<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the fiscal year ended                   MAY 31, 1999

                                                  OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934  For the transition period
         from ________  to _________

                          Commission file number 1-7848


                        LAZARE KAPLAN INTERNATIONAL INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                            <C>
          DELAWARE                                            13-2728690
 (State or other jurisdiction of                            (IRS Employer
 incorporation or organization)                             Identification No.)

     529 FIFTH AVENUE, NEW YORK, NY                            10017
 (Address of principal executive offices)                    (Zip Code)
</TABLE>

Registrant's telephone number, including area code (212) 972-9700

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>

         Title of each class              Name of each exchange on which registered
         -------------------              -----------------------------------------
<S>                                       <C>
  COMMON STOCK ($1 PAR VALUE)                    AMERICAN STOCK EXCHANGE
  PREFERRED SHARE PURCHASE RIGHTS                AMERICAN STOCK EXCHANGE
</TABLE>

Securities registered pursuant to Section 12(g) of the Act: NONE

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X  No
                                               --   --

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         As of July 30, 1999, 8,368,343 of the registrant's common stock were
outstanding, and the aggregate market value of voting and non-voting common
equity held by non-affiliates of the registrant, computed by reference to the
closing price for the registrant's common equity on the American Stock Exchange
at that date was $41,869,549.

                       DOCUMENTS INCORPORATED BY REFERENCE

         1999 definitive proxy statement to be filed with the Commission -
incorporated by reference into Part III.

         1999 Annual Report to Stockholders for the fiscal year ended May 31,
1999 to be filed with the Commission-incorporated by reference into Parts II
and IV.






<PAGE>



                                     Part I

Item 1. Description of Business

The Company

         Lazare Kaplan International Inc. ("the Company") was incorporated in
1972 under the laws of the state of Delaware as the successor to a business
which was founded by Mr. Lazare Kaplan in 1903. The Company is engaged in the
cutting, polishing and selling of ideally proportioned diamonds which it markets
internationally under the brand name "Lazare Diamonds'r'". Ideally proportioned
diamonds are distinguished from non-ideal cut ("commercial") diamonds by the
symmetrical relationship of their facets, which maximizes brilliance, sparkle
and fire. Due to these characteristics, Lazare Diamonds command a premium in the
marketplace. The Company believes there are only a few other companies worldwide
engaged primarily in the production of ideally proportioned diamonds and that it
is the largest U.S. producer of ideal cut diamonds through its facility in
Puerto Rico. In addition, at its facilities in Moscow, the Company cuts and
polishes commercial diamonds which it markets to wholesalers, distributors and,
to a growing extent, through retail jewelers. All rough stones purchased by the
Company are either selected for manufacturing or resold as rough diamonds in the
marketplace. The Company believes that the combination of its cutting and
polishing operations and its trading operations enables the Company to purchase
larger quantities of rough diamonds from which it may select those rough
diamonds best suited for the Company's current needs.

         The Company's marketing strategy in the selling of Lazare Diamonds is
directed primarily toward quality conscious consumers throughout the United
States, South America, the Far East and Europe. The Company focuses its
distribution efforts for Lazare Diamonds on selectivity with a view towards
helping retailers who carry the product maintain a competitive advantage. Lazare
Diamonds can be found at some of the most prestigious jewelry stores around the
world, including those with international reputations and those known only in
their communities as being the highest quality retail jewelers. This strategy
helps ensure that the Company's product is presented in an environment
consistent with its superior quality and image. The Company also sells to
certain jewelry manufacturers and diamond wholesalers. The Company has developed
a comprehensive grading system which, when coupled with the "ideal cut"
standard, allows jewelers to order inventory by category rather than through the
more cumbersome process of visual selection. In addition, the Company designs,
manufactures (through independent contractors) and sells a line of high quality
jewelry which features Lazare Diamonds.

         An important element of the Company's strategy is the promotion of the
Lazare Diamond brand name. Every Lazare Diamond bears a laser inscription on its
outer perimeter, invisible to the naked eye, containing the Lazare Kaplan logo
and an identification number unique to the stone. The laser signature also
allows consumers to register their Lazare Diamonds with the Company under its
program, The Lazare Diamond Registry'r', thereby providing proof of ownership in
case of loss or theft.

         One of the Company's important suppliers of rough diamonds is the
Diamond Trading Company ("DTC"), an affiliate of De Beers Centenary AG, a Swiss
company ("DeBeers"). Based on published reports, the Company believes that the
DTC controls approximately 60% of the value of world rough diamond output. The
Company has been a client of the DTC for more than 60 years. In order to
diversify its sources of rough diamond supply, however, the Company has
broadened its purchasing capabilities throughout Africa and has an office in
Antwerp to supplement its rough diamond needs by secondary market purchases. The
Company also has expanded its operations and entered into relationships with
other primary source suppliers. The Company believes that its success in
maintaining quantities and qualities of polished inventory that best meet its
customers' needs is achieved through its ability to fully integrate its diverse
rough diamond sources.

         The Company currently has three manufacturing facilities. The Company's
domestic


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<PAGE>



manufacturing operation, located in Puerto Rico, is believed by the Company to
be the largest diamond cutting facility in the United States. The Company
believes its work force in Puerto Rico is the most highly skilled in the world
producing ideal cut diamonds. This facility generally produces polished diamonds
having weights of 1/5 of a carat and greater. The Company also has two
manufacturing facilities in Russia. These facilities are conducted pursuant to
agreements with AK Almazi Rossii Sakha (ALROSA) of Russia. The Company's first
Russian factory in Moscow, which was equipped and staffed during fiscal year
1997, is operating near its full anticipated manufacturing capacity. The
Company's other Russian facility, located in Barnaul, was equipped and staffed
at the end of fiscal year 1999. The Company's manufacturing operation which was
conducted in cooperation with the Russian Government agency responsible for
diamond exports and the Russian national stockpile has suspended production.

Diamond Supply

         The Company's overall revenues are dependent upon the availability of
rough diamonds, the world's known sources of which are highly concentrated.
Based upon published reports, the Company believes that Angola, Australia,
Botswana, Brazil, Ghana, Guinea, Ivory Coast, Namibia, Republic of the Congo,
Russia, Sierra Leone and South Africa account for more than 90% of present world
rough gem diamond production. In addition, diamond production in Canada
commenced during late calendar year 1998, and, according to published reports,
is expected to reach $500 million annually. The Central Selling Organization
("CSO"), which is affiliated with De Beers, is the primary world-wide marketing
mechanism of the rough diamond industry. The CSO seeks to maintain an orderly
and stable market for diamonds by regulating the quantity and selection of rough
diamonds that reach the market. This is achieved either by directly owning
diamond mines, entering into multi-year purchase agreements with host
governments, or by purchasing rough diamonds in the secondary market. Sales for
the CSO are made in London by the DTC to a select group of clients
("sightholders") which, according to published reports, number approximately
160, including the Company. Based upon published reports, the Company believes
that approximately 60% of the world diamond output is purchased for resale by
the DTC and its affiliated companies. In order to maintain their purchasing
relationship, the DTC's clients have traditionally been expected to purchase all
of the diamonds offered to them by the DTC. Companies that are not sightholders
must either purchase their requirements from sightholders or seek access to that
portion of the world supply not marketed by the DTC.

         The DTC has been and continues to be an important supplier of rough
diamonds to the Company. The DTC periodically invites its clients to submit
their requirements as to the amount and type of stones they wish to purchase.
Employees of the Company attend offerings of rough diamonds ("sights") held by
the DTC periodically during the year in London. At sights, the Company
purchases, at the DTC's stated price, an assortment of rough diamonds known as a
"series", the composition of which attempts to take into account the qualitative
and quantitative requirements of the Company based on requests submitted to the
DTC by the Company. The Company has been a sightholder for more than 60 years.
The loss of its status as a sightholder could have a material adverse effect on
the Company.

         In order to diversify its sources of supply, the Company has entered
into arrangements with other primary source suppliers and manufacturers. The
Company also has established an office in Antwerp to supplement its rough and
polished diamond needs by making purchases in the secondary market.

         In December 1994, the Company reached an agreement with the Empresa
Nacional de Diamantes de Angola ("Endiama"), Angola's national diamond mining
company, pursuant to which the Company was granted a license to purchase rough
diamonds from local Angolan miners and export such rough diamonds for resale. At
the time, this was one of three such licenses granted by Endiama. The Company
believes that, since this time, Endiama has issued two additional licenses. The
agreement entitles the Company to establish buying offices throughout Angola,
the first of which was set up during 1995 in Luanda, the capital of Angola. The
Company currently has five buying offices located


                                        3






<PAGE>



in Angola, including the office in Luanda. The agreement has a term of five
years ending on December 31, 1999. The Company has not yet determined whether or
not to seek to renew this agreement. Any renewal will, among other things, be
dependent upon stability in Angola, market conditions, profitability, if any, of
the Company's Angolan operations and the Company's ability to negotiate
acceptable terms and conditions. As a result of the intensification of
hostilities and a restructuring of the Company's operations in Angola, the
Company's purchase of Angolan rough diamonds during the latter part of Fiscal
1999 were significantly reduced.

         In March 1999, the Company announced that a newly formed, wholly-owned
subsidiary, Pegasus Overseas Ltd. ("POL") had entered into an exclusive ten-year
agreement with a wholly-owned subsidiary of General Electric Company ("GE")
under which POL will market natural diamonds that have undergone a new GE
process that enhances certain characteristics of select, natural gemstone
diamonds. The process is an additional step which complements the many steps to
which a diamond is customarily subjected in the course of being extracted,
processed with mechanical and chemical operations and then cut and polished. The
process is permanent and irreversible and it does not involve treatments such as
irradiation, laser drilling, surface coating or fracture filling and is
conducted before the final cutting and polishing by the Company. The process is
designed to improve the color, brilliance and brightness of qualifying diamonds
without reducing their all-natural content. The process, which was developed and
is owned by GE, will be used only on a select, limited range of natural diamonds
with qualifying colors, sizes and clarities for both round and fancy cuts. The
estimated number of gemstones with characteristics suitable for this process is
a small fraction of the overall diamond market. POL will sell only diamonds that
have undergone the new GE process. Each diamond sold by POL will be laser
inscribed with the brand name "GE POL." POL began offering these diamonds to
distributors around the world in late May 1999.

         The Company believes that it has good relations with its suppliers,
that its trade reputation and established customer base will continue to assure
access to primary sources of diamonds and that its sources of supply are
sufficient to enable the Company to meet its present and foreseeable needs.
However, the Company's sources of supply could be affected by political and
economic developments in producing countries over which the Company has no
control. While the Company believes that alternative sources of supply may be
available, any significant disruption of the Company's access to its primary
source suppliers could have a material adverse effect on its ability to purchase
rough diamonds.

         The Company has rough diamond supply arrangements in Russia for the
cutting and polishing of diamonds in Russia. See "Cutting and Polishing".

Cutting and Polishing

         The Company and its subsidiaries currently have three primary cutting
and polishing operations, two located in Russia (of which one is in Moscow and
one is in Barnaul) and one located in Puerto Rico.

         The Company's first factory in Russia was announced in July 1996 when
the Company reached an agreement (the "ALROSA I Agreement"), for a term of ten
years, with AK Almazi Rossii Sakha (ALROSA) of Russia for the cutting, polishing
and marketing of large rough gem diamonds. According to published reports,
ALROSA is the largest producer of rough diamonds in Russia with annual
production in excess of $1.4 billion, accounting for over 20% of the world's
supply of diamonds. Under the terms of the ALROSA I Agreement, the Company has
equipped a diamond cutting factory which was completed in February 1997 within
the ALROSA facility in Moscow. This facility is staffed by Russian technicians
and managed and supervised by Company personnel. Under the ALROSA I Agreement,
ALROSA has agreed to supply a minimum of $45 million per year (at rough diamond
cost) of large rough gem diamonds selected by the Company as being suitable for
processing in this facility. The Company received its first shipment of polished
stones produced at this facility during November 1997. During fiscal year 1999,
this facility produced in excess of $45 million of polished stones. In March
1999 (in


                                        4






<PAGE>



furtherance of a Memorandum of Understanding signed by the Export-Import Bank of
the United States ("Eximbank"), ALROSA and the Company) the Company and ALROSA
entered into a second agreement (the "ALROSA II Agreement") to expand their
relationship in the cutting, polishing and marketing of rough gem diamonds.
Under the terms of the ALROSA II Agreement, the Company and ALROSA agreed to
refurbish two additional diamond cutting facilities (one of which is not yet
operational). These facilities are staffed by Russian technicians and jointly
managed and supervised by the Company and ALROSA personnel. ALROSA has agreed to
supply a minimum of $100 million per year (at rough diamond cost) for ten years
of rough gem diamonds selected by the Company as being suitable for processing
in these facilities. The Company received its first test shipment of polished
stones produced at these facilities during the fourth quarter of fiscal 1999.
These facilities, once they are all fully operational, have the capacity to cut
and polish in excess of $150 to 200 million (at rough diamond cost) per year of
rough gem diamonds. Under both the ALROSA I and the ALROSA II agreements, the
Company sells the resulting polished diamonds through its worldwide distribution
network. The proceeds from the sale of these polished diamonds, after
reimbursement of costs incurred by each of the parties, generally will be shared
equally with ALROSA. These agreements do not require the Company to advance
funds for the purchase of rough diamonds. The ALROSA I Agreement served as a
long-term off-take arrangement to secure the repayment of $62 million of
financing which ALROSA received from a United States commercial bank and to be
guaranteed by Eximbank for the purchase by ALROSA of U.S. manufactured mining
equipment. This equipment will be used by ALROSA to increase production in its
diamond mines. Eximbank has stated that this agreement was the first transaction
approved under Eximbank's General Project Incentive Agreement with the Ministry
of Finance and the Central Bank of the Russian Federation signed in December
1993. The ALROSA II Agreement will enable ALROSA to receive additional loan
guarantees from Eximbank of an additional several hundred million dollars. These
guaranties will allow ALROSA to continue purchasing U.S. manufactured mining
equipment, expand mining productions and refurbish operations at currently
non-functioning Russian diamond cutting factories.

         The Company had another facility located in Moscow which was conducted
in cooperation with the Russian Government organization responsible for diamond
policy and the Russian national stockpile. Production from this facility has
been suspended and there have been no diamonds exported from this facility since
the beginning of calendar year 1997, including those that are already polished
by the Company and awaiting export. The Company believes that it will recapture
lost sales once these polished diamonds are exported.

         The Company believes that its factory in Puerto Rico is the largest
cutting and polishing facility in the United States. Each rough diamond received
in Puerto Rico is evaluated against strict management standards designed to
maximize its potential economic contribution to the Company. Expert technicians,
assisted by proprietary computer software, determine whether to cut the rough
diamond to ideal or commercial proportions or resell the rough diamond. The
shape of the rough diamond, its color, clarity, size, potential profitability
and salability are among the criteria used in making such determinations. The
Company's production workers are compensated principally on a piece rate basis.
The Company has an incentive program that rewards its factory managers and
supervisors for maximizing the manufactured results based on the following
criteria: gross margin, yield (rough weight to polished weight conversion) and
efficiency.

         Rough diamonds selected for cutting are analyzed and where desirable
are sorted for sawing or cleaving to achieve the desired shape and to eliminate
imperfections. They are then cut and polished into finished gems. Each finished
ideal cut diamond (weighing .18 carats and larger) which is marketed as a Lazare
Diamond is then inscribed with the Lazare Kaplan logo and its own identification
number by the Company's patented laser inscription process. All of these
operations are performed by the Company's employees. The Company believes its
work force in Puerto Rico is the most highly skilled in the diamond industry.
The Company has undertaken a worker training program at its facility in Puerto
Rico to ensure a constant flow of skilled labor to satisfy its needs for further
growth.


                                        5






<PAGE>



         The Company believes that it is recognized in the diamond industry for
the high quality and brilliance of the gems it cuts and that it also enjoys a
reputation as an imaginative and innovative cutter of large and difficult
diamonds.

Pricing

         Rough Diamond Prices

         Through its control of approximately 60% of the value of the world
diamond output, the DTC can exert significant control over the pricing of rough
and polished diamonds to maintain an orderly market by adjusting rough diamond
supplies in the marketplace. Rough diamond prices established by the DTC have
been characterized historically by steady increases over the long term; however,
prices in the secondary market have experienced a greater degree of volatility,
particularly during the late 1970's. Traditionally, the Company has been able to
pass along such price increases to its customers. From time to time, however,
the Company has absorbed these price increases in the short term to maintain an
orderly pricing relationship with its customers. This has, in the past, caused
temporary adverse effects on the Company's earnings. However, a large rapid
increase in rough diamond prices could materially adversely affect the Company's
revenue and operating margins if the increased cost of rough diamonds could not
be passed along to its customers in a timely manner.

         According to published reports, during 1995 there was an emergence of a
two-tier market for rough diamonds. The first tier is comprised of better
quality rough diamonds, for which the DTC continues to maintain an orderly
market. The Company conducts its cutting and polishing operations almost
exclusively in this segment of the market. The second tier is comprised of
small, less expensive, imperfect rough diamonds. The prices for these diamonds
are determined principally by supply and demand. Consequently, there has been
considerable volatility in the prices of less expensive diamonds since 1995.
Because the Company focuses primarily on better quality rough diamonds, this
volatility has not had a significant effect on the Company.

         Polished Diamond Prices

         Over the past 60 years, increases in the price of rough diamonds have
generally resulted in a corresponding increase in the price of polished
diamonds. However, during periods of economic uncertainty, there may be a time
lag before the Company is able to increase polished diamond prices. During the
period of high inflation in the late 1970's, investors speculated in hard
assets, driving polished diamond prices to exceptionally high levels which in
turn caused significant increases in the cost of rough diamonds. However, the
moderation of inflation during the early 1980's resulted in a sudden and massive
shift of investments from hard assets to financial instruments, resulting in
dramatic price declines for polished diamonds which caused a market liquidity
crisis as prices of some categories of polished diamonds fell below the
inventory costs of such diamonds. Since this period in the early 1980's, the
Company believes the pricing of polished diamonds has returned to its historical
pattern of responding to increases in the pricing of rough diamonds. However,
there can be no assurance that volatility in the price of polished diamonds
could not occur again. Any rapid decrease in the price of polished diamonds
could have a material adverse effect on the Company in terms of inventory
reserves, lower sales and lower margins.

         The Company has broadened its sales base and implemented strict
inventory, pricing and purchasing controls which it believes could lessen the
impact of fluctuations in the price of rough and polished diamonds. These
include computerized rough diamond evaluation programs, automatic economic order
quantity models and inventory utilization programs.


                                        6






<PAGE>



Marketing, Sales and Distribution

         Marketing Strategy

         The Company's sales strategy is directed primarily toward quality
conscious consumers throughout the United States, South America, the Far East
and Europe. The Company focuses its distribution efforts for Lazare Diamonds on
selectivity with a view to helping retailers who carry the product maintain a
competitive advantage. Lazare Diamonds can be found at some of the most
prestigious jewelry stores around the world, including both those with
international reputations and those recognized only in their local communities
as being the highest quality retail jewelers. This strategy helps ensure that
the Company's product is presented in an environment consistent with its
superior quality and image.

         The Company also sells to certain jewelry manufacturers and diamond
wholesalers. The Company has developed a comprehensive grading system for its
diamonds which, when coupled with the "ideal cut" standard, allows jewelers to
order inventory by category rather than through the more cumbersome process of
visual selection. In addition, the Company designs, manufactures (through
independent contractors) and sells a line of high quality jewelry that features
Lazare Diamonds.

         A key element of the Company's strategy is the promotion of the Lazare
Diamond brand name directly to consumers. The Company is able to market its
diamonds under a brand name to retailers because (a) the ideal cut
differentiates the Company's diamonds from commercial diamonds in the
marketplace and (b) each Lazare Diamond is inscribed with the Company's logo and
identification number using the Company's patented laser inscription process,
thus authenticating the diamonds. The Company holds a domestic patent, which
expires in 2000, and various international patents for this process. In
addition, on August 3, 1999, a U.S. patent was issued to the Company for a new
and improved laser inscription process. The Company also has international
patents-pending for this process.

         The Company's decision to pursue the brand name strategy is reinforced
by two factors - a rising trend among informed consumers to purchase quality,
brand name products, and the need among upscale jewelers to set themselves apart
in an increasingly competitive market by carrying and promoting a highly
differentiated product.

         Building awareness and acceptance of the Lazare Diamond brand name is
accomplished through a comprehensive marketing program which includes sales
training, cooperative advertising, sales promotion and public relations. A wide
assortment of sales promotion materials has been designed to facilitate
jewelers' sales of the Company's diamonds and fine jewelry line to consumers.
Public relations events are offered which help build traffic in retail stores.
The Company believes these marketing programs have been and will continue to be
instrumental in increasing sales. The Company has no current plans to sell its
diamonds directly to consumers and intends to continue concentrating its
marketing efforts towards the quality retail jeweler.

         The Lazare Diamond Registry program has been established by the Company
to enable consumers to register their Lazare Diamonds with the Company using the
laser inscribed identification number, thereby providing proof of ownership in
case of loss or theft.

Sales and Distribution

         While the purchase and sale of rough diamonds is concentrated among
relatively few parties, industry wide retailing of polished diamonds occurs
through over 40,000 jewelry stores in the United States, over 25,000 retailers
in Japan and over 60,000 retail stores in Europe. The Company's sales efforts
for its polished diamonds are directed primarily toward the fine quality segment
of these retailers


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(the majority of which are independently owned and operated), wholesalers and
distributors and, to a lesser extent, to jewelry manufacturers. Full time
regional sales representatives located throughout the United States, Hong Kong
and Europe, are compensated on a commission basis and handle sales throughout
their respective territories.

         The Company's U.S. sales force is supported by a New York based
telemarketing department. Sales to certain of the Company's largest accounts are
handled by headquarters personnel. Most of the Company's major accounts are
customers of long standing.

         The Company has been actively working to expand its foreign business
activities, particularly in the Far East countries of Japan, Hong Kong,
Singapore, Taiwan, Korea and Malaysia and recently throughout South America.

         After working with its former distributor of over 25 years, in 1999,
the Company changed the nature of its distribution in Japan by assuming control
of distribution of its products and opening its own office. In this way, the
Company has realigned its position with its retail and wholesale customers and
shortened its channels of distribution. In addition, this realignment has
enabled the Company, without interruption, to assume control of the expansion
and maintenance of the Lazare Diamond brand name in Japan. As part of the
realignment, the Company retained experienced Japanese staff, giving it
immediate and direct access to important customers as well as in depth industry
knowledge. The Company believes that this realignment was necessary in order to
compete effectively in Japan (the world's second largest market for diamonds and
diamond jewelry) in the years to come. The Company continues to maintain its
relationship with Seiko Corporation ("Seiko"), one of the world's largest
watchmakers. It is anticipated that Seiko will ultimately supply Lazare Diamonds
to 300-400 retailers in Japan. Seiko is generally recognized as a leader in
consumer brand marketing and has a well developed network of contacts and
retailers.

         The Company uses a comprehensive sorting and inventory classification
system for grading color and clarity of its ideal cut polished diamonds. This
system, combined with the fact that the Company's stones are uniformly cut to
ideal proportions, reduces and in some cases eliminates the need for customers
to view diamonds before placing orders. The system enables customers to
standardize their inventories, order by mail or telephone and minimize their
inventory investment.

         The percentages of the Company's total domestic and foreign net sales
to its customers, which include a combination of both rough diamonds and
polished diamonds sales taken together, for the past three fiscal years are set
forth below:


<TABLE>
<CAPTION>

                                                                        Years ended May 31,
                                                              ---------------------------------------
                                                              1999              1998             1997
                                                              ----              ----             ----
<S>                                                          <C>              <C>              <C>
Percentage of Net Sales to Customers

         United States                                          31%               28%              22%
         Far East                                                8%                7%               9%
         Europe, Israel & other                                 61%               65%              69%
                                                              ----             -----             ----
                                                              100%              100%             100%
                                                              ====              ====             ====
</TABLE>

         The world's rough diamond trading markets are primarily located in
Belgium and Israel; therefore, the majority of the Company's rough diamond sales
have been transacted with foreign customers. In 1999 and 1998, due to an
increase in demand in the United States combined with weaker markets in the Far
East, the Company sold a greater percentage of its polished diamonds
domestically than it had in prior years. In addition, the Company's sales to
customers in Europe, Israel & other, which consisted primarily of rough
diamonds, were lower as a percentage of total sales in 1999 as compared to 1998
due to the greater rate of increase in polished diamond sales in the U.S. in
1999 as compared to the prior years,


                                        8






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         The Company believes that due to the possible international resale of
diamonds by its customers, the above percentages may not represent the final
location of retail sales of its product. All of the Company's foreign sales,
other than those made in Japan, are denominated in United States dollars. Where
possible, the Company hedges its sales transactions in Japan to minimize the
impact of any foreign currency exposure on its foreign revenue. The
profitability of foreign sales of either polished or rough diamonds is
consistent with that of domestic sales of similar merchandise.

Competition

         The polished and rough diamond business is highly competitive. While
the Company believes that it has achieved a reputation as a leading cutter and
distributor of high quality diamonds, it faces competition in sales to its
customers in the United States and abroad from many other suppliers. In
addition, the Company sells rough diamonds in the competitive world market. A
substantial number of cutters and polishers and traders, some of which the
Company believes to be larger or to have greater financial resources than the
Company, sell diamonds of all qualities to the Company's customers.

         The Company believes there are significant barriers to entry by
potential competitors into the business of manufacturing ideally proportioned
diamonds. Among the most important of these barriers are the need for
significant working capital to purchase rough diamonds and hold polished
inventory, the long-term relationships required to have access to adequate
supplies of rough diamonds, the limited number of persons with the skills
necessary to consistently cut significant amounts of ideally proportioned
diamonds, the difficulty in obtaining access to upscale channels of
distribution, the importance of public recognition of an established brand name
and the establishment of computer systems to report on and monitor the
manufacturing and distribution network.

Employees

         At July 31, 1999, the Company had 191 full-time employees and 7
regional sales representatives. The Company maintains an apprenticeship program
at its facility in Puerto Rico, through which it trains its cutters, who are
highly skilled workmen. The Company provides paid vacations, sick leave, group
life, disability, hospitalization and medical insurance for its employees. The
Company has a 401(k) retirement plan for its U.S. and Puerto Rico employees. The
Company believes that it has satisfactory relationships with its employees. None
of the Company's employees is represented by a union.

Item 2. Properties

         The Company leases office space, a portion of which is devoted to sales
rooms, at 529 Fifth Avenue, New York City, for a term expiring September 30,
2003 at an annual rental rate of approximately $278,000 (subject to
escalations). The Company also subleases space at the same address to Leon
Tempelsman & Son for a like term at a rental rate per square foot which is the
same as the Company is paying to the landlord.

         The Company also owns a manufacturing facility in Caguas, Puerto Rico.
The Caguas facility consists of approximately 7,500 square feet.

         The Company leases office space in Antwerp, Belgium for a term expiring
May 31, 2003 at an annual rental rate of 1,500,000 Belgian francs (approximately
$39,000).

         The Company also has a 40% ownership interest in a 330 square meter
office in Antwerp, Belgium, a portion of which is devoted to sales rooms.

         The Company leases office space in Hong Kong for a term expiring April
30, 2000 at an annual


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rental rate of 354,000 Hong Kong dollars (approximately $46,000).

         The Company leases office space in Tokyo for a term expiring August 31,
2000 at an annual rental rate of 18,200,000 Japanese Yen (approximately
$148,500).

         The Company believes that its facilities are fully equipped and
adequate to fulfill its operating and manufacturing needs.

Item 3.  Legal Proceedings

         On or about April 13, 1999, International Diamond Traders CY B.V.B.A.
("IDT") and Avi Neumark ("Neumark"), the President and controlling stockholder
of IDT, commenced an action in the U.S. District Court for the Southern District
of New York against the Company, Lazare Kaplan Belgium, N.V., a subsidiary of
the Company ("LKB"), and Maurice Tempelsman, Leon Tempelsman and Sheldon
Ginsberg, each of whom is a director and officer of the Company and a director
of LKB. The plaintiffs subsequently amended their complaints to eliminate LKB
and Mr. Ginsberg as defendants. The plaintiffs alleged, among other things, that
the Company and its principals fraudulently induced IDT to make more than $1.75
million in payments to the Company in connection with an alleged "joint venture"
for the purchase of rough diamonds, excluded IDT from this relationship and
expropriated its interest, defamed the plaintiffs, causing injury to their
business reputation and interfered with plaintiffs' business prospects. The
plaintiffs are seeking damages of $1.75 million, together with interest,
general, consequential and other damages in an unspecified amount and punitive
damages. The plaintiffs further seek the value of half of the alleged profits
since September 1998, the date at which the relationship was allegedly
wrongfully terminated. In addition, the plaintiffs allege that the Company's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1998
inaccurately includes all of the sales of the Company's Angolan operations. The
Company believes that the plaintiffs' allegations are without merit and is
vigorously defending this action.

         In a related matter, on or about April 13, 1999, Novel Diamonds Inc.
("Novel") and Lexco Limited ("Lexco") submitted a demand for arbitration to the
International Chamber of Commerce naming as respondents, the Company, Lazare
Kaplan (Bermuda) Ltd., a wholly-owned subsidiary of the Company, LKN Diamond
Company, LTD. ("LKN") and Sheldon Ginsberg. Each of the claimants is controlled
by Neumark. The claimants have alleged, among other things, that the respondents
are in breach of their obligations to transfer the Company's "rough diamond
trading sight" (the "sight") to LKN as was allegedly required by a 1994
shareholders agreement and have improperly barred claimants and Mr. Neumark from
access to the "sight" business. As a result of the foregoing, the claimants are
seeking damages of $5 million and at least 50% of the profits from the "sight"
business since September 1998, plus interest, and 50% of the net asset value of
LKN, including the "sight." The Company believes that the claimants' allegations
are without merit and is vigorously defending this action.

         The two above actions followed the institution, earlier in 1999, of an
arbitration proceeding jointly submitted by Neumark, IDT and the Company. This
matter was voluntarily submitted to arbitration by Neumark, IDT and the Company
to resolve all monetary disputes between the parties as a result of the
termination of their relationship, except for those that are the subject of the
foregoing actions. All matters submitted to arbitration have been substantially
resolved with the exception of the following (i) whether there is any goodwill
arising from the alleged relationship in Angola, and (ii) if goodwill exists,
the value of such goodwill and the amount of the payment, if any, to be made.
The Company believes that such claim for goodwill is without merit and is
vigorously defending its position that no payment for goodwill is appropriate.

         If the opposing parties are successful in some or all of above related
proceedings, the Company's business could be materially and adversely affected.


                                       10






<PAGE>



         In addition, Neumark has commenced an action in Delaware Chancery Court
against the Company seeking the right to inspect, and make copies of, certain
books and records of LKI and LKB.

Item 4.  Submission of Matters to a Vote of Security Holders

         None

Executive Officers of the Company

         The following table sets forth information regarding executive officers
of the Company.

<TABLE>
<CAPTION>

NAME                                                 POSITION                           AGE
----                                                 --------                           ---

<S>                                                  <C>                              <C>
Maurice Tempelsman                                   Chairman of the Board               70

Leon Tempelsman                                      Vice Chairman of the                43
                                                     Board and President

Sheldon L. Ginsberg                                  Executive Vice President and        45
                                                     Chief Financial Officer

Robert Speisman                                      Senior Vice President - Sales       46
</TABLE>


         All officers were elected by the Board of Directors at its meeting
following the Annual Meeting of Stockholders held in November 1998, and hold
office until the Board of Directors meeting following the next Annual Meeting of
Stockholders and until their respective successors have been duly elected and
qualified.

         Maurice Tempelsman is the Chairman of the Board and a director of the
Company and a general partner of Leon Tempelsman & Son ("LTS"), a partnership
with interests in the international diamond and mining industries. He has held
these positions since 1984. Maurice Tempelsman is the father of Leon Tempelsman
and the father-in-law of Robert Speisman.

         Leon Tempelsman is the Vice Chairman of the Board, the President and a
director of the Company and a general partner of Leon Tempelsman & Son. He has
held these positions since 1984. Leon Tempelsman is the son of Maurice
Tempelsman and the brother-in-law of Robert Speisman.

         The Company believes that neither the Tempelsmans nor LTS currently
engages directly or indirectly in any activities competitive with those of the
Company.

         Sheldon L. Ginsberg has been Executive Vice President and Chief
Financial Officer since February 1996. He was the Vice President and Chief
Financial Officer from April 1991 until February 1996. Mr. Ginsberg has been a
director of the Company since 1989.

         Robert Speisman has been the Senior Vice President - Sales of the
Company since January 1999. He was Vice President - Sales of the Company from
April 1986 until January 1999. Mr. Speisman has been a director of the Company
since 1989. Mr. Speisman is the son-in-law of Maurice Tempelsman and the
brother-in-law of Leon Tempelsman.

                                     Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters


                                       11






<PAGE>



         The Company's common stock (par value $1 per share) is traded on the
American Stock Exchange.

         Market prices and other information with respect to the Company's
common stock are hereby incorporated by reference to the Company's Annual
Report.

Item 6.   Selected Financial Data

         Selected financial data are hereby incorporated by reference to the
Company's Annual Report.

Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

         Management's discussion and analysis of financial condition and results
of operations is hereby incorporated by reference to the Company's Annual
Report.

Item 7A.   Quantitative and Qualitative Disclosure About Market Risk

         Not applicable.

Item 8.   Financial Statements and Supplementary Data

         (a) The following financial statements and supplementary data are
hereby incorporated by reference to the Company's Annual Report.

                  (i)      Report of Ernst & Young LLP

                  (ii)     Consolidated Statements of Operations for each of the
                           three years in the period ended May 31, 1999.

                  (iii)    Consolidated Balance Sheets as at May 31, 1999 and
                           May 31, 1998.

                  (iv)     Consolidated Statements of Stockholder's Equity for
                           each of the three years in the period ended May 31,
                           1999.

                  (v)      Consolidated Statements of Cash Flows for each of the
                           three years in the period ended May 31, 1999.

                  (vi)     Notes to Consolidated Financial Statements.

Item 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosures

         Not applicable.

                                    Part III

         Except for information regarding Executive Officers of the Company,
which, in accordance with Instruction G to Form 10-K, is included in Part I
hereof, the information called for by Part III (Items 10, 11, 12 and 13) is
incorporated by reference herein to the Company's definitive proxy statement to
be filed with the Commission within 120 days after the close of its fiscal year
ended May 31, 1999.


                                     Part IV


                                       12






<PAGE>



Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

<TABLE>

    <S>          <C>       <C>
         (a)      1.       The response to this portion of Item 14 is set forth
                           in Item 8 of Part II hereof.

                  2.       Financial Statement Schedule

                           Schedule II - Valuation and Qualifying Accounts for
                           each of the three years in the period ended May 31,
                           1999.

                           All other schedules are omitted because they are not
                           applicable, or not required, or because the required
                           information is included in the consolidated financial
                           statements or notes thereto.

</TABLE>


                                       13






<PAGE>



                        LAZARE KAPLAN INTERNATIONAL INC.

                                AND SUBSIDIARIES

                  SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>

COLUMN A                               COLUMN B          COLUMN C                COLUMN D     COLUMN E
--------                               --------          --------                --------     --------
                                                        Additions
                                                  --------------------------
                                     Balance at   Charged to    Charged to                   Balance at
                                      beginning   costs and   other accounts    Deductions      end
      Description                     of period    expenses      describe        describe    of period
      -----------                     ---------   ---------   --------------    ----------   ---------
<S>                                    <C>        <C>           <C>             <C>           <C>
YEAR ENDED MAY 31, 1999:

Allowance for doubtful accounts        $143,120    $ 60,000      $    -         $  1,064(A)   $202,056
                                       --------    --------      -------        --------      --------

YEAR ENDED MAY 31, 1998:

Allowance for doubtful accounts        $162,487    $ 60,000      $    -         $ 79,367(A)   $143,120
                                       --------    --------      -------        --------      --------

YEAR ENDED MAY 31, 1997:

Allowance for doubtful accounts        $281,265    $(25,000)     $    -         $ 93,778(A)   $162,487
                                       --------    --------      -------        --------      --------

</TABLE>



(A) Amounts written off.

                                       14






<PAGE>



Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)

         (b)      Reports on Form 8-K - The Company filed a Current Report on
                  Form 8-K, responding to Item 5 - "Other Events," on May 10,
                  1999.

         (c)      Exhibits

(3)      Articles of Incorporation and Bylaws

         (a)      Certificate of Incorporation, as amended - incorporated herein
                  by reference to Exhibit 3(a) to the Company's Annual Report on
                  Form 10-K for the fiscal year ended May 31, 1987 filed with
                  the Commission on August 26, 1987, as amended on January 14,
                  1988.

         (b)      Certificate of Amendment of Certificate of Incorporation filed
                  with the Secretary of State of the State of Delaware on
                  November 1, 1990 - incorporated herein by reference to Exhibit
                  (3)(b) to the Company's Annual Report on Form 10-K for the
                  fiscal year ended May 31, 1992 filed with the Commission on
                  August 28, 1992.

         (c)      Certificate of Amendment of the Certificate of Incorporation
                  filed with the Secretary of State of the State of Delaware on
                  November 6, 1997 - incorporated by reference to Exhibit 4.1(a)
                  (iii) to Company's Registration Statement for the Lazare
                  Kaplan International Inc. 1997 Long Term Stock Incentive Plan
                  on Form S-8 filed with the Commission on November 14, 1997.

         (d)      Certificate of Designations of Series A Junior Participating
                  Preferred Stock filed with the Secretary of State of the State
                  of Delaware on November 6, 1997 - incorporated by reference to
                  Exhibit 4.1(b) to the Company's Registration Statement on Form
                  S-8 filed with the Commission on November 14, 1997.

         (e)      By-laws, as amended - incorporated herein by reference to
                  Exhibit 3(b) to the Company's Annual Report on Form 10-K for
                  the fiscal year ended May 31, 1987 filed with the Commission
                  on August 26, 1987, as amended on January 14, 1988.

(10)     Material Contracts

         (a)      Lazare Kaplan International Inc. Amended and Restated 1988
                  Stock Option Incentive Plan - incorporated herein by reference
                  to Exhibit 4.1 to the Company's Registration Statement on Form
                  S-8 filed with the Commission on November 5, 1990.

         (b)      Lazare Kaplan International Inc. 1997 Long Term Stock
                  Incentive Plan - incorporated herein by reference to Exhibit A
                  to the Company's proxy statement for its Annual Meeting of
                  Stockholders held on November 5, 1997 filed with the
                  Commission on September 17, 1997.

         (c)      Form of Incentive Stock Option Agreement for options granted
                  pursuant to the Lazare Kaplan International Inc. 1997 Long
                  Term Stock Incentive Plan - incorporated herein by reference
                  to Exhibit 4.5(a) to the Company's Registration Statement on
                  Form S-8 filed with the Commission on November 14, 1997.

         (d)      Form of Non-Qualified Stock Option Agreement for options
                  granted pursuant to the Lazare Kaplan International Inc. 1997
                  Long Term Stock Incentive Plan - incorporated herein by
                  reference to Exhibit 4.5(a) to the Company's Registration
                  Statement on Form S-8 filed with the Commission on November
                  14, 1997.

                                       15






<PAGE>



         (e)      Note Agreement dated as of May 15, 1991 by and between the
                  Company, Allstate Life Insurance Company, Monumental Insurance
                  Company and PFL Life Insurance Company - incorporated herein
                  by reference to Exhibit 28 to Report on Form 8-K dated May 23,
                  1991 filed with the Commission on June 4, 1991.

         (f)      First Amendment to Note Agreement, dated as of February 28,
                  1992, by and between the Company, Allstate Life Insurance
                  Company, Monumental Life Insurance Company and PFL Life
                  Insurance Company - incorporated herein by reference to
                  Exhibit 10(d) to the Company's Annual Report on Form 10-K for
                  the fiscal year ended May 31, 1992 filed with the Commission
                  on August 28, 1992.

         (g)      Second Amendment to Note Agreement, dated as of March 25, 1992
                  by and between the Company, Allstate Life Insurance Company,
                  Monumental Life Insurance Company and PFL Life Insurance
                  Company - incorporated herein by reference to Exhibit 10(e) to
                  Report on Form 10-K of the Company for the fiscal year ended
                  May 31, 1992 filed with the Commission on August 28, 1992.

         (h)      Third Amendment to the Note Agreement, dated as of December 1,
                  1992 by and between the Company, Allstate Life Insurance
                  Company, Monumental Life Insurance Company and PFL Life
                  Insurance Company - incorporated herein by reference to
                  Exhibit 10(f) to the Company's Annual Report on Form 10-K for
                  the fiscal year ended May 31, 1993 filed with the Commission
                  on August 30, 1993.

         (i)      Fourth Amendment to the Note Agreement, dated as of August 25,
                  1995 by and between the Company, Allstate Life Insurance
                  Company, Monumental Life Insurance Company and PFL Life
                  Insurance Company - incorporated herein by reference to
                  Exhibit 10 to the Quarterly Report on Form 10-Q for the
                  quarterly period ended August 31, 1995 filed with the
                  Commission on October 13, 1995.

         (j)      Loan Agreement, dated May 14, 1996 among the Company, Fleet
                  Bank, N.A. and Bank Leumi Trust Company of New York -
                  incorporated herein by reference to Exhibit 10(i) to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  May 31, 1996 filed with the Commission on August 28, 1996.

         (k)      Amendment No. 1, dated as of November 29, 1996, to Loan
                  Agreement, dated May 14, 1996, among the Company, Fleet Bank,
                  N.A. and Bank Leumi Trust Company of New York - incorporated
                  herein by reference to Exhibit 10(1) to Amendment No. 2 to the
                  Company's Registration Statement on Form S-2 filed with the
                  Commission on December 11, 1996.

         (l)      Amendment No. 2, dated as of May 30, 1997, to Loan Agreement,
                  dated May 14, 1996, among the Company, Fleet Bank, N.A. and
                  Bank Leumi Trust Company of New York incorporated herein by
                  reference to Exhibit 10(n) to the Company's Annual Report on
                  Form 10-K for the fiscal year ended May 31, 1997 filed with
                  the Commission on August 28, 1997.

         (m)      Cooperation Agreement, dated July 15, 1996 between the Company
                  and AK Almazi Rossii Sakha - incorporated herein by reference
                  to Exhibit (2) to the Company's Current Report on Form 8-K/A
                  filed with the Commission on November 18, 1996 (certain
                  portions of this agreement have been omitted pursuant to a
                  request for confidential treatment).

         (n)      Cooperation Agreement, dated March 23, 1999 between the
                  Company and AK Almazi

                                       16






<PAGE>



                  Rossii Sakha (certain portions of this agreement have been
                  omitted pursuant to a request for confidential treatment).

         (o)      Processing Agreement, dated as of February 20, 1999, between
                  Pegasus Overseas Ltd. and a wholly-owned subsidiary of General
                  Electric Company (certain portions of this agreement have been
                  omitted pursuant to a request for confidential treatment).

         (p)      Rights Agreement, dated as of July 31, 1997, between the
                  Company and ChaseMellon Shareholder Services, LLC -
                  incorporated herein by reference to Exhibit 99.1 to the
                  Company's Form 8-A filed with the Commission on August 26,
                  1997.

         (q)      Leon Tempelsman Retirement Benefit Plan of Lazare Kaplan
                  International Inc. incorporated herein by reference to Exhibit
                  10(o) to the Company's Annual Report on Form 10-K for the
                  fiscal year ended May 31, 1997 filed with the Commission on
                  August 28, 1997.

         (r)      Sheldon L. Ginsberg Retirement Benefit Plan of Lazare Kaplan
                  International Inc. incorporated herein by reference to Exhibit
                  10(p) to the Company's Annual Report on Form 10-K for the
                  fiscal year ended May 31, 1997 filed with the Commission on
                  August 28, 1997.

         (s)      Robert Speisman Retirement Benefit Plan of Lazare Kaplan
                  International Inc. incorporated herein by reference to Exhibit
                  10(q) to the Company's Annual Report on Form 10-K for the
                  fiscal year ended May 31, 1997 filed with the Commission on
                  August 28, 1997.

(13)     1999 Annual Report to Security Holders - incorporated herein by
         reference to the Company's 1999 Annual Report to Stockholders to be
         filed with the Commission.

(21)     Subsidiaries

(23)     Consent of Ernst & Young LLP

(27)     Financial Data Schedule

                                       17






<PAGE>



                                    SIGNATURE

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.


                                LAZARE KAPLAN INTERNATIONAL INC.



                                By (s) Sheldon L. Ginsberg
                                   ---------------------------------------------
                                Sheldon L. Ginsberg, Executive Vice President
                                and Chief Financial Officer (principal financial
                                and accounting officer)

Dated:  August 27, 1999

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


<TABLE>
<CAPTION>

Signature                                      Title                           Date
---------                                      -----                           ----

<S>                                     <C>                                <C>
(s) Maurice Tempelsman                  Chairman of the                    August 27, 1999
---------------------------------       Board of Directors
(Maurice Tempelsman)


(s) Leon Tempelsman                     Vice Chairman of the               August 27, 1999
---------------------------------       Board of Directors and
(Leon Tempelsman)                       President (principal
                                        executive officer)

(s) Lucien Burstein                     Director                           August 27, 1999
---------------------------------
(Lucien Burstein)


(s) Myer Feldman                        Director                           August 27, 1999
---------------------------------
(Myer Feldman)


(s) Sheldon L. Ginsberg                 Director and Executive             August 27, 1999
---------------------------------       Vice President and Chief
(Sheldon L. Ginsberg)                   Financial Officer (principal
                                        financial and accounting
                                        officer)


(s) Robert Speisman                     Director                           August 27, 1999
---------------------------------
(Robert Speisman)

</TABLE>


                                       18






<PAGE>



                                  EXHIBIT INDEX

<TABLE>

<S>      <C>      <C>
(10)     (n)      Cooperation Agreement, dated March 23, 1999 between the
                  Company and AK Almazi Rossii Sakha (certain portions of this
                  agreement have been omitted pursuant to a request for
                  confidential treatment).

(10)     (o)      Processing Agreement, dated as of February 20, 1999,
                  between Pegasus Overseas Ltd. and a wholly-owned subsidiary of
                  General Electric Company (certain portions of this agreement
                  have been omitted pursuant to a request for confidential
                  treatment).

(13)     1999 Annual Report to Security Holders-incorporated herein by
         reference to the 1999 Annual Report to Stockholders to be filed
         with the Commission.

(21)     Subsidiaries

(23)     Consent of Ernst & Young LLP

(27)     Financial Data Schedule

</TABLE>


                                       19


                            STATEMENT OF DIFFERENCES

The registered trademark symbol shall be expressed as........................'r'
The paragraph symbol shall be expressed as...................................[p]
The trademark symbol shall be expressed as..................................'TM'