securities or other assets of the Portfolio in cases of emergency or at any time that the Investment Manager believes a cash distribution would impair the liquidity of the Portfolio to the detriment of the existing shareholders. In such event, the securities would be valued in the same manner as the Portfolio’s investments are valued. If the recipient sold such securities, brokerage charges might be incurred.

          Suspension of Redemptions. The right of redemption may be suspended, or the date of payment postponed: (a) during any period when the NYSE is closed (other than customary weekend and holiday closings); (b) when trading in the markets the Portfolio ordinarily utilizes is restricted, or when an emergency exists as determined by the SEC so that disposal of the Portfolio’s investments or determination of its net asset value is not reasonably practicable; or (c) for such other periods as the SEC by order may permit to protect the Portfolio’s shareholders.

DISTRIBUTION AND SERVICING ARRANGEMENTS

Distribution and Servicing Plan for Open Shares

          Open Shares are subject to a Distribution and Servicing Plan adopted by the Fund’s Board pursuant to Rule 12b-1 (the “Rule”) adopted by the SEC under the 1940 Act which provides, among other things, that an investment company may bear expenses of distributing its shares only pursuant to a plan adopted in accordance with the Rule. Pursuant to the Distribution and Servicing Plan, the Fund pays the Distributor for advertising, marketing and distributing each Portfolio’s Open Shares, and for the provision of certain services to the holders of Open Shares, a fee at the annual rate of 0.25% of the average daily net assets of the Portfolio’s Open Shares. The Distributor may make payments to Service Agents for providing these services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the Fund and providing reports and other

49


information, and services related to the maintenance of shareholder accounts. The fee payable for such services is intended to be a “service fee” as defined in Conduct Rules of FINRA. From time to time, the Distributor may defer or waive receipt of fees under the Distribution and Servicing Plan while retaining the ability to be paid by the Fund under the Distribution and Servicing Plan thereafter. The fees payable under the Distribution and Servicing Plan are payable without regard to actual expenses incurred. The Fund’s Board believes there is a reasonable likelihood that the Distribution and Servicing Plan will benefit each Portfolio and holders of its Open Shares.

          A quarterly report of the amounts expended under the Distribution and Servicing Plan, and the purposes for which such expenditures were incurred, must be made to the Board for its review. The Distribution and Servicing Plan provides that it may not be amended to increase materially the costs which holders of Open Shares of a Portfolio may bear without such shareholders’ approval and that other material amendments of the Distribution and Servicing Plan must be approved by the Board and by the Independent Directors of the Fund who have no direct or indirect financial interest in the operation of the Distribution and Servicing Plan or in any agreements entered into in connection with the Distribution and Servicing Plan, by vote cast in person at a meeting called for the purpose of considering such amendments. The Distribution and Servicing Plan is subject to annual approval by such vote cast in person at a meeting called for the purpose of voting on the Distribution and Servicing Plan. As to each Portfolio, the Distribution and Servicing Plan may be terminated at any time by vote of a majority of the Independent Directors who have no direct or indirect financial interest in the operation of the Distribution and Servicing Plan or in any agreements entered into in connection with the Distribution and Servicing Plan, or by vote of the holders of a majority of such Portfolio’s Open Shares.

          For the fiscal year ended December 31, 2009, the Portfolios paid the Distributor the amounts set forth below with respect to their Open Shares under the Distribution and Servicing Plan:

 

 

 

 

 

 

 

Portfolio

 

Amount Paid Under
Distribution and Servicing
Plan For Fiscal Year
Ended December 31, 2009

 

 

 

 

 

 

 

 

Equity Value Portfolio

 

 

$

567

 

 

Strategic Equity Portfolio

 

 

 

18,976

 

 

Mid Cap Portfolio

 

 

 

166,657

 

 

Small-Mid Cap Portfolio

 

 

 

32,351

 

 

International Equity Portfolio

 

 

 

40,879

 

 

International Equity Select Portfolio

 

 

 

13,205

 

 

International Strategic Portfolio

 

 

 

32,728

 

 

International Small Cap Portfolio

 

 

 

72,939

 

 

Global Listed Infrastructure Portfolio

 

 

 

 

 

Emerging Markets Portfolio

 

 

 

5,210,982

 

 

Developing Markets Portfolio

 

 

 

32,323

 

 

High Yield Portfolio

 

 

 

18,461

 

 

Capital Allocator Portfolio

 

 

 

34,359

 

 

          Emerging Markets Select Portfolio and Emerging Markets Blend Portfolio will commence operations in 2010, so no distribution fee information is provided for these Portfolios.

Payments by the Investment Manager or Distributor

          The Investment Manager or the Distributor may provide additional cash payments out of its own resources to financial intermediaries that sell shares and/or provide other services. Such payments are in

50


addition to any fees paid by the Fund under Rule 12b-1. These additional payments may be paid to intermediaries that provide shareholder servicing and administration and/or marketing and related administrative support; opportunities to participate in conferences and educational workshops, meetings and events; and/or access to and information about sales meetings and conferences and sales representatives, financial advisors or management personnel of the intermediary. Cash compensation also may be paid to financial intermediaries in connection with consideration or inclusion of the Fund for or on a “recommended” or similar list, including a preferred or select sales list, or in other programs. In some cases, these payments may create an incentive for a financial intermediary or its representatives to recommend or sell Fund shares. Shareholders or potential shareholders should contact their financial intermediary representative for details about any payments the representative or the financial intermediary may receive in connection with the sale of Fund shares or the provision of services to the Fund.

          From time to time, the Investment Manager or the Distributor also may provide cash or non-cash compensation to financial intermediaries or their representatives in the form of occasional gifts or meals, event tickets or other entertainment; support for due diligence trips; educational conference sponsorship; support for recognition programs; and other forms of cash or non-cash compensation permissible under applicable broker-dealer regulations.

DIVIDENDS AND DISTRIBUTIONS

          The Fund intends to declare as a dividend on the outstanding shares of High Yield Portfolio substantially all of the Portfolio’s net investment income at the close of each business day to shareholders of record as of the close of regular trading on the NYSE. Net investment income for a Saturday, Sunday or holiday will be included in the dividend declared on the previous business day. Dividends declared on the shares of High Yield Portfolio ordinarily will be paid on the last business day of each month. Shareholders who redeem all their shares of the Portfolio prior to a dividend payment date will receive, in addition to the redemption proceeds, any dividends that are declared but unpaid through the date of their redemption. Shareholders who redeem only a portion of their shares will receive all dividends declared but unpaid on those shares on the next dividend payment date.


          For Global Listed Infrastructure Portfolio, dividends from net investment income, if any, are anticipated to be paid quarterly. Dividends from net investment income, if any, on all Portfolios except Global Listed Infrastructure Portfolio and High Yield Portfolio generally will be declared and paid at least annually, and may be declared and paid more frequently.

          Dividends for each Class of a Portfolio will be calculated at the same time and in the same manner and will be of the same amount, except that certain expenses will be borne exclusively by one Class and not by the other, such as fees payable under the Distribution and Servicing Plan. Open Shares will receive lower per share dividends than Institutional Shares because of the higher expenses borne by Open Shares.

          Investment income for a Portfolio includes, among other things, interest income, accretion of market and original issue discount and amortization of premium and, in the case of each Portfolio except High Yield Portfolio, would include dividends.

          With respect to all of the Portfolios, net realized capital gains, if any, will be distributed at least annually, and may be declared and paid more frequently. If a dividend check mailed to a shareholder who elected to receive dividends and/or capital gain distributions in cash is returned as undeliverable by the postal or other delivery service, such shareholder’s distribution option automatically will be converted to all dividends and other distributions reinvested in additional shares. No interest will accrue on amounts represented by uncashed distribution or redemption checks.

51


TAXATION

          The Investment Manager believes that each Portfolio has qualified for the most recent fiscal year as a “regulated investment company” under Subchapter M of the Code. It is intended that each such Portfolio will continue to so qualify as a regulated investment company if such qualification is in the best interests of its shareholders. Each Portfolio will be treated as a separate entity for tax purposes and thus the provisions of the Code applicable to regulated investment companies generally will be applied to each Portfolio separately, rather than to the Fund as a whole. As a regulated investment company, a Portfolio will pay no federal income tax on net investment income and net realized securities gains to the extent that such income and gains are distributed to shareholders in accordance with applicable provisions of the Code. To qualify as a regulated investment company, the Portfolio must distribute at least 90% of its net income (consisting of net investment income and net short-term capital gain) to its shareholders and meet certain asset diversification and other requirements. If the Portfolio did not qualify as a regulated investment company, it would be treated, for tax purposes, as an ordinary corporation subject to federal income tax. The term “regulated investment company” does not imply the supervision of management of investment practices or policies by any government agency.

          Each Portfolio may in certain years use “equalization accounting” in determining the portion of its net investment income and capital gain net income that has been distributed. A Portfolio that elects to use equalization accounting in a year will allocate a portion of its realized investment income and capital gain to redemptions of Portfolio shares and will reduce the amount of such income and/or gain that it distributes in cash. The Internal Revenue Service (the “IRS”) has not published any guidance concerning the methods to be used in allocating investment company income and capital gain to redemptions of shares. In the event that the IRS determines that a Portfolio is using an improper method of allocation and has under-distributed its net investment income or capital gain net income for any taxable year, such Portfolio may be liable for additional federal income tax.

          Any dividend or distribution paid shortly after an investor’s purchase may have the effect of reducing the net asset value of the shares below the investor’s cost of those shares. Such a dividend or distribution would be a return of investment in an economic sense, although taxable as stated in the Prospectus. In addition, the Code provides that if a shareholder holds shares of a Portfolio for six months or less and has received a capital gain distribution with respect to such shares, any loss incurred on the sale of such shares will be treated as long-term capital loss to the extent of the capital gain distribution received.


          Corporate shareholders of Equity Value, Strategic Equity, Mid Cap, Small-Mid Cap, Global Listed Infrastructure and Capital Allocator Portfolios will be eligible for the dividends-received deduction on the dividends (excluding the net capital gain dividends) paid by the Portfolio, to the extent that the Portfolio’s income is derived from certain dividends received from domestic corporations. A corporation’s dividends-received deduction will be disallowed unless the corporation holds shares in the Portfolio for 46 days or more during the 90-day period commencing 45 days before the shares become ex-dividend. Furthermore, a corporation’s dividends-received deduction will be disallowed to the extent a corporation’s investment in shares of the Portfolio is financed with indebtedness. It is anticipated that distributions from the other Portfolios will not qualify for the dividends-received distribution. Each year the Fund will notify shareholders of the federal income tax status of distributions.

          High Yield Portfolio may invest in REMICs. Interests in REMICs are classified as either “regular” interests or “residual” interests. Under the Code, special rules apply with respect to the treatment of a portion of the Portfolio’s income from REMIC residual interests. (Such portion is referred to herein as “Excess Inclusion Income.”) Excess Inclusion Income generally cannot be offset by net operating losses and, in addition, constitutes unrelated business taxable income to entities which are

52


subject to the unrelated business income tax. The Code provides that a portion of Excess Inclusion Income attributable to REMIC residual interests held by regulated investment companies such as the Portfolios shall, pursuant to regulations, be allocated to the shareholders of such regulated investment company in proportion to the dividends received by such shareholders. Accordingly, shareholders of High Yield Portfolio generally will not be able to use net operating losses to offset such Excess Inclusion Income. In addition, if a shareholder of one of the Portfolios is an entity subject to the unrelated business income tax (including a qualified pension plan, an IRA, a 401(k) plan, a Keogh plan, or another tax-exempt entity) and is allocated any amount of Excess Inclusion Income, such a shareholder may be required to file a return and pay a tax on such Excess Inclusion Income even though a shareholder might not have been required to pay such tax or file such return absent the receipt of such Excess Inclusion Income. The Investment Manager anticipates that only a small portion, if any, of the assets of High Yield Portfolio will be invested in REMIC residual interests. Accordingly, the amount of Excess Inclusion Income, if any, received by the Portfolio and allocated to its shareholders should be quite small. Shareholders that are subject to the unrelated business income tax should consult their own tax adviser regarding the treatment of their income derived from the Portfolio.

          Except as discussed above with respect to Excess Inclusion Income, a dividend or capital gains distribution with respect to shares held by a tax-deferred or qualified plan, such as an IRA, 403(b)(7) retirement plan or corporate pension or profit sharing plan, will not be taxable to the plan. Distributions from such plans will be taxable to individual participants under applicable tax rules without regard to the income earned by the qualified plan.

          Ordinarily, gains and losses realized from portfolio transactions will be treated as capital gains and losses. However, a portion of the gain or loss realized from the disposition of foreign currencies and non-U.S. dollar denominated securities (including debt instruments and certain futures or forward contracts and options) may be treated as ordinary income or loss. In addition, all or a portion of any gains realized from the sale or other disposition of certain market discount bonds will be treated as ordinary income. Finally, all or a portion of the gain realized from engaging in “conversion transactions” (generally including certain transactions designed to convert ordinary income into capital gain) may be treated as ordinary income.


          Certain Portfolios may invest in preferred securities or other securities the U.S. federal income tax treatment of which may not be clear or may be subject to recharacterization by the IRS. To the extent the tax treatment of such securities or the income from such securities differs from the tax treatment expected by a Portfolio, it could affect the timing or character of income recognized by the Portfolio, requiring the Portfolio to purchase or sell securities, or otherwise change its portfolio, in order to comply with the tax rules applicable to regulated investment companies under the Code.

          Gain or loss, if any, realized by a Portfolio from certain financial futures or forward contracts and options transactions (“Section 1256 contracts”) will be treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss. Gain or loss will arise upon exercise or lapse of such Section 1256 contract as well as from closing transactions. In addition, any Section 1256 contracts remaining unexercised at the end of the Portfolio’s taxable year will be treated as sold for its then fair market value, resulting in additional gain or loss to such Portfolio.

          Offsetting positions held by a Portfolio involving certain financial futures or forward contracts or options transactions with respect to actively traded personal property may be considered, for tax purposes, to constitute “straddles.” To the extent the straddle rules apply to positions established by the Portfolio, losses realized by the Portfolio may be deferred to the extent of unrealized gain in the offsetting position. In addition, short-term capital loss on straddle positions may be recharacterized as long-term capital loss, and long-term capital gains on straddle positions may be treated as short-term capital gains or ordinary

53


income. Certain of the straddle positions held by the Portfolio may constitute “mixed straddles.” The Portfolio may make one or more elections with respect to the treatment of “mixed straddles,” resulting in different tax consequences. In certain circumstances, the provisions governing the tax treatment of straddles override or modify certain of the provisions discussed above.

          If a Portfolio either (1) holds an appreciated financial position with respect to stock, certain debt obligations, or partnership interests (“appreciated financial position”) and then enters into a short sale, futures or forward contract, or offsetting notional principal contract (collectively, a “Contract”) with respect to the same or substantially identical property or (2) holds an appreciated financial position that is a Contract and then acquires property that is the same as, or substantially identical to, the underlying property, the Portfolio generally will be taxed as if the appreciated financial position were sold at its fair market value on the date the Portfolio enters into the financial position or acquires the property, respectively.

          If a Portfolio enters into certain derivatives (including forward contracts, long positions under notional principal contracts, and related puts and calls) with respect to equity interests in certain pass-thru entities (including other regulated investment companies, real estate investment trusts, partnerships, real estate mortgage investment conduits and certain trusts and foreign corporations), long-term capital gain with respect to the derivative may be recharacterized as ordinary income to the extent it exceeds the long-term capital gain that would have been realized had the interest in the pass-thru entity been held directly by the Portfolio during the term of the derivative contract. Any gain recharacterized as ordinary income will be treated as accruing at a constant rate over the term of the derivative contract and may be subject to an interest charge. The Treasury has authority to issue regulations expanding the application of these rules to derivatives with respect to debt instruments and/or stock in corporations that are not pass-through entities.

          Investment by a Portfolio in securities issued or acquired at a discount, or providing for deferred interest or for payment of interest in the form of additional obligations, could under special tax rules affect the amount, timing and character of distributions to shareholders by causing the Portfolio to recognize income prior to the receipt of cash payments. For example, the Portfolio could be required each year to accrue a portion of the discount (or deemed discount) at which the securities were issued and to distribute such income in order to maintain its qualification as a regulated investment company. In such case, the Portfolio may have to dispose of securities which it might otherwise have continued to hold in order to generate cash to satisfy the distribution requirements.

          Certain Portfolios may invest in an entity that is classified as a “passive foreign investment company” (“PFIC”) for federal income tax purposes, the operation of certain provisions of the Code applying to PFICs could result in the imposition of certain federal income taxes on the Portfolios. In addition, gain realized from the sale or other disposition of PFIC securities held beyond the end of the Portfolio’s taxable year may be treated as ordinary income.

          Income received by a Portfolio from sources within foreign countries may be subject to withholding and other taxes imposed by such countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. It is impossible to determine the effective rate of foreign tax in advance, since the amount of each Portfolio’s assets to be invested in various countries is not known.

          If you are neither a resident nor a citizen of the United States, or if you are a foreign entity, the Portfolio’s ordinary income dividends (which include distributions of net short-term capital gains) will generally be subject to a 30% U.S. withholding tax, unless a lower treaty rate applies.

54


          If more than 50% of the value of a Portfolio’s total assets at the close of its taxable year consists of the stock or securities of foreign corporations, the Portfolio may elect to “pass through” to its shareholders the amount of foreign income taxes paid by the Portfolio. Pursuant to such election, shareholders would be required: (i) to include in gross income, even though not actually received, their respective pro rata shares of the foreign taxes paid by the Portfolio; (ii) treat their income from the Portfolio as being from foreign sources to the extent that the Portfolio’s income is from foreign sources; and (iii) either to deduct their pro rata share of foreign taxes in computing their taxable income, or to use it as a foreign tax credit against federal income (but not both). No deduction for foreign taxes could be claimed by a shareholder who does not itemize deductions.


          It is anticipated that each of International Equity, International Equity Select, International Strategic, International Small Cap, Global Listed Infrastructure, Emerging Markets, Emerging Markets Select, Developing Markets and Emerging Markets Blend Portfolios will be operated so as to meet the requirements of the Code to “pass through” to shareholders credits for foreign taxes paid, although there can be no assurance that these requirements will be met. Each shareholder will be notified within 45 days after the close of each taxable year of the Portfolio whether the foreign taxes paid by the Portfolio will “pass through” for that year, and, if so, the amount of each shareholder’s pro rata share of (i) the foreign taxes paid, and (ii) the Portfolio’s gross income from foreign sources. Of course, shareholders who are not liable for federal income taxes, such as retirement plans qualified under Section 401 of the Code, will not be affected by any such “pass through” of foreign tax credits.

          The foregoing is only a general summary of some of the important federal income tax considerations generally affecting the Portfolios and their shareholders. No attempt is made to present a complete explanation of the federal tax treatment of the Portfolios’ activities or to discuss state and local tax matters affecting the Portfolios. Shareholders are urged to consult their own tax advisers for more detailed information concerning tax implications of investments in the Portfolios.

ADDITIONAL INFORMATION ABOUT THE FUND AND PORTFOLIOS


          As of March 31, 2010, no person owned of record or was known by the Fund to own beneficially 5% or more of a Class of the indicated Portfolio’s outstanding voting securities except the following:

 

 

 

 

Name and Address

 

Percentage of Total
Institutional Shares Outstanding

 

 

 

 

 

Equity Value Portfolio

 

 

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

Lazard Frères & Co. LLC

 

 

 

30 Rockefeller Plaza

 

 

 

New York, NY 10112

 

83%

 

 

 

 

 

Mitra & Co

 

 

 

FBO 79

 

 

 

11270 West Park Place, Suite 400

 

 

 

Milwaukee, WI 53224

 

8%

 

55



 

 

 

 

Strategic Equity Portfolio

 

 

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

34%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

Iron Workers Local 40361

 

 

 

30 Rockefeller Plaza, 60th Floor

 

 

 

New York, NY 10112

 

14%

 

 

 

 

 

National Financial Services Corp.

 

 

 

FBO Its Customers

 

 

 

One World Financial Center

 

 

 

200 Liberty Street

 

 

 

New York, NY 10281

 

12%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

Lazard Frères & Co. LLC

 

 

 

30 Rockefeller Plaza, 60th Floor

 

 

 

New York, NY 10112

 

9%

 

 

 

 

 

Mid Cap Portfolio

 

 

 

 

 

 

 

Merrill Lynch

 

 

 

FBO Its Customers

 

 

 

4800 Deer Lake Drive East, 2nd Floor

 

 

 

Jacksonville, FL 32246

 

35%

 

 

 

 

 

City of Los Angeles

 

 

 

8515 E. Orchard Road

 

 

 

Greenwood Village, CO 80111

 

17%

 

 

 

 

 

Citistreet Core Market

 

 

 

State Street Bank as Trustee

 

 

 

1 Heritage Drive

 

 

 

North Quincy, MA 02171

 

13%

 

 

 

 

 

State Street Bank as Trustee for Olin Corporation
Contribution Employee Ownership Plan

 

 

 

105 Rosemont Avenue

 

 

 

Westwood, MA 02090

 

6%

 

 

 

 

 

Small-Mid Cap Portfolio

 

 

 

 

 

 

 

National Financial Services Corp.

 

 

 

FBO Its Customers

 

 

 

One World Financial Center

 

 

 

200 Liberty Street

 

 

 

New York, NY 10281

 

26%

 

56



 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

11%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

International Union of Operating Engineers

 

 

 

Local 57 Pension Fund

 

 

 

141 Gano Street

 

 

 

Providence, RI 02906

 

8%

 

 

 

 

 

IBEW 7th District

 

 

 

Retirement Benefit Trust Fund

 

 

 

418 South Polk Street, Suite 200

 

 

 

Amarillo, TX 79101

 

6%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

Milbank Winthrop & Co.

 

 

 

654 Madison Avenue, Suite 1550

 

 

 

New York, NY 10065

 

6%

 

 

 

 

 

International Equity Portfolio

 

 

 

 

 

 

 

Oprah Winfrey, Trustee

 

 

 

Phoenix Investment Trust

 

 

 

C/O Harpo Inc.- Sophie Lee

 

 

 

P.O. Box 617666

 

 

 

Chicago, IL 60661

 

21%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

The McConnell Foundation

 

 

 

Redding, CA

 

17%

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

9%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

Somerville Retirement System

 

 

 

50 Evergreen Avenue

 

 

 

Somerville, MA 02145

 

6%

 

 

 

 

 

Citigroup Global Markets Inc.

 

 

 

388 Greenwich Street

 

 

 

New York, NY 10013

 

6%

 

57



 

 

 

 

National Financial Services Corp.

 

 

 

FBO Its Customers

 

 

 

One World Financial Center

 

 

 

200 Liberty Street

 

 

 

New York, NY 10281

 

5%

 

 

 

 

 

Agnes Neill Williams

 

 

 

Potomac, MD

 

5%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

The Baycrest Centre Foundation

 

 

 

3560 Bathurst Street

 

 

 

North York, Ontario

 

5%

 

 

 

 

 

International Equity Select Portfolio

 

 

 

 

 

 

 

Merrill Lynch

 

 

 

FBO Its Customers

 

 

 

4800 Deer Lake Drive East, 2nd Floor

 

 

 

Jacksonville, FL 32246

 

22%

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

21%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

Kenneth Blackman, Esq.

 

 

 

30 Rockefeller Plaza, 60th Floor

 

 

 

New York, NY 10112

 

7%

 

 

 

 

 

First Clearing, LLC

 

 

 

FBO Its Customers

 

 

 

2801 Market Street

 

 

 

St. Louis, MO 63103

 

6%

 

 

 

 

 

International Strategic Portfolio

 

 

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

Market Street International

 

 

 

30 Rockefeller Plaza, 60th Floor

 

 

 

New York, NY 10112

 

17%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

The Board of Public Utilities

 

 

 

30 Rockefeller Plaza

 

 

 

New York, NY 10112

 

12%

 

58



 

 

 

 

First Union National Bank

 

 

 

Omnibus Reinvest

 

 

 

1525 West Wt. Harris Blvd.

 

 

 

Charlotte, NC 28288

 

9%

 

 

 

 

 

Wendel & Company

 

 

 

c/o The Bank of New York Mutual Funds

 

 

 

P.O. Box 1066

 

 

 

Wall Street Station

 

 

 

New York, NY 10268

 

8%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

The Steamfitters Industry

 

 

 

30 Rockefeller Plaza, 60th Floor

 

 

 

New York, NY 10112

 

7%

 

 

 

 

 

Mac & Co.

 

 

 

P.O. Box 3198

 

 

 

525 William Penn Place

 

 

 

Pittsburgh, PA 15230

 

6%

 

 

 

 

 

Wendel & Company

 

 

 

c/o The Bank of New York Mutual Funds

 

 

 

P.O. Box 1066

 

 

 

Wall Street Station

 

 

 

New York, NY 10268

 

5%

 

 

 

 

 

International Small Cap Portfolio

 

 

 

 

 

 

 

Wells Fargo Bank

 

 

 

P.O. Box 1533

 

 

 

Minneapolis, MN 55480

 

50%

 

 

 

 

 

National Financial Services Corp.

 

 

 

FBO Its Customers

 

 

 

One World Financial Center

 

 

 

200 Liberty Street

 

 

 

New York, NY 10281

 

18%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

Pension Plan for the Employees of Marine Atlantic Inc.

 

 

 

10 Marine Drive

 

 

 

Marine Atlantic Port Aux Basques NL AOM ICO

 

14%

 

 

 

 

 

Global Listed Infrastructure Portfolio

 

 

 

 

 

 

 

Genworth Financial Trust Company

 

 

 

3200 North Central Avenue, Floor 7

 

 

 

Phoenix, AZ 85012

 

99%

 

59



 

 

 

 

Emerging Markets Portfolio

 

 

 

 

 

 

 

National Financial Services Corp.

 

 

 

FBO Its Customers

 

 

 

One World Financial Center

 

 

 

200 Liberty Street

 

 

 

New York, NY 10281

 

21%

 

 

 

 

 

Citigroup Global Markets Inc.

 

 

 

388 Greenwich Street

 

 

 

New York, NY 10013

 

17%

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

7%

 

 

 

 

 

Developing Markets Portfolio

 

 

 

 

 

 

 

Lazard Capital Markets, LLC

 

 

 

30 Rockefeller Plaza, 60th Floor

 

 

 

New York, NY 10112

 

40%

 

 

 

 

 

Lazard Capital Markets LLC

 

 

 

Bireleys Orange Japan Emerging

 

 

 

30 Rockefeller Plaza, 60th Floor

 

 

 

New York, NY 10112

 

11%

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

10%

 

 

 

 

 

National Financial Services, LLC

 

 

 

FBO Its Customers

 

 

 

One World Financial Center

 

 

 

200 Liberty Street, 5th Floor

 

 

 

New York, NY 10281

 

8%

 

 

 

 

 

Lazard Group LLC

 

 

 

30 Rockefeller Plaza

 

 

 

New York, NY 10112

 

7%

 

60



 

 

 

 

High Yield Portfolio

 

 

 

 

 

 

 

Merrill Lynch

 

 

 

FBO Its Customers

 

 

 

4800 Deer Lake Drive East

 

 

 

Jacksonville, FL 32246

 

15%

 

 

 

 

 

Mac & Co.

 

 

 

Mutual Funds Operations

 

 

 

P.O. Box 3198

 

 

 

Pittsburgh, PA 15230

 

13%

 

 

 

 

 

SEI Private Trust Co.

 

 

 

FBO Harlysville Bank

 

 

 

One Freedom Valley Drive

 

 

 

Oaks, PA 19456

 

8%

 

 

 

 

 

The Bernard Heller Foundation

 

 

 

Westlake Village, CA

 

7%

 

 

 

 

 

Capital Allocator Portfolio

 

 

 

 

 

 

 

National Financial Services Corp.

 

 

 

FBO Its Customers

 

 

 

One World Financial Center

 

 

 

200 Liberty Street

 

 

 

New York, NY 10281

 

15%

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

13%

 


 

 

 

 

Name and Address

 

Percentage of Total
Open Shares Outstanding

 

 

 

 

 

Equity Value Portfolio

 

 

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

32%

 

 

 

 

 

Pershing LLC

 

 

 

P.O. Box 2052

 

 

 

Jersey City, NJ 07303

 

13%

 

 

 

 

 

National Financial Services LLC

 

 

 

FEBO Marjorie L. Brown

 

 

 

Bedford, OH

 

9%

 

61



 

 

 

 

Ameritrade Inc.

 

 

 

FBO Its Customers

 

 

 

P.O. Box 2226

 

 

 

Omaha, NE 68103

 

7%

 

 

 

 

 

National Financial Services LLC

 

 

 

FEBO Wegmans 401K Plan

 

 

 

Camillus, NY

 

7%

 

 

 

 

 

Pershing LLC

 

 

 

P.O. Box 2052

 

 

 

Jersey City, NJ 07303

 

5%

 

 

 

 

 

Strategic Equity Portfolio

 

 

 

 

 

 

 

Priac as Trustee/Custodian

 

 

 

FBO Various Retirement Plans

 

 

 

280 Trumbull Street

 

 

 

One Commercial Plaza

 

 

 

Hartford, CT 06103

 

66%

 

 

 

 

 

Merrill Lynch

 

 

 

FBO Its Customers

 

 

 

4800 Deer Lake Drive East, 2nd Floor

 

 

 

Jacksonville, FL 32246

 

9%

 

 

 

 

 

Mid Cap Portfolio

 

 

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO 24000996

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

30%

 

 

 

 

 

National Financial Services LLC

 

 

 

FEBO Various Retirement Plans

 

 

 

4 Manhattanville Road

 

 

 

Purchase, NY 10577

 

15%

 

 

 

 

 

Citistreet Core Market

 

 

 

State Street Bank as Trustee

 

 

 

1 Heritage Drive

 

 

 

North Quincy, MA 02171

 

8%

 

 

 

 

 

JPMorgan Chase

 

 

 

Elkay Manufacturing Co. Ret. Svgs. Plan

 

 

 

9300 Ward Parkway

 

 

 

Kansas City, MO 64114

 

6%

 

62



 

 

 

 

ING Life Insurance and Annuity Company

 

 

 

151 Farmington Avenue, TN41

 

 

 

Hartford, CT 06156

 

5%

 

 

 

 

 

Merrill Lynch

 

 

 

FBO Its Customers

 

 

 

4800 Deer Lake Drive East, 2nd Floor

 

 

 

Jacksonville, FL 32246

 

5%

 

 

 

 

 

Nationwide Trust Company, Custodian

 

 

 

FBO IPO Portfolio Accounting

 

 

 

P.O. Box 182029

 

 

 

Columbus, OH 43218

 

5%

 

 

 

 

 

Small-Mid Cap Portfolio

 

 

 

 

 

 

 

Nationwide Life Insurance, QVPA

 

 

 

C/O IPO Portfolio Accounting

 

 

 

P.O. Box 182029

 

 

 

Columbus, OH 43218

 

18%

 

 

 

 

 

Prudential Retirement Insurance & Annuity Co.

 

 

 

FBO Various Retirement Plans

 

 

 

280 Trumbull Street

 

 

 

One Commercial Plaza

 

 

 

Hartford, CT 06103

 

11%

 

 

 

 

 

Mercer Trust FBO Savings Plan

 

 

 

For Employees of Furniture Brands Intl.

 

 

 

1 Investors Way #2

 

 

 

Norwood, MA 02062

 

10%

 

 

 

 

 

Nationwide Life Insurance, NWVA

 

 

 

C/O IPO Portfolio Accounting

 

 

 

P.O. Box 182029

 

 

 

Columbus, OH 43218

 

9%

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

9%

 

 

 

 

 

Nationwide Trust Co.

 

 

 

FBO IPO Portfolio Accounting

 

 

 

P.O. Box 182029

 

 

 

Columbus, OH 43218

 

5%

 

63



 

 

 

 

International Equity Portfolio

 

 

 

 

 

 

 

Charles Atwood Company

 

 

 

136 E. Michigan Avenue, Suite 1201

 

 

 

Kalamazoo, MI 49007

 

22%

 

 

 

 

 

Prudential Retirement Insurance & Annuity Co.

 

 

 

FBO Various Retirement Plans

 

 

 

280 Trumbull Street

 

 

 

One Commercial Plaza

 

 

 

Hartford, CT 06103

 

19%

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

Special Custody Account

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

9%

 

 

 

 

 

ING National Trust

 

 

 

151 Farmington Avenue

 

 

 

Hartford, CT 06156

 

5%

 

 

 

 

 

International Equity Select Portfolio

 

 

 

 

 

 

 

First Clearing, LLC

 

 

 

FBO Its Customers

 

 

 

10750 Wheat First Drive

 

 

 

Glen Allen, VA 23060

 

14%

 

 

 

 

 

Nationwide Trust Co.

 

 

 

FBO IPO Portfolio Accounting

 

 

 

P.O. Box 182029

 

 

 

Columbus, OH 43218

 

12%

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

11%

 

 

 

 

 

National Financial Services LLC

 

 

 

FEBO American Trust and Savings

 

 

 

P.O. Box 938

 

 

 

Dubuque, IA 52004

 

9%

 

 

 

 

 

National Financial Services LLC

 

 

 

FEBO Bernhardt-Reese Unit Trust

 

 

 

60 Macbain Avenue

 

 

 

Atherton, CA 94027

 

8%

 

64



 

 

 

 

International Strategic Portfolio

 

 

 

 

 

 

 

Genworth Financial Trust Co.

 

 

 

3200 North Central Avenue

 

 

 

Phoenix, AZ 85012

 

37%

 

 

 

 

 

Ameritrade Inc.

 

 

 

FBO Its Customers

 

 

 

P.O. Box 2226

 

 

 

Omaha, NE 68103

 

30%

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

Special Custody Account

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

21%

 

 

 

 

 

International Small Cap Portfolio

 

 

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

Special Custody Account

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

64%

 

 

 

 

 

Ameritrade Inc.

 

 

 

FBO Its Customers

 

 

 

P.O. Box 2226

 

 

 

Omaha, NE 68103

 

5%

 

 

 

 

 

Emerging Markets Portfolio

 

 

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

Special Custody Account

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

24%

 

 

 

 

 

Developing Markets Portfolio

 

 

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

Special Custody Account

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

71%

 

 

 

 

 

Ameritrade Inc.

 

 

 

FBO Its Customers

 

 

 

P.O. Box 2226

 

 

 

Omaha, NE 68103

 

6%

 

65



 

 

 

 

Capital Allocator Portfolio

 

 

 

 

 

 

 

Charles Schwab & Co., Inc.

 

 

 

FBO Its Customers

 

 

 

101 Montgomery Street

 

 

 

San Francisco, CA 94104

 

14%

 

          Under the 1940 Act, a shareholder that beneficially owns, directly or indirectly, more than 25% of a Portfolio’s total outstanding shares may be deemed a “control person” (as defined in the 1940 Act) of the Portfolio.

          Certain of the shareholders are investment management clients of the Investment Manager that have entered into agreements with the Investment Manager pursuant to which the Investment Manager has investment discretion and voting power over any assets held in the clients’ accounts, including shares of the Portfolios. For purposes of the list above, the Fund considers the Investment Manager to be a beneficial owner of Portfolio shares held in management accounts on behalf of its investment management clients.

          Generally, all shares have equal voting rights and will be voted in the aggregate, and not by class, except where voting by Class is required by law or where the matter involved affects only one Class. As used in this Statement of Additional Information, the vote of a majority of the outstanding voting securities means, with respect to the Fund or a Portfolio, the vote of the lesser of (i) 67% of the shares represented at a meeting if the holders of more than 50% of the outstanding shares of the Fund or Portfolio, as the case may be, are present in person or by proxy, or (ii) more than 50% of the outstanding shares of the Fund or Portfolio, as the case may be. Shareholders are entitled to one vote for each full share held, and fractional votes for fractional shares held.

          Shareholders are not entitled to any preemptive, subscription or conversion rights and are freely transferable. All shares, when issued and paid for in accordance with the terms of the offering, will be fully paid and non-assessable by the Fund. Each share of the applicable Class of a Portfolio is entitled to such dividends and distributions out of the income earned on the assets belonging to that Portfolio as are declared in the discretion of the Fund’s Board. In the event of the liquidation of a Portfolio, shares of each Class of the Portfolio are entitled to receive the assets attributable to such Class of that Portfolio that are available for distribution based on the relative net assets of the applicable Class.

          Unless otherwise required by the 1940 Act, ordinarily it will not be necessary for the Fund to hold annual meetings of shareholders. As a result, shareholders may not consider each year the election of Directors or the appointment of independent auditors. However, the holders of at least 10% of the shares outstanding and entitled to vote may require the Fund to hold a special meeting of shareholders for purposes of removing a Director from office. Shareholders may remove a Director by the affirmative vote of two-thirds of the Fund’s outstanding voting shares. In addition, the Board will call a meeting of shareholders for the purpose of electing Directors if, at any time, less than a majority of the Directors then holding office have been elected by shareholders.

          The Fund is a “series fund,” which is a mutual fund divided into separate portfolios, each of which is treated as a separate entity for certain matters under the 1940 Act and for other purposes. A shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. For certain matters shareholders vote together as a group; as to others they vote separately by portfolio.

66


          To date, the Board has authorized fifteen Portfolios. All consideration received by the Fund for shares of one of the Portfolios, and all assets in which such consideration is invested, will belong to that Portfolio (subject only to the rights of creditors of the Fund) and will be subject to the liabilities related thereto. The income attributable to, and the expenses of, one Portfolio would be treated separately from those of the other Portfolios. The Fund has the ability to create, from time to time, new series without shareholder approval.

          Rule 18f-2 under the 1940 Act provides that any matter required to be submitted under the provisions of the 1940 Act or applicable state law or otherwise to the holders of the outstanding voting securities of an investment company, such as the Fund, will not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding shares of each portfolio affected by such matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of such portfolio. The Rule exempts the selection of independent auditors and the election of Directors from the separate voting requirements of the rule.

          Each Portfolio will send annual and semi-annual financial statements to its shareholders.

          The Fund’s Registration Statement, including the Prospectus, the Statement of Additional Information and the exhibits filed therewith, may be examined at the office of the SEC in Washington, D.C. Statements contained in the Prospectus or this Statement of Additional Information as to the content of any contract or other document referred to herein or in the Prospectus are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference.

          A special service is available to banks, brokers, investment advisers, trust companies and others who have a number of accounts in the Fund. In addition to the regular Statement of Account furnished to the registered holder after each transaction, a monthly summary of accounts can be provided. The monthly summary will show for each account the account number, the month-end share balance and the dividends and distributions paid during the month. For information on the special monthly summary of accounts, contact the Fund.

COUNSEL AND INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

          Legal matters in connection with the issuance of the shares of the Fund offered hereby have been passed upon by Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982.


          Anchin, Block & Anchin LLP, 1375 Broadway, New York, New York 10018, is the independent registered public accounting firm for the Fund.

67


APPENDIX

Rating Categories
Description of certain ratings assigned by S&P and Moody’s:

S&P

Long-term

AAA
An obligation rated “AAA” has the highest rating assigned by S&P. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

AA
An obligation rated “AA” differs from the highest rated obligations only in small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

A
An obligation rated “A” is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

BBB
An obligation rated “BBB” exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

BB, B, CCC, CC, and C
Obligations rated “BB”, “B”, “CCC”, “CC”, and “C” are regarded as having significant speculative characteristics. “BB” indicates the least degree of speculation and “C” the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

BB
An obligation rated “BB” is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

B
An obligation rated “B” is more vulnerable to nonpayment than obligations rated “BB”, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

CCC
An obligation rated “CCC” is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

68


CC
An obligation rated “CC” is currently highly vulnerable to nonpayment.

C
A subordinated debt or preferred stock obligation rated “C” is currently highly vulnerable to nonpayment. The “C” rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A “C” also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying.

D
An obligation rated “D” is in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

r
The symbol “r” is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating. Examples include: obligations linked or indexed to equities, currencies, or commodities; obligations exposed to severe prepayment risk—such as interest-only or principal-only mortgage securities; and obligations with unusually risky interest terms, such as inverse floaters.

N.R.
The designation “N.R.” indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy.

Note: The ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (-) sign designation to show relative standing within the major rating categories.

Short-term

A-1
A short-term obligation rated “A-1” is rated in the highest category by S&P. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are given a plus sign (+) designation. This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.

A-2
A short-term obligation rated “A-2” is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory.

A-3
A short-term obligation rated “A-3” exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

B
A short-term obligation rated “B” is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces

69


major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet is financial commitment on the obligation.

C
A short-term obligation rated “C” is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.

D
A short-term obligation rated “D” is in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

Moody’s

Long-term

Aaa
Bonds rated “Aaa” are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edged.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.

Aa
Bonds rated “Aa” are judged to be of high quality by all standards. Together with the “Aaa” group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in “Aaa” securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the “Aaa” securities.

A
Bonds rated “A” possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.

Baa
Bonds rated “Baa” are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

Ba
Bonds rated “Ba” are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.

70


B
Bonds rated “B” generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.

Caa
Bonds rated “Caa” are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.

Ca
Bonds rated “Ca” represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.

C
Bonds rated “C” are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

Note: Moody’s applies numerical modifiers 1, 2, and 3 in each generic rating classification from “Aa” through “Caa.” The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

Prime rating system (short-term)

Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics:

 

 

 

 

Leading market positions in well-established industries.

 

 

 

 

High rates of return on funds employed.

 

 

 

 

Conservative capitalization structure with moderate reliance on debt and ample asset protection.

 

 

 

 

Broad margins in earnings coverage of fixed financial charges and high internal cash generation.

 

 

 

 

Well-established access to a range of financial markets and assured sources of alternate liquidity.

Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.

71


Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

72


THE LAZARD FUNDS, INC.
PART C. OTHER INFORMATION

 

 

 

 

 

 


 

 

ITEM 28.

EXHIBITS.

 

 

(a)

Articles of Incorporation, Articles of Amendment and Articles Supplementary(1), (2), (3), (6), (7), (8), (9), (10), (11), (12),*

 

 

(b)

By-Laws(9)

 

 

(d)

Investment Management Agreement, as revised*

 

 

(e)

Distribution Agreement, as revised(7)

 

 

(g)

Amended and Restated Custodian Contract(1)

 

 

(h)(1)

Revised Transfer Agency and Service Agreement(1)

(h)(2)

Amendment to Revised Transfer Agency and Service Agreement(1)

(h)(3)

Administration Agreement(4)

 

 

(i)

Opinion and Consent of Counsel(5)

 

 

(j)

Consent of Independent Registered Public Accounting Firm*

 

 

(m)(1)

Distribution and Servicing Plan, as revised*

(m)(2)

Form of Servicing Agreement, as revised*

 

 

(n)

18f-3 Plan, as revised*

 

 

(p)

Code of Ethics(8)

 

 

Other Exhibits:

 

 

 

(s)

Powers of Attorney of Board Members(9)


 

 

 

 

 

*

Filed herewith.

 

 

1.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 28 filed with the Securities and Exchange Commission (the “SEC”) on April 29, 2003.

2.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 22 filed with the SEC on December 29, 2000.

3.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 25 filed with the SEC on April 30, 2001.

4.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 8 filed with the SEC on October 13, 1995.

5.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 9 filed with the SEC on December 27, 1995.

6.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 31 filed with the SEC on December 3, 2004.

7.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 34 filed with the SEC on July 20, 2005.

8.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 38 filed with the SEC on February 27, 2006.

9.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 42 filed with the SEC on February 13, 2008.




 

 

10.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 44 filed with the SEC on April 29, 2008.

11.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 48 filed with the SEC on September 24, 2008.

12.

Incorporated by reference from Registrant’s Post-Effective Amendment No. 51 filed with the SEC on December 22, 2009.


 

 

ITEM 29.

PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

 

 

 

None.

 

 

ITEM 30.

INDEMNIFICATION.


 

 

Reference is made to Article NINTH of Registrant’s Articles of Incorporation filed as Exhibit (a) and to Section 2-418 of the Maryland General Corporation Law. The application of these provisions is limited by Article VIII of Registrant’s By-Laws filed as Exhibit (b) and by the following undertaking set forth in the rules promulgated by the SEC:

 

 

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of Registrant pursuant to the foregoing provisions, or otherwise, Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in such Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Registrant will unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in such Act and will be governed by the final adjudication of such issue.

 

 

Reference also is made to the Investment Management Agreement and the Distribution Agreement filed as Exhibits (d) and (e), respectively.


 

 

ITEM 31.

BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

 

 

The descriptions of personnel of Lazard Asset Management LLC under the Captions “Fund Management” in the Prospectus and “Management” in the Statement of Additional Information constituting Parts A and B, respectively, of this Registration Statement are incorporated by reference herein. The following is a list of the directors and senior officers of the Investment Manager. None of the persons listed below has had other business connections of a substantial nature during the past two fiscal years.


 

Title / Name

Director

Charles G. Ward

Chief Executive Officer and Director

Ashish Bhutani

Deputy Chairmen

Charles Carroll

Andrew Lacey

John Reinsberg

Chairman USA

Robert P. DeConcini

Senior Managing Directors

Gabrielle Boyle

Andreas Huebner

Robert Prugue




 

Bill Smith

Managing Directors

Jennifer Abate

Ardra Belitz

Michael Bennett

Maureen Beshar

Christopher Blake

Nicholas Bratt

Charles Burgdorf

Irene Cheng

Henry Choon

David Cleary

Kenneth Colton

Robert Connin

Alan Custis

Kun Deng

James Donald

Anthony Dote, Jr.

Yury Dubrovsky

Michael Fry

Jeffrey Gould

Timothy Griffen

William Holzer

Peter Hunsberger

Matthias Kruse

John Lee

Mark Little

Carmine Lizza

Gerald B. Mazzari

Andrew Norris

Nathan Paul

Brian Pessin

David Pizzimenti

Michael Powers

Ganesh Ramachandran

Eulogio (Joe) Ramos

Sean Reynolds

Susan Roberts

Robert Rowland

Nina Saglimbeni

James Schachtel

Ulrich Schweiger

Darrin Sokol

Jeremy Taylor

Ronald Temple

Richard Tutino

Merida Welles

Markus van de Weyer

Charles Wilson


 

 

ITEM 32.

PRINCIPAL UNDERWRITERS.


 

 

 

 

(a)

Lazard Asset Management Securities LLC, a Delaware limited liability company, is the principal underwriter of the Registrant and also serves as the principal underwriter of Lazard Retirement Series, Inc.

 

 

 

 

(b)

The following information is given regarding directors and officers of Lazard Asset Management Securities LLC, whose principal business address is 30 Rockefeller Plaza, New York, New York 10112.




 

 

 

Name

Position and Offices with
Underwriter

Position and Offices with
Registrant

Charles L. Carroll

Chief Executive Officer

President and Director

Lorelei B. Martin

Chief Compliance Officer

None

Gerald B. Mazzari

Chief Financial Officer and Chief
Operating Officer

None

Nathan A. Paul

Chief Legal Officer

Secretary


 

 

(c)

Not applicable.

 

 

ITEM 33.

LOCATION OF ACCOUNTS AND RECORDS.

The majority of the accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules thereunder are maintained as follows: journals, ledgers, securities records and other original records are maintained primarily at the offices of Registrant’s custodian, State Street Bank and Trust Company. All other records so required to be maintained are maintained at the offices of LAM, 30 Rockefeller Plaza, New York, New York 10112.

 

 

ITEM 34.

MANAGEMENT SERVICES.

 

 

 

Not applicable.

 

 

ITEM 35.

UNDERTAKINGS.

 

 

 

None.



SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, and State of New York, on the 9th day of April, 2010.

 

 

 

 

 

THE LAZARD FUNDS, INC.

 

 

 

 

 

By: 

/s/ Charles Carroll

 

 

 

Charles Carroll, Chief Executive Officer

 

Pursuant to the requirements of the Securities Act of 1933, this Amendment to Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

 

 

 

 

/s/ Charles Carroll

 

President and Director

April 9, 2010

Charles Carroll

 

 

 

 

 

 

 

/s/ Stephen St. Clair

 

Treasurer and Chief Financial Officer

April 9, 2010

Stephen St. Clair

 

 

 

 

 

 

 

/s/ Ashish Bhutani

 

Director

April 9, 2010

Ashish Bhutani

 

 

 

 

 

 

 

/s/ Kenneth S. Davidson

*

Director

April 9, 2010

Kenneth S. Davidson

 

 

 

 

 

 

 

/s/ Nancy A. Eckl

*

Director

April 9, 2010

Nancy A. Eckl

 

 

 

 

 

 

 

/s/ Lester Z. Lieberman

*

Director

April 9, 2010

Lester Z. Lieberman

 

 

 

 

 

 

 

/s/ Leon M. Pollack

*

Director

April 9, 2010

Leon M. Pollack

 

 

 

 

 

 

 

/s/ Richard Reiss, Jr.

*

Director

April 9, 2010

Richard Reiss, Jr.

 

 

 

 

 

 

 

/s/ Robert M. Solmson

*

Director

April 9, 2010

Robert M. Solmson

 

 

 


 

 

 

*By: 

/s/ Nathan A. Paul

 

 

Attorney-in-fact, Nathan A. Paul

 



EXHIBIT INDEX

 

 

(a)

Articles Supplementary

 

 

(d)

Investment Management Agreement, as revised

 

 

(j)

Consent of Independent Registered Public Accounting Firm

 

 

(m)(1)

Distribution and Servicing Plan, as revised

 

 

(m)(2)

Form of Servicing Agreement, as revised

 

 

(n)

18f-3 Plan, as revised



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M"IH`YZ:2^TR\99[@3P))'YLDMTZQ[QO92S$$1[OE)51@%4'1^.NM9_M-I#<> M6\?FQJ^QQAER,X/O5.'6K"=B(9&=F9``(F&_>2%9<@;EPK'(R,*3VK1H`*** M*`"BBB@`HHHH`****`"BBB@`HHHH`****`"BBB@`HHHH`****`"BBB@`HHHH M`****`"BBB@`HHHH`****`"BBB@`HHHH`****`"BBB@`HHHH`*\\^*7_`#"O M^VW_`+)7H=>>?%+_`)A7_;;_`-DK@S/_`'6?R_-'GYI_ND_E^:/.Z***^2/D M#Z'HHHK[P^_"BBB@`HHHH`****`"BBB@`HHHH`****`"BBB@`HHHH`****`, MZ[MM0$9%M<>>))"9(YW\K$95AM1T7*D$J72VD&_;OD8A(HP<&1ST`_Q[`$G@5@V_BR2Y MTEM4CT]?LD%O%/=$S_-'NC65@HV_-M1U/)7-`#[KPZYNWN+,+$%8!(A.\>Y< M'/SC)3EN`HP,-_?:MZUCEBM(8YY?-F2-5>3&-[`YL[M'E\T>?N=!*BJ"!(B@-P%P`6(Q7'_`&7A?Y?Q9Q?V5A/Y?Q?^ M9V8O[-I88A=P&2==\2"09D7&6\6Q(D^3Y4$2`@;.,;]^.^,9KT#T3=HHHH`****`"BBB@`HHHH`****`"BB MB@`HHHH`****`"BBB@"C+HVESY\[3;.3,AE.^!3ESD%N1UY//O6;;>$+"TL% ML+>:YBLS%'%-`I0+.$4+E_ESDJ`&VD9`KH**`,ZZT>*[G:X:>9)PRM'(FW,0 M"D8`((P=S9R#][V&+EM;QVEK#;0C$4*+&@)S@`8%2T4`%%%%`!1110`4444` M%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4 M444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!11 M10`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%% M`!1110`5P7Q4O]&T_2-.DUK=<1&ZQ%IS2K'%=N5(`E8\!%SN)Z9`Z]*[VB@# MY\ODLHM"@AU#4XM22/P_,NCW%O(SI_:'G.=D+=W4&)1WVK]:M*URFK%I&D7Q MD-5NC>%49W%C]G?;\HZI]S:!U;IS7O-%`'EGPC:SM+J^TS3$TNZM([.V=]1T M^T:#=)\P\J7<3N<8W9X^\<@=!ZG110`4444`%%%%`!1110`5YM\5]0T*U;1H M=7V7,LC3"WL+B<16KMM`\V9CT"9XQR2W`)Z>DT4`?/\`#"MO*D+:G_:>OQOI M2:#>(S-YL(*"8QGH4SYH;V`S4=JVH)I3MH'G?\)(-'U#^W]F[S/.WKLW9_Y: M??VXYQTXKZ$HH`\W^%'D1-KEM8&TFTZ.2!H;JR21()'*'>H5V;YEPNXC&+CK-QNF;.Z2P\A_+9NWED>6 M1VSTYJII">'_`.RI[FXLEO;&T\-K<:U!+NPVHJP*A\G_`%A/F#UP1[5[]10! MS'@'PPGA/PG;6&U5N)2;FY5!A5E?!95'91PH'H*Z>BB@`HHHH`****`"BBB@ M`KQOQK>:%+\1_L)U.&WU6.6UFDO[RX$8TZ-<-Y4"]6:0= M1%]Y%P-(\[_A+/\`B;?VUY>[S/)R_EY]O]7L_2I+Z32C?R6VCO:Q^$YM0M?+ MDNV8:>)1;R>:LOKD^7QD#?UZ&OH*D95=2K`%3U!'!H`Y+X8S23_#[3#+YA*^ M:@=R2'42,`R$\[",;<\[<=>M==110`4444`%%%%`!1110`5XG<7>E7?Q+N8M M(U.&+5[6]F,M[=7`$]Q*49%LXD[QJ2!D\97C)R3[910!\Z0>3]BL/[.\W^S_ M`+!9?\)5MWY\W[3'YOF?[>WS<]]O7BEU,6T5G-<*UI<:$;F_BT:SN7FCC`(B MV2P,J,&8/O"KP3GY>Y'T510!F>'5O5\,:2NI;OMXLX1<[NOF[!OS[YS6G110 /`4444`%%%%`!1110!__9 ` end EX-99.A 16 c60963_ex99-a.htm

Exhibit (a)

THE LAZARD FUNDS, INC.

ARTICLES SUPPLEMENTARY

                    THE LAZARD FUNDS, INC., a Maryland corporation having its principal office in the State of Maryland (hereinafter called the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

                    FIRST: The Corporation is registered as an open-end company under the Investment Company Act of 1940.

                    SECOND: The fifty million (50,000,000) unissued shares of Institutional Common Stock and fifty million (50,000,000) unissued shares of Open Common Stock of Lazard U.S. Small Cap Equity Value Portfolio, par value one tenth of one cent ($.001) per share, with an aggregate par value of one hundred thousand dollars ($100,000.00), that the Corporation has authority to issue are hereby reclassified as fifty million (50,000,000) unissued shares of Institutional Common Stock and fifty million (50,000,000) unissued shares of Open Common Stock of Lazard Emerging Markets Equity Select Portfolio.

                    THIRD: The fifty million (50,000,000) unissued shares of Institutional Common Stock and fifty million (50,000,000) unissued shares of Open Common Stock of Lazard U.S. Small Cap Equity Growth Portfolio, par value one tenth of one cent ($.001) per share, with an aggregate par value of one hundred thousand dollars ($100,000.00), that the Corporation has authority to issue are hereby reclassified as fifty million (50,000,000) unissued shares of Institutional Common Stock and fifty million (50,000,000) unissued shares of Open Common Stock of Lazard Emerging Markets Equity Blend Portfolio.

                    FOURTH: The total number of shares of capital stock of all classes that the Corporation has authority to issue is two billion three hundred fifty million (2,350,000,000) shares of Common Stock, par value one tenth of one cent ($.001) per share, having an aggregate par value of two million three hundred fifty thousand dollars ($2,350,000.00), classified as shares of Institutional Common Stock and Open Common Stock of each of the following Portfolios, prior to the foregoing reclassification (each a “Portfolio”), as follows:

 

 

 

 

 

Portfolio

 

 

Shares
Authorized

 

 

 

 

 

 

 

 

 

 

Lazard U.S. Equity Value Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard U.S. Strategic Equity Portfolio

 

 

 

Institutional Common Stock

 

100,000,000

 

Open Common Stock

 

100,000,000

 

 

 

 

 

Lazard U.S. Mid Cap Equity Portfolio

 

 

 

Institutional Common Stock

 

100,000,000

 

Open Common Stock

 

50,000,000

 




 

 

 

 

 

Portfolio

 

 

Shares
Authorized

 

 

 

 

 

 

 

 

 

 

Lazard U.S. Small-Mid Cap Equity Portfolio

 

 

 

Institutional Common Stock

 

150,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard U.S. Small Cap Equity Value Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard U.S. Small Cap Equity Growth Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard International Equity Portfolio

 

 

 

Institutional Common Stock

 

150,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard International Equity Select Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard International Strategic Equity Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard International Small Cap Equity Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard Global Listed Infrastructure Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard Emerging Markets Equity Portfolio

 

 

 

Institutional Common Stock

 

200,000,000

 

Open Common Stock

 

100,000,000

 

 

 

 

 

Lazard Developing Markets Equity Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard U.S. High Yield Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard Bond Portfolio

 

 

 

Institutional Common Stock

 

50,000,000 

 

2



 

 

 

 

 

Portfolio

 

 

Shares
Authorized

 

 

 

 

 

 

 

 

 

 

Lazard Capital Allocator Opportunistic Strategies Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Unclassified

 

250,000,000

 

 

 

 

 

Total

 

2,350,000,000

 

          FIFTH: As hereby classified and reclassified, the total number of shares of capital stock of all classes that the Corporation has authority to issue is two billion three hundred fifty million (2,350,000,000) shares of Common Stock, par value one tenth of one cent ($.001) per share, having an aggregate par value of two million three hundred fifty thousand dollars ($2,350,000.00), classified as shares of Institutional Common Stock and Open Common Stock of each of the following Portfolios (each, a “Portfolio”) or remaining unclassified as follows:

 

 

 

 

 

Portfolio

 

 

Shares
Authorized

 

 

 

 

 

 

 

 

 

 

Lazard U.S. Equity Value Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard U.S. Strategic Equity Portfolio

 

 

 

Institutional Common Stock

 

100,000,000

 

Open Common Stock

 

100,000,000

 

 

 

 

 

Lazard U.S. Mid Cap Equity Portfolio

 

 

 

Institutional Common Stock

 

100,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard U.S. Small-Mid Cap Equity Portfolio

 

 

 

Institutional Common Stock

 

150,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard International Equity Portfolio

 

 

 

Institutional Common Stock

 

150,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard International Equity Select Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

3



 

 

 

 

 

Portfolio

 

 

Shares
Authorized

 

 

 

 

 

 

 

 

 

 

Lazard International Strategic Equity Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard International Small Cap Equity Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard Global Listed Infrastructure Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard Emerging Markets Equity Portfolio

 

 

 

Institutional Common Stock

 

200,000,000

 

Open Common Stock

 

100,000,000

 

 

 

 

 

Lazard Emerging Markets Equity Select Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard Developing Markets Equity Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard Emerging Markets Equity Blend Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard U.S. High Yield Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Lazard Bond Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

 

 

 

 

Lazard Capital Allocator Opportunistic Strategies Portfolio

 

 

 

Institutional Common Stock

 

50,000,000

 

Open Common Stock

 

50,000,000

 

 

 

 

 

Unclassified

 

250,000,000

 

 

 

 

 

Total

 

2,350,000,000

 

4


                    SIXTH: The shares of Institutional Common Stock and Open Common Stock of each Portfolio of the Corporation as classified and reclassified immediately hereby (and all shares of Institutional Common Stock and Open Common Stock, respectively, of any Portfolio issued after these Articles Supplementary become effective regardless of whether such shares are currently unissued or become unissued as a result of the subsequent redemption or repurchase by the Corporation of such shares) shall have the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption as previously set forth in the Charter with respect to any particular Portfolio and otherwise as set forth in Article FIFTH of the Corporation’s Charter and shall be subject to all provisions of the Corporation’s Charter relating to stock of the Corporation generally, and to the following:

 

 

 

 

(1)

As more fully set forth hereinafter, the assets and liabilities and the income and expenses of the Open Common Stock and Institutional Common Stock of the Corporation shall be determined separately from each other and, accordingly, the net asset value, dividends and distributions payable to holders, and amounts distributable in the event of liquidation of the Corporation to holders of shares of the Corporation’s stock may vary from class to class. Except for these differences, and certain other differences hereinafter set forth, each class of the Corporation’s stock shall have the same preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption.

 

 

 

 

(2)

Assets of the Corporation attributable to the Open Common Stock and to the Institutional Common Stock of each Portfolio shall be invested in the same respective Portfolio.

 

 

 

 

(3)

At such times (which may vary between and among the holders of Institutional Common Stock of the Portfolios) as may be determined by the Board of Directors (or, with the authorization of the Board of Directors, by the officers of the Corporation) in accordance with the Investment Company Act of 1940, as amended, applicable rules and regulations thereunder, and applicable rules and regulations of the Financial Industry Regulatory Authority, and reflected in the pertinent registration statement of the Corporation (the “Registration Statement”), certain of the shares of Institutional Common Stock of each Portfolio may be automatically converted into shares of the Open Common Stock of the respective Portfolio, based on the relative net asset values of such classes at the time of conversion, subject to any conditions of conversion that may be imposed by the Board of Directors (or, with the authorization of the Board of Directors, by the officers of the Corporation) and reflected in the Registration Statement.

 

 

 

 

(4)

Proceeds from the redemption of a share of Institutional Common Stock or Open Common Stock of a Portfolio, including fractional shares, shall be reduced by the amount of any redemption fee, liquidation fee or other amount payable on such redemption as may be approved by the Board of Directors of the Corporation and reflected in the Registration Statement from time to time.

5



 

 

 

 

(5)

The dividends and distributions of investment income and capital gains with respect to each class of stock of the Corporation shall be in such amounts as may be declared from time to time by the Board of Directors, and such dividends and distributions may vary between each class of stock of the Corporation to reflect differing allocations of the expenses of the Corporation among the classes and any resultant differences between the net asset values per share of the classes, to such extent and for such purposes as the Board of Directors may deem appropriate. The allocation of investment income, realized and unrealized capital gains and losses, and expenses and liabilities of the Corporation among the classes shall be determined by the Board of Directors in a manner that is consistent with applicable law.

 

 

 

 

(6)

Except as may otherwise be required by law, the holders of each class of stock of the Corporation shall have (i) exclusive voting rights with respect to any matter submitted to a vote of stockholders that affects only holders of that particular class and (ii) no voting rights with respect to any matter submitted to a vote of stockholders that does not affect holders of that particular class.

                    SEVENTH: The Board of Directors of the Corporation has reclassified the authorized shares of capital stock as provided herein under the authority contained in its Charter.

                    EIGHTH: These Articles Supplementary to the Charter of the Corporation shall become effective at 9:01 a.m. on April 30, 2010.

                    IN WITNESS WHEREOF, The Lazard Funds, Inc. has caused these presents to be signed as of April 1, 2010 in its name and on its behalf by its duly authorized officers who acknowledge that these Articles Supplementary are the act of the Corporation, and state that to the best of their knowledge, information and belief, all matters and facts set forth herein relating to the authorization and approval of these Articles Supplementary are true in all material respects, and that this statement is made under the penalties of perjury.

 

 

 

 

THE LAZARD FUNDS, INC.

 

 

 

By:           

/s/ Nathan A. Paul

 

 

 

 

 

Name:

Nathan A. Paul

 

Title:

Vice President


 

 

 

WITNESS:

 

 

 

 

/s/ Tamar Goldstein

 

 

 

Name:

Tamar Goldstein

Title:

Assistant Secretary

6


EX-99.D 17 c60963_ex99-d.htm

Exhibit (d)

THE LAZARD FUNDS, INC.

INVESTMENT MANAGEMENT AGREEMENT

          Agreement, made the 11th day of August, 2005, between The Lazard Funds, Inc., a Maryland corporation (the “Fund”), on behalf of the portfolios named on Schedule 1 hereto, as such Schedule may be revised from time to time (each, a “Portfolio”), and Lazard Asset Management LLC, a New York limited liability company (the “Investment Manager”).

WITNESSETH

          WHEREAS, the Fund is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), authorized to reclassify and issue any unissued shares to any number of additional classes or series each having its own investment objective, policies and restrictions; and

          WHEREAS, the Fund desires to retain the Investment Manager to render investment advisory services to each Portfolio and the Investment Manager is willing to render such investment advisory services;

          NOW, THEREFORE, the parties agree as follows:

          1. The Fund hereby appoints the Investment Manager to act as manager of each Portfolio for the period and on the terms set forth in this Agreement. The Investment Manager accepts such appointment and agrees to render the services herein described, for the compensation herein provided.

          2. Subject to the supervision of the Board of Directors of the Fund, the Investment Manager shall manage the investment operations of each Portfolio and the assets of each Portfolio, including the purchase, retention and disposition thereof, in accordance with the Portfolio’s investment objective, policies and restrictions as stated in the Fund’s Prospectus (hereinafter defined) and subject to the following understandings:



 

 

 

          (a) The Investment Manager shall provide supervision of each Portfolio’s investments and determine from time to time what investments or securities will be purchased, retained, sold or loaned by the Portfolio, and what portion of the assets will be invested or held uninvested as cash.

 

 

 

          (b) The Investment Manager shall use its best judgment in the performance of its duties under this Agreement.

 

 

 

          (c) The Investment Manager, in the performance of its duties and obligations under this Agreement, shall act in conformity with the Articles of Incorporation, By-Laws and Prospectus of the Fund (each hereinafter defined) and with the instructions and directions of the Board of Directors of the Fund and will conform to and comply with the requirements of the 1940 Act and all other applicable federal and state laws and regulations.

 

 

 

          (d) The Investment Manager shall determine the securities to be purchased or sold by each Portfolio and will place orders pursuant to its determinations with or through such persons, brokers or dealers (including Lazard Frères & Co. LLC) to carry out the policy with respect to brokerage as set forth in the Fund’s Prospectus or as the Fund’s Board of Directors may direct from time to time. In providing a Portfolio with investment supervision, it is recognized that the Investment Manager will give primary consideration to securing the most favorable price and efficient execution.

 

 

 

          On occasions when the Investment Manager deems the purchase or sale of a security to be in the best interest of a Portfolio as well as other clients, the Investment Manager, to the extent permitted by applicable laws and regulations, may aggregate the securities to be so sold or purchased in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by

-2-



 

 

 

the Investment Manager in the manner it considers to be the most equitable and consistent with its fiduciary obligations to the Portfolio and to such other clients.

 

 

 

          (e) The Investment Manager shall render to the Fund’s Board of Directors such periodic and special reports with respect to each Portfolio’s securities transactions as the Board may reasonably request.

 

 

 

          (f) The Investment Manager shall provide the Fund’s custodian on each business day with information relating to all transactions concerning a Portfolio’s assets.

          3. The Fund has delivered to the Investment Manager copies of each of the following documents and will deliver to it all future amendments and supplements, if any:

 

 

 

          (a) Articles of Incorporation of the Fund, filed with the State Department of Assessments and Taxation of Maryland (such Articles of Incorporation, as in effect on the date hereof and as amended from time to time, are herein called the “Articles of Incorporation”);

 

 

 

          (b) By-Laws of the Fund (such By-Laws, as in effect on the date hereof and as amended from time to time, are herein called the “By-Laws”);

 

 

 

          (c) Resolutions of the Board of Directors of the Fund authorizing the appointment of the Investment Manager and approving the form of this Agreement;

 

 

 

          (d) Registration Statement under the 1940 Act and the Securities Act of 1933, as amended, on Form N-lA (the “Registration Statement”), as filed with the Securities and Exchange Commission (the “Commission”) relating to the Fund and shares of the Fund’s Common Stock;

 

 

 

          (e) Notification of Registration of the Fund under the 1940 Act on Form N-8A as filed with the Commission; and

-3-



 

 

 

          (f) Prospectus of the Fund (such prospectus and the statement of additional information, each as currently in effect and as amended or supplemented from time to time, being herein called the “Prospectus”).

          4. The Investment Manager shall authorize and permit any of the general members, officers and employees of the Investment Manager, and any of the general members, directors, officers and employees of any of its affiliates, who may be elected as Directors or officers of the Fund to serve in the capacities in which they are elected. All services to be furnished by the Investment Manager under this Agreement may be furnished through the medium of any such general members, directors, officers or employees of the Investment Manager or any of its affiliates.

          5. The Investment Manager shall keep the books and records of the Fund and the Portfolios required to be maintained by it pursuant to this Agreement and by the Fund pursuant to the 1940 Act. The Investment Manager agrees that all records which it maintains for the Fund or the Portfolios are the property of the Fund or the relevant Portfolio and it will surrender promptly to the Fund or such Portfolio any of such records upon the request of the Fund or such Portfolio. The Investment Manager further agrees to preserve such records as prescribed by Rule 3la-2 under the 1940 Act.

          6. The Investment Manager will bear all of its expenses incurred in connection with the services to be rendered by the Investment Manager to the Portfolios under this Agreement, including without limitation, the compensation of all personnel of the Fund and the Investment Manager, except the fees of Directors of the Fund who are not affiliated persons of the Investment Manager or its affiliates. The Fund or the relevant Portfolio assumes and will pay all other expenses in connection with the Fund or such Portfolio not assumed by the Investment Manager, including but not limited to:

 

 

 

          (a) the fees and expenses of Directors who are not affiliated persons of the Investment Manager or any of its affiliates;

 

 

 

          (b) the fees and expenses of the Fund’s administrator, if any;

-4-



 

 

 

          (c) the fees and expenses of the custodian which relate to (i) the custodial function and the recordkeeping connected therewith, (ii) the maintenance of the required accounting records of the Fund, (iii) the pricing of the shares of the Portfolio, including the cost of any pricing service or services which may be retained pursuant to the authorization of the Directors of the Fund and (iv) for both mail and wire orders, the cashiering function in connection with the issuance and redemption of the Portfolio’s securities;

 

 

 

          (d) the fees and expenses of the Fund’s transfer agent, which may be the custodian, which relate to the maintenance of, and communications with respect to, each stockholder account;

 

 

 

          (e) the charges and expenses of legal counsel and independent accountants for the Fund;

 

 

 

          (f) brokers’ commissions, any issue or transfer taxes and any other charges in connection with portfolio transactions on behalf of the Portfolio;

 

 

 

          (g) all taxes and corporate fees payable by the Fund or the Portfolio to federal, state or other governmental agencies, and all costs of maintaining corporate existence;

 

 

 

          (h) the allocable share of the fees of any trade association of which the Fund may be a member;

 

 

 

          (i) the cost of share certificates, if any, representing shares of the Portfolio;

 

 

 

          (j) the fees and expenses involved in registering and maintaining registrations of the Fund and of its shares with the Commission and, if required, qualifying the shares of the Portfolio under state securities laws, including the preparation and printing of the Fund’s registration statements and Prospectuses for filing under federal and state securities laws for such purposes;

-5-



 

 

 

          (k) all expenses of stockholders’ and Directors’ meetings and of preparing, printing and mailing Prospectuses and reports to stockholders in quantities required for distribution to the stockholders, and communications expenses with respect to individual stockholder accounts;

 

 

 

          (l) the cost of obtaining fidelity insurance and any liability insurance covering the Directors and officers of the Fund as such;

 

 

 

          (m) litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Fund’s business;

 

 

 

          (n) expenses of issue, repurchase or redemption of shares of the Fund;

 

 

 

          (o) fees payable to the Investment Manager hereunder;

 

 

 

          (p) interest expenses of the Fund; and

 

 

 

          (q) all other expenses properly payable by the Fund.

          7. For the services provided to the Portfolios and the expenses assumed pursuant to this Agreement, each Portfolio will pay monthly to the Investment Manager as full compensation therefor a management fee, accrued daily, at the annual rate set forth opposite the Portfolio’s name on Schedule 1 hereto.

          8. The Investment Manager shall not be liable for any error of judgment or for any loss suffered by a Portfolio in connection with the matters to which this Agreement relates, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services (in which case any award of damages shall be limited to the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. The federal securities laws may impose liabilities even, under certain circumstances, on persons who act in good faith, and therefore nothing herein shall in any way constitute a waiver or limitation of any right which a Portfolio may have under any federal securities law.

-6-


          9. As to each Portfolio, this Agreement shall continue until the date set forth opposite such Portfolio’s name on Schedule 1 hereto (the “Reapproval Date”) and thereafter shall continue automatically for successive annual periods ending on the day of each year set forth opposite the Portfolio’s name on Schedule 1 hereto (the “Reapproval Day”), provided such continuance is specifically approved at least annually by (i) the Fund’s Board of Directors or (ii) vote of a majority (as defined in the 1940 Act) of such Portfolio’s outstanding voting securities, provided that in either event its continuance also is approved by a majority of the Fund’s Directors who are not “interested persons” (as defined in the 1940 Act) of any party to this Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. As to each Portfolio, this Agreement may be terminated at any time, without payment of penalty by the Portfolio, on 60 days’ written notice to the Investment Manager, by vote of the Board of Directors of the Fund, or by vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of such Portfolio. This Agreement shall automatically terminate, as to the relevant Portfolio, in the event of its assignment (as defined in the 1940 Act).

          10. Nothing in this Agreement shall limit or restrict the right of any general member, officer or employee of the Investment Manager or any general member, director, officer or employee of any of its affiliates who may also be a Director, officer or employee of the Fund to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any business, whether of a similar or dissimilar nature, nor limit or restrict the right of the Investment Manager to engage in any other business or to render services of any kind to any other corporation, firm, individual or association.

          11. During the term of this Agreement, the Fund agrees to furnish to the Investment Manager at its principal office all Prospectuses, proxy statements, reports to stockholders, sales literature, or other material prepared for distribution to stockholders of the Fund or the public, which refer in any way to the Investment Manager, prior to use thereof and not to use such material if the Investment Manager reasonably objects in writing within five business days (or such other time as may be mutually agreed) after receipt thereof. In the event of termination of this Agreement, the Fund will continue to

-7-


furnish to the Investment Manager copies of any of the above-mentioned materials which refer in any way to the Investment Manager. The Fund shall furnish or otherwise make available to the Investment Manager such other information relating to the business affairs of the Fund as the Investment Manager at any time, or from time to time, reasonably requests in order to discharge its obligations hereunder.

          12. This Agreement may be amended by mutual consent, but the consent of the Fund must be approved in conformity with the requirements of the 1940 Act.

          13. Any notice or other communication required to be given pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (1) to the Investment Manager at 30 Rockefeller Plaza, New York, New York 10112, Attention: Secretary, or (2) to the Fund at 30 Rockefeller Plaza, New York, New York 10112, Attention: President.

          14. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

          IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.

 

 

 

 

THE LAZARD FUNDS, INC.

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

LAZARD ASSET MANAGEMENT LLC

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

Title:

 

-8-


SCHEDULE 1

 

 

 

 

 

 

 

Name of Portfolio

 

Annual Fee
as a
Percentage of Average Daily
Net Assets

 

Reapproval
Date

 

Reapproval
Day

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Equity Value Portfolio

 

.75%

 

December 31, 2006

 

December 31

U.S. Strategic Equity Portfolio

 

.75%

 

December 31, 2006

 

December 31

U.S. Mid Cap Equity Portfolio

 

.75%

 

December 31, 2006

 

December 31

U.S. Small-Mid Cap Equity Portfolio

 

.75%

 

December 31, 2006

 

December 31

International Equity Portfolio

 

.75%

 

December 31, 2006

 

December 31

International Equity Select Portfolio

 

.85%

 

December 31, 2006

 

December 31

International Strategic Equity Portfolio

 

.75%

 

December 31, 2006

 

December 31

International Small Cap Equity Portfolio

 

.75%

 

December 31, 2006

 

December 31

Global Listed Infrastructure Portfolio

 

.90%

 

December 31, 2010

 

December 31

Emerging Markets Equity Portfolio

 

1.00%

 

December 31, 2006

 

December 31

Emerging Markets Equity Select Portfolio

 

1.00%

 

December 31, 2011

 

December 31

Developing Markets Equity Portfolio

 

1.00%

 

December 31, 2009

 

December 31

Emerging Markets Equity Blend Portfolio

 

1.05%

 

December 31, 2011

 

December 31

U.S. High Yield Portfolio

 

.55%

 

December 31, 2006

 

December 31

Capital Allocator Opportunistic Strategies Portfolio

 

1.00%

 

December 31, 2009

 

December 31

Revised as of: April 1, 2010

-9-


EX-99.J 18 c60963_ex99-j.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

Exhibit (j)

     

Anchin, Block & Anchin LLP
Accountants & Advisors
1375 Broadway, New York, NY 10018
212 840-3456
www.anchin.com


CONSENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Statement of Additional Information constituting part of The Lazard Funds, Inc. Post-Effective Amendment No. 53 to Registration Statement on Form N-1A of our report dated March 1, 2010 relating to the financial statements and financial highlights of The Lazard Funds, Inc. We also consent to the reference to us under the heading "Financial Highlights" in the Prospectus.

We also consent to the reference to our firm under the captions "Independent Registered Public Accounting Firm" in the Prospectus and "Counsel and Independent Registered Public Accounting Firm" in the Statement of Additional Information.

ANCHIN, BLOCK & ANCHIN LLP

April 8, 2010


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Exhibit (m)(1)

THE LAZARD FUNDS, INC.

DISTRIBUTION AND SERVICING PLAN

          Introduction: It has been proposed that the above-captioned investment company (the “Fund”) adopt a Distribution and Servicing Plan (the “Plan”) relating to its Open Shares in accordance with Rule 12b-1, promulgated under the Investment Company Act of 1940, as amended (the “1940 Act”), with respect to each series of the Fund set forth on Exhibit A hereto, as such Exhibit may be revised from time to time (each, a “Portfolio”). Under the Plan, the Fund would pay the Fund’s distributor (the “Distributor”) for (a) advertising, marketing and distributing Open Shares of each Portfolio and (b) providing services to holders of Open Shares of each Portfolio. The Distributor would be permitted to pay third parties in respect of these services. If this proposal is to be implemented, the 1940 Act and said Rule 12b-1 require that a written plan describing all material aspects of the proposed financing be adopted by the Fund.

          The Fund’s Board, in considering whether the Fund should implement a written plan, has requested and evaluated such information as it deemed necessary to an informed determination as to whether a written plan should be implemented and has considered such pertinent factors as it deemed necessary to form the basis for a decision to use assets attributable to each Portfolio’s Open Shares for such purposes.

          In voting to approve the implementation of such a plan, the Board members have concluded, in the exercise of their reasonable business judgment and in light of their respective fiduciary duties, that there is a reasonable likelihood that the plan set forth below will benefit each Portfolio and holders of its Open Shares.

               The Plan: The material aspects of this Plan are as follows:

          1. As to each Portfolio, the Fund shall pay to the Distributor a fee at the annual rate set forth opposite each Portfolio’s name on Exhibit A hereto of the value of the relevant Portfolio’s average daily net assets attributable to its Open Shares for (a) advertising, marketing and distributing such shares and (b) the provision of personal services to holders of Open Shares and/or the maintenance of such shareholder accounts. The Distributor may pay third parties a fee in respect of these services. The Distributor shall determine the amounts to be paid to third parties and the basis on which such payments will be made. Payments to third parties are subject to compliance by each such party with the terms of any related Plan agreement between it and the Distributor.

          2. For the purpose of determining the fees payable under this Plan, the value of the net assets of a Portfolio’s Open Shares shall be computed in the manner specified in the Fund’s charter documents and registration statement for the computation of net asset value.


          3. The Board shall be provided, at least quarterly, with a written report of all amounts expended with respect to each Portfolio pursuant to this Plan. The report shall state the purpose for which the amounts were expended.

          4. As to each Portfolio, this Plan will become effective upon approval by a majority of the Board members, including a majority of the Board members who are not “interested persons” (as defined in the 1940 Act) of the Fund and have no direct or indirect financial interest in the operation of this Plan or in any agreements entered into in connection with this Plan, pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of this Plan.

          5. As to each Portfolio, this Plan shall continue for a period of one year from its effective date, unless earlier terminated in accordance with its terms, and thereafter shall continue automatically for successive annual periods, provided such continuance is approved at least annually in the manner provided in paragraph 4 hereof.

          6. As to each Portfolio, this Plan may be amended at any time by the Board, provided that (a) any amendment to increase materially the costs which a Portfolio may bear pursuant to this Plan shall be effective only upon approval by a vote of the holders of a majority of the Portfolio’s outstanding Open Shares, and (b) any material amendments of the terms of this Plan shall become effective only upon approval as provided in paragraph 4 hereof.

          7. As to each Portfolio, this Plan is terminable without penalty at any time by (a) vote of a majority of the Board members who are not “interested persons” (as defined in the 1940 Act) of the Fund and have no direct or indirect financial interest in the operation of this Plan or in any agreements entered into in connection with this Plan, or (b) vote of the holders of a majority of the Portfolio’s outstanding Open Shares.

Effective: July 23, 1996


EXHIBIT A

 

 

 

 

 

Name of Portfolio

 

 

Fee as a Percentage of
Average Daily Net Assets

 

 

 

 

 

 

 

 

 

Lazard Capital Allocator Opportunistic Strategies Portfolio

 

.25%

Lazard Developing Markets Equity Portfolio

 

.25%

Lazard Emerging Markets Equity Blend Portfolio

 

.25%

Lazard Emerging Markets Equity Portfolio

 

.25%

Lazard Emerging Markets Equity Select Portfolio

 

.25%

Lazard Global Listed Infrastructure Portfolio

 

.25%

Lazard International Equity Portfolio

 

.25%

Lazard International Equity Select Portfolio

 

.25%

Lazard International Small Cap Equity Portfolio

 

.25%

Lazard International Strategic Equity Portfolio

 

.25%

Lazard U.S. Equity Value Portfolio

 

.25%

Lazard U.S. High Yield Portfolio

 

.25%

Lazard U.S. Mid Cap Equity Portfolio

 

.25%

Lazard U.S. Small-Mid Cap Equity Portfolio

 

.25%

Lazard U.S. Strategic Equity Portfolio

 

.25%

Revised as of: March 2, 2010


EX-99.M(2) 21 c60963_ex99-m2.htm

Exhibit (m)(2)

THE LAZARD FUNDS, INC.

SERVICING AGREEMENT

Lazard Asset Management Securities LLC
30 Rockefeller Plaza
New York, New York 10112

Ladies and Gentlemen:

We wish to enter into this Agreement with you for distribution and/or certain other services with respect to shares (the “Shares”) of the series of The Lazard Funds, Inc. (the “Fund”) set forth on Schedule A attached hereto, as such Schedule may be revised from time to time (each, a “Series”), of which you are the principal underwriter as defined in the Investment Company Act of 1940, as amended (the “1940 Act”).

The terms and conditions of this Agreement are as follows:

1. Provision of Services. We agree to provide reasonable assistance in connection with the sale of the Shares and/or to provide shareholder and administrative services for our Clients who own Shares through accounts in the Series (as specified on Schedule B attached hereto; each, an “Account”). Such services are as specified on Schedule C attached hereto. The term “Client” means (i) the beneficial owner of Shares, whether the Shares are held directly or by us in nominee name and (ii) for retirement plans, the plan participant, notwithstanding that the retirement plan may be deemed to be the beneficial owner of Shares.

2. Limited Agency; Operational Procedures.

          (a) You hereby appoint us as the Fund’s agent for the limited purpose of accepting Clients’ purchase and redemption orders for Shares. Other than as specifically provided herein, nothing in this Agreement shall be construed to establish a joint venture between us or establish either of us as an agent, partner or employee of the other, nor shall anything in this Agreement be construed to establish us or the Fund as an agent, partner or employee of the other. We understand that the Fund’s activities may be performed on its behalf by you (as distributor) or the Fund’s investment adviser, transfer agent or other authorized service providers.

          (b) Client orders for the purchase or redemption of Shares through the Accounts shall be processed in accordance with the Operating Procedures specified on Schedule D attached hereto.

 

 

 

(i) We represent that we have adopted, and will at all times during the term of this Agreement maintain, reasonable and appropriate procedures (“Late Trading Procedures”) designed to ensure that any and all orders for the purchase, sale or exchange of Shares communicated by us to you or the Fund’s transfer agent to be treated in accordance with Schedule D as having been received on a Business Day (as defined in Schedule D) have been received by us by the Close of Trading (as defined in Schedule D) on such Business Day and were not modified after the Close of Trading, and that all Share orders received from Clients but not rescinded by the Close of Trading were communicated to you or the Fund’s transfer agent as received for that Business Day.




 

 

 

(ii) Each transmission of Share orders by us shall constitute a representation by us that such orders are accurate and complete and are as received by us by the Close of Trading on the Business Day for which the order is to be priced and that such transmission includes all Share orders received from Clients but not rescinded by the Close of Trading.

 

 

 

(iii) We will provide you with (A) a copy of our Late Trading Procedures and (B) such certifications and representations regarding our Late Trading Procedures as you may reasonably request. We will ensure the ability of appropriate regulatory authorities to obtain information and records relating to our Late Trading Procedures and the ability of you and the Fund or your agents to inspect our records and facilities regarding compliance with our Late Trading Procedures. We will notify you in writing of any material change in our Late Trading Procedures within 60 days of such change.

3. Offering of Shares. In no way shall the provisions of this Agreement limit your or the Fund’s authority and discretion to take such action as you or it may deem appropriate or advisable, without notice, in connection with all matters relating to the operation of the Fund or any Series and the sale of Shares, including the right to suspend sales or withdraw the offering of Shares of one or more Series. You will advise us of any U.S. states and other U.S. jurisdictions where the Shares are not qualified for sale.

4. Advertising Materials and Sales Literature; Fund Documentation.

          (a) We agree that neither we nor any of our employees or agents are authorized to make any statement or representation concerning the Shares except those contained (i) in the relevant Series’ then-current prospectus and/or statement of additional information, as amended or supplemented (collectively, the “Prospectus”), copies of which will be supplied by you to us, or (ii) in such advertising material or sales literature as may be supplied by you or authorized by you in writing. We understand that any supplemental sales literature, if distributed, must be preceded or accompanied by the relevant Series’ then-current prospectus. Advertising material and sales literature provided by you that are designated as being for broker-dealer use only may not be disseminated to the public.

          (b) You shall, as applicable, provide us upon request reasonably sufficient copies, at a single address, of: Prospectuses, proxy or information statements, shareholder reports and any other materials required to be delivered to record holders of Shares (collectively, “Fund Documentation”). Neither you nor the Fund shall be responsible for the cost of distributing such materials to Clients.

          (c) Each party will provide the other party with such information or documentation necessary for the other party to fulfill its obligations hereunder and such other information or documentation as each party may reasonably request, and each party is entitled to rely on any written records or instructions provided to it by the other party.

5. Fees. In consideration of the services described herein, we shall be entitled to receive from you fees at the annual rate and frequency set forth on Schedule A, paid based on the average daily net asset value of Clients’ Shares held during relevant period (computed in the manner specified in the Fund’s charter documents and Prospectus). Our acceptance of any fees for such services shall constitute our representation (which shall survive any payment of such fees and any termination of this Agreement and shall be reaffirmed at each acceptance) that our receipt of such fees is lawful.

6. Representations, Warranties and Covenants. The following representations, warranties and covenants are in addition to those made elsewhere in this Agreement.

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          (a) Each party hereto hereby represents, warrants and covenants, as applicable, to the other party that:

 

 

 

(i) it will comply with all laws, rules and regulations of governmental authorities and regulatory agencies applicable to it by virtue of entering into and performing this Agreement;

 

 

 

(ii) the execution, performance and delivery of this Agreement by it will not violate any of its contractual obligations or any applicable laws, rules and regulations of governmental authorities and regulatory agencies;

 

 

 

(iii) it has full power and authority under applicable law, and has taken all necessary actions, to enter into and perform this Agreement; the person executing this Agreement on its behalf is duly authorized and empowered to execute and deliver this Agreement; and this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms; and

 

 

 

(iv) no consent or authorization of, filing with, or other act by or in respect of any governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement.

          (b) You hereby represent and warrant to us that:

 

 

 

(i) you are duly registered as a broker-dealer pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

 

 

 

(ii) the Fund is registered as an investment company under the 1940 Act and the Shares are registered under the Securities Act of 1933, as amended.

          (c) We hereby represent, warrant and covenant to you, as applicable, that:

 

 

 

(i) if we are not registered as a broker-dealer pursuant to the Exchange Act, we are not required to be so registered in order to perform the services specified in this Agreement;

 

 

 

(ii) if we are not registered as a transfer agent pursuant to the Exchange Act, we are not required to be so registered in order to perform the services specified in this Agreement;

 

 

 

(iii) if we are required to be a member of the Financial Industry Regulatory Authority (“FINRA”), we are a member in good standing and will comply with FINRA’s Conduct Rules, including any requirements as to suitability of Shares for Clients;

 

 

 

(iv) we will not be a “fiduciary” with respect to the performance of this Agreement for any Plan, as such term is defined in Section 3(21) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”);

 

 

 

(v) our receipt of fees under and the performance of the services specified in this Agreement will not constitute a non-exempt “prohibited transaction” as such term is defined in Section 406 of ERISA and Section 4975 of the Code;

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(vi) we have full authority to act on behalf of Clients in the manner contemplated by this Agreement, and each time we so act we shall be deemed to have restated this representation and warranty;

 

 

 

(vii) we will impose any applicable redemption fee as described in the Fund’s prospectus;

 

 

 

(viii) we will not enter into any arrangements, formal or informal, with any Client to permit or facilitate the use of market timing or excessive trading strategies, we have implemented reasonable procedures to monitor for such activities, and we will cooperate with your reasonable requests in taking steps to deter and to detect the use of market timing or excessive trading strategies by any Client, including providing identity information (solely for the purpose of deterring and detecting the use of market timing or excessive trading strategies by Clients) and other information you reasonably request; and

 

 

 

(ix) we will maintain insurance coverage issued by a qualified insurance carrier appropriate in light of our duties under this Agreement.

7. Client and Transaction Information.

          (a) Agreement to Provide Information. We agree to provide the Fund, upon written request (which may include electronic writings and facsimile transmissions, a “Request”), the taxpayer identification number (the “TIN”), the Individual/International Taxpayer Identification Number (“ITIN”) or other government-issued identifier (“GII”), if known, of any or all Clients who have purchased, redeemed, transferred or exchanged Shares held through an Account with us during the period covered by the Request and the amount, date, name or other identifier of any investment professionals associated with the Clients or Accounts (if known), and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of Shares.

 

 

 

(i) Period Covered by Request. Requests must set forth a specific period, not to exceed 180 days from the date of the Request for which transaction information is sought. The Fund may request transaction information older than 180 days from the date of the Request as it deems necessary to investigate compliance with policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of its Shares.

 

 

 

(ii) Form and Timing of Response. We agree to transmit the requested information that is on our books and records to the Fund or its designee promptly, but in any event not later than 10 business days after receipt of a Request. To the extent practicable, the format for any transaction information provided to the Fund should be consistent with the National Securities Clearing Corporation (the “NSCC”) Standardized Data Report Format, or any other format acceptable to the Fund.

 

 

 

(iii) Limitations on Use of Information. The Fund agrees not to use the information received for marketing or any other similar purpose without our prior written consent.

          (b) Agreement to Restrict Trading. We agree to execute a Request to restrict or prohibit further purchases or exchanges of Shares by a Client that has been identified by the Fund as having engaged in transactions in Shares (directly or indirectly through an Account) that violate policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of its Shares.

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(i) Form of Instructions. Such Request must include the TIN, ITIN or GII if known, and the specific restrictions(s) to be executed. If the TIN, ITIN or GII is not known, the instructions must include an equivalent identifying number of the Clients or Accounts or other agreed upon information to which the instruction relates.

 

 

 

(ii) Timing of Response. We agree to execute the Request as soon as reasonably practicable, but not later than five business days after our receipt of the instructions.

 

 

 

(iii) Confirmation. We agree to provide written confirmation to the Fund as soon as reasonably practicable that the Request has been executed, but not later than 10 business days after the Request has been executed.

          (c) Share Holdings Through Indirect Intermediaries. We will use best efforts to determine, promptly upon the Request of the Fund, but not later than five business days after our receipt of the Request, whether any specific person or entity about whom the Fund has received information pursuant to Section 7 (a) of this Agreement is an “indirect intermediary” as defined in Rule 22c-2 under the 1940 Act (“Indirect Intermediary”) and, upon further Request from the Fund, promptly (but not later than five Business Days after receipt of such Request) either:

 

 

 

(i) provide (or arrange to have provided) the identification and transaction information set forth in Section 7(a) of this Agreement regarding such person who hold Shares through the Indirect Intermediary; or

 

 

 

(ii) restrict or prohibit the Indirect Intermediary from purchasing Shares on behalf of itself or other persons.

We agree to inform the Fund whether it plans to perform (i) or (ii) above.

8. Privacy Law; AML Requirements.

          (a) Each party agrees that it will comply with all applicable laws and regulations relating to consumer privacy (“Privacy Law”) and that it is prohibited from using or disclosing any nonpublic personal information (as defined in Regulation S-P, or any similar term or terms as defined in other applicable Privacy Law, “Client Information”) received from the other party other than (i) as required by law, regulation or rule; (ii) as permitted in writing by the disclosing party; (iii) to its affiliates; or (iv) as necessary to perform this Agreement or to service Clients, in each case in compliance with the reuse and redisclosure provisions of Privacy Law. Each party shall use its best efforts to (A) cause its employees and agents to be informed of and to agree to be bound by Privacy Law and the provisions of this Agreement and (B) maintain physical, electronic and procedural safeguards reasonably designed to protect the security, confidentiality and integrity of, and to prevent unauthorized access to or use of, Client Information.

          (b) We have adopted and implemented compliance policies and procedures to comply with all money laundering and currency transaction reporting laws, regulations, requirements and guidance applicable to the Fund or to us (if applicable, as record holder of Fund shares for which we maintain information regarding beneficial holders of Fund shares), including those relating to Client identification and verification; monitoring for Specially Designated Nationals and Blocked Persons named on the U.S. Treasury Department’s Office of Foreign Assets Control list or other similar governmental lists; suspicious activity reporting; and recordkeeping requirements (collectively, “AML Requirements”), and with any “money laundering” guidelines as may be provided by you or the Fund or agreed with you and the Fund. We will ensure the ability of federal examiners to obtain information and records relating to

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AML Requirements and the ability of you and the Fund or your agents to inspect our records and facilities regarding compliance with AML Requirements.

          (c) We will provide you with such information, representations and certifications regarding compliance with AML Requirements as you may reasonably request.

          (d) We will notify you if any of our representations with respect to our compliance with AML Requirements ceases to be true.

9. Indemnification; Adjustments.

          (a) You shall release, indemnify and hold harmless us and each of our affiliates, trustees, directors, members, officers, employees and agents from and against any and all losses, claims, damages, demands, actions, liabilities, costs and expenses (including reasonable attorneys’ fees) (“Losses”) arising out of or attributable to (i) any material misstatements in or omissions of material facts from any Prospectus, periodic report, or proxy statement of the Fund or any advertising material or sales literature supplied by you or the Fund or (ii) any breach by you of any representation, warranty or covenant made by you in this Agreement.

          (b) We shall release, indemnify and hold harmless you and the Fund and each of your or the Fund’s affiliates, directors, members, officers, employees and agents (the “Lazard Indemnitees”) from and against any and all Losses arising out of or attributable to (i) our bad faith, negligence or willful misconduct in the performance of our duties and obligations under this Agreement; (ii) any breach by us of any representation, warranty or covenant made by us in this Agreement; (iii) any statement or representation that we or our agents or employees make concerning the Fund that is inconsistent with the Prospectus or advertising material or sales literature supplied by you or authorized by you in writing; and (iv) any sale of the Shares outside of the U.S. or in any U.S. state or other U.S. jurisdiction where you have indicated to us that the Shares were not properly qualified for sale.

          (c) We agree not to seek a net asset value per Share of a Series as of a time other than the next calculated net asset value per Share following our receipt of a Client order (“As of Trade”) or to cancel or change a previously placed Account order without the prior approval of the Fund. We acknowledge that the Fund shall have complete and sole discretion as to whether or not to accept an As of Trade or to make a cancellation or change. If an As of Trade is authorized by the Fund to be processed as of a particular Business Day (as defined in Schedule D), we hereby warrant that such trade relates only to Client orders received by us by the Close of Trading (as defined in Schedule D) on that Business Day.

          (d) In the event that we (i) with approval of the Fund, place an As of Trade other than to correct your or the Fund’s error, (ii) place or adjust trades after the latest time for the placement of orders through the Fund/SERV service of the NSCC or, for manual transactions, the Order Deadline (as defined in Schedule D), or (iii) fail to settle trades in the manner described on Schedule D, we do hereby release, indemnify and hold harmless the Lazard Indemnitees from and against any and all Losses any of them may incur which arise out of or are attributable to such actions.

          (e) We understand that, in accordance with established Fund procedures for correction of errors in the computation of the net asset value of Shares, the Fund or its agent will make adjustments to the number of Shares owned in the Accounts and distribute underpayments to us for credit to the Accounts. If we, on behalf of Clients, receive amounts in excess of the amounts to which we otherwise would have been entitled in the absence of any error in the computation of the net asset value of Shares or otherwise as a result of an error of the Fund or its agent, we will use best efforts to collect such amounts from Clients. If, after such efforts, we are not able to recover all of such overpayment, we will cooperate

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with your or the Fund’s attempt to recover any portion of the overpayment, including providing you or the Fund with information reasonably available to us as to the identity of the Client(s) from whom the remainder has not been recovered.

          (f) In no event shall either party be liable for special, consequential or incidental damages.

10. Non-exclusivity. You and we acknowledge and agree that this Agreement and the arrangements described herein are intended to be non-exclusive and that each of us may enter into similar agreements and arrangements with other entities.

11. Term.

          (a) We acknowledge that this Agreement shall become effective as of the date indicated by you below. We understand that if our compensation is subject (as indicated on Schedule A) to the Fund’s plan adopted pursuant to Rule 12b-1 under the 1940 Act (the “12b-1 Plan”), as to each Series, this Agreement: (i) shall continue until the last day of the calendar year of execution and thereafter shall continue automatically for successive annual periods ending on the last day of each calendar year, provided such continuance is approved at least annually by a vote of a majority of the Fund’s Board and the Board members who are not “interested persons” (as defined in the 1940 Act) of the Fund and have no direct or indirect financial interest in the operation of the 12b-1 Plan or any agreement related to the 12b-1 Plan (“Independent Board Members”), cast in person for the purpose of voting on such approval; (ii) is terminable without penalty, at any time, by vote of a majority of the Independent Board Members; (iii) is terminable on not more than 60 days’ written notice by vote of holders of a majority of the Series’ outstanding voting securities (as defined in the 1940 Act); and (iv) is terminable upon 15 days’ notice by you. If our compensation is not subject to a 12b-1 Plan, either party may terminate this Agreement on 15 days’ notice to the other party.

          (b) You shall have the right to terminate this Agreement, without prior notice, if: (i) we or any of our registered principals become the subject of any investigation or disciplinary action by any governmental, regulatory or judicial authority that has resulted, or for which it appears reasonably likely will result, in the loss or suspension of any required registration, membership or license; (ii) our ability to perform our obligations under this Agreement has become or is reasonably likely to become impaired; (iii) we otherwise breach any of the representations, warranties or covenants set forth in this Agreement; (iv) we fail to perform the services contemplated by this Agreement; or (v) if our compensation is subject to the 12b-1 Plan, if the 12b-1 Plan is terminated by the Fund’s Board, or the 12b-1 Plan, or any part thereof, is found invalid or is ordered terminated by any regulatory or judicial authority.

          (c) This Agreement will terminate automatically in the event of its assignment (as defined in the 1940 Act).

12. Complete Agreement; Amendment.

          (a) This Agreement and the Schedules hereto (which are incorporated by reference) contain the full and complete understanding between the parties with respect to the matters covered and contemplated hereunder and supersede all prior agreements or understandings between the parties relating to the subject matter hereof, whether oral or written, express or implied.

          (b) No modification or waiver of any provisions of this Agreement will be binding unless in writing and executed by the party to be bound thereby, except that, notwithstanding anything in this Agreement to the contrary, our placement of an order to purchase Shares subsequent to our receipt of written notice of amendment of Schedule A by you shall constitute our agreement to the amendment.

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13. Notices. All communications to you shall be sent to you at the address set forth above, attention: Lazard Asset Management LLC, Director, Legal Affairs. Any notice to us shall be duly given if delivered (via hand delivery, commercial courier service or certified mail) or sent by confirmed facsimile to us at the address or number set forth below.

14. Governing Law. This Agreement shall be construed in accordance with the laws of the State of New York, without giving effect to conflict of laws principles.

15. Survival. The provisions of sections 8, 9 and 15 (and any other provisions expressly stating their survival) will survive the termination of the Agreement.

 

 

 

 

 

 

 

 

Very truly yours,

 

 

 

 

 

Date: 

 

 

By: 

 

 

 

 

 

 

 

 

 

 

Name:
Title:

Please return two signed copies of this Agreement to Lazard Asset Management Securities LLC. Upon acceptance, one countersigned copy will be returned for your files.

 

 

 

 

 

 

 

 

Accepted:

 

 

 

 

 

 

 

LAZARD ASSET MANAGEMENT SECURITIES LLC

 

 

 

 

 

Date:

 

 

By:

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

Title:

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SCHEDULE A

Open Shares

 

 

 

 

 

 

 

 

 

Name of Series

 

 

Cusip

 

Annual
Percentage Rate
(paid monthly)*

 

Lazard Capital Allocator Opportunistic Strategies Portfolio

 

 

52106N483

 

 

%

 

Lazard Developing Markets Equity Portfolio

 

 

52106N467

 

 

 

 

Lazard Emerging Markets Equity Blend Portfolio

 

 

52106N418

 

 

 

 

Lazard Emerging Markets Equity Portfolio

 

 

52106N764

 

 

 

 

Lazard Emerging Markets Equity Select Portfolio

 

 

52106N434

 

 

 

 

Lazard Global Listed Infrastructure Portfolio

 

 

52106N442

 

 

 

 

Lazard International Equity Portfolio

 

 

52106N830

 

 

 

 

Lazard International Equity Select Portfolio

 

 

52106N657

 

 

 

 

Lazard International Small Cap Equity Portfolio

 

 

52106N772

 

 

 

 

Lazard International Strategic Equity Portfolio

 

 

52106N582

 

 

 

 

Lazard U.S. Equity Value Portfolio

 

 

52106N574

 

 

 

 

Lazard U.S. High Yield Portfolio

 

 

52106N681

 

 

 

 

Lazard U.S. Mid Cap Equity Portfolio

 

 

52106N715

 

 

 

 

Lazard U.S. Small-Mid Cap Equity Portfolio

 

 

52106N780

 

 

 

 

Lazard U.S. Strategic Equity Portfolio

 

 

52106N632

 

 

 

 


 

 

 

 

The Fund pays 0.25% pursuant to the 12b-1 Plan, and the remainder is paid by Lazard Asset Management Securities LLC or its affiliates. Payment is subject to continued effectiveness of the 12b-1 Plan. We understand that the Fund’s Board will review, at least quarterly, a written report of the amounts expended pursuant to this Agreement and the purposes for which such expenditures were made. In connection with such reviews, we will furnish you or your designees with such information or reports as you or they may reasonably request, which reports shall be accurate and complete.

Institutional Shares

 

 

 

 

 

 

 

 

 

Name of Series

 

 

Cusip

 

Annual
Percentage Rate
(paid quarterly)

 

Lazard Capital Allocator Opportunistic Strategies Portfolio

 

 

52106N491

 

 

%

 

Lazard Developing Markets Equity Portfolio

 

 

52106N475

 

 

 

 

Lazard Emerging Markets Equity Blend Portfolio

 

 

52106N392

 

 

 

 

Lazard Emerging Markets Equity Portfolio

 

 

52106N889

 

 

 

 

Lazard Emerging Markets Equity Select Portfolio

 

 

52106N426

 

 

 

 

Lazard Global Listed Infrastructure Portfolio

 

 

52106N459

 

 

 

 

Lazard International Equity Portfolio

 

 

52106N400

 

 

 

 

Lazard International Equity Select Portfolio

 

 

52106N665

 

 

 

 

Lazard International Small Cap Equity Portfolio

 

 

52106N806

 

 

 

 

Lazard International Strategic Equity Portfolio

 

 

52106N590

 

 

 

 

Lazard U.S. Equity Value Portfolio

 

 

52106N616

 

 

 

 

Lazard U.S. High Yield Portfolio

 

 

52106N699

 

 

 

 

Lazard U.S. Mid Cap Equity Portfolio

 

 

52106N723

 

 

 

 

Lazard U.S. Small-Mid Cap Equity Portfolio

 

 

52106N509

 

 

 

 

Lazard U.S. Strategic Equity Portfolio

 

 

52106N624

 

 

 

 



SCHEDULE B

OMNIBUS ACCOUNTS

 

 

We will maintain sub-accounts for each Client through one or more omnibus or master Accounts in each Series.

 

 

We will perform all sub-accounting for Clients investing in Shares through the Accounts.

 

 

We will be responsible for all administration and maintenance of our Clients’ investments in Shares through the Accounts.

 

 

We will provide to you, by the tenth day of each calendar quarter, (a) a report which indicates the number of Clients holding Shares of a Series through each Account as of the last day of the prior month and (b) such other information as you or your designee may reasonably request.



SCHEDULE B

NETWORKING

 

 

Each party (a) represents that it has executed the NSCC’s standard Networking Agreement (the “Networking Agreement”) and (b) agrees to perform all duties assigned to it by the NSCC and to conduct its activities in accordance with the rules, regulations, policies and procedures of the NSCC, as applicable.

 

 

The terms of the Networking Agreement shall be incorporated by reference herein. The term “Firm” as used in the Networking Agreement shall refer to us, and the term “Fund Agent” as used in the Networking Agreement shall refer to you.

 

 

Each party agrees that its responsibilities with respect to accounts maintained through Networking shall be allocated in accordance with the Matrix Level agreed between the parties.



SCHEDULE C

SERVICES

We shall be responsible for the following, unless an item is the responsibility of you or the Fund pursuant to the relevant Matrix Level for Accounts maintained through Networking:

 

 

1.

establishing and maintaining the Accounts;

 

 

2.

accepting orders for the purchase and redemption of Shares and transmitting such orders to you;

 

 

3.

tracking, collecting from Clients and remitting to you any applicable redemption fee to be deducted from Clients’ Share redemption proceeds in accordance with the Prospectus;

 

 

4.

disbursing dividends and distributions to Clients and/or arranging for reinvestment in Shares;

 

 

5.

delivering Fund Documentation to Clients and prospective Clients as required by applicable law;

 

 

6.

providing Clients with a schedule of services and any fees that we may charge Clients directly for such services;

 

 

7.

maintaining a record of each Client’s name, address (including zip code) and taxpayer identification number; the time, date and price for all Share transactions; and the number of Shares held by such Client;

 

 

8.

preparing, filing and transmitting all federal, state and local government returns and reports as required by law;

 

 

9.

providing the Fund or its designee with Account registration and other information and updates to such information, including addresses, tax identification numbers, tax withholding information and the selection of Account options and privileges (registration information must be received prior to any trade activity and the Fund may reject any form of pending registration);

 

 

10.

monitoring and maintaining Client accounts, including verifying account information and documentation and delivering confirmations in compliance with Rule 10b-10 under the Exchange Act;

 

 

11.

as required by law, preparing and transmitting to Clients periodic account statements showing, among other appropriate information, the total number of Shares owned and the net asset value of Shares as of the statement closing date, purchases and redemptions of Shares during the period and other distributions during the statement period (whether paid in cash or reinvested);

 

 

12.

making our employees available during normal business hours to consult with you or your designees concerning the performance of our responsibilities under this Agreement; and

 

 

13.

maintaining all other records as required by law.



We also shall perform some or all of the following services:

 

 

1.

marketing, advertising and distributing Shares in accordance with this Agreement;

 

 

2.

answering Client inquiries about the Fund;

 

 

3.

assisting Clients in changing dividend options and other account designations and addresses;

 

 

4.

integrating Client statements with those of other transactions and balances in Clients’ other accounts serviced by us;

 

 

5.

arranging for bank wires; and

 

 

6.

providing such other information and services as the Fund reasonably may request, to the extent we are permitted by applicable law, rule or regulation.



SCHEDULE D

OPERATING PROCEDURES

General

 

 

Orders that we receive from Clients by the close of regular trading (the “Close of Trading”) on the New York Stock Exchange (the “NYSE”) (usually 4:00 p.m., Eastern time) on each day on which a Series calculates its net asset value (as described in the Prospectus, a “Business Day”) shall be treated by you and us as though received on that Business Day. Orders that we receive after the Close of Trading shall be treated by you and us as though received on the next Business Day. All orders are subject to acceptance or rejection in the sole discretion of you and/or the Fund or its agent, and orders shall be effective only upon receipt in proper form.

 

 

You will use commercially reasonable efforts to make available to us each Series’ net asset value per share on each Business Day as soon as reasonable practicable after calculation—usually 6:30 p.m., Eastern time.

 

 

The Fund or its agent will furnish notice of the declaration of any dividends or distributions payable by the Fund’s Series. This information will include the record and payable dates.

 

 

Dividends and distributions will be automatically reinvested at net asset value in accordance with the Prospectus unless otherwise instructed by us.

For transactions through the NSCC’s Fund/SERV service

 

 

Each party (a) represents that it has entered into a membership agreement with the NSCC and it is eligible to participate in the NSCC’s Fund/SERV system and (b) agrees to perform all duties assigned to it by the NSCC and to conduct its activities in accordance with the rules, regulations, policies and procedures of the NSCC, as applicable.

 

 

We shall use our best efforts to transmit all Account transactions through Fund/SERV by 8:00 p.m., Eastern time each Business Day or, if we are using the Defined Contribution Clearing Service of the NSCC (“DCCS”) and use the settlement override indicator, 6:00 a.m. on the next Business Day (“T+1”). If we fail to transmit such transactions through Fund/SERV by 12:00 a.m., Eastern time on T+1, or, if we are using DCCS and use the settlement override indicator, by 6:00 a.m. on T+1, we shall notify you by 9:00 a.m., Eastern time on T+1 of such failure.

For manual transactions

Unless processed using the NSCC’s Fund/SERV interfaces in the customary manner as prescribed by the NSCC, operational responsibilities will be executed as follows:

 

 

 

For trades placed on T+1 for investment at the prior Business Day’s net asset value:

 

 

 

(a)

Trade orders for the Accounts must be communicated to you by us prior to 9:00 a.m., Eastern time on T+1 (the “Order Deadline”) in the manner agreed between the parties;

 

 

 

 

(b)

We will wire, or arrange for the wire of, the purchase price of each purchase order to the Funds’ custodian (the “Custodian”) as you shall direct in writing so that either (i) such funds are received by the Custodian prior to 11:30 a.m., Eastern




 

 

 

 

 

time on T+1, or (ii) we provide you or your designee a federal funds wire system reference number prior to 11:30 a.m., Eastern time on T+1 evidencing the entry of the wire transfer of the purchase price prior to such time; and

 

 

 

 

(c)

You or your designee shall transmit by wire the proceeds of net redemption orders placed by the Order Deadline by us to the appropriate custodial account.

 

 

 

You will make available confirmations of each executed trade the next Business Day following receipt of the trade from us. We shall promptly inform you of any discrepancies.

 

 

You will make Account statements available no less frequently than each calendar quarter.



EX-99.N 22 c60963_ex99-n.htm

Exhibit (n)

THE LAZARD FUNDS, INC.

Rule 18f-3 Plan

                    Rule 18f-3 under the Investment Company Act of 1940, as amended (the “1940 Act”), requires that the Board of an investment company desiring to offer multiple classes pursuant to said Rule adopt a plan setting forth the separate arrangement and expense allocation of each class, and any related conversion features or exchange privileges.

                    The Board of Directors (the “Board”) of The Lazard Funds, Inc. (the “Fund”), including a majority of the Board members who are not “interested persons” (as defined in the 1940 Act), which desires to offer multiple classes with respect to each series of the Fund listed on Schedule A attached hereto, as such Schedule may be revised from time to time, has determined that the following plan is in the best interests of each class individually and the Fund as a whole:

                    1. Class Designation: Fund shares shall be divided into Institutional Shares and Open Shares.

                    2. Differences in Services: The services offered to shareholders of each Class shall be substantially the same, except for certain services provided to Open Shares pursuant to a Distribution and Servicing Plan.

                    3. Differences in Distribution Arrangements: Institutional Shares and Open Shares shall be offered at net asset value. Neither Class shall be subject to any front-end or contingent sales charges.

                    Open Shares shall be subject to an annual distribution and servicing fee at the rate of .25% of the value of the average daily net assets of the Open Class pursuant to a Distribution and Servicing Plan adopted in accordance with Rule 12b-1 under the 1940 Act.

                    4. Expense Allocation. The following expenses shall be allocated, to the extent practicable, on a Class-by-Class basis: (a) fees under the Distribution and Servicing Plan; (b) transfer agent fees identified by the Fund’s transfer agent as being attributable to a specific Class; (c) litigation or other legal expenses relating solely to a specific Class; and (d) fees and expenses of an administration that are identified and approved by the Board as being attributable to a specific Class.

Dated: July 23, 1996


SCHEDULE A

Name of Portfolio

Lazard Capital Allocator Opportunistic Strategies Portfolio
Lazard Developing Markets Equity Portfolio
Lazard Emerging Markets Equity Blend Portfolio
Lazard Emerging Markets Equity Portfolio
Lazard Emerging Markets Equity Select Portfolio
Lazard Global Listed Infrastructure Portfolio
Lazard International Equity Portfolio
Lazard International Equity Select Portfolio
Lazard International Small Cap Equity Portfolio
Lazard International Strategic Equity Portfolio
Lazard U.S. Equity Value Portfolio
Lazard U.S. High Yield Portfolio
Lazard U.S. Mid Cap Equity Portfolio
Lazard U.S. Small-Mid Cap Equity Portfolio
Lazard U.S. Strategic Equity Portfolio

Revised as of: March 2, 2010

A-I


CORRESP 23 filename23.htm

STROOCK & STROOCK & LAVAN LLP
180 Maiden Lane
New York, New York 10038

April 9, 2010

VIA EDGAR

Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attention: Deborah O’Neal-Johnson

 

 

Re:

The Lazard Funds, Inc.

 

File Numbers: 33-40682; 811-06312

Ladies and Gentlemen:

On behalf of The Lazard Funds, Inc. (the “Fund”), transmitted for filing under the Securities Act of 1933, as amended (the “Securities Act”), and the Investment Company Act of 1940, as amended, is Post-Effective Amendment No. 53 (the “Amendment”) to the Fund’s Registration Statement (the “Registration Statement”) on Form N-1A filed with the Securities and Exchange Commission (the “Commission”).

The Amendment is marked to show changes made in response to comments of the Commission’s staff (the “Staff”) on Amendment No. 52 to the Registration Statement filed on February 12, 2010 (“Amendment No. 52”) that were provided to the undersigned by Deborah O’Neal-Johnson of the Staff via telephone on March 25, 2010. Changes in the Amendment also reflect incorporation of comments from the Staff on a recent post-effective registration statement amendment on Form N-1A for Lazard Retirement Series, Inc.

For the convenience of the Staff and for completeness purposes, the Staff’s comments have been restated below in their entirety, and the Fund’s response is set out immediately following each comment. Capitalized terms used but not defined herein have the meanings assigned to them in the Amendment; references to page numbers in our responses are to those in the prospectus and statement of additional information (the “SAI”) filed in the Amendment. As discussed with the Staff, we understand that to the extent a Staff comment made with respect to disclosure for one of the Fund’s Portfolios may apply to one or more other Portfolios, it should be so applied, and we have applied each comment to the other Portfolios as applicable.

PROSPECTUS

Cover Page

 

 

 

1.

Staff Comment: If the Fund intends to use summary prospectuses to satisfy its prospectus delivery obligations pursuant to Rule 498 under the Securities Act, please

1



 

 

 

 

provide us with a draft of the language that will be included in the legend on the cover page of the summary prospectuses.

 

 

 

Response: The Fund does intend to use summary prospectuses to satisfy its prospectus delivery obligations, and the legend on the cover page of the summary prospectuses will read as follows:

 

 

 

 

Before you invest, you may want to review the Portfolio’s Prospectus, which contains more information about the Portfolio and its risks. The Portfolio’s Prospectus and Statement of Additional Information (“SAI”), both dated April 30, 2010, are incorporated by reference into this Summary Prospectus. You can find the Portfolio’s Prospectus, SAI and other information about the Portfolio online at www.LazardNet.com/lam/us/lazardfunds.shtml. You can also get this information at no cost by calling (800) 823-6300 or by sending an e-mail request to ContactUs@LazardNet.com.

Summary Section

—U.S. Equity Value Portfolio—Performance Bar Chart and Table; Average Annual Total Returns

 

 

 

2.

Staff Comment: Please delete the following language in the paragraph preceding the performance bar chart:

 

 

 

 

The table compares the performance of the Portfolio’s Institutional Shares (before and after taxes) and Open Shares over time to that of the Russell 1000 Value Index, an unmanaged index that 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. Both the bar chart and table assume reinvestment of all dividends and distributions, if any.

 

 

 

 

A narrative description of the required broad-based securities market index is not permitted by Item 4 of Form N-1A. Such disclosure is permitted only if an additional index is included (see Instruction 2(b) to Item 4).

 

 

 

Response: The specified language has been deleted for all Portfolios as applicable.

 

 

 

3.

Staff Comment: Please amend the headings in the average annual total returns table from “Past Year” to “1 Year” and from “Since Inception” to “Life of Fund.”

 

 

 

Response: The headings have been amended in the tables for all Portfolios as applicable.

 

 

—U.S. Strategic Equity Portfolio—Principal Investment Strategies; Average Annual Total Returns

 

4.

Staff Comment: The first sentence under “Principal Investment Strategies” states that “[t]he Portfolio invests primarily in equity securities, principally common stocks…” Please clarify what types of equity securities other than common stocks the Portfolio

2



 

 

 

 

invests in.

 

 

 

Response: Investing in equity securities other than common stocks and, for certain Portfolios, ADRs and GDRs, is not a principal investment strategy of any of the Portfolios.

 

 

5.

Staff Comment: Please clarify whether the Portfolio’s investments in ADRs includes sponsored ADRs, unsponsored ADRs or both. If the Portfolio invests in unsponsored ADRs as a principal investment strategy, please add corresponding risk disclosure.

 

 

 

Response: None of the Portfolios have a material amount of assets invested in unsponsored ADRs, and none of the Portfolios consider investing in unsponsored ADRs to be a principal investment strategy (or principal investment risk).

 

 

6.

Staff Comment: Please format index returns in the average annual total returns table to conform to the format used for Lazard International Strategic Equity Portfolio, which provides index returns corresponding to Institutional Shares and Open Shares separately.

 

 

 

Response: The presentation of index returns for all Portfolios has been conformed to the format used for Lazard International Strategic Equity Portfolio.

 

 

—U.S. Mid Cap Equity Portfolio—Principal Investment Strategies; Principal Investment Risks

 

7.

Staff Comment: Please amend the last sentence of the second paragraph to read: “The Portfolio also may invest up to 15% of its assets in equity securities of non-U.S. companies…”

 

 

 

Response: The requested change has been made.

 

 

8.

Staff Comment: With respect to the fourth paragraph under “Principal Investment Risks,” please consider whether the Portfolio engages in foreign currency and other derivatives transactions as a principal investment strategy. If the Portfolio does not consider these investments a principal investment strategy, please remove the related disclosure from the summary section.

 

 

 

Response: Fund management has advised us that, for all Portfolios other than Lazard Global Listed Infrastructure and Lazard Capital Allocator Opportunistic Strategies Portfolios, engaging in foreign currency and other derivatives transactions is not a principal investment strategy, and disclosure relating to these investments has been removed from the prospectus for all Portfolios other than Lazard Global Listed Infrastructure and Lazard Capital Allocator Opportunistic Strategies Portfolios.

 

 

—Developing Markets Equity Portfolio—Principal Investment Strategies; Performance Bar Chart and Table

 

9.

Staff Comment: Please amend the first sentence to read: “The Portfolio invests primarily in equity securities, principally common stocks, of non-U.S. companies whose principal activities are located in emerging market countries (also known as ‘developing markets’).”

 

 

 

Response: The requested change has been made.

3



 

 

 

10.

Staff Comment: Please correct the information provided for the Portfolio’s “Worst Quarter.” Item 4(b)(2)(ii) of Form N-1A requires disclosure of the lowest return for a quarter during the period of the bar chart.

 

 

 

Response: The information provided for the Portfolio’s “Worst Quarter” has been corrected.

 

 

—Emerging Markets Equity Blend Portfolio—Principal Investment Strategies

 

11.

Staff Comment: Please consider whether it is appropriate to reword the description of the Portfolio’s principal investment strategy to remove references to the Investment Manager’s Emerging Markets Equity Select and Developing Markets Equity investment strategies and focus only on the underlying investment strategies pursued.

 

 

 

Response: The Investment Manager believes that including references to the names of the Investment Manager’s strategies serves to enhance the description of the manner in which the Portfolio will invest. Please note that the underlying investment strategies, and accompanying risks, for each named strategy are described under “Principal Investment Strategies” and “Principal Investment Risks” in the same level of detail as set forth for other Portfolios.

 

 

12.

Staff Comment: The second sentence in the third paragraph states that in the Emerging Markets Equity Select strategy “assets are invested in companies that the Investment Manager believes are undervalued…” Please clarify whether this refers to an investment in equity securities or in other types of investments.

 

 

 

Response: Each strategy invests primarily in equity securities. Rather than stating this separately for each strategy, we state in the first sentence under “Principal Investment Strategies” that “[t]he Portfolio invests primarily in equity securities, ….”

 

 

—Capital Allocator Opportunistic Strategies Portfolio—Fees and Expenses; Performance Bar Chart and Table

 

13.

Staff Comment: In the second footnote to the fees and expenses table, please delete the following language: “The addition of Acquired Fund Fees and Expenses will cause Total Annual Portfolio Operating Expenses After Fee Waiver and Expense Reimbursement to exceed the maximum amounts of 1.02% and 1.32% for Institutional Shares and Open Shares, respectively, agreed to by the Investment Manager.”

 

 

 

Response: The referenced language has been deleted.

 

 

14.

Staff Comment: Please correct the information provided for the Portfolio’s “Worst Quarter.” Item 4(b)(2)(ii) of Form N-1A requires disclosure of the lowest return for a quarter during the period of the bar chart.

 

 

 

Response: The information provided for the Portfolio’s “Worst Quarter” has been corrected.

 

 

4



 

 

 

Investment Objectives, Strategies and Risks

 

—U.S. Mid Cap Equity Portfolio—Principal Investment Risks

 

15.

Staff Comment: Please consider whether foreign currency and other derivatives transactions are a principal investment strategy of the Portfolio, and whether this disclosure is more appropriate in the SAI.

 

 

 

Response: Please see the response to Comment 8 above.

 

 

—International Equity Portfolio—Principal Investment Strategies

 

16.

Staff Comment: The first sentence of the first paragraph states that the Portfolio will invest “primarily in equity securities, principally common stocks, of relatively large non-U.S. companies...” Please confirm whether the Portfolio invests more than 50% in common stocks of non-U.S. equity companies.

 

 

 

Response: We understand that the Staff interprets “principally” in this context as meaning more than 50%, and the Portfolio complies with this standard. It is expected that ordinarily a substantial majority of its assets are invested in common stocks of non-U.S. companies.

 

 

Other Performance of the Investment Manager

 

17.

Staff Comment: Please confirm whether each composite includes the performance of the relevant Portfolio.

 

 

 

Response: Each composite includes the performance of the relevant Portfolio.

 

 

SAI

 

Description of the Fund and Portfolios—Certain Portfolio Securities

 

18.

Staff Comment: Please confirm that each Portfolio’s principal investment strategies are disclosed in the prospectus.

 

 

 

Response: Each Portfolio’s principal investment strategies are disclosed in the prospectus.

 

 

Investment Restrictions

 

19.

Staff Comment: Please confirm that the fundamental and non-fundamental investment restrictions on pages 24-26 are consistent. In particular, please explain how the following restrictions are consistent with each other:


 

 

 

 

 

 

restriction 3 and restriction 11;

 

 

restriction 6(C) and restriction 13; and

 

 

restriction 9 and restriction 15.

 

 

 

 

 

Response: Restrictions 11 and 13, as stated in the SAI included in Amendment No. 52, were incorrectly stated. As the Staff observed, they cannot be read consistently. We researched the filing history of the SAI and determined that an error was made in the SAI included within Amendment No. 41 to the Registration Statement, filed on November 30,

5



 

 

 

 

 

2007, when the beginning of each of restrictions 11 and 13 was inadvertently changed from a list of Portfolios corresponding to those listed in restrictions 3 and 6(C), respectively, to instead reference only Lazard U.S. Small-Mid Cap Equity and Lazard International Equity Portfolios.

 

 

 

 

 

We have corrected non-fundamental restrictions 11 and 13 in the Amendment to read as follows:

 

 

 

11. for Equity Value, Strategic Equity, Mid Cap, International Equity Select, International Strategic, Global Listed Infrastructure, Emerging Markets Select, Developing Markets, Emerging Markets Blend, High Yield and Opportunistic Strategies Portfolios, invest in illiquid securities as defined in “Certain Portfolio Securities—Illiquid Securities” if immediately after such investment more than 15% of the value of the Portfolio’s net assets would be invested in such securities;

 

 

 

13. for Equity Value, Strategic Equity, Mid Cap, International Equity Select, International Strategic, Global Listed Infrastructure, Emerging Markets Select, Developing Markets, Emerging Markets Blend, High Yield and Opportunistic Strategies Portfolios, invest in interests in or leases relating to oil, gas, or other mineral exploration or development programs;

 

 

 

Regarding restriction 11, please note that the correctly-stated restriction in the Amendment not only remedies the inconsistency issue, but the restated restriction applies to a smaller number of Portfolios, contracting, not expanding, the number of Portfolios to which the higher 15% limit applies. Please note that during the period in which the illiquid securities limit may have been ambiguous for certain Portfolios, the Portfolios were in compliance with the correctly-stated, and more restrictive, restriction 3. As a result, this error was of no effect during the period of time that restriction 11 was incorrectly stated.

 

 

 

Regarding restriction 13, either way that restrictions 6(C) and 13 are read, whether in Amendment No. 52 or in the Amendment, investment in interests in or leases relating to oil, gas or other mineral exploration or development programs is not permitted for any Portfolios. The only difference is whether the applicable restriction is fundamental or non-fundamental. Since the Board did not act during the period that the restriction was incorrectly stated to change the policy without a shareholder vote, this error was similarly of no effect.

 

 

 

Restrictions 9 and 15, which prohibit making investments for the purpose of exercising control or management, apply separately to different Portfolios. Restriction 9 is a fundamental restriction applicable to Lazard U.S. Small-Mid Cap Equity and Lazard International Equity Portfolios, while restriction 15 is a non-fundamental restriction applicable to Lazard International Small Cap and Lazard Emerging Markets Portfolios.

 

 

 

 

Management

 

 

 

 

20.

Staff Comment: Please confirm that the SAI included in the Amendment will comply with the new disclosure requirements released by the Commission on December 16, 2009 relating to governance and boards of directors.

 

 

 

Response: The Amendment includes the disclosure required by the new disclosure

6



 

 

 

requirements.

*    *    *    *    *    *    *    *

As discussed with the Staff, we respectfully request that the effective date of the Amendment be accelerated to April 30, 2010 and have included with this filing request letters from the Fund and the Fund's principal underwriter pursuant to Rule 461 under the Securities Act.

We hope the Staff finds this letter and the revisions in the Amendment are responsive to the Staff’s comments. Should members of the Staff have any questions or comments regarding the Amendment, they should call the undersigned at 212.806.6141 or Linda Y. Kim at 212.806.6173.

 

 

Very truly yours,

 

/s/ Janna Manes

 

Janna Manes

 

cc:     Linda Y. Kim

7


April 9, 2010

Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549
Attention: Deborah O’Neal-Johnson

 

 

Re:

The Lazard Funds, Inc.

 

File Numbers: 33-40682; 811-06312

Ladies and Gentlemen:

At the request of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”), the undersigned Fund acknowledges the following:

 

 

 

 

the Fund is responsible for the adequacy and accuracy of the disclosure in the filing;

 

 

 

 

Staff comments or changes to disclosure in response to Staff comments in the filing reviewed by the Staff do not foreclose the Commission from taking any action with respect to the filing; and

 

 

 

 

the Fund may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.


 

 

Sincerely,

 

THE LAZARD FUNDS, INC.

 

 

 

By: 

/s/ Tamar Goldstein

 

Tamar Goldstein

 

Assistant Secretary



CORRESP 24 filename24.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

THE LAZARD FUNDS, INC.
30 Rockefeller Plaza
New York, New York 10112

April 9, 2010

Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549
Attention: Deborah O'Neal-Johnson

Re:  The Lazard Funds, Inc. 
  Registration Statement on Form N-1A 
  (Registration Nos: 811-06312, 33-40682) 

Ladies and Gentlemen:

The undersigned hereby requests that the effective date for Post-Effective Amendment No. 53 to the above-referenced Registration Statement be accelerated so that it will become effective as soon as it may be practicable on April 30, 2010.

Very truly yours,

THE LAZARD FUND, INC.

 
By:  /s/ Tamar Goldstein 
  Tamar Goldstein 
  Assistant Secretary 


LAZARD ASSET MANAGEMENT SECURITIES LLC
30 Rockefeller Plaza
New York, New York 10112

April 9, 2010

Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549
Attention: Deborah O'Neal-Johnson

Re:  The Lazard Funds, Inc. (the "Fund") 
  Registration Statement on Form N-1A 
  (Registration Nos: 811-06312, 33-40682) 

As principal underwriter of the Fund, we hereby join the Fund in requesting that the effective date for Post-Effective Amendment No. 53 to the Fund's Registration Statement on Form N-1A be accelerated so that it will become effective as soon as it may be practicable on April 30, 2010.

Very truly yours,

LAZARD ASSET MANAGEMENT SECURITIES LLC

 
By:  /s/ Lorelei Martin 
Name:  Lorelei Martin 
Title:  Chief Compliance Officer