-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D1uXJOQ0GRlPrBQPu59hdPVF4Jw/bXj+tKCbkmVtr1HSgdQ4ekKkkFVNMLGZLWFB Y2ssPMUJ7erqAzkegD51lg== 0001047469-98-021871.txt : 19980528 0001047469-98-021871.hdr.sgml : 19980528 ACCESSION NUMBER: 0001047469-98-021871 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980527 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEAR STEARNS FUNDS CENTRAL INDEX KEY: 0000931145 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08798 FILM NUMBER: 98632108 BUSINESS ADDRESS: STREET 1: 245 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10167 MAIL ADDRESS: STREET 2: 245 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10167 N-30D 1 N-30D [LOGO] The Bear Stearns Funds 245 PARK AVENUE NEW YORK, NY 10167 1.800.766.4111 Michael Minikes Chairman of the Board Robert S. Reitzes President Peter B. Fox Executive Vice President William J. Montgoris Executive Vice President Peter M. Bren Trustee Alan J. Dixon Trustee John R. McKernan, Jr. Trustee M.B. Oglesby, Jr. Trustee Stephen A. Bornstein Vice President Donalda L. Fordyce Vice President Frank J. Maresca Vice President and Treasurer Ellen T. Arthur Secretary Vincent L. Pereira Assistant Treasurer Christina P. LaMastro Assistant Secretary INVESTMENT ADVISER COUNSEL Bear Stearns Asset Kramer, Levin, Management Inc. Naftalis & Frankel 575 Lexington Avenue 919 Third Avenue New York, NY 10022 New York, NY 10022 SUB-ADVISER DISTRIBUTOR INTERNATIONAL EQUITY Bear, Stearns & Co. Inc. PORTFOLIO 245 Park Avenue Marvin & Palmer New York, NY 10167 Associates, Inc. TRANSFER AND DIVIDEND 1201 N. Market Street DISBURSEMENT AGENT Suite 2300 PFPC Inc. Wilmington, DE 19801 Bellevue Corporate Center ADMINISTRATOR 400 Bellevue Parkway Bear Stearns Funds Wilmington, DE 19809 Management Inc. INDEPENDENT AUDITORS 245 Park Avenue Deloitte & Touche LLP New York, NY 10167 Two World Financial Center CUSTODIAN New York, NY 10281 Custodial Trust Company 101 Carnegie Center Princeton, NJ 08540
This report is submitted for the general information of the shareholders of each Portfolio. It is not authorized for distribution to prospective investors in each Portfolio unless it is preceded or accompanied by a current prospectus which includes details regarding each Portfolio's objectives, policies, sales commissions and other information. Total investment return is based on historical results and is not intended to indicate future performance. The investment return and principal value of an investment in each Portfolio will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. "Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-", and "STARS-Registered Trademark-" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Bear, Stearns & Co. Inc. S&P STARS Portfolio is not sponsored, managed, advised, sold or promoted by Standard & Poor's. BSF-R-015-02 S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio Annual Report March 31, 1998 THE BEAR STEARNS FUNDS S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio LETTER TO SHAREHOLDERS April 22, 1998 Dear Shareholders: We are pleased to present the annual report to shareholders for the S&P STARS Portfolio ("S&P STARS"), The Insiders Select Fund ("Insiders Select"), Large Cap Value Portfolio ("Large Cap"), Small Cap Value Portfolio ("Small Cap"), Focus List Portfolio ("Focus List"), Balanced Portfolio ("Balanced") and International Equity Portfolio ("International Equity") (each a "Portfolio" and collectively the "Portfolios") for the fiscal year ended March 31, 1998. Detailed performance data for each class of shares of each Portfolio can be found in the "Financial Highlights" and in the line graph sections of this report. Data for Focus List, Balanced and International Equity Portfolios cover the period from December 29, 1997 (commencement of operations) through March 31, 1998. During the twelve months ended March 31, 1998, the U.S. equity markets continued their dramatic upward climb. Despite pullbacks in April and August of 1997 and then again in the fall, the major indices rose between 40% and 50% over the period. The Dow Jones Industrial Average and Standard & Poor's 500 Composite Index ("S&P 500 Index") closed the fiscal period just off their twelve-month highs, and both the Russell 2000 Index and the Nasdaq Composite Index closed at new highs. The markets continue to be buoyed by consistent, moderate economic growth, almost nonexistent inflation, low interest rates, and high levels of employment and consumer spending. At the beginning of 1998 we expected the broader market as measured by the S&P 500 Index to rise 5% to 10% for this year, a pace easily surpassed in the first quarter alone. However, given the slowdown in corporate earnings growth expected to result from the financial crisis in Asia, the sharp run-up in stock prices and the high valuations of the major indices -- the S&P 500 Index ended March at 24 times the 1998 consensus earnings estimates -- we expect positive, but more moderate returns from stocks through the end of the year. S&P STARS PORTFOLIO For the fiscal year ended March 31, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of 43.53%.(1) The Portfolio's benchmark, the S&P 500 Index, returned 47.95% for the same period. AN EMPHASIS ON QUALITY GROWTH SECTORS Given concerns that the financial crisis in Southeast Asia would slow economic growth worldwide and that technology companies, with their exposure to the region, were particularly vulnerable, we reduced our weighting in several technology stocks while increasing our exposure to other sectors of the economy. For example, we increased our exposure to less-cyclical quality growth stocks with such additions as Cincinnati Bell, Inc. (4.57% of net assets), The Dial Corp. (2.17%) and Pfizer Inc. (6.51%). Both Pfizer and Monsanto Co. (6.19%), another top holding, have strong product pipelines. Given the improving fundamentals in financial services, the Portfolio has also increased the weighting in this sector. 1 Although earnings from the technology sector are likely to be lackluster, we continue to maintain positions in three premier companies -- Cisco Systems, Inc. (6.38%), Texas Instruments, Inc. (6.31%) and Intel Corp. (6.37%). We believe that the growth of the Internet and new product cycles will eventually contribute to improved earnings and stock prices. We continue to hold several quality growth stocks, including General Electric Co. (4.02%), Time Warner Inc. (2.22%) and Cincinnati Bell. In addition, we hold small positions in cyclical companies such as specialty chemical concerns Crompton & Knowles Corp. (2.29%) and paper-products maker Fort James Corp. (1.92%). We believe that as long as inflation and interest rates remain under control, the market should continue to do well. Although we expect Asia to be a problem in the foreseeable future, we expect any weakness caused in the U.S. economy to be offset by strength in Europe. THE INSIDERS SELECT FUND For the fiscal year ended March 31, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of 46.02%.(2) The Portfolio's benchmark, the S&P MidCap 400 Index, returned 49.02% for the same period. The Fund's performance has been driven in part by outperformance in our consumer cyclical and health-care holdings. We remain positive on these sectors given the current low inflation and low interest-rate environment. In addition, financial services holdings exhibited strength as consolidation in the sector continued. Toward the end of the fiscal period, the Fund had slightly below-market returns in its energy and consumer staples holdings, which, however, comprise a relatively small percentage of the portfolio. Recent additions to the Fund that have performed extremely well include Furniture Brands International, Inc. (3.41% of net assets) and Echlin Inc. (2.50%). In addition, health-care holdings such as Beckman Instruments, Inc. (1.52%) and Pharmacia & Upjohn, Inc. (1.74%) did extremely well. All of these stocks were brought to our attention due to very strong insider buying either late last year or early this year. ON-SITE VISITS CONFIRM INSIDER BUY SIGNALS The decision to buy auto-parts manufacturer Echlin Inc. in late 1997 is a good example of our stock selection process. Our interest in Echlin began when we observed that the CEO and other officers and directors had bought shares after the company adopted an economic value-added program in October 1997 to improve efficiency and increase profitability. The Fund's equity team visited Echlin, confirmed that the company had a strong restructuring plan in place and bought the stock in December 1997. Echlin became a takeover target in February 1998, and the stock price rose. We continue to maintain a defensive posture in the portfolio and are focusing on companies with significant insider activity and below-market valuation multiples. In addition, we will continue to focus on stocks with positive Signal II rankings from CDA/ Investnet as a result of their strong correlation with market outperformance. LARGE CAP VALUE PORTFOLIO For the fiscal year ended March 31, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of 44.59%.(3) The Portfolio's benchmark, the S&P 500 Index, returned 47.95% for the same period. Given our value approach in a market that favored growth stocks, the Portfolio generated very attractive returns during the twelve-month period. Among our best-performing stocks were Xerox Corp. (2.58% of net assets) and United Technologies Corp. (3.16%), after reporting better-than-expected fourth-quarter earnings. Both firms appear to be withstanding the Asian flu and are expected to generate earnings growth well in excess of the market's in 1998. Other holdings that performed well included such recent portfolio additions as McDonald's Corp. (3.28%) and American Greetings Corp. (3.30%). Both companies began 1998 at relative valuations well below historical levels and have secular growth rates well above the overall market's, and we continue to find both stocks attractive. In addition, our holdings in the financial services sector, including The Equitable Companies Inc. (3.00%) and USF&G Corp. (2.26%), continued to perform well. Positions that lagged the market included Philip Morris Cos. Inc. (2.62%) and Wendy's International, Inc. (2.23%). Philip Morris fell in the first quarter of 1998 as hopes for a national tobacco settlement evaporated. Wendy's declined on reduced 1998 2 earnings expectations even though it announced a $200 million-share repurchase program and a higher targeted long-term earnings growth rate. We continue to like both stocks based on their superior growth rates and price earnings ratios ("P/E's") that are significantly below the market's. UNCOVERING VALUE IN A HIGH-PRICED MARKET In a stock market that looks richly priced by historical standards, we were nevertheless able to identify several attractively valued stocks that we expect to perform well over the next few years. Among our new additions were Genuine Parts Co. (2.30%), a leading auto parts distributor, Grainger (W.W.), Inc. (1.27%), a major distributor of maintenance and repair equipment to businesses, and toy-maker Hasbro, Inc. (1.51%), all of which have higher long-term growth rates than the overall market but are trading at significant P/E discounts. At fiscal year-end the Large Cap Value Portfolio had a P/E ratio significantly below the S&P 500 Index's, but with a much higher projected growth rate. While we expect corporate profit growth to slow in 1998 and earnings estimates to trend down throughout the year, we expect the Portfolio's composite earnings and cash flow growth rate to exceed those of the index in 1998. Despite the anticipated slowdown in corporate profit growth, we expect many of our largest holdings to deliver solid, well-above average earnings and cash flow growth in 1998. SMALL CAP VALUE PORTFOLIO* For the fiscal year ended March 31, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of 46.86%.(4) The Portfolio's benchmark, the Russell 2000 Index, returned 42.19% for the same period. Beginning in the fall of 1997, market sentiment, which had favored small-cap issues through late last summer, swung back to large-cap stocks as investors turned to larger, well-known issues given the uncertainties stemming from the Asian crisis. In this environment, we believe that the strong performance of the Small Cap Value Portfolio is attributable to our strict value discipline. During the twelve-month period, we entered new industries with the purchase of Jacor Communications, Inc. (3.53% of net assets), one of the fastest-growing radio broadcasters, and Butler International, Inc. (4.45%), a temporary-help company, both of which illustrate our strategy of seeking out undervalued, high-growth stocks. Both remain among the Portfolio's largest positions. At current market levels, we have tended to increase the weightings of those holdings we believe offer the greatest return potential, particularly when factoring in risk considerations. A FOCUS ON DOMINANT MARKET PLAYERS The performance of a number of our top holdings has been outstanding. Steiner Leisure Ltd. (5.75%), Butler International, Inc., SPS Technologies, Inc. (3.90%) and Furniture Brands International, Inc. (3.94%) have produced significant returns since we acquired them, and we believe they are still undervalued. We continue to focus on industries that are oligopolies and companies with dominant market positions, which protects them from the pricing pressure so prevalent in many sectors of the economy. Given our risk concerns, we have added only a few new names to the Portfolio since the beginning of 1998. For example, we added to our holdings in Global Pharmaceutical Corp.(2.10%) through a convertible preferred offering. While we have not participated in this type of security in the past, we believe the company offers significant stock appreciation potential with minimal risk given its prospects and the structure of the offering. Global is a generic drug manufacturer that focuses on small niche markets with few if any competitors. We believe the company is at an inflection point as new drug offerings are methodically rolled out. We continue to believe that the gap between large- and small-cap returns will narrow, as the more attractive current valuations of smaller companies draw investors' attention. However, with the market continuing to reach new highs, the absolute valuations of many companies concern us. We are not digressing from our value approach and believe we continue to be well positioned to outperform the market. FOCUS LIST PORTFOLIO For the period December 29, 1997 (commencement of operations) through March 31, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of 11.67%.(5) The Portfolio's benchmark, the S&P 500 Index, returned 13.95% for the same period. 3 The Portfolio is designed to mirror, as closely as possible, the stocks on the Bear Stearns Focus List -- typically 20 stocks selected by the Bear Stearns Research Department as its "best stock picks for capital appreciation." In addition, the Portfolio's management team determines the weighting given to any one stock based on its assessment of company and industry trends. A BIAS TOWARD CONSUMER SERVICES As a result of rising personal income, Focus List stocks showed a tilt toward consumer services, such as retailers and media, during the first quarter. For example, we added Chancellor Media Corp. (4.85% of net assets), the radio industry's second-largest broadcaster and the only pure radio play with 99 stations in 17 of the 20 largest radio markets in the U.S. Campbell Soup Co. (4.67%) was added based on recent restructuring and strong earnings growth projections. Some technology stocks were removed from the Portfolio's holdings during the quarter, in part because of earnings disappointments resulting from the problems in Asia. As Corporate America retools for the Year 2000, we see greater potential in computer services companies rather than hardware manufacturers. For this reason, we expect "mission-critical spending" to focus on service-providers in this sector. We continue to be bullish on European multinationals that stand to profit from industry consolidation, particularly as European Monetary Union approaches. An addition this quarter is Vodafone Group plc (4.85%), the largest United Kingdom wireless network operator, which is expected to benefit from increased market penetration. It is also one of the few wireless companies that pays a dividend. AEGON N.V. (4.83%), a leading insurer with headquarters in the Netherlands, remains a holding based on our expectations for profit growth from continuing restructuring in financial services and an increase in retirement savings. With falling prices in commodities, we eliminated our paper position and reduced our oil services holdings. We have kept Cross Timbers Oil Co. (5.22%) due to our confidence in the company's ability to continue its rapid expansion in domestic exploration and production. Crescent Real Estate Equities Co. (4.89%) was added to the Portfolio as investors have become more concerned with yield and recognized that Real Estate Investment Trusts represent one of the few areas of absolute value in the investing marketplace. Crescent owns or has interests in office properties, health-care facilities and hotels, with its office assets in the recovering high-growth areas of Dallas, Houston and Denver. We will continue to look for companies that have expanding profit margins and restructuring potential. With corporate earnings squeezed by competitive pressures, we are looking for companies with strong sales power that can sustain profit margin growth. BALANCED PORTFOLIO For the period December 29, 1997 (commencement of operations) through March 31, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of 8.04%.(6) The Portfolio's benchmark, the Lipper Balanced Fund Index, returned 7.90% for the same period. The first quarter of 1998 was marked by unexpectedly strong returns in the U.S. stock market and returns that approximated the coupons from bonds -- resulting in a solid first quarter for Balanced. The Portfolio's long-term objective is to produce good growth of principal with less volatility than a pure stock portfolio through investments in high-quality fixed income securities. Currently, the Portfolio's allocation is approximately 50% in common stocks and 50% in bonds and cash equivalents. The Portfolio's best-performing stocks included Xerox Corp. (1.40% of net assets) and United Technologies Corp. (1.37%), after the companies reported better-than-expected fourth-quarter earnings. Other holdings with strong performance included McDonald's Corp. (1.47%), and American Greetings Corp. (1.33%). Both companies began the year at relative valuations well below historical levels and have secular growth rates well above that of the overall market. Positions that lagged the market included Philip Morris Cos. Inc. (2.04%) and Wendy's International, Inc. (1.36%). Philip Morris stock fell as hopes for a national tobacco settlement evaporated near quarter-end. Wendy's declined on reduced 1998 earnings expectations despite announcing a $200 million-share repurchase program and higher long-term earnings growth targets. We continue to like both stocks based on their superior growth rates and P/Es that are significantly below the market's. 4 A FOCUS ON DEFENSIVE ISSUES In general, stock purchases have been concentrated in companies that we believe are less sensitive to international developments and the vagaries of the domestic economy, such as H&R Block, Inc. (1.25%), the tax-preparer, Genuine Parts Co. (1.30%), a leading auto parts distributor, and Grainger (W.W.), Inc. (0.90%), a major distributor of maintenance and repair equipment to businesses. Each company derives its revenues primarily from U.S. sources and has produced historically steady earnings growth, positioning them to perform well in a slower growth environment. Our fixed income strategy will continue to be to produce a good cash flow that will enable us to take advantage of investment opportunities as they arise. We have implemented this strategy with a proportionately large position in government-backed mortgage securities, which pay not only interest, but a small amount of principal. We expect to continue to overweight corporate bonds rated A and better, since their spreads narrowed considerably to Treasuries during the quarter. INTERNATIONAL EQUITY PORTFOLIO** For the period December 29, 1997 (commencement of operations) through March 31, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of 14.75%.(7) The Portfolio's benchmark, the Morgan Stanley Capital International Europe, Australia, Far East (EAFE) Index returned 14.29% for the same period. The Portfolio is designed for capital appreciation through equity investments in companies based outside the United States. The Portfolio's strategy is to focus, first, on countries with the best stock market trends and, second, on companies with strong fundamental characteristics within those countries. Bear Stearns Asset Management Inc., the Portfolio's investment adviser, has contracted with Marvin & Palmer Associates, Inc. ("Marvin & Palmer") to be the Portfolio's sub-adviser responsible for the day-to-day management of the Portfolio. Marvin & Palmer has been managing international assets since 1986 and its client list includes several Fortune 500 companies. Its assets under management as of March 31, 1998, were $5.6 billion. RELATIVE STRENGTH IN EUROPE During the first three months of 1998, the Portfolio's investment focus was on Europe, which we believe to be the region with the greatest return potential at this time. Opportunities are being created by consolidation and new product launches in both financial services and pharmaceuticals and by rapid growth in certain telecommunications sectors. Competition is being driven by the prospect of the European Monetary Union ("EMU"), which is scheduled to take effect next January. Because the financial services industry is still in the early stages of a U.S.-like transformation, we see tremendous potential in this arena. For example, Europe is at the beginning of what we expect to be a surge of mutual fund growth as governments cut back social security programs and individuals start to build savings for retirement. Among the Portfolio's holdings, Credito Italiano S.p.A. (2.02% of net assets), perhaps the best managed bank in Italy, has been a beneficiary of this development. Credit Suisse Group (1.73%) has a strong global presence and is one of the few European financial services concerns with a significant presence in the U.S. Deutsche Bank AG (1.49%), a leader in Germany, is also, we believe, a likely merger candidate. We expect further consolidation in pharmaceuticals and continuing developments in the product cycle. SmithKline Beecham plc (2.27%), for example, one of the Portfolio's top holdings, has a very strong product pipeline, very few patent expirations and is a leader in the field of gene-mapping -- remaining, we believe, a very attractive merger candidate despite the failure of its proposed merger with Glaxo Wellcome plc (1.80%) last year. In telecommunications, Mannesmann AG (2.69%) in Germany, Vodafone Group plc (1.94%) in the United Kingdom and Telecom Italia Mobile S.p.A. (1.41%) in Italy are benefiting from strong subscriber growth in the cellular telephone market. Cellular usage in Europe is outpacing that in the U.S. thanks to a unified digitally based standard, which is technically superior to the competing systems within the U.S. Despite the recent rebound in some Asian markets, we believe it is premature to increase our investments there, particularly since Japan, the world's second-largest economy, is faced with the monumental task of restructuring the way business in general is conducted if it is to take meaningful steps to avoid recession. We are comfortable with our overweighting in Europe and see the EMU as a major catalyst for the continuing implementation of efficiency measures by individual companies and economic growth in general. Given our outlook for continued dollar strength, the Portfolio was 50% hedged at quarter-end. A key part of our strategy is to preserve returns in the local currency and not lose value when these returns are converted into dollars. 5 In conclusion, we value the confidence you have placed in us and would be pleased to address any questions or concerns you may have. Please feel free to call us at 1-800-766-4111. Sincerely, /s/ Robert S. Reitzes Robert S. Reitzes President The Bear Stearns Funds - ------- * Small-cap funds typically carry additional risks, since smaller companies generally have a higher risk of failure than well-established larger companies. Historically, stocks of smaller companies have experienced a greater degree of market volatility than stocks on average. **International investing involves risks such as currency exchange-rate volatility, possible political, social, or economic instability and differences in taxation and other financial standards. (1) For the fiscal year ended March 31, 1998, the Portfolio's Class A shares had a total return of 36.75%, including a 4.75% maximum sales charge, which was in effect at the beginning of the period. (2) For the fiscal year ended March 31, 1998, the Portfolio's Class A shares had a total return of 39.06%, including a 4.75% maximum sales charge, which was in effect at the beginning of the period. (3) For the fiscal year ended March 31, 1998, the Portfolio's Class A shares had a total return of 37.69%, including a 4.75% maximum sales charge, which was in effect at the beginning of the period. (4) For the fiscal year ended March 31, 1998, the Portfolio's Class A shares had a total return of 39.90%, including a 4.75% maximum sales charge, which was in effect at the beginning of the period. (5) For the period December 29, 1997 (commencement of operations) through March 31, 1998, the Portfolio's Class A shares had a total return of 11.67%, including the initial 5.50% maximum sales charge. (6) For the period December 29, 1997 (commencement of operations) through March 31, 1998, the Portfolio's Class A shares had a total return of 2.09%, including the initial 5.50% maximum sales charge. (7) For the period December 29, 1997 (commencement of operations) through March 31, 1998, the Portfolio's Class A shares had a total return of 8.43%, including the initial 5.50% maximum sales charge. Bear Stearns Asset Management Inc. waived its advisory fee and agreed voluntarily to reimburse a portion of each Portfolio's operating expenses, as necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. 6 THE BEAR STEARNS FUNDS S&P STARS Portfolio COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(3) VS. VARIOUS INDICES EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
S&P STARS PORTFOLIO Class A shares Class C shares S&P 500 Index Apr. 5, 1995 $9,525.00 $10,000.00 $10,000.00 $10,571.43 $11,083.33 $10,848.00 Sept. 30, 1995 $11,446.00 $11,975.00 $11,709.00 $11,644.82 $12,170.34 $12,411.00 Mar. 31, 1996 $12,162.00 $12,591.00 $13,074.00 $12,304.88 $12,836.51 $13,659.00 Sept. 30, 1996 $13,287.00 $13,835.76 $14,076.00 $14,878.37 $15,471.38 $15,247.00 Mar. 31, 1997 $14,208.88 $14,763.54 $15,653.00 $16,411.13 $17,034.15 $18,384.00 Sept. 30, 1997 $19,353.33 $20,058.56 $19,757.00 $17,555.43 $18,171.88 $20,324.00 Mar. 31, 1998 $20,394.52 $21,081.93 $23,159.00 Past performance is not predictive of future performance. S&P STARS PORTFOLIO Consumer Price Index Apr. 5, 1995 $10,000.00 $10,079.00 Sept. 30, 1995 $10,125.58 $10,185.06 Mar. 31, 1996 $10,284.00 $10,356.91 Sept. 30, 1996 $10,436.22 $10,522.14 Mar. 31, 1997 $10,568.41 $10,594.84 Sept. 30, 1997 $10,660.94 $10,700.59 Mar. 31, 1998 $10,707.20 Past performance is not predictive of future performance.
TOTAL RETURNS ONE YEAR ENDED AVERAGE MARCH 31, 1998 ANNUAL(4) ------------------- ------------------- S&P STARS Portfolio(2) Class A shares(5)................................... 36.75% 26.90% Class C shares...................................... 42.80 28.31 Class Y shares(3)................................... 44.22 26.06 S&P 500 Index(1)........................................ 47.95 32.41 Consumer Price Index(1)................................. 1.31 2.31
- ---------- (1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio and reflects all Portfolio expenses. Investors should note that the Portfolio is a professionally managed mutual fund while the indices are unmanaged, do not incur sales charges or expenses and are not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed voluntarily to reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements.Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The return of Class Y shares (for which August 7, 1995 was the initial public offering date) would have been higher than Class A and C shares if operations were commenced on the same day. The higher return is due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) For the period of April 5, 1995 (commencement of investment operations) through March 31, 1998 for Class A and C shares. (5) Reflects the initial maximum sales charge in effect at the beginning of the period (4.75%). Without the applicable sales charge, the total returns would have been 43.53% and 28.98%, respectively, for each period shown. CDSC -- Contingent Deferred Sales Charge. 7 THE BEAR STEARNS FUNDS The Insiders Select Fund COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(3) VS. VARIOUS INDICES EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
THE INSIDERS SELECT FUND Class A shares Class C shares S&P 500 Index (6) June 16, 1995 $9,525.00 $10,000.00 $10,000.00 $9,579.40 $10,066.67 $10,150.00 Sept. 30, 1995 $10,468.20 $10,975.00 $10,956.00 $10,801.00 $11,316.67 $11,613.00 Mar. 31, 1996 $11,118.70 $11,633.30 $12,234.00 $11,682.50 $12,200.00 $12,781.00 Sept. 30, 1996 $12,206.70 $12,733.33 $13,171.00 $13,109.80 $13,662.60 $14,267.00 Mar. 31, 1997 $13,155.00 $13,691.00 $14,647.00 $15,194.10 $15,799.50 $17,202.00 Sept. 30, 1997 $16,755.00 $17,387.90 $18,487.00 $16,995.90 $17,614.80 $19,017.00 Mar. 31, 1998 $19,209.00 $19,874.30 $21,670.00 Past performance is not predictive of future performance. THE INSIDERS SELECT FUND S&P MidCap 400 Index (6) Consumer Price Index June 16, 1995 $10,000.00 $10,000.00 $10,134.00 $10,079.00 Sept. 30, 1995 $11,123.00 $10,126.00 $11,280.00 $10,178.00 Mar. 31, 1996 $11,974.00 $10,284.00 $12,319.00 $10,300.00 Sept. 30, 1996 $12,681.00 $10,361.00 $13,448.00 $10,475.00 Mar. 31, 1997 $13,249.00 $10,513.00 $15,197.00 $10,565.00 Sept. 30, 1997 $17,639.00 $10,591.00 $17,785.00 $10,644.31 Mar. 31, 1998 $19,743.00 $10,650.89 Past performance is not predictive of future performance.
TOTAL RETURNS ONE YEAR ENDED AVERAGE MARCH 31, 1998 ANNUAL(4) ----------------- ----------------- The Insiders Select Fund(2) Class A shares(5).................... 39.06% 26.31% Class C shares....................... 45.17 27.86 Class Y shares(3).................... 46.68 28.76 S&P 500 Index(1)(6)...................... 47.95 31.88 S&P MidCap 400 Index(1)(6)............... 49.02 27.56 Consumer Price Index(1).................. 1.31 2.28
- ---------- (1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio and reflects all Portfolio expenses. Investors should note that the Portfolio is a professionally managed mutual fund while the indices are unmanaged, do not incur sales charges or expenses and are not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed voluntarily to reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The return of Class Y shares (for which June 20, 1995 was the initial public offering date) would have been higher than Class A and C shares if operations were commenced on the same day. The higher return is due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) For the period of June 16, 1995 (commencement of investment operations) through March 31, 1998 for Class A and C shares. (5) Reflects the initial maximum sales charge in effect at the beginning of the period (4.75%). Without the applicable sales charge, the total returns would have been 46.02% and 28.54%, respectively, for each period shown. (6) Effective February 1, 1998, the Board of Trustees approved the change of the Portfolio's performance benchmark from the S&P 500 Index to the S&P MidCap 400 Index because the Board and Bear Stearns Asset Management Inc. believe that the S&P MidCap 400 Index is more reflective of the management of the Portfolio than the S&P 500 Index. CDSC -- Contingent Deferred Sales Charge. 8 THE BEAR STEARNS FUNDS Large Cap Value Portfolio COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(3) VS. VARIOUS INDICES EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
LARGE CAP VALUE PORTFOLIO Class A shares Class C shares S&P 500 Index Apr. 4, 1995 $9,525.00 $10,000.00 $10,000.00 $10,191.75 $10,683.33 $10,800.00 Sept. 30, 1995 $11,295.06 $11,825.00 $11,700.00 $11,915.10 $12,462.52 $12,375.00 Mar. 31, 1996 $12,034.41 $12,570.89 $13,075.00 $12,042.36 $12,562.55 $13,150.00 Sept. 30, 1996 $12,257.12 $12,770.96 $14,095.00 $13,626.63 $14,178.46 $15,400.00 Mar. 31, 1997 $13,892.10 $14,440.30 $15,763.00 $16,335.50 $16,955.40 $18,600.00 Sept. 30, 1997 $17,524.90 $18,162.20 $19,895.00 $17,858.50 $18,481.30 $20,467.00 Mar. 31, 1998 $20,008.60 $20,785.20 $23,321.00 Past performance is not predictive of future performance. LARGE CAP VALUE PORTFOLIO Consumer Price Index Apr. 4, 1995 $10,000.00 $10,079.31 Sept. 30, 1995 $10,125.58 $10,185.06 Mar. 31, 1996 $10,284.20 $10,356.91 Sept. 30, 1996 $10,436.22 $10,522.14 Mar. 31, 1997 $10,568.41 $10,594.84 Sept. 30, 1997 $10,660.94 $10,700.59 Mar. 31, 1998 $10,707.20 Past performance is not predictive of future performance.
TOTAL RETURNS ONE YEAR ENDED AVERAGE MARCH 31, 1998 ANNUAL(4) ------------------- ------------------- Large Cap Value Portfolio(2) Class A shares(5)................................... 37.69% 26.20% Class C shares...................................... 43.94 27.65 Class Y shares(3)................................... 45.27 26.75 S&P 500 Index(1)........................................ 47.95 32.65 Consumer Price Index(1)................................. 1.31 2.31
- ---------- (1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio and reflects all Portfolio expenses. Investors should note that the Portfolio is a professionally managed mutual fund while the indices are unmanaged, do not incur sales charges or expenses and are not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed voluntarily to reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The return of Class Y shares (for which September 11, 1995 was the initial public offering date) would have been higher than Class A and C shares if operations were commenced on the same day. The higher return is due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) For the period of April 4, 1995 (commencement of investment operations) through March 31, 1998 for Class A and C shares. (5) Reflects the initial maximum sales charge in effect at the beginning of the period (4.75%). Without the applicable sales charge, the total returns would have been 44.59% and 28.27%, respectively, for each period shown. CDSC -- Contingent Deferred Sales Charge. 9 THE BEAR STEARNS FUNDS Small Cap Value Portfolio COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(3) VS. VARIOUS INDICES EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
SMALL CAP VALUE PORTFOLIO Class A shares Class C shares Russell 2000 Index Apr. 3, 1995 $9,525.00 $10,000.00 $10,000.00 $10,342.56 $10,841.67 $10,901.15 Sept. 30, 1995 $12,057.06 $12,625.00 $11,965.07 $12,127.79 $12,673.20 $12,224.03 Mar. 31, 1996 $12,797.08 $13,358.47 $12,837.62 $14,240.48 $14,847.44 $13,511.36 Sept. 30, 1996 $14,248.54 $14,822.06 $13,529.58 $14,001.67 $14,552.87 $14,248.44 Mar. 31, 1997 $14,294.60 $14,844.60 $13,511.85 $16,600.07 $16,433.30 $15,696.89 Sept. 30, 1997 $18,669.70 $19,337.30 $18,027.72 $18,570.10 $19,212.30 $17,416.11 Mar. 31, 1998 $20,993.40 $21,687.80 $19,212.59 Past performance is not predictive of future performance. SMALL CAP VALUE PORTFOLIO Consumer Price Index Apr. 3, 1995 $10,000.00 $10,079.00 Sept. 30, 1995 $10,126.00 $10,185.00 Mar. 31, 1996 $10,284.00 $10,357.00 Sept. 30, 1996 $10,436.00 $10,522.00 Mar. 31, 1997 $10,568.41 $10,594.84 Sept. 30, 1997 $10,660.94 $10,700.59 Mar. 31, 1998 $10,707.20 Past performance is not predictive of future performance.
TOTAL RETURNS ONE YEAR ENDED AVERAGE MARCH 31, 1998 ANNUAL(4) ----------------- ----------------- Small Cap Value Portfolio(2) Class A shares(5).................... 39.90% 28.07% Class C shares....................... 46.10 29.47 Class Y shares(3).................... 47.54 29.36 Russell 2000 Index(1).................... 42.19 24.34 Consumer Price Index(1).................. 1.31 2.31
- ---------- (1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio and reflects all portfolio expenses. Investors should note that the Portfolio is a professionally managed mutual fund while the indices are unmanaged, do not incur sales charges or expenses and are not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed voluntarily to reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The return of Class Y shares (for which June 22, 1995 was the initial public offering date) would have been higher than Class A and C shares if operations were commenced on the same day. The higher return is due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) For the period of April 3, 1995 (commencement of investment operations) through March 31, 1998 for Class A and C shares. (5) Reflects the initial maximum sales charge in effect at the beginning of the period (4.75%). Without the applicable sales charge, the total returns would have been 46.86% and 30.18%, respectively, for each period shown. CDSC -- Contingent Deferred Sales Charge. 10 THE BEAR STEARNS FUNDS S&P STARS Portfolio MARCH 31, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Electronics....................................... 14.70 2. Telecommunications................................ 11.40 3. Drugs & Hospital Supplies......................... 11.21 4. Banks............................................. 8.38 5. Networking Products............................... 6.73 6. Diversified Operations............................ 6.70 7. Chemicals - Diversified........................... 6.19 8. Computer Software................................. 5.14 9. Retailing - Grocery Stores........................ 3.32 10. Multimedia........................................ 3.16
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Pfizer Inc................................... Drugs & Hospital Supplies 6.51 2. Cisco Systems, Inc........................... Networking Products 6.38 3. Intel Corp................................... Electronics 6.37 4. Texas Intruments, Inc........................ Electronics 6.31 5. Monsanto Co.................................. Chemicals - Diversified 6.19 6. Cincinnati Bell, Inc......................... Telecommunications 4.57 7. Computer Associates International, Inc....... Computer Software 4.44 8. General Electric Co.......................... Diversified Operations 4.02 9. Warner-Lambert Co............................ Drugs & Hospital Supplies 3.97 10. Bank of New York Co., Inc. (The)............. Banks 3.81
- ------- * The Portfolio's holdings will change over time. 11 THE BEAR STEARNS FUNDS The Insiders Select Fund MARCH 31, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Life/Health Insurance............................. 9.90 2. Financial Services................................ 7.87 3. Telecommunications................................ 6.91 4. Drugs & Hospital Supplies......................... 5.98 5. Credit & Finance.................................. 4.96 6. Oil & Natural Gas................................. 3.72 7. Aerospace & Defense............................... 3.63 8. Home Furnishings.................................. 3.41 9. Advertising Agencies.............................. 3.07 10. Automotive Parts & Equipment...................... 3.01
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Furniture Brands International, Inc.......... Home Furnishings 3.41 2. Travelers Group, Inc......................... Credit & Finance 3.34 3. WPP Group plc - ADR.......................... Advertising Agencies 3.07 4. American International Group, Inc............ Life/Health Insurance 2.90 5. American Greetings Corp...................... Consumer Products - Miscellaneous 2.80 6. Penncorp Financial Group, Inc................ Life/Health Insurance 2.68 7. Johnson & Johnson............................ Drugs & Hospital Supplies 2.57 8. H&R Block, Inc............................... Financial Services 2.52 9. Mueller Industries, Inc...................... Non-Ferrous Metals 2.52 10. Echlin Inc................................... Automotive Parts & Equipment 2.50
- ------- * The Portfolio's holdings will change over time. 12 THE BEAR STEARNS FUNDS Large Cap Value Portfolio MARCH 31, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Diversified Operations............................ 10.39 2. Life/Health Insurance............................. 9.67 3. Credit & Finance.................................. 6.18 4. Restaurants....................................... 5.50 5. Automobiles....................................... 5.35 6. Automotive Parts & Equipment...................... 5.25 7. Building & Construction Products.................. 4.72 8. Drugs & Hospital Supplies......................... 4.12 9. Banks............................................. 3.64 10. Oil & Natural Gas................................. 3.57
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Bank of New York Co., Inc. (The)............. Banks 3.64 2. Fannie Mae................................... Credit & Finance 3.33 3. American Greetings Corp...................... Consumer Products - Miscellaneous 3.30 4. McDonald's Corp.............................. Restaurants 3.28 5. Ford Motor Co................................ Automobiles 3.23 6. United Technologies Corp. ................... Aerospace & Defense 3.16 7. Raychem Corp. ............................... Diversified Operations 3.16 8. H&R Block, Inc............................... Financial Services 3.16 9. J.C. Penny Co., Inc.......................... Retailing - Department Stores 3.09 10. Viad Corp.................................... Diversifed Operations 3.06
- ------- * The Portfolio's holdings will change over time. 13 THE BEAR STEARNS FUNDS Small Cap Value Portfolio MARCH 31, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Diversified Operations............................ 7.02 2. Commercial Services............................... 6.91 3. Home Furnishings.................................. 6.56 4. Rental/Auto Equipment............................. 6.03 5. Human Resources................................... 4.45 6. Financial Services................................ 4.43 7. Retail - Restaurants.............................. 4.29 8. Non-Ferrous Metals................................ 4.28 9. Building & Housing................................ 4.19 10. Commercial Printing............................... 3.98
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Steiner Leisure Ltd.......................... Commercial Services 5.75 2. Butler International, Inc.................... Human Resources 4.45 3. Bowne & Co., Inc............................. Commercial Printing 3.98 4. Furniture Brands International, Inc.......... Home Furnishings 3.94 5. SPS Technologies, Inc........................ Diversified Operations 3.90 6. Jacor Communications, Inc.................... Radio 3.53 7. Universal Stainless & Alloy Products, Inc.... Steel 3.46 8. Data Transmission Network Corp............... Communications 3.46 9. Giant Cement Holding, Inc.................... Building & Housing 3.43 10. Budget Group, Inc., Class A.................. Rental/Auto Equipment 3.41
- ------- * The Portfolio's holdings will change over time. 14 THE BEAR STEARNS FUNDS Focus List Portfolio MARCH 31, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Oil & Gas Exploration & Production................ 5.22 2. Satellite Broadcasting & Communications........... 5.11 3. Real Estate Investment Trust...................... 4.89 4. Broadcasting/Cable................................ 4.85 5. European Telecommunication Services............... 4.85 6. Chemicals......................................... 4.84 7. Broadcasting...................................... 4.84 8. Auto & Auto Parts................................. 4.84 9. Insurance......................................... 4.83 10. Telecommunication Services........................ 4.79
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - -------------------------------------------- ---------------------------------------- ------------- 1. Cross Timbers Oil Co.................... Oil & Gas Exploration & Production 5.22 2. Orbital Sciences Corp................... Satellite Broadcasting & Communications 5.11 3. Crescent Real Estate Equities Co........ Real Estate Investment Trust 4.89 4. Chancellor Media Corp................... Broadcasting/Cable 4.85 5. Vodafone Group plc - ADR................ European Telecommunication Services 4.85 6. Crompton & Knowles Corp................. Chemicals 4.84 7. Time Warner Inc......................... Broadcasting 4.84 8. Citation Corp........................... Auto & Auto Parts 4.84 9. AEGON N.V............................... Insurance 4.83 10. Cincinnati Bell, Inc.................... Telecommunication Services 4.79
- ------- * The Portfolio's holdings will change over time. 15 THE BEAR STEARNS FUNDS Balanced Portfolio MARCH 31, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP INDUSTRY WEIGHTINGS EQUITY - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Diversified Operations............................ 6.40 2. Life/Health Insurance............................. 4.43 3. Financial Services................................ 3.80 4. Drugs & Hospital Supplies......................... 3.47 5. Restaurants....................................... 2.83 LONG-TERM DEBT - --------------------------------------------------------------------- 1. U.S. Government Agency Obligations................ 18.95 2. U.S. Government Obligations....................... 18.21 3. Corporate Obligations............................. 11.56
- -------------------------------------------------------------------------------- TOP FIVE HOLDINGS* EQUITY - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ---------- 1. General Electric Co.......................... Diversified Operations 1.51 2. Viad Corp.................................... Diversified Operations 1.48 3. Texaco, Inc.................................. Oil & Natural Gas 1.47 4. Ford Motor Co................................ Automobiles 1.47 5. McDonald's Corp.............................. Restaurants 1.47 LONG-TERM DEBT - ------------------------------------------------------------------------------------------------------- 1. U.S. Treasury Notes.......................... U.S. Government Obligations 18.21 2. Government National Mortgage Association..... U.S. Government Agency Obligations 8.89 3. Federal Home Loan Mortgage Corporation....... U.S. Government Agency Obligations 5.63 4. Federal National Mortgage Association........ U.S. Government Agency Obligations 4.43 5. NationsBank Corp. ........................... Corporate Obligations 2.26
- ------- * The Portfolio's holdings will change over time. 16 THE BEAR STEARNS FUNDS International Equity Portfolio MARCH 31, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Medical - Drugs................................... 13.34 2. Multi-line Insurance.............................. 10.31 3. Money Center Banks................................ 8.80 4. Commercial Banks - Europe......................... 4.94 5. Computer Services................................. 4.51 6. Food, Miscellaneous/Diversified................... 3.81 7. Cellular Telecommunications....................... 3.35 8. Telephone - Integrated............................ 3.14 9. Consumer Products - Miscellaneous................. 2.97 10. Telecommunication Equipment....................... 2.71
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Unilever..................................... Consumer Products - Miscellaneous 2.97 2. Mannesmann AG................................ Machinery - General Industry 2.69 3. Allianz AG................................... Multi-line Insurance 2.30 4. SmithKline Beecham plc....................... Medical - Drugs 2.27 5. Credito Italiano S.p.A....................... Commercial Banks - Europe 2.02 6. Vodafone Group plc ADR....................... Cellular Telecommunications 1.94 7. Logica plc................................... Computer Services 1.92 8. AXA.......................................... Multi-line Insurance 1.91 9. Banco Popular Espanol, SA.................... Commercial Banks - Europe 1.80 10. Glaxo Wellcome plc........................... Medical - Drugs 1.80
- ------- * The Portfolio's holdings will change over time. 17 THE BEAR STEARNS FUNDS S&P STARS Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------ MARKET SHARES+ VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 99.37% BANKS - 8.38% 130,000 Bank of New York Co., Inc. (The) ............. $ 8,165,625 50,000 Citicorp ..................................... 7,100,000 37,000 NationsBank Corp. ............................ 2,698,687 --------------- 17,964,312 --------------- CHEMICALS - DIVERSIFIED - 6.19% 255,000 Monsanto Co. ................................. 13,260,000 --------------- CHEMICALS - SPECIALTY - 2.29% 170,000 Crompton & Knowles Corp.+++ .................. 4,919,375 --------------- COMPUTER SERVICES - 0.87% 40,000 Sterling Commerce, Inc.*+++ .................. 1,855,000 --------------- COMPUTER SOFTWARE - 5.14% 165,000 Computer Associates International, Inc. ...... 9,528,750 100,000 Summit Design, Inc.*++++ ..................... 1,487,500 --------------- 11,016,250 --------------- COMPUTERS - MEMORY DEVICES - 2.47% 140,000 EMC Corp.* ................................... 5,293,750 --------------- COSMETICS & TOILETRIES - 2.02% 50,000 Colgate-Palmolive Co.+++ ..................... 4,331,250 --------------- DIVERSIFIED OPERATIONS - 6.70% 100,000 General Electric Co. ......................... 8,618,750 105,000 Tyco International Ltd. ...................... 5,735,625 --------------- 14,354,375 --------------- DRUGS & HOSPITAL SUPPLIES - 11.21% 15,000 Bristol-Myers Squibb Co. ..................... 1,564,687 140,000 Pfizer Inc. .................................. 13,956,250 50,000 Warner-Lambert Co.+++ ........................ 8,515,625 --------------- 24,036,562 --------------- - ------------------------------------------------------------------------------ MARKET SHARES+ VALUE - ------------------------------------------------------------------------------ ELECTRONICS - 14.70% 130,000 Analog Devices, Inc.* ........................ $ 4,322,500 175,000 Intel Corp.+++ ............................... 13,660,937 250,000 Texas Instruments, Inc.+++ ................... 13,531,250 --------------- 31,514,687 --------------- FUNERAL SERVICES & RELATED ITEMS - 2.18% 185,000 Loewen Group, Inc. (The) ..................... 4,671,250 --------------- HOTELS & MOTELS - 0.44% 50,000 Host Marriott Corp. .......................... 946,875 --------------- HOUSEHOLD PRODUCTS - 2.17% 194,000 Dial Corp. (The) ............................. 4,643,875 --------------- INVESTMENT MANAGMENT/ADVISOR SERVICE - 2.47% 100,000 Franklin Resources, Inc. ..................... 5,300,000 --------------- LIFE/HEALTH INSURANCE - 1.98% 75,000 Conseco, Inc. ................................ 4,246,875 --------------- MULTIMEDIA - 3.16% 75,000 News Corp. Ltd. (The) ........................ 2,020,313 66,000 Time Warner Inc. ............................. 4,752,000 --------------- 6,772,313 --------------- NETWORKING PRODUCTS - 6.73% 40,000 Adaptec, Inc.*++ ............................. 785,000 200,000 Cisco Systems, Inc.* ......................... 13,675,000 --------------- 14,460,000 --------------- OIL & GAS DRILLING - 1.15% 100,000 Global Marine Inc.* .......................... 2,475,000 --------------- PAPER & PAPER RELATED PRODUCTS - 1.92% 90,000 Fort James Corp. ............................. 4,123,125 --------------- RETAILING - DEPARTMENT STORES - 1.24% 35,000 J.C. Penney Co., Inc. ........................ 2,649,063 ---------------
The accompanying notes are an integral part of the financial statements. 18 THE BEAR STEARNS FUNDS S&P STARS Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------ MARKET SHARES+ VALUE - ------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) RETAILING - GROCERY STORES - 3.32% 50,000 Kroger Co.* .................................. $ 2,309,375 130,000 Safeway Inc.* ................................ 4,801,875 --------------- 7,111,250 --------------- RETAILING - RESTAURANTS - 0.09% 10,000 Consolidated Products Inc.* .................. 192,500 --------------- TELECOMMUNICATIONS - 11.40% 70,000 AirTouch Communications, Inc.* ............... 3,425,625 90,000 Alcatel Alsthom ADR .......................... 3,420,000 275,000 Cincinnati Bell, Inc. ........................ 9,796,875 128,300 DSP Communications, Inc.*++++ ................ 2,189,118 130,000 WorldCom, Inc.* .............................. 5,598,125 --------------- 24,429,743 --------------- TOYS - 1.15% 70,000 Hasbro, Inc.++ ............................... 2,471,875 --------------- Total Common Stocks (cost - $173,282,914) ...................... 213,039,305 --------------- - ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------ SHORT-TERM INVESTMENT -- 0.82% INVESTMENT COMPANY - 0.82% 1,751,468 The Milestone Funds Treasury Obligations Portfolio, Institutional Shares**++++ (cost - $1,751,468) .............................. $ 1,751,468 --------------- Total Investments -- 100.19% (cost - $175,034,382) ...................... 214,790,773 Liabilities in excess of other assets -- (0.19)% .......................... (417,845) --------------- Net Assets -- 100.00% ........................ $ 214,372,928 --------------- ---------------
- --------- + Unless otherwise indicated all common stocks are ranked five stars. ++ Currently ranked three stars. +++ Currently ranked four stars. ++++ Not ranked by STARS. * Non-income producing security. ** Money market fund. S&P STARS RANKINGS: Five stars - Buy - Expected to be among the best performers over the next twelve months and to rise in price. Four stars - Accumulate - Expected to be an above-average performer. Three stars - Hold - Expected to be an average performer. Two stars - Avoid - Expected to be a below average performer. One star - Sell - Expected to be a well-below-average performer and to fall in price. The accompanying notes are an integral part of the financial statements. 19 THE BEAR STEARNS FUNDS The Insiders Select Fund PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 87.76% ADVERTISING AGENCIES - 3.07% 20,000 WPP Group plc - ADR .............................. $ 1,160,000 ----------- AEROSPACE & DEFENSE - 3.63% 11,600 Boeing Co. (The) ................................. 604,650 8,300 United Technologies Corp. ........................ 766,194 ----------- 1,370,844 ----------- AUTOMOTIVE PARTS & EQUIPMENT - 3.01% 18,000 Echlin Inc. ...................................... 943,875 3,500 TRW Inc. ......................................... 192,937 ----------- 1,136,812 ----------- AVIATION PARTS - 1.99% 50,000 Aviall, Inc.* .................................... 750,000 ----------- BANKS - 2.88% 19,000 City National Corp. .............................. 722,000 7,250 Summit Bancorp ................................... 362,953 ----------- 1,084,953 ----------- BUILDING & CONSTRUCTION PRODUCTS - 2.07% 9,000 Armstrong World Industries, Inc. ................. 779,062 ----------- COMPUTERS & OFFICE EQUIPMENT - 2.00% 15,000 Pitney Bowes, Inc. ............................... 752,812 ----------- CONSUMER PRODUCTS - MISCELLANEOUS - 2.80% 23,000 American Greetings Corp. ......................... 1,058,000 ----------- CREDIT & FINANCE - 4.96% 14,000 SLM Holding Corp. ................................ 610,750 21,000 Travelers Group, Inc. ............................ 1,260,000 ----------- 1,870,750 ----------- DIVERSIFIED OPERATIONS - 1.41% 12,000 Corning Inc. ..................................... 531,000 ----------- - ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------- DRUGS & HOSPITAL SUPPLIES - 5.98% 8,400 Abbott Laboratories .............................. $ 632,625 13,200 Johnson & Johnson ................................ 967,725 15,000 Pharmacia & Upjohn, Inc. ......................... 656,250 ----------- 2,256,600 ----------- ELECTRONICS - 1.66% 11,600 Texas Instruments, Inc. .......................... 627,850 ----------- ENTERTAINMENT & LEISURE - 0.71% 7,700 Brunswick Corp. .................................. 268,537 ----------- FINANCIAL SERVICES - 7.87% 7,200 American Express Co. ............................. 661,050 20,000 H&R Block, Inc. .................................. 951,250 9,735 Morgan Stanley, Dean Witter, Discover and Co. .... 709,438 16,100 PaineWebber Group Inc. ........................... 646,013 ----------- 2,967,751 ----------- FOOD & BEVERAGE - 1.63% 12,700 Dole Food Co., Inc. .............................. 614,363 ----------- FUNERAL SERVICES & RELATED ITEMS - 1.34% 20,000 Loewen Group, Inc. (The) ......................... 505,000 ----------- GOLF - 2.31% 30,000 Callaway Golf Co. ................................ 870,000 ----------- HOME FURNISHINGS - 3.41% 40,000 Furniture Brands International, Inc.* ............ 1,287,500 ----------- HOUSEHOLD PRODUCTS - 2.18% 34,400 Dial Corp. (The) ................................. 823,450 ----------- LIFE/HEALTH INSURANCE - 9.90% 8,700 American International Group, Inc. ............... 1,095,656 10,000 Conseco Inc. ..................................... 566,250 8,500 Equitable Companies Inc. (The) ................... 479,719 35,000 Penncorp Financial Group, Inc. ................... 1,010,625 23,300 USF&G Corp. ...................................... 581,044 ----------- 3,733,294 -----------
The accompanying notes are an integral part of the financial statements. 20 THE BEAR STEARNS FUNDS The Insiders Select Fund PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) MEDICAL INSTRUMENTS - 1.52% 10,000 Beckman Instruments, Inc. ........................ $ 573,125 ----------- MEDICAL SERVICES - 0.79% 9,200 Columbia/HCA Healthcare Corp. .................... 296,700 ----------- NON-FERROUS METALS - 2.52% 15,000 Mueller Industries, Inc.* ........................ 949,688 ----------- OIL & NATURAL GAS - 3.72% 8,400 Mobil Corp. ...................................... 643,650 12,600 Texaco Inc. ...................................... 759,150 ----------- 1,402,800 ----------- PAPER & PAPER RELATED PRODUCTS - 1.84% 38,500 P.H. Glatfelter Co. .............................. 695,406 ----------- PUBLISHING - BOOKS - 1.81% 9,000 McGraw-Hill Companies, Inc. ...................... 684,563 ----------- PUBLISHING - NEWSPAPER - 1.97% 1,400 Washington Post Co. .............................. 744,538 ----------- TELECOMMUNICATIONS - 6.91% 25,000 Cincinnati Bell, Inc. ............................ 890,625 25,000 CommScope, Inc.* ................................. 360,938 25,000 MasTec, Inc.* .................................... 787,500 13,000 SBC Communications, Inc. ......................... 567,125 ----------- 2,606,188 ----------- TOYS - 1.87% 20,000 Hasbro, Inc. ..................................... 706,250 ----------- Total Common Stocks (cost - $25,875,129) ........................... 33,107,836 -----------
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 11.13% INVESTMENT COMPANIES - 0.07% 2,025 Automated Government Money Trust** ............... $ 2,025 23,015 The Milestone Funds Treasury Obligations Portfolio, Institutional Shares** .............. 23,015 ----------- Total Investment Companies (cost - $25,040) ............................... 25,040 ----------- PRINCIPAL AMOUNT (000'S) - --------------- U.S. GOVERNMENT AGENCY OBLIGATION - 11.06% $4,175 Federal Home Loan Bank Discount Notes, 5.700%, 04/01/98 (cost - $4,175,000) ............................ 4,175,000 ----------- Total Short-Term Investments (cost - $4,200,040) ............................ 4,200,040 ----------- Total Investments -- 98.89% (cost - $30,075,169) ........................... 37,307,876 Other assets in excess of liabilities -- 1.11% ... 419,413 ----------- Net Assets -- 100.00% ............................ $37,727,289 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. The accompanying notes are an integral part of the financial statements. 21 THE BEAR STEARNS FUNDS Large Cap Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 93.33% ADVERTISING AGENCIES - 3.03% 11,000 WPP Group plc - ADR .............................. $ 638,000 ----------- AEROSPACE & DEFENSE - 3.16% 7,200 United Technologies Corp. ........................ 664,650 ----------- AUTOMOBILES - 5.35% 10,500 Ford Motor Co. ................................... 680,531 6,600 General Motors Corp. ............................. 445,087 ----------- 1,125,618 ----------- AUTOMOTIVE PARTS & EQUIPMENT - 5.25% 12,700 Genuine Parts Co. ................................ 484,187 8,200 Goodyear Tire & Rubber Co. (The) ................. 621,150 ----------- 1,105,337 ----------- BANKS - 3.64% 12,200 Bank of New York Co., Inc. (The) ................. 766,312 ----------- BUILDING & CONSTRUCTION PRODUCTS - 4.72% 7,100 Armstrong World Industries, Inc. ................. 614,594 7,000 USG Corp.* ....................................... 379,312 ----------- 993,906 ----------- COMPUTERS - 1.73% 3,500 International Business Machines Corp. ............ 363,563 ----------- COMPUTERS & OFFICE EQUIPMENT - 2.58% 5,100 Xerox Corp. ...................................... 542,831 ----------- CONSUMER PRODUCTS - MISCELLANEOUS - 3.30% 15,100 American Greetings Corp. ......................... 694,600 ----------- CREDIT & FINANCE - 6.18% 11,100 Fannie Mae ....................................... 702,075 10,000 Travelers Group, Inc. ............................ 600,000 ----------- 1,302,075 ----------- - ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------- DIVERSIFIED OPERATIONS - 10.39% 9,300 Corning Inc. ..................................... $ 411,525 5,400 General Electric Co. ............................. 465,412 16,000 Raychem Corp. .................................... 665,000 26,600 Viad Corp. ....................................... 645,050 ----------- 2,186,987 ----------- DRUGS & HOSPITAL SUPPLIES - 4.12% 7,400 Baxter International Inc. ........................ 407,925 4,400 Bristol-Myers Squibb Co. ......................... 458,975 ----------- 866,900 ----------- ELECTRICAL EQUIPMENT - 1.27% 2,600 Grainger (W.W.), Inc. ............................ 267,312 ----------- ELECTRONICS - 1.78% 4,800 Intel Corp. ...................................... 374,700 ----------- FINANCIAL SERVICES - 3.16% 14,000 H&R Block, Inc. .................................. 665,875 ----------- HOUSEHOLD PRODUCTS - 2.65% 23,300 Dial Corp. (The) ................................. 557,744 ----------- LIFE/HEALTH INSURANCE - 9.67% 9,350 Aon Corp. ........................................ 605,413 11,200 Equitable Companies Inc. (The) ................... 632,100 13,000 Humana, Inc.* .................................... 322,563 19,100 USF&G Corp. ...................................... 476,306 ----------- 2,036,382 ----------- OIL & NATURAL GAS - 3.57% 2,200 Atlantic Richfield Co. ........................... 172,975 9,600 Texaco Inc. ...................................... 578,400 ----------- 751,375 ----------- PAPER & PAPER RELATED PRODUCTS - 2.88% 12,100 Kimberly-Clark Corp. ............................. 606,513 -----------
The accompanying notes are an integral part of the financial statements. 22 THE BEAR STEARNS FUNDS Large Cap Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) RESTAURANTS - 5.50% 11,500 McDonald's Corp. ................................. $ 690,000 21,000 Wendy's International, Inc. ...................... 468,563 ----------- 1,158,563 ----------- RETAILING - DEPARTMENT STORES - 3.09% 8,600 J.C. Penney Co., Inc. ............................ 650,913 ----------- SAVINGS & LOAN - 2.18% 6,390 Washington Mutual, Inc. .......................... 458,283 ----------- TOBACCO - 2.62% 13,250 Philip Morris Cos. Inc. .......................... 552,359 ----------- TOYS - 1.51% 9,000 Hasbro, Inc. ..................................... 317,813 ----------- Total Common Stocks (cost - $14,010,988) ........................... 19,648,611 ----------- SHORT-TERM INVESTMENTS -- 6.96% INVESTMENT COMPANY - 0.31% 65,620 The Milestone Funds Treasury Obligations Portfolio, Institutional Shares** (cost - $65,620) ............................... 65,620 ----------- - ------------------------------------------------------------------------------ PRINCIPAL AMOUNT MARKET (000'S) VALUE - ------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCY OBLIGATION - 6.65% $1,400 Federal Home Loan Mortgage Corp. Discount Notes, 5.700%, 04/01/98 (cost - $1,400,000) ............................ $ 1,400,000 ----------- Total Short-Term Investments (cost - $1,465,620) ............................ 1,465,620 ----------- Total Investments -- 100.29% (cost - $15,476,608) ........................... 21,114,231 Liabilities in excess of other assets -- (0.29)% ........................................ (60,126) ----------- Net Assets -- 100.00% ............................ $21,054,105 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. The accompanying notes are an integral part of the financial statements. 23 THE BEAR STEARNS FUNDS Small Cap Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
------------------------------------------------------------------------------ MARKET SHARES VALUE ------------------------------------------------------------------------------ EQUITY SECURITIES -- 94.82% COMMON STOCKS - 92.61% BANKS - 2.32% 50,200 Bay View Capital Corp. ........................... $ 1,744,450 ----------- BROADCASTING - 1.55% 124,300 Four Media Co.* .................................. 1,165,312 ----------- BUILDING & HOUSING - 4.19% 21,100 Elcor Corp. ...................................... 567,212 96,500 Giant Cement Holding, Inc.* ...................... 2,581,375 ----------- 3,148,587 ----------- CHEMICALS & FERTILIZERS - 2.72% 19,500 Lilly Industries, Inc., Class A .................. 385,125 243,900 U.S. Home & Garden Inc.* ......................... 1,661,569 ----------- 2,046,694 ----------- COMMERCIAL PRINTING - 3.98% 72,300 Bowne & Co., Inc. ................................ 2,991,412 ----------- COMMERCIAL SERVICES - 6.91% 40,350 COMARCO, Inc.* ................................... 870,047 85,200 Steiner Leisure Ltd.* ............................ 4,329,225 ----------- 5,199,272 ----------- COMMUNICATIONS - 3.46% 75,400 Data Transmission Network Corp.* ................. 2,601,300 ----------- DIVERSIFIED OPERATIONS - 7.02% 129,800 Alyn Corp.* ...................................... 1,127,637 77,000 Griffon Corp.* ................................... 1,222,375 54,400 SPS Technologies, Inc.* .......................... 2,934,200 ----------- 5,284,212 ----------- DRUGS & HOSPITAL SUPPLIES - 2.01% 165,000 Global Pharmaceutical Corp.* ..................... 732,188 106,200 HumaScan Inc.* ................................... 783,225 ----------- 1,515,413 ----------- ------------------------------------------------------------------------------ MARKET SHARES VALUE - --------------------------------------------------------------------------------- ELECTRONICS - 0.82% 26,100 Cubic Corp. ...................................... $ 613,350 ----------- FINANCIAL SERVICES - 4.43% 110,800 Aames Financial Corp. ............................ 1,537,350 35,900 Bank United Corp., Class A ....................... 1,795,000 ----------- 3,332,350 ----------- FOOD - MEAT PRODUCTS - 0.56% 100,000 Hibernia Foods plc - ADR* ........................ 418,750 ----------- FOOD - MISCELLANEOUS/DIVERSIFIED - 2.15% 48,600 International Home Foods, Inc.* .................. 1,615,950 ----------- HOME FURNISHINGS - 6.56% 92,000 Furniture Brands International, Inc.* ............ 2,961,250 52,000 Triangle Pacific Corp.* .......................... 1,976,000 ----------- 4,937,250 ----------- HUMAN RESOURCES - 4.45% 152,000 Butler International, Inc.* ...................... 3,344,000 ----------- MACHINERY - CONSTRUCTION & MINING - 2.52% 70,000 Terex Corp.* ..................................... 1,894,375 ----------- MEDICAL SUPPLIES - 1.11% 110,000 Novametrix Medical Systems Inc.* ................. 838,750 ----------- NON-FERROUS METALS - 4.28% 58,900 Chase Industries, Inc.* .......................... 1,822,219 22,100 Mueller Industries, Inc.* ........................ 1,399,206 ----------- 3,221,425 ----------- OIL & GAS - 1.10% 25,000 Equitable Resources, Inc. ........................ 831,250 ----------- PAPER & PAPER RELATED PRODUCTS - 1.89% 78,900 P.H. Glatfelter Co. .............................. 1,425,131 ----------- RADIO - 3.53% 45,000 Jacor Communications, Inc.* ...................... 2,655,000 -----------
The accompanying notes are an integral part of the financial statements. 24 THE BEAR STEARNS FUNDS Small Cap Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
------------------------------------------------------------------------------ MARKET SHARES VALUE - ---------------------------------------------------------------------------------
EQUITY SECURITIES (CONTINUED) REAL ESTATE INVESTMENT TRUST - 2.94% 20,000 Glenborough Realty Trust, Inc. ................... $ 582,500 102,000 Sunstone Hotel Investors, Inc. ................... 1,632,000 ----------- 2,214,500 ----------- RENTAL/AUTO EQUIPMENT - 6.03% 68,450 Budget Group, Inc., Class A* ..................... 2,566,875 39,100 Dollar Thrifty Automotive Group, Inc.* ........... 879,750 42,000 United Rentals, Inc.* ............................ 1,092,000 ----------- 4,538,625 ----------- RESORTS - 1.53% 47,900 Silverleaf Resorts, Inc.* ........................ 1,152,594 ----------- RETAIL - RESTAURANTS - 4.29% 107,000 Apple South, Inc. ................................ 1,584,938 84,800 Foodmaker, Inc.* ................................. 1,643,000 ----------- 3,227,938 ----------- STEEL - 3.46% 186,000 Universal Stainless & Alloy Products, Inc.* ...... 2,604,000 ----------- TELECOMMUNICATIONS - 1.12% 32,800 Davel Communications Group, Inc.* ................ 840,500 ----------- TEXTILES - 0.14% 62,000 Frenchtex, Inc.* ................................. 102,688 ----------- TRANSPORT - 2.24% 11,000 Celadon Group, Inc.* ............................. 162,250 39,500 Varlen Corp. ..................................... 1,520,750 ----------- 1,683,000 ----------- WIRE & CABLE PRODUCTS - 3.30% 62,900 Essex International, Inc.* ....................... 2,484,550 ----------- Total Common Stocks (cost - $50,550,161) ........................... 69,672,628 -----------
------------------------------------------------------------------------------ MARKET SHARES VALUE - --------------------------------------------------------------------------------- PREFERRED STOCKS - 2.21% DRUGS & HOSPITAL SUPPLIES - 1.13% 5,000 Global Pharmaceutical Corp. Convertible Series A .............................................. $ 806,738 260 Global Pharmaceutical Corp. Convertible Series B .............................................. 41,950 ----------- 848,688 ----------- FOOD - MEAT PRODUCTS - 1.08% 7,000 Hibernia Foods plc - ADR Convertible Series A .... 814,240 ----------- Total Preferred Stocks (cost - $1,226,000) ............................ 1,662,928 ----------- Total Equity Securities (cost - $51,776,161) ........................... 71,335,556 ----------- SHORT-TERM INVESTMENT -- 3.95% INVESTMENT COMPANY - 3.95% 2,972,966 The Milestone Funds Treasury Obligations Portfolio, Institutional Shares** (cost - $2,972,966) ............................ 2,972,966 ----------- Total Investments -- 98.77% (cost - $54,749,127) ........................... 74,308,522 Other assets in excess of liabilities -- 1.23% ... 926,609 ----------- Net Assets -- 100.00% ............................ $75,235,131 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. The accompanying notes are an integral part of the financial statements. 25 THE BEAR STEARNS FUNDS Focus List Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
------------------------------------------------------------------------------ MARKET SHARES VALUE ------------------------------------------------------------------------------ COMMON STOCKS -- 96.30% AUTO & AUTO PARTS - 4.84% 15,700 Citation Corp.* .................................. $ 352,269 ----------- BROADCASTING - 4.84% 4,900 Time Warner Inc. ................................. 352,800 ----------- BROADCASTING/CABLE - 4.85% 7,700 Chancellor Media Corp.* .......................... 353,238 ----------- CHEMICALS - 4.84% 12,200 Crompton & Knowles Corp. ......................... 353,037 ----------- COMPUTER SCIENCES - 4.69% 10,300 Affiliated Computer Services, Inc.* .............. 341,831 ----------- COMPUTER SERVICES - 4.74% 9,800 BISYS Group, Inc. (The)* ......................... 345,450 ----------- EUROPEAN TELECOMMUNICATION SERVICES - 4.85% 3,400 Vodafone Group plc - ADR ......................... 353,175 ----------- FOOD-MISCELLANEOUS/DIVERSIFIED - 0.21% 600 Vlasic Foods International Inc.*+ ................ 15,338 ----------- GOVERNMENT-SPONSORED ENTERPRISES - 4.77% 5,500 Fannie Mae ....................................... 347,875 ----------- HOME SHOPPING/CATALOG - 4.62% 8,500 Cendant Corp.* ................................... 336,812 ----------- INSURANCE - 4.83% 2,900 AEGON N.V. ....................................... 351,806 ----------- MID-CAP BANKS - 4.74% 6,900 Summit Bancorp. .................................. 345,431 ----------- OIL & GAS EXPLORATION & PRODUCTION - 5.22% 18,900 Cross Timbers Oil Co. ............................ 380,363 ----------- PACKAGED FOOD - 4.67% 6,000 Campbell Soup Co. ................................ 340,500 ----------- ------------------------------------------------------------------------------ MARKET SHARES VALUE - --------------------------------------------------------------------------------- PHARMACEUTICALS - 4.67% 2,000 Warner-Lambert Co. ............................... $ 340,625 ----------- REAL ESTATE INVESTMENT TRUST - 4.89% 9,900 Crescent Real Estate Equities Co. ................ 356,400 ----------- SATELLITE BROADCASTING & COMMUNICATIONS - 5.11% 8,300 Orbital Sciences Corp.* .......................... 372,462 ----------- SERVICES/FACILITIES - 4.71% 8,000 Health Care and Retirement Corp.* ................ 343,500 ----------- SPECIALTY RETAILING/HARD & SOFT LINES - 4.77% 6,000 Williams-Sonoma, Inc.* ........................... 347,250 ----------- TELECOMMUNICATION SERVICES - 4.79% 9,800 Cincinnati Bell, Inc. ............................ 349,125 ----------- WHOLESALE DISTRIBUTION - 4.65% 8,800 Tech Data Corp.* ................................. 338,800 ----------- Total Common Stocks (cost - $6,518,432) ............................ 7,018,087 ----------- SHORT-TERM INVESTMENT -- 2.79% INVESTMENT COMPANY - 2.79% 203,374 The Milestone Funds Treasury Obligations Portfolio, Institutional Shares**+ (cost - $203,374) .............................. 203,374 ----------- Total Investments -- 99.09% (cost - $6,721,806) ............................ 7,221,461 Other assets in excess of liabilities -- 0.91% ... 66,079 ----------- Net Assets -- 100.00% ............................ $ 7,287,540 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. + Not a Focus List selection at March 31, 1998. The accompanying notes are an integral part of the financial statements. 26 THE BEAR STEARNS FUNDS Balanced Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------ EQUITY SECURITIES -- 50.03% ADVERTISING AGENCIES - 1.42% 2,800 WPP Group plc - ADR .............................. $ 162,400 ----------- AEROSPACE & DEFENSE - 1.37% 1,700 United Technologies Corp. ........................ 156,931 ----------- AUTOMOBILES - 2.59% 2,600 Ford Motor Co. ................................... 168,512 1,900 General Motors Corp. ............................. 128,131 ----------- 296,643 ----------- AUTOMOTIVE PARTS & EQUIPMENT - 2.76% 3,900 Genuine Parts Co. ................................ 148,566 2,200 Goodyear Tire & Rubber Co. (The) ................. 166,650 ----------- 315,216 ----------- BANKS - 1.37% 2,500 Bank of New York Co., Inc. (The) ................. 157,031 ----------- BUILDING & CONSTRUCTION PRODUCTS - 1.44% 1,900 Armstrong World Industries, Inc. ................. 164,469 ----------- COMMERCIAL PRINTING - 0.58% 1,600 Bowne & Co., Inc. ................................ 66,200 ----------- COMMERCIAL SERVICES - 0.80% 1,800 Steiner Leisure Ltd.* ............................ 91,462 ----------- COMPUTERS & OFFICE EQUIPMENT - 1.40% 1,500 Xerox Corp. ...................................... 159,656 ----------- CONSUMER PRODUCTS - MISCELLANEOUS - 1.33% 3,300 American Greetings Corp. ......................... 151,800 ----------- COSMETICS & TOILETRIES - 1.27% 2,900 Kimberly-Clark Corp. ............................. 145,362 ----------- CREDIT & FINANCE - 2.64% 2,400 Fannie Mae ....................................... 151,800 2,500 Travelers Group, Inc. ............................ 150,000 ----------- 301,800 ----------- - ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------- DIVERSIFIED OPERATIONS - 6.40% 3,700 Corning Inc. ..................................... $ 163,725 2,000 General Electric Co. ............................. 172,375 3,500 Raychem Corp. .................................... 145,469 1,500 SPS Technologies, Inc.* .......................... 80,906 7,000 Viad Corp. ....................................... 169,750 ----------- 732,225 ----------- DRUGS & HOSPITAL SUPPLIES - 3.47% 2,600 Baxter International, Inc. ....................... 143,325 1,300 Bristol-Myers Squibb Co. ......................... 135,606 12,700 Global Pharmaceutical Corp.* ..................... 56,356 8,300 HumaScan Inc.* ................................... 61,212 ----------- 396,499 ----------- ELECTRICAL EQUIPMENT - 0.90% 1,000 Grainger (W.W.), Inc. ............................ 102,813 ----------- ELECTRONICS - 0.96% 1,400 Intel Corp. ...................................... 109,288 ----------- FINANCIAL SERVICES - 3.80% 4,300 Data Transmission Network Corp.* ................. 148,350 3,000 H&R Block, Inc. .................................. 142,687 2,000 Washington Mutual, Inc. .......................... 143,437 ----------- 434,474 ----------- HOUSEHOLD PRODUCTS - 1.38% 6,600 Dial Corp. (The) ................................. 157,988 ----------- HUMAN RESOURCES - 0.65% 3,400 Butler International Inc.* ....................... 74,800 ----------- LIFE/HEALTH INSURANCE - 4.43% 2,300 Aon Corp. ........................................ 148,925 2,500 Equitable Companies Inc. (The) ................... 141,094 5,500 Humana, Inc.* .................................... 136,469 3,200 USF&G Corp. ...................................... 79,800 ----------- 506,288 ----------- NON-FERROUS METALS - 0.94% 1,700 Mueller Industries, Inc.* ........................ 107,631 -----------
The accompanying notes are an integral part of the financial statements. 27 THE BEAR STEARNS FUNDS Balanced Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - -------------------------------------------------------------------------------
EQUITY SECURITIES (CONTINUED) OIL & NATURAL GAS - 1.47% 2,800 Texaco, Inc. ..................................... $ 168,700 ----------- RENTAL/AUTO EQUIPMENT - 1.33% 3,300 Hertz Corp. ...................................... 151,800 ----------- RESTAURANTS - 2.83% 2,800 McDonald's Corp. ................................. 168,000 7,000 Wendy's International, Inc. ...................... 156,188 ----------- 324,188 -----------
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------- RETAILING - DEPARTMENT STORES - 1.12% 1,700 J.C. Penney Co., Inc. ............................ $ 128,669 ----------- TOBACCO - 1.38% 3,800 Philip Morris Cos. Inc. .......................... 158,413 ----------- Total Equity Securities (cost - $5,086,580) ............................ 5,722,746 -----------
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - --------------- ------------- ------------------ ----------- LONG-TERM DEBT INVESTMENTS -- 48.72% CORPORATE OBLIGATIONS - 11.56% BANKS - 3.13% $ 100 Firstar Bank Milwaukee, Senior Notes ............. 6.250% 12/01/2002 100,250 250 NationsBank Corp., Senior Notes .................. 7.000 05/15/2003 258,125 ----------- 358,375 ----------- FINANCIAL - 2.22% 100 Associates Corp. N.A., Senior Notes .............. 6.625 06/15/2005 102,000 75 International Lease Finance Corp. ................ 6.125 11/01/1999 74,967 75 Morgan Stanley, Dean Witter, Discover & Co. ...... 6.750 03/04/2003 76,781 ----------- 253,748 ----------- INDUSTRIAL - 4.21% 75 Anheuser Busch Cos. Inc. ......................... 6.750 06/01/2005 76,031 100 Gap, Inc. ........................................ 6.900 09/15/2007 104,000 75 Hoechst-Celanese Corp. ........................... 6.125 02/01/2004 74,719 75 Pepsico Inc. ..................................... 5.750 01/02/2003 74,531 150 Union Camp Corp. ................................. 6.500 11/15/2007 152,250 ----------- 481,531 ----------- TOBACCO - 0.66% 75 Philip Morris Cos. Inc. .......................... 7.375 02/15/1999 75,844 -----------
The accompanying notes are an integral part of the financial statements. 28 THE BEAR STEARNS FUNDS Balanced Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - -------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED) UTILITY - ELECTRIC - 1.34% $ 75 Central Power & Light Co., Series FF ............. 6.875% 02/01/2003 $ 77,250 75 Pacific Gas & Electric Co., Series 93-G .......... 6.250 03/01/2004 75,563 ----------- 152,813 ----------- Total Corporate Obligations (cost - $1,332,200) ...................................... 1,322,311 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS -- 18.95% FEDERAL HOME LOAN MORTGAGE CORPORATION - 5.63% 645 Federal Home Loan Mortgage Corporation ........... 5.500-7.000 03/26/04-05/01/26 643,496 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.43% 501 Federal National Mortgage Association ............ 6.000-8.000 12/01/08-03/01/28 507,161 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 8.89% 994 Government National Mortgage Association ......... 6.000-8.500 09/15/24-02/15/28 1,017,223 ----------- Total U.S. Government Agency Obligations (cost - $2,178,509) ...................................... 2,167,880 ----------- U.S. GOVERNMENT OBLIGATIONS -- 18.21% U.S. TREASURY NOTES - 18.21% 2,050 U.S. Treasury Notes (cost - $2,092,852) .......... 5.625-6.250 09/30/00-08/15/23 2,083,512 ----------- Total Long-Term Debt Investments (cost - $5,603,561) ...................................... 5,573,703 -----------
SHARES - --------------- SHORT-TERM INVESTMENT -- 3.14% INVESTMENT COMPANY - 3.14% 359,867 The Milestone Funds Treasury Obligations Portfolio, Institutional Shares** (cost - $359,867) .......................................................................... 359,867 ----------- Total Investments -- 101.89% (cost - $11,050,008) .................................... 11,656,316 Liabilities in excess of other assets -- (1.89)% ..................................... (216,604) ----------- Net Assets -- 100.00% ................................................................ $11,439,712 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. The accompanying notes are an integral part of the financial statements. 29 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 86.53% DENMARK - 2.82% FOOD, MISCELLANEOUS/DIVERSIFIED - 1.14% 1,400 Danisco AS ...................................... $ 91,948 -------------- MEDICAL - DRUGS - 1.68% 800 Novo-Nordisk AS, Class B ........................ 136,178 -------------- Total Denmark (cost - $204,392) ................. 228,126 -------------- FINLAND - 2.67% MULTI-LINE INSURANCE - 1.61% 2,800 Pohjola Insurance Co., Class B .................. 129,710 -------------- TELECOMMUNICATION EQUIPMENT - 1.06% 800 Nokia AB, Class A ............................... 85,880 -------------- Total Finland (cost - $183,514) ................. 215,590 -------------- FRANCE - 8.22% AGRICULTURAL OPERATIONS - 0.99% 400 Eridania Beghin-Say SA .......................... 80,056 -------------- COMPUTER SERVICES - 1.79% 1,200 Cap Gemini SA ................................... 141,001 1,200 Cap Gemini SA, Rights* .......................... 3,709 -------------- 144,710 -------------- FOOD - RETAIL - 1.79% 300 Promodes ........................................ 144,245 -------------- MEDICAL - DRUGS - 0.82% 1,300 Rhone-Poulenc, Class A .......................... 66,073 -------------- MULTI-LINE INSURANCE - 1.91% 1,500 AXA ............................................. 154,462 -------------- TELEPHONE - INTEGRATED - 0.92% 1,400 France Telecom SA* .............................. 73,845 -------------- Total France (cost - $547,259) .................. 663,391 -------------- GERMANY - 11.01% ATHLETIC FOOTWEAR - 1.54% 700 Adidas-Salamon AG ............................... 124,531 -------------- - ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------
GERMANY (CONTINUED) COMPUTER SOFTWARE - 1.58% 300 SAP AG .......................................... $ 127,992 -------------- ENERGY - 1.41% 1,600 Veba AG ......................................... 114,073 -------------- MACHINERY - GENERAL INDUSTRY - 2.69% 300 Mannesmann AG ................................... 217,050 -------------- MONEY CENTER BANKS - 1.49% 1,600 Deutsche Bank AG ................................ 119,956 -------------- MULTI-LINE INSURANCE - 2.30% 18 Allianz AG, New* ................................ 5,292 600 Allianz AG, Registered .......................... 180,226 -------------- 185,518 -------------- Total Germany (cost - $750,100) ................. 889,120 -------------- IRELAND - 4.23% COMMERCIAL BANKS - EUROPE - 1.12% 4,300 Allied Irish Banks plc .......................... 52,925 1,900 Bank of Ireland ................................. 37,512 -------------- 90,437 -------------- DRUG DELIVERY SYSTEMS - 1.76% 2,200 Elan Corp. plc, ADR* ............................ 142,175 -------------- LIFE/HEALTH INSURANCE - 1.35% 12,000 Irish Life plc .................................. 109,317 -------------- Total Ireland (cost - $304,246) ................. 341,929 -------------- ITALY - 4.59% CELLULAR TELECOMMUNICATIONS - 1.41% 21,100 Telecom Italia Mobile S.p.A. .................... 113,379 -------------- COMMERCIAL BANKS - EUROPE - 2.02% 33,000 Credito Italiano S.p.A. ......................... 163,020 -------------- FINANCE - INVESTMENT BANKING/BROKERAGE - 0.74% 3,700 Instituto Mobiliare Italiano S.p.A. ............. 60,081 -------------- MULTI-LINE INSURANCE - 0.42% 1,100 Assicurazioni Generali S.p.A. ................... 33,914 -------------- Total Italy (cost - $303,022) ................... 370,394 --------------
The accompanying notes are an integral part of the financial statements. 30 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) JAPAN - 3.69% AUDIO/VIDEO PRODUCTS - 1.05% 1,000 Sony Corp. ...................................... $ 84,739 -------------- MEDICAL - DRUGS - 1.26% 4,000 Takeda Chemical Industries ...................... 101,686 -------------- PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.38% 3,000 Fuji Photo Film Co. ............................. 111,585 -------------- Total Japan (cost - $323,084) ................... 298,010 -------------- NETHERLANDS - 9.17% COMPUTER SERVICES - 0.80% 1,500 Getronics N.V. .................................. 64,398 -------------- COMPUTER SOFTWARE - 1.01% 1,700 Baan Co. N.V.* .................................. 81,387 -------------- CONSUMER PRODUCTS - MISCELLANEOUS - 1.50% 1,800 Unilever N.V. - CVA ............................. 121,400 -------------- MONEY CENTER BANKS - 1.19% 1,700 ING Groep N.V. .................................. 96,470 -------------- MULTI-LINE INSURANCE - 1.73% 1,000 AEGON N.V. ...................................... 121,601 300 Fortis Amev N.V. ................................ 17,701 -------------- 139,302 -------------- PUBLISHING - BOOKS - 1.42% 800 Wolters Kluwer N.V. ............................. 114,358 -------------- PUBLISHING - NEWSPAPERS - 1.52% 3,600 Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit ......................................... 123,127 -------------- Total Netherlands (cost - $639,895) ............. 740,442 -------------- PORTUGAL - 1.29% TELEPHONE - INTEGRATED - 1.29% 2,000 Portugal Telecom SA (cost - $106,176) ........... 104,029 -------------- SPAIN - 4.07% COMMERCIAL BANKS - EUROPE - 1.80% 1,500 Banco Popular Espanol, SA ....................... 145,596 --------------
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------
SPAIN (CONTINUED) ELECTRIC - INTEGRATED - 0.70% 3,700 Iberdrola SA .................................... $ 56,203 -------------- MONEY CENTER BANKS - 0.64% 1,100 Banco Bilbao Vizcaya, SA ........................ 51,634 -------------- TELEPHONE - INTEGRATED - 0.93% 1,700 Telefonica de Espana ............................ 74,925 -------------- Total Spain (cost - $275,529) ................... 328,358 -------------- SWEDEN - 5.73% APPLIANCES - 1.53% 1,500 Electrolux AB ................................... 123,839 -------------- MEDICAL - DRUGS - 0.77% 3,000 Astra AB, Class A ............................... 61,919 -------------- MULTI-LINE INSURANCE - 1.78% 2,200 Skandia Forsakrings AB .......................... 143,378 -------------- TELECOMMUNICATION EQUIPMENT - 1.65% 2,800 Ericsson (L.M.) Telephone Co., ADR .............. 133,175 -------------- Total Sweden (cost - $389,597) .................. 462,311 -------------- SWITZERLAND - 9.80% FOOD, MISCELLANEOUS/DIVERSIFIED - 1.78% 75 Nestle SA ....................................... 143,311 -------------- MEDICAL - DRUGS - 3.14% 70 Novartis AG, Registered ......................... 123,885 12 Roche Holding AG ................................ 129,880 -------------- 253,765 -------------- MONEY CENTER BANKS - 3.25% 700 Credit Suisse Group ............................. 140,048 75 Union Bank of Switzerland, Class B .............. 122,501 -------------- 262,549 -------------- REINSURANCE - 1.63% 60 Swiss Reinsurance Co. ........................... 131,809 -------------- Total Switzerland (cost - $686,472) ............. 791,434 --------------
The accompanying notes are an integral part of the financial statements. 31 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1998
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) UNITED KINGDOM - 19.24% CELLULAR TELECOMMUNICATIONS - 1.94% 15,000 Vodafone Group plc Ord 5p ....................... $ 156,993 -------------- COMPUTER SERVICES - 1.92% 5,700 Logica plc Ord 10p .............................. 155,348 -------------- CONSUMER PRODUCTS - MISCELLANEOUS - 1.47% 12,500 Unilever plc Ord 1.25p .......................... 118,268 -------------- FOOD, MISCELLANEOUS/DIVERSIFIED - 0.89% 5,200 Cadbury Schweppes plc Ord 25p ................... 72,188 -------------- LIFE/HEALTH INSURANCE - 0.84% 4,600 Prudential Corporation plc Ord 5p ............... 67,633 -------------- MEDICAL - DRUGS - 5.67% 5,400 Glaxo Wellcome plc Ord 25p ...................... 145,318 14,500 SmithKline Beecham plc Ord 6.25p ................ 183,326 3,000 Zeneca Group plc Ord 25p ........................ 129,312 -------------- 457,956 -------------- MONEY CENTER BANKS - 2.23% 6,700 National Westminster Bank plc Ord 100p .......... 122,632 3,700 Royal Bank of Scotland Group plc Ord 25p ........ 57,499 -------------- 180,131 -------------- MORTGAGE BANKS - EUROPE - 1.44% 6,000 Abbey National plc Ord 10p ...................... 116,250 -------------- MULTI-LINE INSURANCE - 0.56% 2,300 Commercial Union plc Ord 25p .................... 44,909 -------------- RETAIL - MAJOR DEPARTMENT STORES - 1.42% 6,100 Kingfisher plc Ord 25p .......................... 114,306 --------------
- ------------------------------------------------------------------------------ MARKET SHARES VALUE - ------------------------------------------------------------------------------
UNITED KINGDOM (CONTINUED) TELECOMMUNICATION SERVICES - 0.86% 6,400 British Telecommunications plc Ord 25p .......... $ 69,663 -------------- Total United Kingdom (cost - $1,362,280) ........................... 1,553,645 -------------- Total Common Stocks (cost - $6,075,566) ........................... 6,986,779 -------------- SHORT-TERM INVESTMENTS -- 13.49% INVESTMENT COMPANIES - 1.73% 23,313 Federated Investors,Trust for Short-term U.S. Government Securities** ....................... 23,313 116,315 The Milestone Funds Treasury Obligations Portfolio, Institutional Shares** ............. 116,315 -------------- Total Investment Companies (cost - $139,628) ............................. 139,628 --------------
PRINCIPAL AMOUNT (000'S) - ----------- U.S. GOVERNMENT AGENCY OBLIGATION - 11.76% $ 950 Federal Home Loan Bank Discount Notes, 5.700%, 04/01/98 (cost - $950,000) .................... 950,000 -------------- Total Short-Term Investments (cost - $1,089,628) ........................... 1,089,628 -------------- Total Investments -- 100.02% (cost - $7,165,194) ........................... 8,076,407 Liabilities in excess of other assets -- (0.02)% ............................. (1,851) -------------- Net Assets -- 100.00% ........................... $ 8,074,556 -------------- --------------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. The accompanying notes are an integral part of the financial statements. 32 THE BEAR STEARNS FUNDS STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1998
LARGE CAP SMALL CAP S&P STARS THE INSIDERS VALUE VALUE FOCUS LIST PORTFOLIO SELECT FUND PORTFOLIO PORTFOLIO PORTFOLIO --------------- -------------- -------------- -------------- ------------ ASSETS Investments, at value (cost - $175,034,382, $30,075,169, $15,476,608, $54,749,127, $6,721,806, $11,050,008 and $7,165,194, respectively)................................. $ 214,790,773 $ 37,307,876 $ 21,114,231 $ 74,308,522 $ 7,221,461 Receivable for Portfolio shares sold............ 1,047,693 497,229 13,382 482,284 267,704 Receivable for investments sold................. 2,241,935 -- -- 1,096,502 -- Receivable for open forward foreign currency exchange contracts............................ -- -- -- -- -- Dividends and interest receivable............... 76,952 10,934 22,475 12,591 2,268 Receivable from investment adviser.............. -- 52,128 -- 34,484 34,125 Deferred organization expenses and other assets........................................ 136,283 114,945 59,494 76,876 123,657 --------------- -------------- -------------- -------------- ------------ Total assets.............................. 218,293,636 37,983,112 21,209,582 76,011,259 7,649,215 --------------- -------------- -------------- -------------- ------------ LIABILITIES Payable for investments purchased............... 2,048,045 -- 70,823 608,150 227,642 Payable for Portfolio shares repurchased........ 1,447,119 146,367 -- 10,422 -- Distribution fee payable (Class A, B and C shares)....................................... 271,671 52,790 20,577 68,764 7,992 Organization expenses payable................... -- -- -- -- 90,558 Administration fee payable...................... 27,857 4,511 2,544 9,203 1,557 Advisory fee payable............................ 19,053 -- -- -- -- Custodian fee payable........................... 3,027 2,858 1,150 3,444 -- Accrued expenses................................ 103,936 49,297 60,383 76,145 33,926 --------------- -------------- -------------- -------------- ------------ Total liabilities......................... 3,920,708 255,823 155,477 776,128 361,675 --------------- -------------- -------------- -------------- ------------ NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized)..... 10,745 2,119 1,013 3,188 545 Paid-in capital................................. 168,716,203 27,969,633 13,900,845 52,397,423 6,770,314 Undistributed net investment income............. -- -- 16,260 -- -- Accumulated net realized gain/(loss) from investments, securities sold short, option and foreign currency related transactions, if any........................................... 5,889,589 2,522,830 1,498,364 3,275,125 17,026 Net unrealized appreciation on investments, option and foreign currency related transactions, if any.......................... 39,756,391 7,232,707 5,637,623 19,559,395 499,655 --------------- -------------- -------------- -------------- ------------ Net assets................................ $ 214,372,928 $ 37,727,289 $ 21,054,105 $ 75,235,131 $ 7,287,540 --------------- -------------- -------------- -------------- ------------ --------------- -------------- -------------- -------------- ------------ CLASS A Net assets...................................... $ 109,591,324 $ 21,911,909 $ 8,357,911 $ 25,110,659 $ 3,201,231 --------------- -------------- -------------- -------------- ------------ Shares of beneficial interest outstanding....... 5,489,027 1,225,788 401,259 1,061,870 238,908 --------------- -------------- -------------- -------------- ------------ Net asset value per share....................... $19.97 $17.88 $20.83 $23.65 $13.40 --------------- -------------- -------------- -------------- ------------ --------------- -------------- -------------- -------------- ------------ Maximum offering price per share (net asset value plus sales charge of. 5.50%* of the offering price) $21.13 $18.92 $22.04 $25.03 $14.18 --------------- -------------- -------------- -------------- ------------ --------------- -------------- -------------- -------------- ------------ CLASS B Net assets...................................... $ 5,799,745 $ 2,253,463 $ 446,276 $ 901,199 $ 2,398,962 --------------- -------------- -------------- -------------- ------------ Shares of beneficial interest outstanding....... 292,094 127,400 21,606 38,387 179,256 --------------- -------------- -------------- -------------- ------------ Net asset value and offering price per share**....................................... $19.86 $17.69 $20.66 $23.48 $13.38 --------------- -------------- -------------- -------------- ------------ --------------- -------------- -------------- -------------- ------------ CLASS C Net assets...................................... $ 63,330,035 $ 12,296,883 $ 4,987,368 $ 18,082,462 $ 1,687,347 --------------- -------------- -------------- -------------- ------------ Shares of beneficial interest outstanding....... 3,190,488 695,398 241,432 770,225 126,077 --------------- -------------- -------------- -------------- ------------ Net asset value and offering price per share**....................................... $19.85 $17.68 $20.66 $23.48 $13.38 --------------- -------------- -------------- -------------- ------------ --------------- -------------- -------------- -------------- ------------ CLASS Y Net assets...................................... $ 35,651,824 $ 1,265,034 $ 7,262,550 $ 31,140,811 -- --------------- -------------- -------------- -------------- ------------ Shares of beneficial interest outstanding....... 1,773,252 69,939 348,441 1,316,521 -- --------------- -------------- -------------- -------------- ------------ Net asset value, offering and redemption price per share..................................... $20.11 $18.09 $20.84 $23.65 -- --------------- -------------- -------------- -------------- ------------ --------------- -------------- -------------- -------------- ------------ BALANCED INTERNATIONAL PORTFOLIO EQUITY PORTFOLIO -------------- ----------------- ASSETS Investments, at value (cost - $175,034,382, $30,075,169, $15,476,608, $54,749,127, $6,721,806, $11,050,008 and $7,165,194, respectively)................................. $ 11,656,316 $ 8,076,407 Receivable for Portfolio shares sold............ 34,980 84,540 Receivable for investments sold................. -- 25,057 Receivable for open forward foreign currency exchange contracts............................ -- 47,315 Dividends and interest receivable............... 67,609 17,136 Receivable from investment adviser.............. 35,252 35,366 Deferred organization expenses and other assets........................................ 117,273 145,747 -------------- ----------------- Total assets.............................. 11,911,430 8,431,568 -------------- ----------------- LIABILITIES Payable for investments purchased............... 304,496 195,990 Payable for Portfolio shares repurchased........ -- -- Distribution fee payable (Class A, B and C shares)....................................... 7,191 11,839 Organization expenses payable................... 118,339 120,570 Administration fee payable...................... 2,267 2,209 Advisory fee payable............................ -- -- Custodian fee payable........................... -- -- Accrued expenses................................ 39,425 26,404 -------------- ----------------- Total liabilities......................... 471,718 357,012 -------------- ----------------- NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized)..... 884 587 Paid-in capital................................. 10,803,431 7,230,070 Undistributed net investment income............. 16,766 2,461 Accumulated net realized gain/(loss) from investments, securities sold short, option and foreign currency related transactions, if any........................................... 12,323 (117,110) Net unrealized appreciation on investments, option and foreign currency related transactions, if any.......................... 606,308 958,548 -------------- ----------------- Net assets................................ $ 11,439,712 $ 8,074,556 -------------- ----------------- -------------- ----------------- CLASS A Net assets...................................... $ 3,852,162 $ 3,765,446 -------------- ----------------- Shares of beneficial interest outstanding....... 297,823 273,530 -------------- ----------------- Net asset value per share....................... $12.93 $13.77 -------------- ----------------- -------------- ----------------- Maximum offering price per share (net asset value plus sales charge of. 5.50%* of the offering price) $13.68 $14.57 -------------- ----------------- -------------- ----------------- CLASS B Net assets...................................... $ 1,044,145 $ 2,136,591 -------------- ----------------- Shares of beneficial interest outstanding....... 80,793 155,378 -------------- ----------------- Net asset value and offering price per share**....................................... $12.92 $13.75 -------------- ----------------- -------------- ----------------- CLASS C Net assets...................................... $ 858,343 $ 2,172,519 -------------- ----------------- Shares of beneficial interest outstanding....... 66,426 158,014 -------------- ----------------- Net asset value and offering price per share**....................................... $12.92 $13.75 -------------- ----------------- -------------- ----------------- CLASS Y Net assets...................................... $ 5,685,062 -- -------------- ----------------- Shares of beneficial interest outstanding....... 439,078 -- -------------- ----------------- Net asset value, offering and redemption price per share..................................... $12.95 -- -------------- ----------------- -------------- -----------------
- ------------ *On investments of $50,000 or more, the offering price is reduced. **Redemption price per share is equal to the net asset value per share less any applicable contingent deferred sales charge. The accompanying notes are an integral part of the financial statements. 33 THE BEAR STEARNS FUNDS STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 1998
LARGE CAP SMALL CAP S&P STARS THE INSIDERS VALUE VALUE FOCUS LIST* PORTFOLIO SELECT FUND PORTFOLIO PORTFOLIO PORTFOLIO -------------- -------------- ------------- -------------- ------------ INVESTMENT INCOME Dividends....................................... $ 1,085,830 $ 344,800 $ 288,929 $ 278,737 $ 5,323 Interest........................................ 63,705 149,805 52,811 167,892 6,768 -------------- -------------- ------------- -------------- ------------ 1,149,535 494,605 341,740 446,629 12,091 -------------- -------------- ------------- -------------- ------------ EXPENSES Advisory fees................................... 1,262,953 157,031 140,641 425,409 6,748 Distribution fees - Class A..................... 443,379 87,556 32,237 95,967 2,352 Distribution fees - Class B..................... 7,370 1,976 271 830 3,037 Distribution fees - Class C..................... 520,582 99,650 40,215 145,963 2,640 Accounting fees................................. 197,706 123,259 100,107 134,255 5,214 Transfer agent fees and expenses................ 235,474 95,023 86,960 115,779 972 Administration fees............................. 252,557 35,492 28,128 85,085 1,557 Legal and auditing fees......................... 138,458 66,082 38,402 72,398 22,500 Federal and state registration fees............. 66,069 57,293 42,246 54,759 11,223 Reports and notices to shareholders............. 51,501 45,090 25,999 39,999 6,339 Amortization of organization expenses........... 45,373 36,123 19,860 21,604 1,817 Custodian fees and expenses..................... 40,959 22,999 10,001 27,399 2,751 Insurance expenses.............................. 14,354 12,699 13,948 14,834 243 Trustees' fees and expenses..................... 9,115 4,501 3,001 5,001 1,000 Other........................................... 25,504 3,113 4,324 4,278 2,017 -------------- -------------- ------------- -------------- ------------ Total expenses before waivers and related reimbursements............................ 3,311,354 847,887 586,340 1,243,560 70,410 Less: waivers and related reimbursements.... (645,637) (321,356) (325,916) (433,304) (53,003) -------------- -------------- ------------- -------------- ------------ Total expenses after waivers and related reimbursements............................ 2,665,717 526,531 260,424 810,256 17,407 -------------- -------------- ------------- -------------- ------------ Net investment income/(loss).................... (1,516,182) (31,926) 81,316 (363,627) (5,316) -------------- -------------- ------------- -------------- ------------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain/(loss) from: Investments................................... 20,261,053 6,125,491 2,468,368 8,838,017 22,342 Option transactions........................... 387,836 -- -- 31,752 -- Securities sold short......................... (219,617) -- -- -- -- Foreign currency related transactions......... -- -- -- -- -- Net change in unrealized appreciation on: Investments................................... 37,801,568 4,989,395 4,011,497 13,475,276 499,655 Foreign currency related transactions......... -- -- -- -- -- -------------- -------------- ------------- -------------- ------------ Net realized and unrealized gain on investments................................... 58,230,840 11,114,886 6,479,865 22,345,045 521,997 -------------- -------------- ------------- -------------- ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................................... $ 56,714,658 $ 11,082,960 $ 6,561,181 $ 21,981,418 $ 516,681 -------------- -------------- ------------- -------------- ------------ -------------- -------------- ------------- -------------- ------------ BALANCED* INTERNATIONAL* PORTFOLIO EQUITY PORTFOLIO ------------- ------------------ INVESTMENT INCOME Dividends....................................... $ 13,473 $ 15,108** Interest........................................ 54,559 17,616 ------------- -------- 68,032 32,724 ------------- -------- EXPENSES Advisory fees................................... 12,178 14,726 Distribution fees - Class A..................... 3,305 2,887 Distribution fees - Class B..................... 2,073 4,481 Distribution fees - Class C..................... 1,813 4,471 Accounting fees................................. 5,367 5,215 Transfer agent fees and expenses................ 1,303 1,003 Administration fees............................. 2,810 2,209 Legal and auditing fees......................... 22,500 22,500 Federal and state registration fees............. 13,569 17,441 Reports and notices to shareholders............. 6,339 6,339 Amortization of organization expenses........... 2,157 2,239 Custodian fees and expenses..................... 2,751 2,751 Insurance expenses.............................. 243 243 Trustees' fees and expenses..................... 1,000 1,000 Other........................................... 2,084 1,999 ------------- -------- Total expenses before waivers and related reimbursements............................ 79,492 89,504 Less: waivers and related reimbursements.... (59,088) (59,241) ------------- -------- Total expenses after waivers and related reimbursements............................ 20,404 30,263 ------------- -------- Net investment income/(loss).................... 47,628 2,461 ------------- -------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain/(loss) from: Investments................................... 12,323 (19,706) Option transactions........................... -- -- Securities sold short......................... -- -- Foreign currency related transactions......... -- (97,404) Net change in unrealized appreciation on: Investments................................... 606,308 911,213 Foreign currency related transactions......... -- 47,335 ------------- -------- Net realized and unrealized gain on investments................................... 618,631 841,438 ------------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................................... $ 666,259 $ 843,899 ------------- -------- ------------- --------
- --------- *Commenced operations on December 29, 1997. **Net of foreign withholding taxes of $1,458. The accompanying notes are an integral part of the financial statements. 34 (This page has been left blank intentionally.) 35 THE BEAR STEARNS FUNDS STATEMENT OF CHANGES IN NET ASSETS
S&P STARS PORTFOLIO THE INSIDERS SELECT FUND ------------------------------- ------------------------------- FOR THE FISCAL FOR THE FISCAL FOR THE FISCAL FOR THE FISCAL YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1998 MARCH 31, 1997 -------------- -------------- -------------- -------------- INCREASE IN NET ASSETS FROM OPERATIONS Net investment income/(loss)... $ (1,516,182) $ (687,406) $ (31,926) $ (15,171) Net realized gain/(loss) on investments.................. 20,429,272 16,488,691 6,125,491 3,006,957 Net change in unrealized appreciation/(depreciation) on investments............... 37,801,568 (4,048,192) 4,989,395 792,036 -------------- -------------- -------------- -------------- Net increase in net assets resulting from operations.... 56,714,658 11,753,093 11,082,960 3,783,822 -------------- -------------- -------------- -------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares............... -- -- -- (8,066) Class B shares............... -- -- -- -- Class C shares............... -- -- -- -- Class Y shares............... -- -- -- (1,784) -------------- -------------- -------------- -------------- -- -- -- (9,850) -------------- -------------- -------------- -------------- Net realized capital gains Class A shares............... (12,011,452) (4,448,797) (2,877,613) (1,540,623) Class C shares............... (7,215,795) (2,375,768) (1,511,446) (1,088,043) Class Y shares............... (3,784,124) (956,196) (272,772) (170,326) -------------- -------------- -------------- -------------- (23,011,371) (7,780,761) (4,661,831) (2,798,992) -------------- -------------- -------------- -------------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares....................... 85,871,383 66,340,756 13,066,709 7,652,245 Cost of shares repurchased..... (46,357,215) (39,406,235) (11,007,952) (9,576,787) Shares issued in reinvestment of dividends................. 21,279,449 7,060,655 4,312,328 2,531,683 -------------- -------------- -------------- -------------- Net increase in net assets derived from shares of beneficial interest transactions................. 60,793,617 33,995,176 6,371,085 607,141 -------------- -------------- -------------- -------------- Total increase in net assets... 94,496,904 37,967,508 12,792,214 1,582,121 NET ASSETS Beginning of period............ 119,876,024 81,908,516 24,935,075 23,352,954 -------------- -------------- -------------- -------------- End of period**................ $ 214,372,928 $ 119,876,024 $ 37,727,289 $ 24,935,075 -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- -------- * Commencement of operations. ** Includes undistributed net investment income of $16,260, $16,766 and $2,461 for Large Cap Value Portfolio, Balanced Portfolio and International Equity Portfolio, respectively, for the fiscal year ended March 31, 1998 and $8,376 for the fiscal year ended March 31, 1997 for Large Cap Value Portfolio. The accompanying notes are an integral part of the financial statements. 36
LARGE CAP VALUE PORTFOLIO SMALL CAP VALUE PORTFOLIO FOCUS LIST PORTFOLIO ------------------------------- ------------------------------- ---------------------- FOR THE FISCAL FOR THE FISCAL FOR THE FISCAL FOR THE FISCAL FOR THE PERIOD YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 29, 1997* MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1998 MARCH 31, 1997 THROUGH MARCH 31, 1998 -------------- -------------- -------------- -------------- ---------------------- INCREASE IN NET ASSETS FROM OPERATIONS Net investment income/(loss)... $ 81,316 $ 131,375 $ (36,627) $ (296,012) $ (5,316) Net realized gain/(loss) on investments.................. 2,468,368 2,770,141 8,869,769 210,104 22,342 Net change in unrealized appreciation/(depreciation) on investments............... 4,011,497 486,773 13,475,276 3,397,726 499,655 -------------- -------------- -------------- -------------- ----------- Net increase in net assets resulting from operations.... 6,561,181 3,388,289 21,981,418 3,311,818 516,681 -------------- -------------- -------------- -------------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares............... (6,738) (36,680) -- -- -- Class B shares............... -- -- -- -- -- Class C shares............... -- (5,113) -- -- -- Class Y shares............... (66,694) (86,346) -- -- -- -------------- -------------- -------------- -------------- ----------- (73,432) (128,139) -- -- -- -------------- -------------- -------------- -------------- ----------- Net realized capital gains Class A shares............... (1,061,580) (66,024) (1,714,612) (191,411) -- Class C shares............... (688,493) (46,015) (1,249,650) (113,992) -- Class Y shares............... (1,872,935) (97,133) (1,869,317) (274,790) -- -------------- -------------- -------------- -------------- ----------- (3,623,008) (209,172) (4,833,579) (580,193) -- -------------- -------------- -------------- -------------- ----------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares....................... 8,081,705 21,189,714 26,127,616 31,319,342 7,046,653 Cost of shares repurchased..... (7,019,459) (20,911,123) (13,322,599) (15,839,169) (275,794) Shares issued in reinvestment of dividends................. 3,045,286 203,090 4,344,751 509,481 -- -------------- -------------- -------------- -------------- ----------- Net increase in net assets derived from shares of beneficial interest transactions................. 4,107,532 481,681 17,149,768 15,989,654 6,770,859 -------------- -------------- -------------- -------------- ----------- Total increase in net assets... 6,972,273 3,532,659 34,297,607 18,721,279 7,287,540 NET ASSETS Beginning of period............ 14,081,832 10,549,173 40,937,524 22,216,245 -- -------------- -------------- -------------- -------------- ----------- End of period**................ $ 21,054,105 $ 14,081,832 $ 75,235,131 $ 40,937,524 $7,287,540 -------------- -------------- -------------- -------------- ----------- -------------- -------------- -------------- -------------- ----------- BALANCED PORTFOLIO INTERNATIONAL EQUITY PORTFOLIO ---------------------- ------------------------------ FOR THE PERIOD FOR THE PERIOD DECEMBER 29, 1997* DECEMBER 29, 1997* THROUGH MARCH 31, 1998 THROUGH MARCH 31, 1998 ---------------------- ------------------------------ INCREASE IN NET ASSETS FROM OPERATIONS Net investment income/(loss)... $ 47,628 $ 2,461 Net realized gain/(loss) on investments.................. 12,323 (117,110) Net change in unrealized appreciation/(depreciation) on investments............... 606,308 958,548 ------------ ----------- Net increase in net assets resulting from operations.... 666,259 843,899 ------------ ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares............... (10,210) -- Class B shares............... (2,353) -- Class C shares............... (1,857) -- Class Y shares............... (16,442) -- ------------ ----------- (30,862) -- ------------ ----------- Net realized capital gains Class A shares............... -- -- Class C shares............... -- -- Class Y shares............... -- -- ------------ ----------- -- -- ------------ ----------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares....................... 10,954,435 7,265,097 Cost of shares repurchased..... (166,905) (34,440) Shares issued in reinvestment of dividends................. 16,785 -- ------------ ----------- Net increase in net assets derived from shares of beneficial interest transactions................. 10,804,315 7,230,657 ------------ ----------- Total increase in net assets... 11,439,712 8,074,556 NET ASSETS Beginning of period............ -- -- ------------ ----------- End of period**................ $11,439,712 $8,074,556 ------------ ----------- ------------ -----------
37 THE BEAR STEARNS FUNDS FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total investment returns, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
NET NET DISTRIBUTIONS NET ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE, BEGINNING INCOME GAIN ON INVESTMENT CAPITAL END OF OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD --------- ---------- ---------------- ---------- ------------- ------ S&P STARS PORTFOLIO CLASS A For the fiscal year ended March 31, 1998................ $16.13 $(0.13) $6.69 $ -- $(2.72) $19.97 For the fiscal year ended March 31, 1997................ 14.92 (0.09) 2.63 -- (1.33) 16.13 For the period April 3, 1995* through March 31, 1996...... 12.00 -- 3.31 -- (0.39) 14.92 CLASS B For the period January 5, 1998* through March 31, 1998...... 17.37 (0.04) 2.53 -- -- 19.86 CLASS C For the fiscal year ended March 31, 1998................ 16.06 (0.22) 6.65 -- (2.64) 19.85 For the fiscal year ended March 31, 1997................ 14.86 (0.17) 2.62 -- (1.25) 16.06 For the period April 3, 1995* through March 31, 1996...... 12.00 (0.06) 3.28 -- (0.36) 14.86 CLASS Y For the fiscal year ended March 31, 1998................ 16.23 (0.05) 6.74 -- (2.81) 20.11 For the fiscal year ended March 31, 1997................ 14.97 (0.02) 2.66 -- (1.38) 16.23 For the period August 7, 1995* through March 31, 1996...... 14.13 0.07 1.20 (0.03) (0.40) 14.97 THE INSIDERS SELECT FUND CLASS A For the fiscal year ended March 31, 1998................ 14.58 -- 6.30 -- (3.00) 17.88 For the fiscal year ended March 31, 1997................ 14.00 0.02 2.48 (0.01) (1.91) 14.58 For the period June 16, 1995* through March 31, 1996...... 12.00 0.03 1.98 (0.01) -- 14.00 CLASS B For the period January 6, 1998* through March 31, 1998...... 15.72 0.01 1.96 -- -- 17.69 CLASS C For the fiscal year ended March 31, 1998................ 14.48 (0.07) 6.21 -- (2.94) 17.68 For the fiscal year ended March 31, 1997................ 13.96 (0.06) 2.47 -- (1.89) 14.48 For the period June 16, 1995* through March 31, 1996...... 12.00 (0.01) 1.97 -- -- 13.96 CLASS Y For the fiscal year ended March 31, 1998................ 14.66 0.07 6.36 -- (3.00) 18.09 For the fiscal year ended March 31, 1997................ 14.02 0.08 2.49 (0.02) (1.91) 14.66 For the period June 20, 1995* through March 31, 1996...... 12.12 0.07 1.87 (0.04) -- 14.02 LARGE CAP VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 1998................ 17.17 0.05 7.15 (0.02) (3.52) 20.83 For the fiscal year ended March 31, 1997................ 15.13 0.04 2.28 (0.10) (0.18) 17.17 For the period April 3, 1995* through March 31, 1996...... 12.00 0.06 3.10 (0.02) (0.01) 15.13 CLASS B For the period January 28, 1998* through March 31, 1998...... 18.17 (0.01) 2.50 -- -- 20.66 CLASS C For the fiscal year ended March 31, 1998................ 17.11 (0.03) 7.10 -- (3.52) 20.66 For the fiscal year ended March 31, 1997................ 15.08 (0.02) 2.25 (0.02) (0.18) 17.11 For the period April 3, 1995* through March 31, 1996...... 12.00 (0.01) 3.10 -- (0.01) 15.08 CLASS Y For the fiscal year ended March 31, 1998................ 17.18 0.26 7.05 (0.13) (3.52) 20.84 For the fiscal year ended March 31, 1997................ 15.12 0.23 2.17 (0.16) (0.18) 17.18 For the period September 11, 1995* through March 31, 1996................ 13.98 0.07 1.16 (0.08) (0.01) 15.12
- ---------- * Commencement of operations. ** Calculated based on shares outstanding on the first and last day of the respective periods, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. (1) Reflects waivers and reimbursements. (2) The amounts shown for a share outstanding throughout the respective periods are not in accord with the changes in the aggregate gains and losses on investments during the respective periods because of the timing of sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective periods. The accompanying notes are an integral part of the financial statements. 38
INCREASE/(DECREASE) REFLECTED IN EXPENSE RATIOS AND NET RATIO OF NET NET AVERAGE ASSETS, RATIO OF INVESTMENT INVESTMENT COMMISSION TOTAL END OF EXPENSES TO INCOME/(LOSS) INCOME/(LOSS) PORTFOLIO RATE INVESTMENT PERIOD AVERAGE NET TO AVERAGE DUE TO WAIVERS AND TURNOVER PER RETURN(3) (000'S OMITTED) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS RATE SHARE(6) ---------- --------------- ----------- ------------- ------------------- --------- ---------- S&P STARS PORTFOLIO CLASS A For the fiscal year ended March 31, 1998................ 43.53% $109,591 1.50%(7) (0.83)%(7) 0.38% 172.78%(8) $0.0541(8) For the fiscal year ended March 31, 1997................ 16.87 67,491 1.50(7) (0.59)(7) 0.70 220.00(8) 0.0595(8) For the period April 3, 1995* through March 31, 1996...... 27.68 45,049 1.50(5)(7) (0.01)(5)(7) 0.89(5) 295.97(8) 0.0603(8) CLASS B For the period January 5, 1998* through March 31, 1998...... 14.34 5,800 2.00(5) (1.47)(5) 0.53(5) 172.78(8) 0.0541(8) CLASS C For the fiscal year ended March 31, 1998................ 42.80 63,330 2.00(7) (1.32)(7) 0.38 172.78(8) 0.0541(8) For the fiscal year ended March 31, 1997................ 16.33 37,622 2.00(7) (1.09)(7) 0.70 220.00(8) 0.0595(8) For the period April 3, 1995* through March 31, 1996...... 26.91 28,081 2.00(5)(7) (0.45)(5)(7) 0.92(5) 295.97(8) 0.0603(8) CLASS Y For the fiscal year ended March 31, 1998................ 44.22 35,652 1.00(7) (0.32)(7) 0.38 172.78(8) 0.0541(8) For the fiscal year ended March 31, 1997................ 17.48 14,763 1.00(7) (0.10)(7) 0.70 220.00(8) 0.0595(8) For the period August 7, 1995* through March 31, 1996...... 9.09(4) 8,779 1.00(5)(7) 0.82(4)(5)(7) 0.99(4)(5) 295.97(8) 0.0603(8) THE INSIDERS SELECT FUND CLASS A For the fiscal year ended March 31, 1998................ 46.02 21,912 1.65 0.03 1.09 115.64 0.0389 For the fiscal year ended March 31, 1997................ 18.31 13,860 1.65 0.11 1.82 128.42 0.0264 For the period June 16, 1995* through March 31, 1996...... 16.75 12,132 1.65(5) 0.38(5) 1.87(5) 93.45 0.0294 CLASS B For the period January 6, 1998* through March 31, 1998...... 12.53 2,253 2.15(5) (0.95)(5) 1.82(5) 115.64 0.0389 CLASS C For the fiscal year ended March 31, 1998................ 45.17 12,297 2.15 (0.46) 1.10 115.64 0.0389 For the fiscal year ended March 31, 1997................ 17.69 9,519 2.15 (0.38) 1.81 128.42 0.0264 For the period June 16, 1995* through March 31, 1996...... 16.33 9,928 2.15(5) (0.12)(5) 1.92(5) 93.45 0.0294 CLASS Y For the fiscal year ended March 31, 1998................ 46.68 1,265 1.15 0.55 1.07 115.64 0.0389 For the fiscal year ended March 31, 1997................ 18.81 1,557 1.15 0.60 1.81 128.42 0.0264 For the period June 20, 1995* through March 31, 1996...... 15.98(4) 1,293 1.15(5) 0.97(4)(5) 2.04(4)(5) 93.45 0.0294 LARGE CAP VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 1998................ 44.59 8,358 1.50 0.32 1.73 61.75 0.0581 For the fiscal year ended March 31, 1997................ 15.44 4,987 1.50 0.43 1.58 136.67 0.0593 For the period April 3, 1995* through March 31, 1996...... 26.35 3,616 1.50(5) 0.46(5) 4.34(5) 45.28 0.0596 CLASS B For the period January 28, 1998* through March 31, 1998...... 13.70 446 2.00(5) (0.73)(5) 1.05(5) 61.75 0.0581 CLASS C For the fiscal year ended March 31, 1998................ 43.94 4,987 2.00 (0.19) 1.73 61.75 0.0581 For the fiscal year ended March 31, 1997................ 14.87 2,986 2.00 (0.08) 1.61 136.67 0.0593 For the period April 3, 1995* through March 31, 1996...... 25.71 3,520 2.00(5) (0.06)(5) 4.39(5) 45.28 0.0596 CLASS Y For the fiscal year ended March 31, 1998................ 45.27 7,263 1.00 0.83 1.76 61.75 0.0581 For the fiscal year ended March 31, 1997................ 16.04 6,109 1.00 1.00 1.50 136.67 0.0593 For the period September 11, 1995* through March 31, 1996................ 8.75(4) 3,413 1.00(5) 0.76(4)(5) 4.41(4)(5) 45.28 0.0596
- ---------- (3) Total investment return does not consider the effects of sales charges or contingent deferred sales charges.Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total investment return is not annualized. (4) The total investment return and ratios for Class Y shares are not necessarily comparable to those of Class A and C shares, due to timing differences in the commencement of the intial public offering of Class Y shares. (5) Annualized. (6) Represents average commission rate per share charged to the Portfolios on purchase and sales of investments subject to such commissions during each period. (7) Includes S&P STARS' share of S&P STARS Master Series' expenses for the period prior to June 25, 1997. (8) Portfolio turnover rate and average commission rate per share are related to S&P STARS Master Series for the period prior to June 25, 1997. 39 THE BEAR STEARNS FUNDS FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total investment returns, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
NET NET DISTRIBUTIONS NET ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE, BEGINNING INCOME GAIN ON INVESTMENT CAPITAL END OF OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD --------- ---------- ---------------- ---------- ------------- ------ SMALL CAP VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 1998................ $17.48 $(0.14) $8.06 $ -- $(1.75) $23.65 For the fiscal year ended March 31, 1997................ 15.87 (0.10) 1.95 -- (0.24) 17.48 For the period April 3, 1995* through March 31, 1996...... 12.00 (0.07) 4.17 -- (0.23) 15.87 CLASS B For the period January 21, 1998* through March 31, 1998...... 19.95 -- 3.53 -- -- 23.48 CLASS C For the fiscal year ended March 31, 1998................ 17.38 (0.24) 8.00 -- (1.66) 23.48 For the fiscal year ended March 31, 1997................ 15.79 (0.18) 1.93 -- (0.16) 17.38 For the period April 3, 1995* through March 31, 1996...... 12.00 (0.10) 4.11 -- (0.22) 15.79 CLASS Y For the fiscal year ended March 31, 1998................ 17.47 (0.04) 8.06 -- (1.84) 23.65 For the fiscal year ended March 31, 1997................ 15.85 (0.05) 1.97 -- (0.30) 17.47 For the period June 22, 1995* through March 31, 1996...... 13.09 -- 3.05 -- (0.29) 15.85 FOCUS LIST PORTFOLIO CLASS A For the period December 29, 1997* through March 31, 1998................ 12.00 (0.01) 1.41 -- -- 13.40 CLASS B For the period December 29, 1997* through March 31, 1998................ 12.00 (0.01) 1.39 -- -- 13.38 CLASS C For the period December 29, 1997* through March 31, 1998................ 12.00 (0.01) 1.39 -- -- 13.38 BALANCED PORTFOLIO CLASS A For the period December 29, 1997* through March 31, 1998................ 12.00 0.06 0.91 (0.04) -- 12.93 CLASS B For the period December 29, 1997* through March 31, 1998................ 12.00 0.05 0.90 (0.03) -- 12.92 CLASS C For the period December 29, 1997* through March 31, 1998................ 12.00 0.05 0.90 (0.03) -- 12.92 CLASS Y For the period January 6, 1998* through March 31, 1998...... 12.05 0.06 0.88 (0.04) -- 12.95 INTERNATIONAL EQUITY PORTFOLIO CLASS A For the period December 29, 1997* through March 31, 1998................ 12.00 0.01 1.76 -- -- 13.77 CLASS B For the period December 29, 1997* through March 31, 1998................ 12.00 -- 1.75 -- -- 13.75 CLASS C For the period December 29, 1997* through March 31, 1998................ 12.00 -- 1.75 -- -- 13.75
- ---------- * Commencement of operations. ** Calculated based on shares outstanding on the first and last day of the respective periods, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. (1) Reflects waivers and reimbursements. (2) The amounts shown for a share outstanding throughout the respective periods are not in accord with the changes in the aggregate gains and losses on investments during the respective periods because of the timing of sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective periods. The accompanying notes are an integral part of the financial statements. 40
INCREASE/(DECREASE) REFLECTED IN EXPENSE RATIOS AND NET RATIO OF NET NET AVERAGE ASSETS, RATIO OF INVESTMENT INVESTMENT COMMISSION TOTAL END OF EXPENSES TO INCOME/(LOSS) INCOME/(LOSS) PORTFOLIO RATE INVESTMENT PERIOD AVERAGE NET TO AVERAGE DUE TO WAIVERS AND TURNOVER PER RETURN(3) (000'S OMITTED) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS RATE SHARE(6) ---------- --------------- ----------- ------------- ------------------ --------- ---------- SMALL CAP VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 1998................ 46.86% $25,111 1.50% (0.71)% 0.76% 90.39% $0.0557 For the fiscal year ended March 31, 1997................ 11.71 13,143 1.50 (0.81) 1.00 56.88 0.0550 For the period April 3, 1995* through March 31, 1996...... 34.36 6,474 1.50(5) (0.66)(5) 2.32(5) 40.79 0.0572 CLASS B For the period January 21, 1998* through March 31, 1998...... 17.69 901 2.00(5) (1.49)(5) 1.31(5) 90.39 0.0557 CLASS C For the fiscal year ended March 31, 1998................ 46.10 18,082 2.00 (1.21) 0.76 90.39 0.0557 For the fiscal year ended March 31, 1997................ 11.12 11,071 2.00 (1.31) 0.99 56.88 0.0550 For the period April 3, 1995* through March 31, 1996...... 33.59 6,753 2.00(5) (1.09)(5) 2.39(5) 40.79 0.0572 CLASS Y For the fiscal year ended March 31, 1998................ 47.54 31,141 1.00 (0.21) 0.77 90.39 0.0557 For the fiscal year ended March 31, 1997................ 12.19 16,724 1.00 (0.31) 1.00 56.88 0.0550 For the period June 22, 1995* through March 31, 1996...... 23.52(4) 8,989 1.00(5) -- 2.45(4)(5) 40.79 0.0572 FOCUS LIST PORTFOLIO CLASS A For the period December 29, 1997* through March 31, 1998................ 11.67 3,201 1.40(5) (0.30)(5) 5.01(5) 28.91 0.0600 CLASS B For the period December 29, 1997* through March 31, 1998................ 11.50 2,399 1.90(5) (0.78)(5) 5.27(5) 28.91 0.0600 CLASS C For the period December 29, 1997* through March 31, 1998................ 11.50 1,687 1.90(5) (0.62)(5) 5.52(5) 28.91 0.0600 BALANCED PORTFOLIO CLASS A For the period December 29, 1997* through March 31, 1998................ 8.04 3,852 1.20(5) 2.47(5) 3.25(5) 12.72 0.0543 CLASS B For the period December 29, 1997* through March 31, 1998................ 7.92 1,044 1.70(5) 1.96(5) 3.30(5) 12.72 0.0543 CLASS C For the period December 29, 1997* through March 31, 1998................ 7.92 858 1.70(5) 1.95(5) 3.33(5) 12.72 0.0543 CLASS Y For the period January 6, 1998* through March 31, 1998...... 7.80 5,685 0.70(5) 2.98(5) 3.12(5) 12.72 0.0543 INTERNATIONAL EQUITY PORTFOLIO CLASS A For the period December 29, 1997* through March 31, 1998................ 14.75 3,765 1.75(5) 0.53(5) 4.06(5) 3.26 0.0683 CLASS B For the period December 29, 1997* through March 31, 1998................ 14.58 2,137 2.25(5) (0.06)(5) 4.04(5) 3.26 0.0683 CLASS C For the period December 29, 1997* through March 31, 1998................ 14.58 2,173 2.25(5) (0.06)(5) 4.04(5) 3.26 0.0683
- ---------- (3) Total investment return does not consider the effects of sales charges or contingent deferred sales charges.Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total investment return is not annualized. (4) The total investment return and ratios for Class Y shares are not necessarily comparable to those of Class A and C shares, due to timing differences in the commencement of the intial public offering of Class Y shares. (5) Annualized. (6) Represents average commission rate per share charged to the Portfolios on purchase and sales of investments subject to such commissions during each period. 41 THE BEAR STEARNS FUNDS S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio NOTES TO FINANCIAL STATEMENTS ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business trust on September 29, 1994 and is registered with the Securities and Exchange Commission (the "Commission") under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as an open-end management investment company. The Fund currently has ten separate portfolios in operation: seven diversified portfolios, Large Cap Value Portfolio ("Large Cap"), Small Cap Value Portfolio ("Small Cap"), Balanced Portfolio ("Balanced"), International Equity Portfolio ("International Equity"), High Yield Total Return Portfolio, Total Return Bond Portfolio and Prime Money Market Portfolio and three non-diversified portfolios, S&P STARS Portfolio ("S&P STARS"), Insiders Select Fund ("Insiders Select") and Focus List Portfolio ("Focus List"), (each a "Portfolio" and collectively, the "Portfolios"). Each Portfolio is treated as a separate entity for certain matters under the Investment Company Act, and for other purposes, and a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. As of the date hereof, each Portfolio offers four classes of shares, which have been designated as Class A, B, C and Y shares (except the Prime Money Market Portfolio, which only offers shares designated as Class Y). Class Y shares of the Focus List and International Equity have yet to commence their initial public offerings. ORGANIZATIONAL MATTERS -- Prior to commencing investment operations, each Portfolio as indicated below did not have any transactions other than those relating to organizational matters and the issuance of shares of beneficial interest of the Portfolios to Bear, Stearns & Co., Inc. ("Bear Stearns" or the "Distributor") as follows:
SHARES OF BENEFICIAL INTEREST ------------------------------------------------------------ COMMENCEMENT OF PORTFOLIO OPERATIONS CLASS A CLASS B CLASS C CLASS Y - ------------------------------ --------------------- ------- ------- ------- ------- S&P STARS..................... April 3, 1995 5,209 -- 5,209 -- Insiders Select............... June 16, 1995 1 -- 1 -- Large Cap..................... April 3, 1995 1,042 -- 1,042 -- Small Cap..................... April 3, 1995 1,042 -- 1,042 -- Focus List.................... December 29, 1997 1 1 1 1 Balanced...................... December 29, 1997 1 1 1 1 International Equity.......... December 29, 1997 1 1 1 1
Costs of $203,596, $181,965, $99,875, $107,203, $40,403, $58,783 and $61,015 which were incurred by S&P STARS, Insiders Select, Large Cap, Small Cap, Focus List, Balanced and International Equity, respectively, in connection with the organization, registration with the Commission and initial public offering of its shares, have been deferred and are being amortized using the straight-line method over the period of benefit not exceeding sixty months, beginning with the commencement of investment operations of each Portfolio. 42 In the event that the Distributor or any transferee of the Distributor redeems any of its original shares in a particular Portfolio prior to the end of the sixty month period, the proceeds of the redemption payable in respect of such shares shall be reduced by the pro rata share (based on the proportionate share of the original shares redeemed to the total number of original shares outstanding at the time of the redemption) of the unamortized deferred organization expenses as of the date of such redemption. In the event that a particular Portfolio is liquidated prior to the end of the sixty month period, the Distributor or the transferee of the Distributor shall bear the unamortized deferred organization expenses. MANAGEMENT ESTIMATES -- The preparation of financial statements in accordance with generally accepted accounting principles requires management to make certain estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. PORTFOLIO VALUATION -- Each Portfolio calculates the net asset value of and completes orders to purchase or repurchase its shares of beneficial interest on each business day, with the exception of those days on which the New York Stock Exchange is closed. Net asset value per share is determined as of the close of regular trading on the floor of the New York Stock Exchange on each business day. Portfolio securities, including covered call options written by the Portfolios, are valued at the last sale price on the securities exchange or national securities market on which such securities primarily are traded. Securities not listed on an exchange or national securities market, or securities in which there were no transactions, are valued at the average of the most recent bid and asked prices, except in the case of open short positions where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities which mature in 60 days or less are valued at amortized cost, which approximates market value, unless this method does not represent fair value. Expenses and fees, including the investment advisory, administration and distribution fees, are accrued daily and taken into account for the purpose of determining the net asset value of a Portfolio's shares. Because of the differences in operating expenses incurred by each class, the per share net asset value of each class will differ. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME -- Investment transactions are recorded on the trade date (the date on which the order to buy or sell is executed). Realized gains and losses from securities and foreign currency related transactions, if any, are calculated on the identified cost basis. Discounts are treated as adjustments to interest income and identified costs of investments over the lives of the respective investments. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Amortization is recorded on a straight-line basis. Each Portfolio's net investment income (other than distribution fees) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of net assets of each class at the beginning of the day (after adjusting for current capital share activity of the respective classes). OPTIONS WRITTEN -- When a Portfolio writes an option, an amount equal to the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from writing options which expire unexercised are recorded by the Portfolio on the expiration date as realized gains from option transactions. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying securities in determining whether the Portfolio has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The use of written options involves, to varying degrees, elements of market risk in excess of the amount recognized in the statement of assets and liabilities. The contractual or notional amounts reflect the extent of the Portfolio's involvement in these financial instruments. In writing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio selling or buying a security at a price different from the current market value. Each Portfolio's activities in written options are conducted through regulated exchanges which do not result in counterparty credit risks. The Portfolios had no other option transactions except for those listed below. 43 Option activity for the fiscal year ended March 31, 1998 was as follows:
S&P STARS* SMALL CAP ---------------------------------------------- --------------------- CALL OPTIONS PUT OPTIONS CALL OPTIONS ----------------------- --------------------- --------------------- CONTRACTS PREMIUMS CONTRACTS PREMIUMS CONTRACTS PREMIUMS --------- ----------- --------- --------- --------- --------- Outstanding at beginning of year......................... 400 $ 332,539 -- -- -- -- Options written............... 9,885 3,618,384 -- -- 800 $ 139,467 Options purchased............. -- -- 2,650 $ 602,041 -- -- Options closed or expired..... (10,285) (3,950,923) (2,650) (602,041) (800) (139,467) --------- ----------- --------- --------- --- --------- Outstanding at end of year.... -- -- -- -- -- -- --------- ----------- --------- --------- --- --------- --------- ----------- --------- --------- --- ---------
- ------- *Includes option transactions of the S&P STARS Master Series, a series of S&P STARS Fund, for the period April 1, 1997 through June 24, 1997. SHORT SELLING -- S&P STARS, Insiders Select, Large Cap and Small Cap may engage in short selling of securities. Short sales are transactions in which a Portfolio sells a security it does not own in anticipation of a decline in the market value of that security. When a Portfolio makes a short sale, an amount equal to the proceeds received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the short sale. Short sales represent obligations of a Portfolio to make future delivery of specific securities and, correspondingly, create an obligation to purchase the security at market prices prevailing at the later delivery date (or to deliver the security if already owned by the Portfolio). Upon termination of a short sale, a Portfolio will recognize a gain, limited to the price at which the Portfolio sold the security short, if the market price is less than the proceeds originally received. The Portfolio will recognize a loss, unlimited in magnitude, if the market price at termination is greater than the proceeds originally received. As a result, short sales create the risk that a Portfolio's ultimate obligation to satisfy the delivery requirements may exceed the amount of the proceeds initially received or the liability recorded in the financial statements. Focus List, Balanced and International Equity may only engage in short sales "against the box", a transaction in which a Portfolio enters into a short sale of a security which the Portfolio owns. None of the Portfolios had open short sales at March 31, 1998. FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in foreign currencies, if any, are recorded in a Portfolio's records at the current prevailing exchange rates. Asset and liability accounts that are denominated in a foreign currency are adjusted daily to reflect current exchange rates. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. It is not practical to isolate that portion of both realized and unrealized gains and losses on investments in the statement of operations that result from fluctuations in foreign currency exchange rates. Each Portfolio reports certain foreign currency related transactions, if any, as components of realized gains for financial reporting purposes, whereas such components are treated as ordinary income/(loss) for U.S. federal income tax purposes. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Portfolios may enter into forward foreign currency exchange contracts ("forward currency contracts") to hedge against adverse changes in the relationship of the U.S. dollar to foreign currencies. The Portfolios may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Portfolios may also use these contracts to hedge the U.S. dollar value of securities it already owns denominated in foreign currencies. Forward currency contracts are valued at the forward rate, and are marked-to-market daily. The change in market value is recorded by a Portfolio as an unrealized gain or loss. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the current contract at the time it was opened and the value at the time it was closed. The use of forward currency contracts does not eliminate fluctuations in the underlying prices of a Portfolio's securities, but it does establish a rate of exchange that can be achieved in the future. Although forward currency contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of currency increase. In addition, the Portfolio could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. During the period ended March 31, 1998, only International Equity entered into such forward currency contracts. 44 International Equity's open forward currency contracts at March 31, 1998 were as follows:
DELIVERY VALUE SETTLEMENT UNREALIZED CURRENCY (LOCAL CURRENCY) DATE COST VALUE GAIN/(LOSS) - ------------------------------ ---------------- ---------- ---------- ---------- ---------- Danish krone.................. 440,000 04/29/98 $ 62,507 $ 63,831 $ 1,324 Finnish markkas............... 600,000 04/29/98 107,037 109,187 2,150 French francs................. 1,470,000 04/29/98 237,618 242,287 4,669 German deutschemarks.......... 650,000 04/29/98 351,973 359,174 7,201 Italian lira.................. 227,910,000 04/29/98 124,993 127,305 2,312 Japanese yen.................. 20,220,000 04/30/98 152,443 159,181 6,738 Netherlands guilder........... 590,000 04/29/98 283,490 289,148 5,658 Portuguese escudo............. 9,990,000 04/29/98 52,773 53,828 1,055 Spanish pesetas............... 18,010,000 04/29/98 114,777 117,170 2,393 Swedish krona................. 1,700,000 04/29/98 212,814 211,916 (898) Swiss francs.................. 560,000 04/29/98 368,530 383,243 14,713 ---------- Net unrealized gain... $47,315 ---------- ----------
FOREIGN CURRENCY TRANSLATION -- The books and records of the Portfolios are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions. The resulting exchange gains and losses are included in the STATEMENT OF OPERATIONS. The Portfolios do not generally isolate the effect of fluctuations in foreign exchange rates from the effect of fluctuations in the market prices of investments. However, the Portfolios do isolate the effect of fluctuations in foreign exchange rates when determining the gain or loss upon the sale or maturity of foreign currency-denominated debt obligations pursuant to U.S. federal income tax regulations; such amount is categorized as foreign exchange gain or loss for both financial reporting and income tax reporting purposes. U.S. FEDERAL TAX STATUS -- Each Portfolio intends to distribute substantially all of its taxable income and to comply or continue to comply with the other requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required. In addition, by distributing during each calendar year substantially all of its ordinary income and capital gains, if any, each Portfolio intends not to be subject to a U.S. federal excise tax. DIVIDENDS AND DISTRIBUTIONS -- Each Portfolio, except Balanced, intends to distribute at least annually to shareholders substantially all of its net investment income. Balanced declares and pays as quarterly dividends to shareholders, substantially all of its net investment income. Distribution of net realized gains, if any, will be declared and paid at least annually. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within capital accounts based on their U.S. federal tax-basis treatment, temporary differences do not require reclassification. At March 31, 1998, S&P STARS, Insiders Select, Small Cap and Focus List, reclassified within the composition of net assets, net investment losses of $1,516,182, $31,926, $363,627 and $5,316, respectively to accumulated realized gains. FOREIGN WITHHOLDING TAXES -- Income received from sources outside of the United States may be subject to withholding and other taxes imposed by countries other than the United States. OTHER -- Securities denominated in currencies other than U.S. dollars are subject to changes in value due to fluctuations in exchange rates. Some countries in which the Portfolios invest require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if there is a deterioration in a 45 country's balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad. The securities exchanges of certain foreign markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES As of December 4, 1997, Bear Stearns Asset Management Inc. ("BSAM" or the "Adviser," formerly known as Bear Stearns Funds Management Inc.) delegated certain administrative services to a separate administrator, of the same name, Bear Stearns Funds Management Inc. ("BSFM"), a newly created wholly-owned subsidiary of The Bear Stearns Companies Inc. The Adviser is staffed by the same personnel and performs the same services called for by the Advisory Agreement before its name change. On February 4, 1998, at a regular meeting of the Fund's Board of Trustees, the Board approved the Advisory Agreement with BSAM and the related delegation of duties to BSFM. For the fiscal year ended March 31, 1998, BSAM, a wholly-owned subsidiary of The Bear Stearns Companies Inc., served as the investment adviser pursuant to an Investment Advisory Agreement with each Portfolio. Under the terms of the Investment Advisory Agreement, each Portfolio, except Insiders Select, has agreed to pay BSAM a monthly fee at the annual rate of 0.75% of average daily net assets for S&P STARS, Large Cap and Small Cap, 0.65% of average daily net assets for Focus List and Balanced, and 1.00% of average daily net assets for International Equity. Prior to June 25, 1997, S&P STARS did not retain an investment adviser, rather, S&P STARS invested all of its assets in the S&P STARS Master Series, a series of S&P STARS Fund, which was advised by BSAM. For Insiders Select, BSAM is entitled to receive from the Portfolio a monthly fee equal to an annual rate of 1.00% of the Portfolio's average daily net assets. In addition, starting in the thirteenth month of operation, BSAM is entitled to a monthly performance adjustment fee which may increase or decrease the total advisory fee by up to 0.50% per year of the value of Insider Select's average daily net assets. The performance adjustment fee reduced the total advisory fee by $132,242 or 0.45% of the value of Insider's average daily net assets due to underperformance in comparison to the S&P 500 Index for the ten months ended January 31, 1998 and to the S&P MidCap 400 Index for the two months ended March 31, 1998. Prior to September 22, 1997, BSAM had engaged Symphony Asset Management ("Symphony"), a subsidiary of BARRA, Inc., as Insiders Select's sub-investment adviser. If not for the voluntary undertaking to limit Insiders Select's total operating costs, BSAM would have paid Symphony a monthly fee equal to an annual rate of 0.45% of the Portfolio's average daily net assets (reflecting the performance adjustment). Effective September 22, 1997, BSAM assumed portfolio management responsibilities for Insiders Select. BSAM has engaged Marvin & Palmer Associates, Inc. ("Marvin & Palmer") as the International Equity's sub-investment adviser to manage the Portfolio's day-to-day investment activities. Marvin & Palmer is entitled to receive a monthly fee from BSAM calculated on an annual basis equal to 0.20% of the Portfolio's total average daily net assets to the extent the Portfolio's average daily net assets are in excess of $25 million and below $50 million at the relevant month end, 0.45% of the Portfolio's total average daily net assets to the extent the Portfolio's average daily net assets are in excess of $50 million and below $65 million at the relevant month end and 0.60% of the Portfolio's total average daily net assets to the extent the Portfolio's net assets in excess of $65 million at the relevant month end. For the fiscal year ended March 31, 1998, BSFM (the "Administrator") served as administrator to each Portfolio pursuant to an Administrative Agreement. The Administrator is entitled to receive from each Portfolio a monthly fee equal to an annual rate of 0.15% of each Portfolio's average daily net assets. Under the terms of an Administrative Services Agreement with each Portfolio, PFPC Inc. provides certain accounting and administrative services to each Portfolio. For providing these services, PFPC Inc. is entitled to receive from each Portfolio a monthly fee equal to an annual rate of 0.10% of the Portfolio's average daily net assets up to $200 million, 0.075% of the next $200 million, 0.05% of the next $200 million and 0.03% of net assets above $600 million, subject to a minimum annual fee 46 of $150,000 for each Portfolio. Prior to June 25, 1997, PFPC Inc. was entitled to receive from S&P STARS a monthly fee of $5,500. During the fiscal year ended March 31, 1998, PFPC has voluntarily waived a portion of its fee for all Portfolios except S&P STARS. For the fiscal year ended March 31, 1998, BSAM voluntarily undertook to limit each Portfolio's total operating expenses (exclusive of brokerage commissions, taxes, interest and extraordinary items) to a maximum annual level as a percent of each Portfolio's average daily net assets as follows:
PORTFOLIO CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Y SHARES - ------------------------------ -------------- -------------- -------------- -------------- S&P STARS..................... 1.50% 2.00% 2.00% 1.00% Insiders Select............... 1.65 2.15 2.15 1.15 Large Cap..................... 1.50 2.00 2.00 1.00 Small Cap..................... 1.50 2.00 2.00 1.00 Focus List.................... 1.40 1.90 1.90 0.90 Balanced...................... 1.20 1.70 1.70 0.70 International Equity.......... 1.75 2.25 2.25 1.25
As necessary, this limitation is effected by waivers by the Adviser of its advisory fees and reimbursements of expenses exceeding the advisory fee. For the fiscal year ended March 31, 1998 (unless otherwise indicated), the investment advisory fee waivers and reimbursements of expenses were as follows:
PORTFOLIO ADVISORY FEE WAIVERS EXPENSE REIMBURSEMENTS - ------------------------------ -------------------- ---------------------- S&P STARS..................... $645,637 -- Insiders Select............... 157,031 $164,325 Large Cap..................... 140,641 185,275 Small Cap..................... 412,656 20,648 Focus List*................... 6,748 46,255 Balanced*..................... 12,178 46,910 International Equity*......... 14,726 44,515
- ------- *Commenced operations on December 29, 1997. For the fiscal year ended March 31, 1998 (unless otherwise indicated), Bear Stearns, an affiliate of the Adviser and the Administrator, earned approximately $305,271, $12,445, $522, $1,728, $8,238, and $2,598 in brokerage commissions from portfolio transactions executed on behalf of S&P STARS, Insiders Select, Large Cap, Small Cap, Focus List and Balanced, respectively. Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies Inc. and an affiliate of the Adviser and the Administrator, serves as custodian to each of the Portfolios. DISTRIBUTION PLAN The Fund, on behalf of the S&P STARS, Insiders Select, Large Cap, Small Cap and Focus List has entered into a Distribution and Servicing Plan (the "Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act. Under the Distribution Plan, S&P STARS, Insiders Select, Large Cap, Small Cap and Focus List paid Bear Stearns at an annual rate of 0.25% for Class A shares and 0.75% for Class C shares. Effective December 24, 1997 the Portfolios added Class B shares for which it has entered into a Distribution and Servicing Plan (the "Class B Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act. Under the Class B Distribution Plan, S&P STARS, Insiders Select, Large Cap, Small Cap and Focus List paid Bear Stearns at an annual rate of 0.75% for Class B shares. With respect to the Portfolios' Class A shares, up to 0.25% of Class A will compensate institutions for personal service and maintenance of accounts holding the Portfolios' Class A shares. The Fund, on behalf of Class B shares of the Portfolios has adopted a Shareholder Servicing Plan whereby the Portfolios paid fees of up to 0.25%. 47 The Fund, on behalf of Class A, B and C shares of the Balanced and International Equity, has entered into a Distribution Plan (the "Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act. Under the Distribution Plan in effect for the period December 24, 1997 through March 31, 1998, the Balanced and International Equity has paid Bear Stearns a fee at an annual rate of 0.25% for Class A shares 0.75% for Class B and C shares, respectively. The Fund, on behalf of Class A, B and C shares of Balanced and International Equity, has adopted a Shareholder Servicing Plan (the "Shareholder Servicing Plan"). Under the Shareholder Servicing Plan in effect for the period December 24, 1997 through March 31, 1998, Balanced and International Equity paid fees up to 0.25% of its Class A, B and C shares. Such fees are based on the average daily net assets in each class of the respective Portfolios and are accrued daily and paid monthly or at such other intervals as the Board of Trustees may determine. The fees paid to Bear Stearns under the Plan are payable without regard to actual expenses incurred. Bear Stearns uses distribution fees to pay its dealers whose clients hold Portfolio shares and for other distribution-related activities. Bear Stearns uses shareholder servicing fees to pay broker-dealers and other financial institutions whose clients hold Portfolio shares primarily for shareholder liaison and other account maintenance services. For the fiscal year ended March 31, 1998 (unless otherwise indicated), the distribution and shareholder servicing fees paid to Bear Stearns under the Plan were as follows:
PORTFOLIO DISTRIBUTION FEES SHAREHOLDER SERVICING FEES - ------------------------------ ----------------- -------------------------- S&P STARS..................... $617,557 $353,774 Insiders Select............... 119,999 69,183 Large Cap..................... 46,559 26,164 Small Cap..................... 157,616 85,144 Focus List*................... 5,434 2,595 Balanced*..................... 4,568 2,623 International Equity*......... 8,158 3,681
- ------- *Commenced operations on December 29, 1997. In addition, as Distributor of the Portfolios, Bear Stearns collects the sales charges imposed on sales of each Portfolio's Class A shares, and reallows a portion of such charges to dealers through which the sales are made. As a result of an undertaking by the Distributor, it reallowed all of the sales charges to its dealers selling Portfolio shares for the period April 3, 1995 through September 26, 1995 and the period February 15, 1996 through June 30, 1996. Furthermore, the Distributor has increased the compensation paid to its dealers selling Portfolio shares on net asset value transfers (purchases made by investors with the proceeds from a redemption of shares of an investment company sold with a sales charge or commission and not distributed by Bear Stearns) from 0.50% to 1.00% beginning April 15, 1996 until December 23, 1997. Effective December 24, 1997, the Distributor has increased the reallowance to all authorized dealers on net asset value transfers from 1.00% to 1.25%. In addition, Bear Stearns advanced 4.25% and 1.00% in sales commissions on the sale of Class B and C shares, respectively, to dealers at the time of such sales. For the fiscal year ended March 31, 1998 (unless otherwise indicated), Bear Stearns received the approximate amounts noted below from each Portfolio in front-end sales charges resulting from sales of Class A shares (from which Bear Stearns paid such 48 sales charges to dealers who in turn paid commissions to sales persons) and contingent deferred sales charges ("CDSC") upon certain redemptions by Class C shareholders. There were no amounts received in CDSC for Class B shares. The amounts were as follows:
FRONT-END SALES CHARGES CDSC PORTFOLIO CLASS A SHARES CLASS C SHARES - ------------------------------ ----------------------- -------------- S&P STARS..................... $1,022,837 $25,827 Insiders Select............... 236,026 2,558 Large Cap..................... 68,262 552 Small Cap..................... 214,826 4,052 Focus List*................... 71,580 -- Balanced*..................... 32,306 -- International Equity*......... 58,103 --
- ------- *Commenced operations on December 29, 1997. INVESTMENTS IN SECURITIES For U.S. federal income tax purposes, the cost of securities owned, appreciation and depreciation and net unrealized appreciation of investments at March 31, 1998 for each Portfolio were as follows:
GROSS GROSS NET PORTFOLIO COST APPRECIATION DEPRECIATION APPRECIATION - ------------------------- ------------- ----------- --------------- ------------ S&P STARS................ $ 175,871,998 $42,188,265 $ (3,269,490) $38,918,775 Insiders Select.......... 30,075,169 7,489,880 (257,173) 7,232,707 Large Cap................ 15,491,887 5,632,064 (9,720) 5,622,344 Small Cap................ 54,749,127 20,653,395 (1,094,000) 19,559,395 Focus List............... 6,721,806 553,704 (54,049) 499,655 Balanced................. 11,050,008 658,031 (51,723) 606,308 International Equity..... 7,165,194 953,745 (42,532) 911,213
For the fiscal year ended March 31, 1998 (unless otherwise indicated), aggregate purchases and sales of investment securities (excluding short-term securities) for each Portfolio were as follows:
PORTFOLIO PURCHASES SALES - ------------------------------ ------------ ------------ S&P STARS**................... $323,572,428 $285,362,457 Insiders Select............... 30,715,511 32,631,115 Large Cap..................... 10,985,442 11,851,875 Small Cap..................... 59,322,353 48,910,695 Focus List*................... 7,544,418 1,048,327 Balanced*..................... 11,515,668 820,403 International Equity*......... 6,247,701 152,428
- ------- * Commenced operations on December 29, 1997. **Includes the investment transactions of the S&P STARS Master Series for the period April 1, 1997 through June 24, 1997. Prior to June 25, 1997, S&P STARS invested all of its assets in the S&P STARS Master Series, a series of S&P STARS Fund. Pursuant to a plan of liquidation adopted by the Trustees of the S&P STARS Fund on June 25, 1997, S&P STARS redeemed in-kind its investment in the S&P STARS Master Series. The value of the investments and cash (after the unamortized organization costs absorbed by the Distributor and net of any accrued liabilities) received by S&P STARS totaled $147,186,137. SHARES OF BENEFICIAL INTEREST Each Portfolio offers Class A, B, C and Y shares (except the Prime Money Market Portfolio, which only offers shares designated as Class Y). Class A shares are sold with a front-end sales charge of up to 5.50% for each Portfolio. Effective December 24, 1997, Class B shares are sold with a CDSC of up to 5.00% within six years of purchase. Prior to 49 December 24, 1997, Class A shares of S&P STARS, Insiders Select, Large Cap and Small Cap were sold with a front-end sales charge of up to 4.75%. Class C shares are sold with a CDSC of 1.00% during the first year. There is no sales charge or CDSC on Class Y shares, which are offered primarily to institutional investors. At March 31, 1998, there was an unlimited amount of $0.001 par value shares of beneficial interest authorized for each Portfolio, of which Bear Stearns owned the following shares including reinvestment of dividends and distributions, if any:
SHARES OF BENEFICIAL INTEREST ---------------------------- PORTFOLIO CLASS A CLASS B CLASS C - ------------------------------ -------- -------- -------- S&P STARS..................... 5,209 -- 5,209 Insiders Select............... 1 -- -- Large Cap..................... 1,242 -- 1,242 Small Cap..................... 1,131 -- 1,127 Focus List.................... 41,668 41,668 41,668 Balanced...................... 55,557 55,557 55,687 International Equity.......... 138,890 138,890 138,890
Transactions in each Portfolio's shares of beneficial interest were as follows:
S&P STARS INSIDERS --------------------------------------- --------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ----------- ----------- ------------- ---------- ----------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................... 2,206,598 1,533,370 632,794 420,704 312,605 167,184 Value.................................... $42,537,872 $29,585,256 $10,791,624 $7,036,800 $5,267,810 $2,629,805 FOR THE FISCAL YEAR ENDED MARCH 31, 1997 Shares................................... 2,517,105 1,596,708 242,732 331,726 345,460 97,925 Value.................................... $42,363,300 $25,841,545 $ 3,986,019 $4,976,082 $5,185,795 $1,381,727 CLASS B FOR THE PERIOD ENDED MARCH 31, 1998 Shares................................... 292,094 -- -- 127,400 -- -- Value.................................... $ 5,301,891 -- -- $2,149,181 -- -- CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................... 1,125,588 680,009 402,739 201,834 254,946 91,147 Value.................................... $22,151,823 $12,920,388 $ 6,834,482 $3,338,014 $4,287,656 $1,420,978 FOR THE FISCAL YEAR ENDED MARCH 31, 1997 Shares................................... 935,884 617,043 134,250 148,520 273,058 70,623 Value.................................... $15,772,161 $9,919,428 $ 2,197,714 $2,231,793 $3,992,295 $ 991,548 CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................... 849,614 199,060 213,147 32,037 84,697 16,449 Value.................................... $15,879,797 $3,851,571 $ 3,653,343 $ 542,714 $1,452,486 $ 261,545 FOR THE FISCAL YEAR ENDED MARCH 31, 1997 Shares................................... 429,911 223,037 53,147 29,508 26,728 11,179 Value.................................... $ 8,205,295 $3,645,262 $ 876,922 $ 444,370 $ 398,697 $ 158,408
50
LARGE CAP SMALL CAP --------------------------------------- ---------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ----------- ----------- ------------- ----------- ----------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................... 115,448 50,777 46,162 492,900 253,678 70,857 Value.................................... $ 2,229,250 $ 998,486 $ 853,530 $ 9,966,068 $5,138,087 $1,453,284 FOR THE FISCAL YEAR ENDED MARCH 31, 1997 Shares................................... 231,427 185,652 5,640 589,041 255,449 10,191 Value.................................... $ 3,703,414 $3,216,798 $ 91,138 $10,117,507 $4,464,886 $ 171,713 CLASS B FOR THE PERIOD ENDED MARCH 31, 1998 Shares................................... 21,870 264 -- 38,387 -- -- Value.................................... $ 441,820 $ 5,391 -- $ 830,356 -- -- CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................... 64,169 33,086 35,761 270,017 191,822 54,988 Value.................................... $ 1,249,264 $ 611,649 $ 656,208 $ 5,553,946 $3,883,351 $1,121,735 FOR THE FISCAL YEAR ENDED MARCH 31, 1997 Shares................................... 61,362 123,270 3,077 464,417 261,409 6,043 Value.................................... $ 950,313 $2,089,876 $ 49,600 $ 8,013,394 $4,565,675 $ 107,447 CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................... 202,742 292,994 83,137 469,788 196,994 86,372 Value.................................... $ 4,161,371 $5,403,933 $ 1,535,548 $ 9,777,246 $4,301,161 $1,769,732 FOR THE FISCAL YEAR ENDED MARCH 31, 1997 Shares................................... 1,085,350 959,370 3,863 771,522 394,936 13,693 Value.................................... $16,535,987 $15,604,449 $ 62,352 $13,188,441 $6,808,608 $ 230,321
FOCUS LIST* BALANCED* --------------------------------------- --------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ---------- ----------- ------------- ---------- ----------- ------------- CLASS A FOR THE PERIOD ENDED MARCH 31, 1998 Shares................................... 261,602 22,694 -- 297,413 167 577 Value.................................... $3,226,172 $275,794 -- $3,630,397 $ 1,965 $7,404 CLASS B FOR THE PERIOD ENDED MARCH 31, 1998 Shares................................... 179,256 -- -- 80,740 -- 53 Value.................................... $2,256,277 -- -- $ 977,533 -- $ 682 CLASS C FOR THE PERIOD ENDED MARCH 31, 1998 Shares................................... 126,077 -- -- 66,284 -- 142 Value.................................... $1,564,204 -- -- $ 800,467 -- $1,819 CLASS Y FOR THE PERIOD ENDED MARCH 31, 1998 Shares................................... -- -- -- 451,987 13,445 536 Value.................................... -- -- -- $5,546,038 $164,940 $6,880
51
INTERNATIONAL EQUITY* --------------------------------------- SALES REPURCHASES REINVESTMENTS ---------- ----------- ------------- CLASS A FOR THE PERIOD ENDED MARCH 31, 1998 Shares................................... 273,821 291 -- Value.................................... $3,433,979 $ 3,918 -- CLASS B FOR THE PERIOD ENDED MARCH 31, 1998 Shares................................... 155,378 -- -- Value.................................... $1,882,062 -- -- CLASS C FOR THE PERIOD ENDED MARCH 31, 1998 Shares................................... 160,283 2,269 -- Value.................................... $1,949,056 $ 30,522 --
- ------- * Commenced operations on December 29, 1997. 52 CREDIT AGREEMENT The Fund, on behalf of the Portfolios, has entered into a credit agreement with BankBoston, N.A. Bear Stearns Investment Trust, which consists of the Emerging Markets Debt Portfolio, is also a party to the credit agreement. The agreement provides that each party to the credit agreement is permitted to borrow in an amount equal to the lesser of $25 million or 25% of the net assets of each Portfolio. At no time shall the aggregate outstanding principal amount of all loans to any of the Portfolios exceed $25 million. Each Portfolio as a fundamental policy is permitted to borrow an amount of up to 33 1/3% of the value of such Portfolio's assets. However, each Portfolio currently intends to borrow money only for temporary or emergency (not leveraging) purposes in an amount up to 15% (10% for the Emerging Markets Debt Portfolio) of its net assets. The line of credit will bear interest at the greater of: (i) the annual rate of interest announced from time to time from the bank at its head office as its Base Rate, or (ii) the Federal Funds Effective Rate plus 0.50%, or at the borrower's option, the rate quoted by BankBoston, N.A. Each loan is payable on demand or upon termination of this credit agreement or, for money market loans, on the last day of the interest period and, in any event, not later than 14 days from the date the loan was advanced. Amounts outstanding under the line of credit agreement during the fiscal year ended March 31, 1998 (unless otherwise indicated), were as follows:
MAXIMUM LOAN PORTFOLIO AVERAGE LOAN BALANCE AMOUNTS OUTSTANDING AVERAGE INTEREST RATE - ------------------------------ -------------------- ------------------- --------------------- S&P STARS..................... $183,424 $2,287,500 7.95% Insiders Select............... 818 98,700 8.45 Large Cap..................... 2,605 351,000 8.62 Small Cap..................... 2,071 168,600 8.62 Focus List*................... 764 68,000 8.62 Balanced*..................... 972 305,000 8.62
International Equity had no amounts outstanding under the line of credit agreement during the fiscal year ended March 31, 1998. The Portfolios had no amounts outstanding under the line of credit agreement at March 31, 1998. - ------- *Commenced operations on December 29, 1997. 53 THE BEAR STEARNS FUNDS S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio REPORT OF INDEPENDENT AUDITORS The Board of Trustees and Shareholders, S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio (Series of The Bear Stearns Funds): We have audited the accompanying statements of assets and liabilities, including the portfolios of investments of S&P STARS Portfolio, The Insiders Select Fund, Large Cap Value Portfolio, Small Cap Value Portfolio, Focus List Portfolio, Balanced Portfolio and International Equity Portfolio (collectively, the "Portfolios") as of March 31, 1998, and the related statements of operations, changes in net assets and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Portfolios' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at March 31, 1998 by correspondence with the custodian and brokers, and where replies were not received, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of S&P STARS Portfolio, The Insiders Select Fund, Large Cap Value Portfolio, Small Cap Value Portfolio, Focus List Portfolio, Balanced Portfolio and International Equity Portfolio at March 31, 1998, the results of their operations, the changes in their net assets and the financial highlights for each of the periods presented in conformity with generally accepted accounting principles. Deloitte & Touche LLP New York, New York May 8, 1998 54 THE BEAR STEARNS FUNDS S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio RESULTS OF SPECIAL MEETINGS OF SHAREHOLDERS -- (UNAUDITED) S&P STARS PORTFOLIO On June 18, 1997, a special meeting of the shareholders of S&P STARS Portfolio ("the Stars Portfolio"), a separate non-diversified portfolio of The Bear Stearns Funds (the "Fund"), was held and the following matter was voted upon: (1) To approve a new investment advisory agreement between the Fund, on behalf of the Stars Portfolio, and Bear Stearns Funds Management Inc. (currently Bear Stearns Asset Management Inc.).
FOR AGAINST ABSTAIN NON-VOTES --------- ------- ------- --------- 5,835,966 37,151 118,782 1,763,358
THE INSIDERS SELECT FUND On January 20, 1998, a special meeting of the shareholders of The Insiders Select Fund (the "Portfolio"), a separate non-diversified portfolio of The Bear Stearns Funds (the "Fund"), was held and the following matters were voted upon: (1) To approve amendments to the investment advisory agreement between the Fund, on behalf of the Portfolio, and Bear Stearns Funds Management Inc. (currently Bear Stearns Asset Management Inc.).
FOR AGAINST ABSTAIN NON-VOTES ------- ------- ------- --------- 655,462 16,504 29,923 877,949
(2) To ratify the selection of Deloitte & Touche LLP as independent auditors of the Portfolio for the fiscal year ending March 31, 1998.
FOR AGAINST ABSTAIN NON-VOTES ------- ------- ------- --------- 795,574 4,092 24,320 755,852
No other portfolios of the Fund held shareholder meetings during the fiscal year ended March 31, 1998. 55 THE BEAR STEARNS FUNDS S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Balanced Portfolio SHAREHOLDER TAX INFORMATION -- (UNAUDITED) Each Portfolio is required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise its shareholders within 60 days of each Portfolio's fiscal year end (March 31, 1998) as to the U.S. federal tax status of distributions received by the Portfolio's shareholders in respect of such fiscal year. During the fiscal year ended March 31, 1998, the following dividends and distributions per share were paid by each of the Portfolios:
S&P STARS THE INSIDERS LARGE CAP VALUE SMALL CAP VALUE BALANCED PORTFOLIO SELECT FUND PORTFOLIO PORTFOLIO PORTFOLIO --------- ------------ --------------- --------------- --------- Payment Date 12/24/97 12/24/97 12/24/97 12/24/97 03/24/98 Net Investment Income: Class A -- -- $ 0.0224 -- $ 0.0350 Class B -- -- -- -- 0.0300 Class C -- -- -- -- 0.0300 Class Y -- -- 0.1255 -- 0.0400 Short-Term Gains: Class A $ 2.2257 $ 1.7588 $ 2.0777 $ 0.2819 -- Class C 2.1449 1.7038 2.0777 0.1900 -- Class Y 2.3188 1.7588 2.0777 0.3700 -- 28 Percent Rate Gains: Class A $ 0.1876 $ 0.6857 $ 1.4465 $ 0.5284 -- Class C 0.1876 0.6857 1.4465 0.5284 -- Class Y 0.1876 0.6857 1.4465 0.5284 -- 20 Percent Rate Gains: Class A $ 0.3034 $ 0.5554 -- $ 0.9428 -- Class C 0.3034 0.5554 -- 0.9428 -- Class Y 0.3034 0.5554 -- 0.9428 --
Ordinary income dividends, which include short-term capital gain distributions, should be reported as dividend income on Form 1040. Income dividends are taxable as ordinary income, as are short-term capital gain distributions. 56 FOR CORPORATE SHAREHOLDERS: The percentage of ordinary income dividends received from The Bear Stearns Funds qualifying for the corporate dividends received deduction are as follows:
% OF DIVIDENDS ------------------- S&P STARS Portfolio 4.74 The Insiders Select Fund 12.61 Large Cap Value Portfolio 12.76 Small Cap Value Portfolio 33.38 Balanced Portfolio 43.65 -----
Because each Portfolio's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 1998. The second notification, which will reflect the amount to be used by calendar year taxpayers on their U.S. federal income tax returns, will be made in conjunction with Form 1099-DIV and will be mailed in January 1999. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their dividend. They will generally not be entitled to a foreign tax credit or deduction for the withholding taxes paid by the Portfolios, if any. In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Portfolios. 57 -----END PRIVACY-ENHANCED MESSAGE-----