-----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, R0iHvp26RT0iHxgDL25BOD0W9e+npfvANXo96f8wt5WEW1cPo/9QPQZIhJCVvfVy iRdFkBddKI99pHCdl7BQnQ== 0001047469-98-042477.txt : 19981201 0001047469-98-042477.hdr.sgml : 19981201 ACCESSION NUMBER: 0001047469-98-042477 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981130 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: 98760823 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 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 and Secretary Donalda L. Fordyce Vice President Frank J. Maresca Vice President and Treasurer Vincent L. Pereira Assistant Treasurer Christina P. LaMastro Assistant Secretary INVESTMENT ADVISER COUNSEL Bear Stearns Asset Kramer Levin Management Inc. Naftalis & Frankel LLP 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 without examination by independent auditors who do not express an opinion thereon. 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-015-03 S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio Semi-Annual Report September 30, 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 October 26, 1998 Dear Shareholders: We are pleased to present the semi-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") for the six months ended September 30, 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. In our March 31, 1998 report, we stated that we believed stock prices had risen to levels that were not supported by the slowdown in corporate earnings growth that we expected to occur as a result of Asia's economic problems. After three years of 30%-plus returns, as measured by the Standard & Poor's 500 Composite Index ("S&P 500 Index"), a level that is clearly unsustainable this year, we expect that the U.S. stock market will end the year with a return within its more normal range of 5% to 10%. We did not anticipate a financial crisis in Russia and a sudden bailout of a large hedge fund would bring stock prices down to levels that more realistically reflect corporate earnings growth prospects. Russia's devaluation of the ruble and default on its debt in August knocked the breath out of the world equity markets, causing investors to flee stocks and seek the relative safety of U.S. Government bonds. The flight to quality was exacerbated by growing concern about large hedge fund losses in late September. Despite sound fundamentals in the U.S. economy, including a continuation of low inflation, low interest rates, strong employment and a large budget surplus, the U.S. is clearly not immune to problems abroad. However, we do not believe that the U.S. is headed for a recession, although we expect that corporate profits and overall economic growth will continue to slow. The Federal Reserve Board has indicated its readiness to support economic growth by lowering short-term interest rates at the end of September (and then again in mid-October). While market declines like the ones just experienced are certainly not pleasant, they create investing opportunities, and we expect to continue to find value, particularly in companies resistant to economic slowdowns with sustainable earnings growth. S&P STARS PORTFOLIO For the six months ended September 30, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of (6.56)% and Class C shares (without giving effect to the contingent deferred sales charge "CDSC") had a total return of (6.80)%.(1) The Portfolio's benchmark, the S&P 500 Index, returned (6.97)% for the same period. Although the Portfolio was not immune to the sell-off in small- and mid-cap companies, it was helped by our heavy concentration in health care and technology issues. At September 30, 1998, we continued to have a high concentration of holdings in large pharmaceutical companies, such as Eli Lilly & Co. (5.20% of net assets), Pfizer Inc. (4.69%) and Monsanto Co. (4.74%), and have increased our position in consumer staples, while diversifying within the technology sector. 1 STRENGTH IN CONSUMER STAPLES Among our larger consumer staples holdings, CVS Corp. (4.26%), Safeway Inc. (4.10%) and Time Warner Inc. (3.29%), held up well. We also increased our position in Consolidated Products, Inc. (1.55%), which runs the rapidly expanding Steak n Shake restaurant chain in the Midwest, and Kroger Co. supermarkets (2.21%). We bought Cablevision Systems Corp. (2.67%), a strong regional cable company, which should benefit from surging demand for faster Internet access and cheaper telephone service beginning in 1999. Given the uncertainty about the exposure of financial companies to economic problems around the world, we reduced our financial services holdings, eliminating positions in Citicorp and Franklin Resources. However, we bought Eaton Vance Corp. (2.55%), which is much more heavily oriented to the domestic fixed income market and should benefit from any investor shift into that asset class. We expect the slowdown in economic growth over the next two to three quarters to affect the earnings of companies in the financial, basic materials, heavy industry and consumer cyclical sectors. We will place continued emphasis on consumer staples and pharmaceuticals, and expect to take new positions in industries, such as semiconductors and energy, that could experience substantially higher earnings in 1999. THE INSIDERS SELECT FUND For the six months ended September 30, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of (16.89)% and Class C shares (without giving effect to CDSC) had a total return of (17.08)%.(2) The Portfolio's benchmark, the S&P MidCap 400 Index, returned (16.31)% for the same period. Finding companies with attractive insider buying situations has not been easy during this period of market volatility and weakness in mid- and small-cap stocks. From mid-August through the end of September, financial stocks, such as Travelers Group, Inc. (2.81% of net assets) and The Equitable Companies, Inc., suffered as a result of investors' concerns about a slowing economy and exposure to emerging markets. Partially offsetting this was the Fund's exposure to health care and telecommunications through such stocks as Pharmacia & Upjohn, Inc. (2.28%) and SBC Communications, Inc. (2.32%), which had relatively strong performance. We recently purchased The Dun & Bradstreet Corp. (3.74%) and Viad Corp. (1.82%) as a result of positive insider buying at both companies and their low relative valuations. In addition, we added to positions in American Greetings Corp. (3.50%), the second-largest greeting card company in the U.S., and Beckman Coulter, Inc. (2.58%), a leading manufacturer of medical laboratory equipment, due to the defensive nature of their businesses. We sold Morgan Stanley, Dean Witter, Discover and Co., The Equitable Companies, Inc., Dean Foods Co. and Dole Food Co., Inc. VALUATIONS BODE WELL FOR INSIDER BUYING Weakness in financials was particularly notable in the third quarter. Many larger-cap high-quality names declined as much as 40% in the quarter and 50% from their highs versus more moderate losses in the broader market. Given current valuations, we expect to see more aggressive insider buying in the financial sector and relative outperformance over the next 12 to 18 months. The tone of insider buying in general has been mixed over the past few months, but we expect to see an increase in insider buying as a result of dramatically lower stock valuations. We remain fairly positive on the tone of the insider data and continue to look to purchase companies where insiders are making significant purchases and/or their companies are buying back meaningful amounts of their shares. LARGE CAP VALUE PORTFOLIO For the six months ended September 30, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of (11.81)% and Class C shares (without giving effect to CDSC) had a total return of (12.05)%.(3) The Portfolio's benchmark, the S&P 500 Index, returned (6.97)% for the same period. 2 Although the third quarter of 1998 was its worst quarter in eight years for the U.S. stock market (as measured by the S&P 500 Index), it was only the second down quarter in four years. While stocks of smaller companies and value stocks had been weak throughout the first half of the year, large-cap growth stocks were swept downstream in the third quarter as well. Given our expectation for a more normal market return of 5%-10% this year, the correction was not surprising although the range of global catalysts triggering it was. The market's rise in the first half of the year had been based on investor expectations for a continuation of moderate growth in corporate profits combined with declining interest rates. While interest rates have declined to their lowest level in 30 years, corporate profit growth has slowed dramatically, with profits rising much more slowly than expected earlier this year. The reality of the profit slowdown has only recently begun to be incorporated into stock prices, and we believe that current earnings estimates are still high. A FOCUS ON UNDERVALUED STOCKS WITH SOLID EARNINGS GROWTH As value investors, we are taking advantage of this environment and continue to find attractive securities of companies with above-market earnings growth that are trading at discounts to the market of 25% or more. We expect earnings growth for the companies in the S&P 500 Index to average about 3% to 5% over the next few years, and we are finding undervalued companies with what we believe to be dependable growth rates of 6%, 7% or higher. Examples of such companies in the Portfolio include Grainger (W.W.), Inc. (1.82% of net assets), a major distributor of maintenance and repair equipment, Genuine Parts Co. (2.34%), a leading auto parts distributor, FPL Group, Inc. (2.75%), one of the country's best-managed utilities, and The Dun & Bradstreet Corp. (3.75%), which has restructured and announced a share buyback program. While the earnings growth rates of these companies are below the double-digit pace to which many investors have recently become accustomed, they become very attractive when compared to the overall market and the current rate of inflation. Toward the end of the period, we increased our weightings modestly in energy by initiating a position in Baker Hughes Inc. (1.11%), a large oil services company, and Atlantic Richfield Co. (3.17%) based on signs that oil prices are beginning to firm. We will continue to look for companies with below-average multiples and above-average growth; we also expect to find value in oversold cyclicals. SMALL CAP VALUE PORTFOLIO* For the six months ended September 30, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of (28.54)% and Class C shares (without giving effect to CDSC) had a total return of (28.71)%.(4) The Portfolio's benchmark, the Russell 2000 Index, returned (23.91)% for the same period. Due to investor anxiety about financial and political turmoil around the world, small-cap stocks significantly underperformed larger growth stocks as investors focused on the liquidity of large, well-known names. After Russia's financial crisis came to a head in mid-August, even large-cap stocks suffered as investors fled to the relative safety of U.S. Treasury bonds. August ranks as the second-worst-performing month in eleven years for the Portfolio's benchmark, the Russell 2000 Index, which declined by 19%. Fifty percent of the stocks in the index were down 40% or more from their 52-week highs and only about 3% were down less than 10%. However, this kind of market creates opportunities to buy great companies at valuations that have fallen within our parameters. In the spring, we had started taking a more risk-averse posture by maintaining an overweighting in our top holdings and becoming increasingly selective about adding new stocks to the Portfolio. In the summer, we reacted to the market's heightened volatility by paring down the number of names in the Portfolio even more, which had the effect of both increasing the concentration among the top holdings and raising cash. Positive developments during this period that added value to the Portfolio included the announcement that two holdings, Triangle Pacific Corp. and Celadon Group, Inc. (0.58% of net assets) were to be acquired, which increased their share prices. Other strong performers included Hibernia Foods plc (3.14%) and United Rentals, Inc. (2.05%). Hibernia's stock price has had an impressive gain since we bought it a year ago, and we think the company continues to have the potential for substantial earnings growth. In the third quarter, the company continued its expansion strategy with the purchase of several food companies with strong U.K. franchises, which are expected to increase Hibernia's current annualized revenue. We are confident in 3 management's ability to leverage their current distribution channels in the export and food services markets to continue revenue growth. United Rentals has also consolidated its position as a leader in the rental equipment business by aggressively buying smaller companies. A POSITIVE OUTLOOK FOR SMALL-CAP STOCKS Although the extreme valuation gap between large-cap and small-cap stocks has widened to a 20-year high, we see signs that this gap could begin to narrow. We believe that when the large-cap stocks bottom, investors will realize the values to be found in the small-cap sector and the discrepancies in P/E multiples will narrow toward historical norms -- which should lead to small-caps overtaking the larger-cap stocks. In this environment, we will continue to maintain a defensive posture and take advantage of weakness in individual stocks to initiate or add to current positions. FOCUS LIST PORTFOLIO For the six months ended September 30, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of (9.85)% and Class B and C shares (without giving effect to CDSC) each had a total return of (10.09)%.(5) The Portfolio's benchmark index, the S&P 500 Index, returned (6.97)% for the same period. FUNDAMENTALS STILL SOUND Despite the price declines that occurred during the summer, we believe that the fundamentals of the Portfolio's Focus List stocks remain sound. For example, the rout that occurred in the financial sector due to the fallout from Russia's problems and growing concerns about hedge fund bailouts also dragged down the stocks of Fannie Mae and AEGON N.V. In our opinion, Fannie Mae (4.58% of net assets), the country's largest provider of mortgage financing, is a superb company that we currently regard as a core holding. AEGON N.V. (5.04%), a leading European-based insurance company, has essentially no exposure to emerging markets and remains positioned to benefit from the consolidation and growth expected to occur in the financial services sector in Europe. Other companies in the Portfolio that, by the nature of their business, are not exposed to the issues troubling the equity markets are computer services firms such as BISYS Group, Inc. (5.31%) and EMC Corp. (5.87%). BISYS Group Inc. and EMC Corp. should continue to experience strong demand as providers of services and software that enable companies to become Year 2000-compliant, which is a necessity that cannot be postponed or avoided. Based on the strength in new housing construction and sales during the summer and the fact that we do not anticipate a recession in the U.S., sales of quality home-furnishings from companies like Williams-Sonoma Inc. (3.56%) should continue to be strong. In the same vein, Time Warner Inc. (4.78%), with its huge global cable and entertainment franchise, is expected to be able to withstand an economic downturn. Although we do expect a slowdown in the economy, we do not foresee the consumer paralysis that is widely projected. We believe that the recent investor panic has produced some very attractive valuations, and we could see a shift from "safe haven" stocks to those that are already discounting a recession. For example, after months of depressed prices due to falling demand and oversupply, we are beginning to see strength in stocks of some basic commodity producers, such as oil and copper, as supplies firm and monetary policy loosens. BALANCED PORTFOLIO For the six months ended September 30, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of (4.09)% and Class B and C shares (without giving effect to the CDSC) each had a total return of (4.32)%.(6) The Portfolio's benchmark index, the Lipper Balanced Fund Index, returned (4.39)% for the same period. Based on our monitoring of the markets, we had set our equity allocation target early in the summer to be less than the average of our peers in the Lipper Balanced Fund Index which positioned the Portfolio relatively well in light of the equity market sell-off that followed. Given our expectation for a more normal equity market return of 5%-10% this year, the correction was not 4 surprising although the range of global catalysts triggering it was. The market's rise in the first half of the year had been based on expectations for continuing moderate corporate profit growth combined with declining interest rates. While interest rates have fallen to 30-year lows, corporate profit growth has slowed dramatically. Stock prices have only recently begun to reflect the slowdown, and we believe that current earnings estimates are still high. A FOCUS ON SOLID EARNINGS GROWTH In this environment, we continue to find attractive stocks of companies with above-market earnings growth that are trading at discounts to the market of 25% or more. We expect the S&P 500 Index earnings growth to average about 3% to 5% over the next few years, and we are finding undervalued companies with projected growth rates of 6%, 7% or higher. Examples include: Grainger (W.W.), Inc. (1.09% of net assets), a major distributor of maintenance and repair equipment, Genuine Parts Co. (1.15%), a leading auto parts distributor; FPL Group, Inc. (1.53%), one of the country's best-managed utilities; and The Dun & Bradstreet Corp. (1.34%), which has restructured and announced a share buyback program. While the earnings growth rates of these companies are below the double-digit pace to which many investors have recently become accustomed, they are very attractive when compared to the overall market and the current rate of inflation. We have begun to find value in oversold cyclical stocks and utilities, and, with energy prices beginning to firm, we have increased our energy exposure. In the fixed income portion of the Portfolio, we remain slightly overweighted in maturities of 10 years or less and in high-quality corporate bonds, a strategy that served us well during the past few months as investors put a premium on quality. Although total returns for agency, corporate and mortgage-backed issues were positive for the period, long-term Treasuries fared best. We are currently seeing the highest corporate-to-Treasury spreads since the '90-'91 recession, and agency and mortgage-backed spreads have also widened. We view the recent spread widening as an opportunity to selectively add agency issues and higher- quality corporate bonds (rated "A" or higher) to the Portfolio. We also expect to begin to increase our exposure to the mortgage markets as investors begin to factor in worst-case prepayment scenarios, causing prices in this sector to fall even more. INTERNATIONAL EQUITY PORTFOLIO** For the six months ended September 30, 1998, the Portfolio's Class A shares (without giving effect to the sales charge) had a total return of (5.95)% and Class B and C shares (without giving effect to the CDSC) each had a total return of (6.18)%.(7) The Portfolio's benchmark index, the Morgan Stanley Capital International Europe, Australia, Far East (EAFE) Index returned (13.18)% for the same period. Although we still believe that strong financial companies in Europe will benefit from competition-driven consolidation and the demand for retirement-oriented savings products, the recent worldwide turbulence in the financial markets caused us to significantly reduce our holdings in this sector. In the wake of Russia's financial crisis, we sold our positions in banks with exposure to Russia, Latin America and other emerging markets, including Deutsche Bank AG, Credit Suisse Group and Societe Generale. However, we maintained positions in companies, which we are confident will be less affected by the current uncertainty. We have kept our positions in insurance companies such as Allianz AG (2.91% of net assets) and AEGON N.V. (2.52%) and in domestically focused retail banks, including Bank of Ireland (1.22%) and Banco Popular Espanol, S.A. (0.97%). We also reduced the Portfolio's technology and cellular holdings given concerns about earnings growth. After its stock price soared in the first half of the year, we took profits selling SAP AG (2.03%), the large German software manufacturer, based on conflicting estimates about future earnings. We still see tremendous growth potential in the European cellular markets, but we trimmed back, selling Telefonaktiebolaget LM Ericsson (0.89%), for example, which we felt was vulnerable to the downturn in Asia. We continue to own Nokia Oyj (3.83%) because of its new handset product line and companies with a strong domestic franchise such as Vodafone Group plc (2.44%), which is expanding rapidly in the United Kingdom. A FOCUS ON EARNINGS STABILITY Our sector focus has shifted to pharmaceuticals and utilities, which tend to have greater earnings stability, and to retailers and food companies, which we expect to hold up in periods of slower economic growth. For example, we significantly increased 5 our positions in Glaxo Wellcome plc (4.54%) and SmithKline Beecham plc (1.75%) and added to British Telecommunications plc (1.37%) and Telecom Italia Mobile S.p.A (2.38%). We bought J. Sainsbury plc (0.83%), the United Kingdom's second- largest food retailer, and increased our position in Promodes (2.50%), a large diversified retailer in France. We also added to or initiated positions in food companies with strong brand-name recognition and distribution channels such as Group Danone (2.70%) in France and Heineken N.V. (1.88%) in the Netherlands. By the end of September, our direct exposure to Asia had increased to 6.59% of the total portfolio, with a concentration in strong consumer staples concerns, such as Kao Corp. (1.48%), a personal care company, and Takeda Chemical Industries (1.93%), a large drug company, both in Japan. We are still cautious about Japan's prospects and believe it is premature to invest in other parts of Asia at this time. Despite the recent market volatility, we expect the consolidation trends that we have mentioned before to continue in Europe, and we will continue to use the market sell-off as an opportunity to buy strong companies at more attractive multiples. 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 six months ended September 30, 1998, the Portfolio's Class A shares had a total return of (11.69)%, including the initial 5.50% maximum sales charge and Class C shares had a total return of (7.71)% including a 1.00% CDSC. (2) For the six months ended September 30, 1998, the Portfolio's Class A shares had a total return of (21.46)%, including the initial 5.50% maximum sales charge and Class C shares had a total return of (17.93)% including a 1.00% CDSC. (3) For the six months ended September 30, 1998, the Portfolio's Class A shares had a total return of (16.65)%, including the initial 5.50% maximum sales charge and Class C shares had a total return of (12.92)% including a 1.00% CDSC. (4) For the six months ended September 30, 1998, the Portfolio's Class A shares had a total return of (32.48)%, including the initial 5.50% maximum sales charge and Class C shares had a total return of (29.71)% including a 1.00% CDSC. (5) For the six months ended September 30, 1998, the Portfolio's Class A shares had a total return of (14.81)%, including the initial 5.50% maximum sales charge and Class B shares (including a 5.00% CDSC) and Class C shares (including a 1.00% CDSC) had a total return of (14.57)% and (10.99)%, respectively. (6) For the six months ended September 30, 1998, the Portfolio's Class A shares had a total return of (9.35)%, including the initial 5.50% maximum sales charge and Class B shares (including a 5.00% CDSC) and Class C shares (including a 1.00% CDSC) had a total return of (9.32)% and (5.32)%, respectively. (7) For the six months ended September 30, 1998, the Portfolio's Class A shares had a total return of (11.13)%, including the initial 5.50% maximum sales charge and Class B shares (including 5.00% CDSC) and Class C shares (including a 1.00% CDSC) had a total return of (11.18)% and (7.18)%, respectively. 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 (UNAUDITED) EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
S&P STARS PORTFOLIO Class A shares Class C shares S&P 500 Composite Index Apr. 5, 1995 $9,525.00 $10,000.00 $10,000.00 $10,571.43 $11,083.33 $10,800.00 Sept. 30, 1995 $11,444.45 $11,975.00 $11,700.00 $11,644.82 $12,170.34 $12,375.00 Mar. 31, 1996 $12,158.20 $12,691.32 $13,075.00 $12,304.88 $12,836.51 $13,620.00 Sept. 30, 1996 $13,282.76 $13,835.76 $14,095.00 $14,878.37 $15,471.38 $15,225.00 Mar. 31, 1997 $14,208.88 $14,763.54 $15,653.00 $16,411.13 $17,034.15 $18,450.00 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 $21,569.24 $22,260.41 $23,923.00 Sept. 30, 1998 $19,056.42 $19,647.04 $21,544.00 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 $10,126.00 $10,178.00 Mar. 31, 1996 $10,284.00 $10,364.00 Sept. 30, 1996 $10,430.00 $10,500.00 Mar. 31, 1997 $10,568.00 $10,630.00 Sept. 30, 1997 $10,660.94 $10,700.59 Mar. 31, 1998 $10,707.20 $10,773.30 Sept. 30, 1998 $10,812.95 Past performance is not predictive of future performance.
TOTAL RETURNS
ONE YEAR ENDED AVERAGE SEPTEMBER 30, 1998 ANNUAL(4) ------------------- ------------------- S&P STARS Portfolio(2) Class A shares(5).............. (6.23)% 20.28% Class C shares................. (2.05) 21.33 Class Y shares(3).............. (1.05) 19.02 S&P 500 Composite Index(1)......... 9.04 24.57 Consumer Price Index(1)............ 1.43 2.26
- --------- (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/or are not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to voluntarily 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 September 30, 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 (1.53)% and 21.97%, 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 (UNAUDITED) EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
THE INSIDERS SELECT FUND Class A shares Class C shares S&P 500 Composite Index 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 $19,122.56 $19,772.94 $22,385.00 Sept. 30, 1998 $15,963.51 $16,478.77 $20,159.00 Past performance is not predictive of future performance. THE INSIDERS SELECT FUND Consumer Price Index S&P MidCap 400 Index June 16, 1995 $10,000.00 $10,000.00 $10,079.00 $10,134.00 Sept. 30, 1995 $10,072.32 $11,123.00 $10,178.00 $11,280.00 Mar. 31, 1996 $10,230.11 $11,974.00 $10,302.43 $12,319.00 Sept. 30, 1996 $10,381.33 $12,681.00 $10,466.80 $13,448.00 Mar. 31, 1997 $10,512.82 $13,249.00 $10,539.12 $15,197.00 Sept. 30, 1997 $10,604.87 $17,639.00 $10,644.31 $17,765.00 Mar. 31, 1998 $10,650.89 $19,743.00 $10,716.63 $19,319.00 Sept. 30, 1998 $10,756.08 $16,524.00 Past performance is not predictive of future performance.
TOTAL RETURNS
ONE YEAR ENDED AVERAGE SEPTEMBER 30, 1998 ANNUAL(4) ------------------- ------------------- The Insiders Select Fund(2) Class A shares(5).............. (9.26)% 15.25% Class C shares................. (5.23) 16.37 Class Y shares(3).............. (4.25) 17.21 S&P 500 Composite Index(1)(6)...... 9.04 23.70 S&P MidCap 400 Index(1)(6)......... (6.31) 16.46 Consumer Price Index(1)............ 1.43 2.24
- --------- (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/or are not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to voluntarily 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 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 September 30, 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 (4.72)% and 16.97%, 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 Composite 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 Composite 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 (UNAUDITED) EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CLASS A SHARES CLASS C SHARES S&P 500 COMPOSITE 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 $20,466.54 Mar. 31, 1998 $20,008.60 $20,785.20 $23,321.38 $20,220.69 $20,976.42 $24,091.21 Sept. 30, 1998 $17,646.60 $18,280.95 $21,694.71 Past performance is not predictive of future performance. CONSUMER PRICE INDEX Apr. 4, 1995 $10,000.00 $10,079.00 Sept. 30, 1995 $10,126.00 $10,178.00 Mar. 31, 1996 $10,284.00 $10,364.00 Sept. 30, 1996 $10,430.00 $10,500.00 Mar. 31, 1997 $10,568.00 $10,530.00 Sept. 30, 1997 $10,661.00 $10,700.59 Mar. 31, 1998 $10,707.20 $10,773.30 Sept. 30, 1998 $10,812.96 Past performance is not predictive of future performance.
TOTAL RETURNS
ONE YEAR ENDED AVERAGE SEPTEMBER 30, 1998 ANNUAL(4) ------------------- ------------------- Large Cap Value Portfolio(2) Class A shares(5).............. (3.72)% 17.75% Class C shares................. 0.65 18.82 Class Y shares(3).............. 1.62 17.11 S&P 500 Composite Index(1)......... 9.04 24.78 Consumer Price Index(1)............ 1.43 2.26
- ---------- (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/or are not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to voluntarily 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 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 September 30, 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 1.08% and 19.41%, 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 (UNAUDITED) 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 $11,969.42 $12,127.79 $12,673.20 $12,231.45 Mar. 31, 1996 $12,797.08 $13,358.47 $12,852.36 $14,240.48 $14,847.44 $13,511.36 Sept. 30, 1996 $14,248.54 $14,822.06 $13,555.62 $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 $20,993.50 $21,887.80 $19,212.59 $20,300.71 $20,848.25 $18,334.06 Sept. 30, 1998 $15,000.19 $15,461.90 $14,619.94 Past performance is not predictive of future performance. SMALL CAP VALUE PORTFOLIO Consumer Price Index Apr. 3, 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 $10,773.30 Sept. 30, 1998 $10,812.96 Past performance is not predictive of future performance.
TOTAL RETURNS
ONE YEAR ENDED AVERAGE SEPTEMBER 30, 1998 ANNUAL(4) ------------------- ------------------- Small Cap Value Portfolio(2) Class A shares(5)......... (23.47)% 12.29% Class C shares............ (20.04) 13.27 Class Y shares(3)......... (19.23) 12.35 Russell 2000 Index(1)......... (13.36) 11.47 Consumer Price Index(1)....... 1.43 2.26
- ---------- (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/or are not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to voluntarily 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 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 September 30, 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 (19.65)% and 13.87%, respectively, for each period shown. CDSC -- Contingent Deferred Sales Charge. 10 THE BEAR STEARNS FUNDS S&P STARS Portfolio SEPTEMBER 30, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Drugs & Hospital Supplies......................... 11.26 2. Telecommunications................................ 9.52 3. Banks............................................. 6.80 4. Multimedia........................................ 6.69 5. Networking Products............................... 6.36 6. Retailing - Grocery Stores........................ 6.31 7. Computer Software................................. 5.87 8. Diversified Operations............................ 5.23 9. Chemicals - Diversified........................... 4.74 10. Retailing - Drug Stores........................... 4.26
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Cisco Systems, Inc........................... Networking Products 6.36 2. Lilly, (Eli) & Co............................ Drugs & Hospital Supplies 5.20 3. Monsanto Co.................................. Chemicals - Diversified 4.74 4. Pfizer Inc................................... Drugs & Hospital Supplies 4.69 5. CVS Corp..................................... Retailing - Drug Stores 4.26 6. Safeway Inc.................................. Retailing - Grocery Stores 4.10 7. Sterling Software, Inc....................... Computer Software 3.90 8. Bank of New York Co., Inc. (The)............. Banks 3.63 9. EMC Corp..................................... Computers - Memory Devices 3.54 10. General Electric Co.......................... Diversified Operations 3.52
- ------- * The Portfolio's holdings will change over time. 11 THE BEAR STEARNS FUNDS The Insiders Select Fund SEPTEMBER 30, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Credit & Finance.................................. 8.01 2. Drugs & Hospital Supplies......................... 5.12 3. Telecommunications................................ 4.09 4. Commercial Services............................... 3.74 5. Oil & Natural Gas................................. 3.55 6. Consumer Products - Miscellaneous................. 3.50 7. Banks............................................. 3.44 8. Diversified Operations............................ 3.21 9. Computers & Office Equipment...................... 3.09 10. Aerospace & Defense............................... 3.08
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Dun & Bradstreet Corp. (The)................. Commercial Services 3.74 2. Texaco Inc................................... Oil & Natural Gas 3.55 3. American Greetings Corp...................... Consumer Products - Miscellaneous 3.50 4. Pitney Bowes, Inc............................ Computers & Office Equipment 3.09 5. Dial Corp. (The)............................. Household Products 3.04 6. American Express Co.......................... Credit & Finance 2.99 7. WPP Group plc - ADR.......................... Advertising Agencies 2.90 8. Johnson & Johnson............................ Drugs & Hospital Supplies 2.84 9. H&R Block, Inc............................... Financial Services 2.82 10. Travelers Group, Inc......................... Credit & Finance 2.81
- ------- * The Portfolio's holdings will change over time. 12 THE BEAR STEARNS FUNDS Large Cap Value Portfolio SEPTEMBER 30, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Diversified Operations............................ 7.37 2. Oil & Natural Gas................................. 6.06 3. Restaurants....................................... 5.75 4. Aerospace & Defense............................... 5.56 5. Credit & Finance.................................. 5.54 6. Life/Health Insurance............................. 4.77 7. Drugs & Hospital Supplies......................... 4.31 8. Commercial Services............................... 3.75 9. Consumer Products - Miscellaneous................. 3.71 10. Building & Construction Products.................. 3.28
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Dun & Bradstreet Corp. (The)................. Commercial Services 3.75 2. Fannie Mae................................... Credit & Finance 3.74 3. American Greetings Corp...................... Consumer Products - Miscellaneous 3.71 4. Viad Corp.................................... Diversified Operations 3.43 5. McDonald's Corp.............................. Restaurants 3.30 6. Bank of New York Co., Inc. (The)............. Banks 3.21 7. Atlantic Richfield Co........................ Oil & Natural Gas 3.17 8. H&R Block, Inc............................... Financial Services 3.02 9. Philip Morris Cos. Inc....................... Tobacco 2.93 10. Northrop Grumman Corp........................ Aerospace & Defense 2.91
- ------- * The Portfolio's holdings will change over time. 13 THE BEAR STEARNS FUNDS Small Cap Value Portfolio SEPTEMBER 30, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Building & Housing................................ 6.23 2. Commercial Services............................... 5.97 3. Human Resources................................... 5.49 4. Diversified Operations............................ 5.29 5. Radio............................................. 5.12 6. Communications.................................... 4.64 7. Commercial Printing............................... 4.33 8. Financial Services................................ 3.79 9. Retailing - Restaurants........................... 3.61 10. Non-Ferrous Metals................................ 3.46
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- -------------------------------------------------- ------------- 1. Butler International, Inc.................... Human Resources 5.49 2. Data Transmission Network Corp............... Communications 4.64 3. Steiner Leisure Ltd.......................... Commercial Services 4.54 4. Jacor Communications, Inc.................... Radio 4.48 5. Bowne & Co., Inc............................. Commercial Printing 4.33 6. Giant Cement Holding, Inc.................... Building & Housing 4.21 7. SPS Technologies, Inc........................ Diversified Operations 4.12 8. Furniture Brands International, Inc.......... Home Furnishings 3.17 9. 99 Cents Only Stores......................... Retailing - Variety Stores 2.94 10. Varlen Corp.................................. Transport 2.82
- ------- * The Portfolio's holdings will change over time. 14 THE BEAR STEARNS FUNDS Focus List Portfolio SEPTEMBER 30, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Computer Services................................. 9.89 2. Wholesale Distribution............................ 6.59 3. International Beverages........................... 6.19 4. Computers & Office Equipment...................... 5.87 5. Pharmaceuticals................................... 5.81 6. Internet/News Media............................... 5.46 7. Insurance......................................... 5.04 8. European Telecommunication Services............... 4.90 9. Photographic Equipment & Supplies................. 4.83 10. Aerospace/Defense - Equipment..................... 4.82
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Tech Data Corp............................... Wholesale Distribution 6.59 2. Coca-Cola Enterprises Inc.................... International Beverages 6.19 3. EMC Corp..................................... Computers & Office Equipment 5.87 4. Warner-Lambert Co............................ Pharmaceuticals 5.81 5. America Online, Inc.......................... Internet/News Media 5.46 6. The BISYS Group, Inc......................... Computer Services 5.31 7. AEGON N.V.................................... Insurance 5.04 8. Vodafone Group plc-ADR....................... European Telecommunication Services 4.90 9. Eastman Kodak Co............................. Photographic Equipment & Supplies 4.83 10. Orbital Sciences Corp........................ Aerospace/Defense - Equipment 4.82
- ------- * The Portfolio's holdings will change over time. 15 THE BEAR STEARNS FUNDS Balanced Portfolio SEPTEMBER 30, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Diversified Operations............................ 4.14 2. Financial Services................................ 3.55 3. Drugs & Hospital Supplies......................... 2.91 4. Oil & Natural Gas................................. 2.67 5. Restaurants....................................... 2.65 LONG-TERM DEBT - --------------------------------------------------------------------- 1. U.S. Government Agency Obligations................ 18.34 2. Corporate Obligations............................. 16.21 3. U.S. Government Obligations....................... 14.27
- -------------------------------------------------------------------------------- TOP FIVE HOLDINGS* EQUITY - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ---------- 1. Baxter International, Inc.................... Drugs & Hospital Supplies 1.54 2. FPL Group, Inc............................... Electric - Integrated 1.53 3. Viad Corp.................................... Diversified Operations 1.47 4. Washington Mutual, Inc....................... Financial Services 1.41 5. McDonald's Corp.............................. Restaurants 1.39 LONG-TERM DEBT - ------------------------------------------------------------------------------------------------------- 1. U.S. Treasury Notes.......................... U.S. Government Obligations 14.27 2. Government National Mortgage Association..... U.S. Government Agency Obligations 8.69 3. Federal National Mortgage Association........ U.S. Government Agency Obligations 5.50 4. Federal Home Loan Mortgage Corporation....... U.S. Government Agency Obligations 4.15 5. Dow Chemical Co.............................. Corporate Obligations 1.94
- ------- * The Portfolio's holdings will change over time. 16 THE BEAR STEARNS FUNDS International Equity Portfolio SEPTEMBER 30, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Medical - Drugs................................... 15.80 2. Multi-line Insurance.............................. 9.32 3. Computer Services................................. 7.45 4. Food, Miscellaneous/Diversified................... 6.45 5. Cellular Telecommunications....................... 4.82 6. Telecommunication Equipment....................... 4.72 7. Food - Retail..................................... 3.33 8. Commercial Banks - Europe......................... 2.81 9. Cosmetics & Toiletries............................ 2.43 10. Telecommunication Services........................ 2.42
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Glaxo Wellcome plc........................... Medical - Drugs 4.54 2. Nokia Oyj.................................... Telecommunication Equipment 3.83 3. Cap Gemini S.A............................... Computer Services 3.82 4. Roche Holding AG............................. Medical - Drugs 3.20 5. Nestle S.A................................... Food, Miscellaneous/Diversified 3.06 6. Allianz AG................................... Multi-line Insurance 2.91 7. Groupe Danone................................ Food, Miscellaneous/Diversified 2.70 8. AEGON N.V.................................... Multi-line Insurance 2.52 9. Promodes..................................... Food - Retail 2.50 10. Vodafone Group plc........................... Cellular Telecommunications 2.44
- ------- * The Portfolio's holdings will change over time. 17 THE BEAR STEARNS FUNDS S&P STARS Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------ SHARES+ VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 98.36% BANKS - 6.80% 300,000 Bank of New York Co., Inc. (The) ............. $ 8,212,500 140,000 First Union Corp. ............................ 7,166,250 --------------- 15,378,750 --------------- CABLE TV - 2.67% 140,000 Cablevision Systems Corp.* ................... 6,046,250 --------------- CHEMICALS - DIVERSIFIED - 4.74% 190,000 Monsanto Co.++ ............................... 10,711,250 --------------- CHEMICALS - SPECIALTY - 1.61% 250,000 Crompton & Knowles Corp. ..................... 3,640,625 --------------- COMMERCIAL SERVICES - 0.65% 97,700 Convergys Corp.* ............................. 1,459,394 --------------- COMPUTER SOFTWARE - 5.87% 120,000 Computer Associates International, Inc. ...... 4,440,000 320,000 Sterling Software, Inc.* ..................... 8,820,000 --------------- 13,260,000 --------------- COMPUTERS - MEMORY DEVICES - 3.54% 140,000 EMC Corp.* ................................... 8,006,250 --------------- CONSULTING SERVICES - 0.69% 75,000 Gartner Group, Inc. Class A** ................ 1,565,625 --------------- CREDIT & FINANCE - 0.86% 25,000 American Express Co. ......................... 1,940,625 --------------- DATA PROCESSING/MANAGEMENT - 1.26% 160,000 Reynolds & Reynolds Co. (The) ................ 2,850,000 --------------- DIVERSIFIED OPERATIONS - 5.23% 100,000 General Electric Co. ......................... 7,956,250 70,000 Tyco International Ltd. ...................... 3,867,500 --------------- 11,823,750 --------------- - ------------------------------------------------------------------------------ SHARES+ VALUE - ------------------------------------------------------------------------------ DRUGS & HOSPITAL SUPPLIES - 11.26% 30,000 Bristol-Myers Squibb Co. ..................... $ 3,116,250 150,000 Lilly, (Eli) & Co. ........................... 11,746,875 100,000 Pfizer Inc. .................................. 10,593,750 --------------- 25,456,875 --------------- ELECTRONIC COMPONENTS - 0.50% 45,000 Applied Materials, Inc.* ..................... 1,136,250 --------------- ELECTRONICS - 3.81% 45,000 Intel Corp.+++ ............................... 3,858,750 90,000 Texas Instruments, Inc.+++ ................... 4,747,500 --------------- 8,606,250 --------------- HOTELS & MOTELS - 1.07% 190,000 Host Marriott Corp.* ......................... 2,410,625 --------------- INVESTMENT MANAGEMENT/ADVISOR SERVICE - 2.55% 249,600 Eaton Vance Corp. ............................ 5,756,400 --------------- MEDICAL - HOSPITALS - 0.90% 125,000 Quorum Health Group, Inc.*+++ ................ 2,031,250 --------------- MULTIMEDIA - 6.69% 300,000 News Corp. Ltd. (The) ........................ 7,687,500 85,000 Time Warner, Inc. ............................ 7,442,812 --------------- 15,130,312 --------------- NETWORKING PRODUCTS - 6.36% 232,500 Cisco Systems, Inc.* ......................... 14,371,406 --------------- OIL & GAS DRILLING - 1.22% 250,000 Global Marine Inc.* .......................... 2,765,625 --------------- PAPER & PAPER RELATED PRODUCTS - 1.31% 90,000 Fort James Corp. ............................. 2,953,125 ---------------
The accompanying notes are an integral part of the financial statements. 18 THE BEAR STEARNS FUNDS S&P STARS Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------ SHARES+ VALUE - ------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) RETAILING - DEPARTMENT STORES - 3.20% 100,000 Federated Department Stores, Inc.* ........... $ 3,637,500 160,000 Saks, Inc.* .................................. 3,590,000 --------------- 7,227,500 --------------- RETAILING - DRUG STORES - 4.26% 220,000 CVS Corp. .................................... 9,638,750 --------------- RETAILING - GROCERY STORES - 6.31% 100,000 Kroger Co.* .................................. 5,000,000 200,000 Safeway Inc.* ................................ 9,275,000 --------------- 14,275,000 --------------- RETAILING - OFFICE SUPPLIES - 3.93% 300,000 OfficeMax, Inc.* ............................. 2,943,750 202,500 Staples, Inc.* ............................... 5,948,438 --------------- 8,892,188 --------------- RETAILING - RESTAURANTS - 1.55% 200,000 Consolidated Products, Inc.* ................. 3,512,500 --------------- TELECOMMUNICATIONS - 9.52% 70,000 AirTouch Communications, Inc.* ............... 3,990,000 128,300 DSP Communications, Inc.*++++ ................ 1,058,475 150,000 ECI Telecommunications Ltd. .................. 3,675,000 160,000 MCI Worldcom, Inc.* .......................... 7,820,000 81,000 Northern Telecom Ltd. ........................ 2,592,000 130,000 Telefonaktiebolaget LM Ericsson, ADR+++ ...... 2,388,750 --------------- 21,524,225 --------------- Total Common Stocks (cost - $206,115,506) ...................... 222,370,800 --------------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ SHORT-TERM INVESTMENT -- 0.76% INVESTMENT COMPANY - 0.76% 1,709,422 Trust for Short-Term U.S. Government Securities**++++ (cost - $1,709,422) ....... $ 1,709,422 --------------- Total Investments -- 99.12% (cost - $207,824,928) ...................... 224,080,222 Other assets in excess of liabilities -- 0.88% ...................................... 1,998,090 --------------- Net Assets -- 100.00% ........................ $ 226,078,312 --------------- ---------------
- --------- ADR American Depositary Receipts. + 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 RANKING: 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 SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 84.20% ADVERTISING AGENCIES - 2.90% 28,000 WPP Group plc - ADR .............................. $ 1,277,500 ----------- AEROSPACE & DEFENSE - 3.08% 5,000 Northrop Grumman Corp. ........................... 365,000 13,000 United Technologies Corp. ........................ 993,687 ----------- 1,358,687 ----------- AUTOMOTIVE PARTS & EQUIPMENT - 1.69% 20,000 Dana Corp. ....................................... 746,265 ----------- AVIATION PARTS - 0.95% 40,000 Aviall, Inc.* .................................... 417,500 ----------- BANKS - 3.44% 28,000 City National Corp. .............................. 876,750 17,000 Summit Bancorp. .................................. 637,500 ----------- 1,514,250 ----------- BUILDING & CONSTRUCTION PRODUCTS - 2.06% 17,000 Armstrong World Industries, Inc. ................. 909,500 ----------- COMMERCIAL SERVICES - 3.74% 61,000 Dun & Bradstreet Corp. (The) ..................... 1,647,000 ----------- COMPUTERS & OFFICE EQUIPMENT - 3.09% 25,000 Pitney Bowes, Inc. ............................... 1,364,062 ----------- CONSUMER PRODUCTS - MISCELLANEOUS - 3.50% 39,000 American Greetings Corp. ......................... 1,542,937 ----------- CREDIT & FINANCE - 8.01% 17,000 American Express Co. ............................. 1,319,625 30,000 SLM Holding Corp. ................................ 973,125 33,000 Travelers Group, Inc. ............................ 1,237,500 ----------- 3,530,250 ----------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------- DIVERSIFIED OPERATIONS - 3.21% 25,000 Raychem Corp. .................................... $ 609,375 30,000 Viad Corp. ....................................... 804,375 ----------- 1,413,750 ----------- DRUGS & HOSPITAL SUPPLIES - 5.12% 16,000 Johnson & Johnson ................................ 1,252,000 20,000 Pharmacia & Upjohn, Inc. ......................... 1,003,750 ----------- 2,255,750 ----------- ELECTRONICS - 2.37% 40,000 Pioneer-Standard Electronics, Inc. ............... 252,500 15,000 Texas Instruments, Inc. .......................... 791,250 ----------- 1,043,750 ----------- FINANCIAL SERVICES - 2.82% 30,000 H&R Block, Inc. .................................. 1,241,250 ----------- HOME FURNISHINGS - 1.11% 25,000 Furniture Brands International, Inc.* ............ 487,500 ----------- HOUSEHOLD PRODUCTS - 3.04% 65,000 Dial Corp. (The) ................................. 1,340,625 ----------- LIFE/HEALTH INSURANCE - 2.08% 30,000 Conseco Inc. ..................................... 916,875 ----------- MACHINERY-ELECTRICAL - 2.20% 23,000 Grainger (W.W.), Inc. ............................ 968,875 ----------- MEDICAL INSTRUMENTS - 2.58% 22,000 Beckman Coulter, Inc. ............................ 1,135,750 ----------- MEDICAL SERVICES - 1.36% 30,000 Columbia/HCA Healthcare Corp. .................... 601,875 ----------- MULTI-LINE INSURANCE - 2.79% 16,000 American International Group, Inc. ............... 1,232,000 ----------- NON-FERROUS METALS - 1.50% 26,000 Mueller Industries, Inc.* ........................ 661,375 -----------
The accompanying notes are an integral part of the financial statements. 20 THE BEAR STEARNS FUNDS The Insiders Select Fund PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) OFFICE FURNISHINGS - 1.46% 34,000 Winsloew Furniture, Inc.* ........................ $ 646,000 ----------- OIL-FIELD SERVICES - 1.09% 23,000 Baker Hughes Inc. ................................ 481,563 ----------- OIL & NATURAL GAS - 3.55% 25,000 Texaco Inc. ...................................... 1,567,188 ----------- PAPER & PAPER RELATED PRODUCTS - 0.89% 30,000 P.H. Glatfelter Co. .............................. 391,875 ----------- PROPERTY/CASUALTY INSURANCE - 1.47% 20,000 St. Paul Cos., Inc. (The) ........................ 650,000 ----------- PUBLISHING - BOOKS - 2.16% 12,000 McGraw-Hill Companies, Inc. ...................... 951,000 ----------- PUBLISHING - NEWSPAPERS - 1.62% 1,400 Washington Post Co. .............................. 715,400 ----------- REAL ESTATE INVESTMENT TRUSTS - 1.93% 40,000 Glenborough Realty Trust, Inc. ................... 850,000 ----------- SHIPBUILDING - 1.29% 50,000 Halter Marine Group, Inc.* ....................... 568,750 ----------- TELECOMMUNICATIONS - 4.09% 30,000 Cincinnati Bell, Inc. ............................ 780,000 23,000 SBC Communications, Inc. ......................... 1,022,063 ----------- 1,802,063 ----------- TOYS - 2.01% 30,000 Hasbro, Inc. ..................................... 885,000 ----------- Total Common Stocks (cost - $38,704,826) ........................... 37,116,165 ----------- - ------------------------------------------------------------------------------ PRINCIPAL AMOUNT (000'S) VALUE - ------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS -- 14.23% COMMERCIAL PAPER - 14.07% $2,000 Morton International, Inc., 5.750%, 10/01/98 ............................... $ 2,000,000 2,100 UBS Finance (Delaware) Inc., 5.750%, 10/01/98 ............................... 2,100,000 2,100 Washington Post Co. (The), 5.700%, 10/01/98 ............................... 2,100,000 ----------- Total Commercial Paper (cost - $6,200,000) ....... 6,200,000 ----------- SHARES - --------------- INVESTMENT COMPANIES - 0.16% 58 Federated Automated Government Money Trust**...... 58 71,747 Trust for Short-Term U.S. Government Securities**.................................... 71,747 ----------- Total Investment Companies (cost - $71,805)....... 71,805 ----------- Total Short-Term Investments (cost - $6,271,805)..................................... 6,271,805 ----------- Total Investments -- 98.43% (cost - $44,976,631).................................... 43,387,970 Other assets in excess of liabilities -- 1.57%.... 694,146 ----------- Net Assets -- 100.00%............................. $44,082,116 ----------- -----------
- --------- 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 SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 93.22% ADVERTISING AGENCIES - 2.74% 12,500 WPP Group plc - ADR .............................. $ 570,312 ----------- AEROSPACE & DEFENSE - 5.56% 8,300 Northrop Grumman Corp. ........................... 605,900 7,200 United Technologies Corp. ........................ 550,350 ----------- 1,156,250 ----------- AUTOMOBILES - 3.27% 8,200 Ford Motor Co. ................................... 384,887 5,400 General Motors Corp. ............................. 295,312 ----------- 680,199 ----------- AUTOMOTIVE PARTS & EQUIPMENT - 2.34% 16,200 Genuine Parts Co. ................................ 487,012 ----------- BANKS - 3.21% 24,400 Bank of New York Co., Inc. (The) ................. 667,950 ----------- BUILDING & CONSTRUCTION PRODUCTS - 3.28% 7,100 Armstrong World Industries, Inc. ................. 379,850 7,000 USG Corp. ........................................ 302,750 ----------- 682,600 ----------- COMMERCIAL SERVICES - 3.75% 28,900 Dun & Bradstreet Corp. (The) ..................... 780,300 ----------- COMPUTERS - 2.77% 4,500 International Business Machines Corp. ............ 576,000 ----------- COMPUTERS & OFFICE EQUIPMENT - 1.83% 4,500 Xerox Corp. ...................................... 381,375 ----------- CONSUMER PRODUCTS - MISCELLANEOUS - 3.71% 19,500 American Greetings Corp. ......................... 771,469 ----------- CREDIT & FINANCE - 5.54% 12,100 Fannie Mae ....................................... 777,425 10,000 Travelers Group, Inc. ............................ 375,000 ----------- 1,152,425 ----------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ DIVERSIFIED OPERATIONS - 7.37% 5,400 General Electric Co. ............................. $ 429,637 16,000 Raychem Corp. .................................... 390,000 26,600 Viad Corp. ....................................... 713,213 ----------- 1,532,850 ----------- DRUGS & HOSPITAL SUPPLIES - 4.31% 7,400 Baxter International Inc. ........................ 440,300 4,400 Bristol-Myers Squibb Co. ......................... 457,050 ----------- 897,350 ----------- ELECTRIC-INTEGRATED - 2.75% 8,200 FPL Group, Inc. .................................. 571,438 ----------- FINANCIAL SERVICES - 3.02% 15,200 H&R Block, Inc. .................................. 628,900 ----------- HOUSEHOLD PRODUCTS - 2.31% 23,300 Dial Corp. (The) ................................. 480,563 ----------- LIFE/HEALTH INSURANCE - 4.77% 9,350 Aon Corp. ........................................ 603,075 9,400 Equitable Companies Inc. (The) ................... 388,925 ----------- 992,000 ----------- MACHINERY-ELECTRICAL - 1.82% 9,000 Grainger (W.W.), Inc. ............................ 379,125 ----------- OIL-FIELD SERVICES - 1.11% 11,000 Baker Hughes Inc. ................................ 230,313 ----------- OIL & NATURAL GAS - 6.06% 9,300 Atlantic Richfield Co. ........................... 659,719 9,600 Texaco Inc. ...................................... 601,800 ----------- 1,261,519 ----------- PAPER & PAPER RELATED PRODUCTS - 2.63% 13,500 Kimberly-Clark Corp. ............................. 546,750 ----------- PROPERTY/CASUALTY INSURANCE - 1.68% 10,776 St. Paul Cos., Inc. (The) ........................ 350,220 -----------
The accompanying notes are an integral part of the financial statements. 22 THE BEAR STEARNS FUNDS Large Cap Value Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) RESTAURANTS - 5.75% 11,500 McDonald's Corp. ................................. $ 686,406 23,000 Wendy's International, Inc. ...................... 510,313 ----------- 1,196,719 ----------- RETAILING - DEPARTMENT STORES - 2.25% 10,400 J.C. Penney Co., Inc. ............................ 467,350 ----------- SAVINGS & LOAN - 2.07% 12,785 Washington Mutual, Inc. .......................... 431,494 ----------- TELEPHONE - LOCAL - 2.33% 10,000 Bell Atlantic Corp. .............................. 484,375 ----------- TOBACCO - 2.93% 13,250 Philip Morris Cos. Inc. .......................... 610,328 ----------- TOYS - 2.06% 14,500 Hasbro, Inc. ..................................... 427,750 ----------- Total Common Stocks (cost - $16,774,207) ........................... 19,394,936 ----------- - ------------------------------------------------------------------------------ PRINCIPAL AMOUNT (000'S) VALUE - ------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS -- 6.73% COMMERCIAL PAPER - 6.49% $ 750 UBS Finance (Delaware) Inc., 5.750%, 10/01/98 ............................... $ 750,000 600 Washington Post Co. (The), 5.700%, 10/01/98 ............................... 600,000 ----------- Total Commercial Paper (cost - $1,350,000) ............................ 1,350,000 ----------- SHARES - --------------- INVESTMENT COMPANIES - 0.24% 616 Federated Automated Government Money Trust* ...... 616 50,537 Trust for Short-Term U.S. Government Securities* .................................... 50,537 ----------- Total Investment Companies (cost - $51,153) ............................... 51,153 ----------- Total Short-Term Investments (cost - $1,401,153) ............................ 1,401,153 ----------- Total Investments -- 99.95% (cost - $18,175,360) ........................... 20,796,089 Other assets in excess of liabilities - 0.05% .... 10,402 ----------- Net Assets - 100.00% ............................. $20,806,491 ----------- -----------
- --------- ADR American Depositary Receipts. * 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 SEPTEMBER 30, 1998 (UNAUDITED)
------------------------------------------------------------------------------ SHARES VALUE ------------------------------------------------------------------------------ EQUITY SECURITIES -- 83.87% COMMON STOCKS - 80.90% BROADCAST SERVICES/PROGRAMS - 0.68% 43,000 VDI Media, Inc.* ................................. $ 381,625 ----------- BROADCASTING - 1.06% 158,900 Four Media Co.* .................................. 595,875 ----------- BUILDING & HOUSING - 6.23% 54,100 Elcor Corp. ...................................... 1,142,862 113,500 Giant Cement Holding, Inc.* ...................... 2,376,406 ----------- 3,519,268 ----------- CHEMICALS & FERTILIZERS - 2.02% 243,900 U.S. Home & Garden Inc.* ......................... 1,143,281 ----------- COMMERCIAL PRINTING - 4.33% 144,600 Bowne & Co., Inc. ................................ 2,449,162 ----------- COMMERCIAL SERVICES - 5.97% 41,850 COMARCO, Inc. .................................... 805,612 164,350 Steiner Leisure Ltd.* ............................ 2,567,969 ----------- 3,373,581 ----------- COMMUNICATIONS - 4.64% 87,500 Data Transmission Network Corp.* ................. 2,625,000 ----------- COMPUTER SERVICES - 1.27% 24,500 Computer Task Group, Inc. ........................ 718,156 ----------- DIVERSIFIED OPERATIONS - 5.29% 139,800 Alyn Corp.* ...................................... 664,050 50,000 SPS Technologies, Inc.* .......................... 2,328,125 ----------- 2,992,175 ----------- DRUGS & HOSPITAL SUPPLIES - 0.64% 165,000 Global Pharmaceutical Corp.* ..................... 330,000 106,200 HumaScan Inc.* ................................... 33,187 ----------- 363,187 ----------- ------------------------------------------------------------------------------ SHARES VALUE - --------------------------------------------------------------------------------- ELECTRONICS - 0.96% 26,100 Cubic Corp. ...................................... $ 544,837 ----------- FINANCIAL SERVICES - 3.79% 76,100 Aames Financial Corp. ............................ 461,356 35,900 Bank United Corp., Class A ....................... 1,285,669 25,000 Medallion Financial Corp. ........................ 393,750 ----------- 2,140,775 ----------- FOOD - MEAT PRODUCTS - 1.10% 105,000 Hibernia Foods plc - ADR* ........................ 623,437 ----------- HOME FURNISHINGS - 3.17% 92,000 Furniture Brands International, Inc.* ............ 1,794,000 ----------- HOTELS & MOTELS - 2.12% 170,900 U. S. Franchise System, Inc.* .................... 1,196,300 ----------- HUMAN RESOURCES - 5.49% 155,500 Butler International, Inc.* ...................... 3,100,281 ----------- MACHINERY - CONSTRUCTION & MINING - 1.19% 45,000 Terex Corp. ...................................... 672,188 ----------- MEDICAL SUPPLIES - 0.89% 99,000 Novametrix Medical Systems Inc.* ................. 501,188 ----------- MISCELLANEOUS - 0.00% 1,901 Meicom Computers & Communications, Ltd*+ ......... 190 7,605 Meicom Computers & Communications, Ltd (Partial Paid Restricted).*+ ............................ 380 ----------- 570 ----------- MISCELLANEOUS MANUFACTURING - 0.42% 20,000 Novel Denim Holdings Ltd.* ....................... 235,000 ----------- NON-FERROUS METALS - 3.46% 58,650 Chase Industries, Inc.* .......................... 832,097 44,200 Mueller Industries, Inc.* ........................ 1,124,338 ----------- 1,956,435 -----------
The accompanying notes are an integral part of the financial statements. 24 THE BEAR STEARNS FUNDS Small Cap Value Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
------------------------------------------------------------------------------ SHARES VALUE - ---------------------------------------------------------------------------------
EQUITY SECURITIES (CONTINUED) OIL & GAS - 0.90% 20,000 Equitable Resources, Inc. ........................ $ 508,750 ----------- OIL & GAS EQUIPMENT - 0.39% 37,200 Paradigm Geophysical, LTD* ....................... 218,550 ----------- PUBLISHING - PERIODICALS - 0.86% 20,700 Big Flower Holdings, Inc.* ....................... 483,863 ----------- RADIO - 5.12% 10,300 Cox Radio, Inc., Class A* ........................ 361,788 50,000 Jacor Communications, Inc.* ...................... 2,531,250 ----------- 2,893,038 ----------- REAL ESTATE INVESTMENT TRUSTS - 2.09% 32,300 Glenborough Realty Trust, Inc. ................... 686,375 19,500 U.S. Restaurant Properties, Inc. ................. 496,031 ----------- 1,182,406 ----------- RECREATIONAL CENTERS - 1.18% 38,500 Bally Total Fitness Holding Corp.* ............... 668,938 ----------- RENTAL/AUTO EQUIPMENT - 2.95% 44,100 Dollar Thrifty Automotive Group, Inc.* ........... 512,663 48,300 United Rentals, Inc.* ............................ 1,156,181 ----------- 1,668,844 ----------- RESORTS - 0.59% 33,100 Silverleaf Resorts, Inc.* ........................ 331,000 ----------- RETAILING - RESTAURANTS - 3.61% 63,600 Apple South, Inc. ................................ 707,550 84,800 Foodmaker, Inc.* ................................. 1,330,300 ----------- 2,037,850 -----------
------------------------------------------------------------------------------ SHARES VALUE - --------------------------------------------------------------------------------- RETAILING - VARIETY STORES - 2.94% 42,000 99 Cents Only Stores* ............................ $ 1,661,625 ----------- STEEL - 1.80% 196,000 Universal Stainless & Alloy Products, Inc.* ...... 1,016,750 ----------- TELECOMMUNICATIONS - 0.35% 27,600 Glenayre Technologies, Inc.* ..................... 200,100 ----------- TRANSPORT - 3.40% 33,500 Celadon Group, Inc.* ............................. 328,719 56,800 Varlen Corp. ..................................... 1,590,400 ----------- 1,919,119 ----------- Total Common Stocks (cost - $48,272,630) ........................... 45,717,154 ----------- PREFERRED STOCKS - 2.97% DRUGS & HOSPITAL SUPPLIES - 0.93% 5,000 Global Pharmaceutical Corp. Convertible Series A* ............................................. 500,000 260 Global Pharmaceutical Corp. Convertible Series B* ............................................. 26,000 ----------- 526,000 ----------- FOOD - MEAT PRODUCTS - 2.04% 7,000 Hibernia Foods plc - ADR Convertible Series A* (a) ............................................ 1,154,514 ----------- Total Preferred Stocks (cost - $1,226,000) ............................ 1,680,514 ----------- Total Equity Securities (cost - $49,498,630) ........................... 47,397,668 -----------
The accompanying notes are an integral part of the financial statements. 25 THE BEAR STEARNS FUNDS Small Cap Value Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
------------------------------------------------------------------------------ PRINCIPAL AMOUNT (000'S) VALUE ------------------------------------------------------------------------------ CORPORATE NOTES -- 0.41% $ 233 Meicom Computers & Communications, Ltd (Restricted),+ 6.000%, 07/07/03 (cost - $233,000) .............................. $ 233,000 ----------- SHORT-TERM INVESTMENTS -- 11.84% COMMERCIAL PAPER - 9.20% 2,600 UBS Finance (Delaware) Inc., 5.750%, 10/01/98 ............................... 2,600,000 2,600 Washington Post Co. (The), 5.700%, 10/01/98 ............................... 2,600,000 ----------- Total Commercial Paper (cost - $5,200,000) ............................ 5,200,000 ----------- SHARES - --------------- INVESTMENT COMPANY - 2.64% 1,490,192 Trust for Short-Term U.S. Government Securities** (cost - $1,490,192) ............................ 1,490,192 ----------- Total Short-Term Investments (cost - $6,690,192) ............................ 6,690,192 ----------- Total Investments -- 96.12% (cost - $56,421,822) ........................... 54,320,860 Other assets in excess of liabilities -- 3.88% ... 2,195,226 ----------- Net Assets -- 100.00% ............................ $56,516,086 ----------- -----------
- --------- ADR American Depositary Receipts. + As of September 30, 1998, the Portfolio committed to investing an additional $932,000 of capital in Meicom Computers & Communications, Ltd. Such investment will be made in equal payments of $233,000 on the third, ninth, fifteenth and twenty-first month from the closing date (July 28, 1998). * Non-income producing security. ** Money market fund. (a) Includes 70,000 shares of Class E and Class F warrants, with no market value. The accompanying notes are an integral part of the financial statements. 26 THE BEAR STEARNS FUNDS Focus List Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
------------------------------------------------------------------------------ SHARES VALUE ------------------------------------------------------------------------------ COMMON STOCKS -- 94.12% AEROSPACE/DEFENSE - EQUIPMENT - 4.82% 15,400 Orbital Sciences Corp.*+ ......................... $ 432,163 ----------- AUTO & AUTO PARTS - 2.04% 19,300 Citation Corp.* .................................. 183,350 ----------- BROADCASTING - 4.78% 4,900 Time Warner Inc. ................................. 429,056 ----------- COMPUTER SCIENCES - 4.15% 12,200 Affiliated Computer Services, Inc., Class A* ..... 372,100 ----------- COMPUTER SERVICES - 9.89% 10,800 The BISYS Group, Inc. ............................ 476,550 14,000 Computer Task Group, Inc. ........................ 410,375 ----------- 886,925 ----------- COMPUTERS & OFFICE EQUIPMENT - 5.87% 9,200 EMC Corp.* ....................................... 526,125 ----------- EUROPEAN TELECOMMUNICATION SERVICES - 4.90% 3,900 Vodafone Group plc - ADR ......................... 439,725 ----------- FOOD - MISCELLANEOUS/DIVERSIFIED - 0.12% 600 Vlasic Foods International Inc.*+ ................ 11,212 ----------- GOVERNMENT - SPONSORED ENTERPRISES - 4.58% 6,400 Fannie Mae ....................................... 411,200 ----------- HEALTH CARE INFORMATION SYSTEMS - 4.38% 13,600 HBO & Co. ........................................ 392,700 ----------- INSURANCE - 5.04% 5,800 AEGON N.V. ....................................... 451,675 ----------- INTERNATIONAL BEVERAGES - 6.19% 22,000 Coca-Cola Enterprises Inc. ....................... 555,500 ----------- INTERNET/NEWS MEDIA - 5.46% 4,400 America Online, Inc. ............................. 489,500 ----------- MID-CAP BANKS - 3.76% 9,000 Summit Bancorp. .................................. 337,500 ----------- ------------------------------------------------------------------------------ SHARES VALUE - --------------------------------------------------------------------------------- PHARMACEUTICALS - 5.81% 6,900 Warner-Lambert Co. ............................... $ 520,950 ----------- PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 4.83% 5,600 Eastman Kodak Co. ................................ 432,950 ----------- RADIO - 3.39% 9,100 Chancellor Media Corp.*+ ......................... 303,712 ----------- RETAIL - SPECIALTY DISCOUNT STORES - 3.96% 10,000 Rite Aid Corp. ................................... 355,000 ----------- SPECIALTY RETAILING/HARD & SOFT LINES - 3.56% 15,000 Williams-Sonoma, Inc.* ........................... 319,688 ----------- WHOLESALE DISTRIBUTION - 6.59% 11,800 Tech Data Corp.* ................................. 590,738 ----------- Total Common Stocks (cost - $8,460,566) ............................ 8,441,769 ----------- PRINCIPAL AMOUNT (000'S) - --------------- SHORT-TERM INVESTMENTS -- 7.59% COMMERCIAL PAPER - 3.34% $ 300 Washington Post Co. (The)+, 5.700%, 10/01/98 (cost - $300,000)............................... 300,000 ----------- SHARES - --------------- INVESTMENT COMPANY - 4.25% 381,209 Trust for Short-Term U.S. Government Securities**+ (cost - $381,209) .............................. 381,209 ----------- Total Short-Term Investments (cost - $681,209) .............................. 681,209 ----------- Total Investments -- 101.71% (cost - $9,141,775) ............................ 9,122,978 Liabilities in excess of other assets -- (1.71)% ........................................ (153,753) ----------- Net Assets -- 100.00% ............................ $ 8,969,225 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. + Not a Focus List selection at September 30, 1998. The accompanying notes are an integral part of the financial statements. 27 THE BEAR STEARNS FUNDS Balanced Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ EQUITY SECURITIES -- 48.33% ADVERTISING AGENCIES - 1.21% 4,100 WPP Group plc - ADR .............................. $ 187,062 ----------- AEROSPACE & DEFENSE - 1.29% 2,600 United Technologies Corp. ........................ 198,737 ----------- AUTOMOBILES - 1.62% 2,900 Ford Motor Co. ................................... 136,119 2,100 General Motors Corp. ............................. 114,844 ----------- 250,963 ----------- AUTOMOTIVE PARTS & EQUIPMENT - 1.15% 5,900 Genuine Parts Co. ................................ 177,369 ----------- BANKS - 1.03% 5,800 Bank of New York Co., Inc. (The) ................. 158,775 ----------- BROADCAST SERVICES/PROGRAMS - 0.12% 5,000 Four Media Co.* .................................. 18,750 ----------- BUILDING & CONSTRUCTION PRODUCTS - 1.38% 4,000 Armstrong World Industries, Inc. ................. 214,000 ----------- BUILDING & HOUSING - 0.14% 1,000 Giant Cement Holding, Inc.* ...................... 20,937 ----------- COMMERCIAL PRINTING - 0.35% 3,200 Bowne & Co., Inc. ................................ 54,200 ----------- COMMERCIAL SERVICES - 1.72% 7,700 Dun & Bradstreet Corp. (The) ..................... 207,900 3,700 Steiner Leisure Ltd.* ............................ 57,812 ----------- 265,712 ----------- COMPUTERS & OFFICE EQUIPMENT - 1.32% 2,400 Xerox Corp. ...................................... 203,400 ----------- CONSUMER PRODUCTS - MISCELLANEOUS - 1.28% 5,000 American Greetings Corp. ......................... 197,812 ----------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------- COSMETICS & TOILETRIES - 1.23% 4,700 Kimberly-Clark Corp. ............................. $ 190,350 ----------- CREDIT & FINANCE - 2.43% 3,100 Fannie Mae ....................................... 199,175 4,700 Travelers Group, Inc. ............................ 176,250 ----------- 375,425 ----------- DIVERSIFIED OPERATIONS - 4.14% 2,300 General Electric Co. ............................. 182,994 6,500 Raychem Corp. .................................... 158,437 1,500 SPS Technologies, Inc.* .......................... 69,844 8,500 Viad Corp. ....................................... 227,906 ----------- 639,181 ----------- DRUGS & HOSPITAL SUPPLIES - 2.91% 4,000 Baxter International Inc. ........................ 238,000 1,800 Bristol-Myers Squibb Co. ......................... 186,975 12,700 Global Pharmaceutical Corp.* ..................... 25,400 ----------- 450,375 ----------- ELECTRIC HOUSEWARES & FANS - 0.40% 11,000 Windmere-Durable Holdings Inc.* .................. 61,875 ----------- ELECTRIC - INTEGRATED - 1.53% 3,400 FPL Group, Inc. .................................. 236,937 ----------- FINANCIAL SERVICES - 3.55% 4,300 Data Transmission Network Corp.* ................. 129,000 4,900 H&R Block, Inc. .................................. 202,737 6,450 Washington Mutual, Inc. .......................... 217,687 ----------- 549,424 ----------- HOTELS & MOTELS - 0.23% 5,000 U. S. Franchise System, Inc.* .................... 35,000 ----------- HOUSEHOLD PRODUCTS - 1.33% 10,000 Dial Corp. (The) ................................. 206,250 ----------- HUMAN RESOURCES - 0.57% 4,400 Butler International, Inc.* ...................... 87,725 -----------
The accompanying notes are an integral part of the financial statements. 28 THE BEAR STEARNS FUNDS Balanced Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------ SHARES VALUE - -------------------------------------------------------------------------------
EQUITY SECURITIES (CONTINUED) LIFE/HEALTH INSURANCE - 2.27% 2,800 Aon Corp. ........................................ $ 180,600 4,100 Equitable Companies Inc. (The) ................... 169,637 ----------- 350,237 ----------- MACHINERY - ELECTRICAL - 1.09% 4,000 Grainger (W.W.), Inc. ............................ 168,500 ----------- NON-FERROUS METALS - 0.56% 3,400 Mueller Industries, Inc.* ........................ 86,488 ----------- OIL FIELD MACHINERY & EQUIPMENT - 0.95% 7,000 Baker Hughes Inc. ................................ 146,562 ----------- OIL & NATURAL GAS - 2.67% 3,000 Atlantic Richfield Co. ........................... 212,813 3,200 Texaco Inc. ...................................... 200,600 ----------- 413,413 ----------- PROPERTY/CASUALTY INSURANCE - 1.33% 6,304 St. Paul Cos., Inc. (The) ........................ 204,880 ----------- RADIO - 0.65% 2,000 Jacor Communications, Inc.* ...................... 101,250 -----------
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------- RENTAL/AUTO EQUIPMENT - 1.23% 4,600 Hertz Corp. ...................................... $ 190,325 ----------- RESTAURANTS - 2.65% 3,600 McDonald's Corp. ................................. 214,875 8,800 Wendy's International, Inc. ...................... 195,250 ----------- 410,125 ----------- RETAILING - DEPARTMENT STORES - 1.10% 3,800 J.C. Penney Co., Inc. ............................ 170,763 ----------- RETAILING - VARIETY STORES - 0.64% 2,500 99 Cents Only Stores* ............................ 98,906 ----------- TELECOMMUNICATIONS - 1.13% 3,000 AT&T Corp. ....................................... 175,313 ----------- TOBACCO - 1.13% 3,800 Philip Morris Cos. Inc. .......................... 175,038 ----------- Total Equity Securities (cost - $8,044,921) ............................ 7,472,059 -----------
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE - --------------- ------------- ------------------ LONG-TERM DEBT INVESTMENTS -- 48.82% CORPORATE OBLIGATIONS - 16.21% BANKS - 2.42% $ 100 Firstar Bank Milwaukee, Senior Notes ............. 6.250% 12/01/02 104,625 250 NationsBank Corp., Senior Notes .................. 7.000 05/15/03 269,688 ----------- 374,313 ----------- FINANCIAL - 1.70% 100 Associates Corp. N.A., Senior Notes .............. 6.625 06/15/05 107,875 75 International Lease Finance Corp. ................ 6.125 11/01/99 75,851 75 Morgan Stanley, Dean Witter, Discover & Co. ...... 6.750 03/04/03 79,594 ----------- 263,320 -----------
The accompanying notes are an integral part of the financial statements. 29 THE BEAR STEARNS FUNDS Balanced Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - -------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED) INDUSTRIAL - 10.56% $ 200 American Home Products ........................... 7.900% 02/15/05 $ 229,000 75 Anheuser Busch Cos. Inc. ......................... 6.750 06/01/05 79,688 250 Dow Chemical Co. ................................. 8.625 04/01/06 299,688 100 Gap, Inc. ........................................ 6.900 09/15/07 111,000 200 Heinz (H. J.) Co. ................................ 6.000 03/15/08 214,250 150 Hershey Foods Co. ................................ 6.700 10/01/05 164,438 75 Hoechst-Celanese Corp. ........................... 6.125 02/01/04 79,219 75 Pepsico Inc. ..................................... 5.750 01/02/03 77,344 200 Sara Lee Corp. ................................... 6.150 06/19/08 214,000 150 Union Camp Corp. ................................. 6.500 11/15/07 163,688 ----------- 1,632,315 ----------- TOBACCO - 0.49% 75 Philip Morris Cos. ............................... 7.375 02/15/99 75,563 ----------- UTILITIES - 1.04% 75 Central Power & Light Co., Series 93-G ........... 6.875 02/01/03 80,625 75 Pacific Gas & Electric Co., Series FF ............ 6.250 03/01/04 80,063 ----------- 160,688 ----------- Total Corporate Obligations (cost - $2,396,954) ...................................... 2,506,199 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 18.34% FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.15% 624 Federal Home Loan Mortgage Corporation ........... 5.500-7.000 03/26/04-05/01/26 642,121 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.50% 832 Federal National Mortgage Association ............ 6.000-8.000 12/01/08-06/01/28 849,447 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 8.69% 1,298 Government National Mortgage Association ......... 6.000-8.500 09/15/24-06/15/28 1,343,386 ----------- Total U.S. Government Agency Obligations (cost - $2,792,864) ...................................... 2,834,954 -----------
The accompanying notes are an integral part of the financial statements. 30 THE BEAR STEARNS FUNDS Balanced Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - -------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED) U.S. GOVERNMENT OBLIGATIONS - 14.27% U.S. TREASURY NOTES - 14.27% $2,000 U.S. Treasury Notes (cost - $2,047,532) .......... 5.625-6.500% 02/15/04-08/15/23 $ 2,205,924 ----------- Total Long-Term Debt Investments (cost - $7,237,350) ...................................... 7,547,077 -----------
SHARES - --------------- SHORT-TERM INVESTMENT -- 3.11% INVESTMENT COMPANY - 3.11% 479,948 Trust for Short-Term U.S. Government Securities** (cost - $479,948) .................. 479,948 ----------- Total Investments -- 100.26% (cost - $15,762,219) .................................... 15,499,084 Liabilities in excess of other assets -- (0.26)% ..................................... (39,939) ----------- Net Assets -- 100.00% ................................................................ $15,459,145 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. The accompanying notes are an integral part of the financial statements. 31 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 92.23% AUSTRALIA - 1.39% LIFE/HEALTH INSURANCE - 0.97% 7,800 AMP Ltd.* ....................................... $ 94,470 -------------- MULTIMEDIA - 0.42% 6,400 The News Corporation Ltd. ....................... 41,239 -------------- Total Australia (cost - $151,159) ............... 135,709 -------------- FINLAND - 3.83% TELECOMMUNICATION EQUIPMENT - 3.83% 4,700 Nokia Oyj, Class A (cost - $309,303) ............ 373,146 -------------- FRANCE - 17.70% AGRICULTURAL OPERATIONS - 0.77% 400 Eridania Beghin-Say S.A. ........................ 74,722 -------------- AUTO/TRUCK PARTS & EQUIPMENT - 0.80% 1,100 Valeo S.A. ...................................... 78,504 -------------- COMPUTER SERVICES - 3.82% 2,433 Cap Gemini S.A. ................................. 372,451 -------------- COSMETICS & TOILETRIES - 0.95% 200 L'OREAL ......................................... 92,956 -------------- DIVERSIFIED OPERATIONS - 0.41% 200 Vivendi ......................................... 39,823 -------------- FOOD, MISCELLANEOUS/DIVERSIFIED - 2.70% 1,000 Groupe Danone ................................... 262,810 -------------- FOOD-RETAIL - 2.50% 400 Promodes ........................................ 243,648 -------------- MEDICAL-DRUGS - 1.77% 1,300 Rhone-Poulenc S.A., Class A ..................... 54,507 800 Sanofi S.A. ..................................... 117,613 -------------- 172,120 -------------- MULTI-LINE INSURANCE - 2.35% 2,500 AXA ............................................. 228,822 -------------- SPECIAL PURPOSE BANKS - 0.78% 600 Dexia France .................................... 75,685 -------------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------
FRANCE (CONTINUED) TELEPHONE-INTEGRATED - 0.85% 1,400 France Telecom S.A. ............................. $ 82,804 -------------- Total France (cost - $1,673,110) ................ 1,724,345 -------------- GERMANY - 8.87% CHEMICALS-DIVERSIFIED - 0.82% 1,100 Henkel KGaA ..................................... 79,965 -------------- COMPUTER SOFTWARE - 2.03% 400 SAP AG .......................................... 197,924 -------------- MACHINERY - GENERAL INDUSTRY - 2.17% 2,300 Mannesmann AG ................................... 211,236 -------------- MULTI-LINE INSURANCE - 2.91% 917 Allianz AG, Registered .......................... 283,656 -------------- REINSURANCE - 0.94% 200 Muenchener Rueckversicherungs-Gesellschaft AG ... 87,355 8 Muenchener Rueckversicherungs-Gesellschaft AG, Rights* ....................................... 3,485 8 Muenchener Rueckversicherungs-Gesellschaft AG, Warrants* ..................................... 318 -------------- 91,158 -------------- Total Germany (cost - $761,557) ................. 863,939 -------------- IRELAND - 3.53% COMMERCIAL BANKS-EUROPE - 1.22% 6,700 Bank of Ireland ................................. 119,212 -------------- DRUG DELIVERY SYSTEMS - 1.41% 1,900 Elan Corp. plc, ADR* ............................ 136,919 -------------- LIFE/HEALTH INSURANCE - 0.90% 12,000 Irish Life plc .................................. 88,199 -------------- Total Ireland (cost - $324,844) ................. 344,330 -------------- ITALY - 4.97% CELLULAR TELECOMMUNICATIONS - 2.38% 39,800 Telecom Italia Mobile S.p.A. .................... 231,702 -------------- COMMERCIAL BANKS-EUROPE - 0.62% 14,500 Credito Italiano S.p.A. ......................... 60,371 --------------
The accompanying notes are an integral part of the financial statements. 32 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ITALY (CONTINUED) FINANCE-INVESTMENT BANKING/BROKERAGE - 0.31% 2,300 Istituto Mobiliare Italiano S.p.A. .............. $ 30,343 -------------- MULTI-LINE INSURANCE - 1.37% 4,100 Assicurazioni Generali S.p.A. ................... 133,239 -------------- TELECOMMUNICATION SERVICES - 0.29% 4,200 Telecom Italia S.p.A. ........................... 28,912 -------------- Total Italy (cost - $473,465) ................... 484,567 -------------- JAPAN - 6.59% AUDIO/VIDEO PRODUCTS - 1.79% 2,500 Sony Corp. ...................................... 174,295 -------------- COSMETICS & TOILETRIES - 1.48% 9,000 Kao Corp. ....................................... 144,137 -------------- MEDICAL-DRUGS - 1.93% 7,000 Takeda Chemical Industries ...................... 187,702 -------------- PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 0.35% 1,000 Fuji Photo Film Co. ............................. 34,528 -------------- RUBBER-TIRES - 1.04% 5,000 Bridgestone Corp. ............................... 101,014 -------------- Total Japan (cost - $731,787) ................... 641,676 -------------- NETHERLANDS - 13.10% BREWERIES - 1.88% 3,800 Heineken N.V. ................................... 183,441 -------------- COMPUTER SERVICES - 1.49% 3,200 Getronics N.V. .................................. 145,140 -------------- CONSUMER PRODUCTS-MISCELLANEOUS - 1.16% 1,800 Unilever N.V. ................................... 113,247 -------------- MONEY CENTER BANKS - 1.71% 3,700 ING Groep N.V. .................................. 166,640 -------------- MULTI-LINE INSURANCE - 2.69% 3,100 AEGON N.V. ...................................... 245,523 300 Fortis Amev N.V. ................................ 16,838 -------------- 262,361 --------------
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------
NETHERLANDS (CONTINUED) PUBLISHING-PERIODICALS - 1.77% 900 Wolters Kluwer N.V. ............................. $ 172,688 -------------- PUBLISHING-NEWSPAPERS - 1.53% 3,600 VNU N.V. ........................................ 148,577 -------------- SOAPS & CLEANING AGENTS - 0.87% 1,700 Benckiser N.V., Class B ......................... 84,771 -------------- Total Netherlands (cost - $1,227,008) ........... 1,276,865 -------------- SPAIN - 3.10% COMMERCIAL BANKS-EUROPE - 0.97% 1,500 Banco Popular Espanol, S.A. ..................... 94,499 -------------- ELECTRIC-INTEGRATED - 1.08% 6,300 Iberdrola S.A. .................................. 104,878 -------------- TELEPHONE-INTEGRATED - 1.05% 2,809 Telefonica S.A. ................................. 102,422 -------------- Total Spain (cost - $336,226) ................... 301,799 -------------- SWEDEN - 0.89% TELECOMMUNICATION EQUIPMENT - 0.89% 4,700 Telefonaktiebolaget LM Ericsson, ADR (cost - $113,834) ..................................... 86,363 -------------- SWITZERLAND - 9.76% FOOD, MISCELLANEOUS/DIVERSIFIED - 3.06% 150 Nestle S.A. ..................................... 298,416 -------------- HUMAN RESOURCES - 0.76% 200 Adecco S.A. ..................................... 74,116 -------------- MEDICAL-DRUGS - 4.72% 92 Novartis AG, Registered ......................... 147,473 29 Roche Holding AG ................................ 312,141 -------------- 459,614 -------------- REINSURANCE - 1.22% 60 Schweizerische Rueckversicherungs- Gesellschaft .................................. 118,976 -------------- Total Switzerland (cost - $938,831) ............. 951,122 --------------
The accompanying notes are an integral part of the financial statements. 33 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) UNITED KINGDOM - 18.50% CELLULAR TELECOMMUNICATIONS - 2.44% 20,500 Vodafone Group plc Ord 5p ....................... $ 237,943 -------------- COMPUTER SERVICES - 2.14% 5,700 Logica plc Ord 10p .............................. 208,747 -------------- CONSUMER PRODUCTS-MISCELLANEOUS - 1.10% 12,500 Unilever plc Ord 1.25p .......................... 106,957 -------------- FOOD, MISCELLANEOUS/DIVERSIFIED - 0.69% 5,200 Cadbury Schweppes plc Ord 25p ................... 67,337 -------------- FOOD-RETAIL - 0.83% 8,500 J. Sainsbury plc Ord 25p ........................ 81,398 -------------- GAS-DISTRIBUTION - 1.08% 15,100 BG plc Ord 25p .................................. 104,954 -------------- MEDICAL-DRUGS - 7.38% 15,000 Glaxo Wellcome plc Ord 25p ...................... 442,781 15,500 SmithKline Beecham plc Ord 6.25p ................ 170,425 3,000 Zeneca Group plc Ord 25p ........................ 106,043 -------------- 719,249 -------------- RETAIL-DRUG STORES - 0.71% 4,000 Boots Company plc Ord 25p ....................... 68,860 -------------- TELECOMMUNICATION SERVICES - 2.13% 9,900 British Telecommunications plc Ord 25p .......... 133,416 8,800 COLT Telecom Group plc Ord 0.025p* .............. 74,101 -------------- 207,517 -------------- Total United Kingdom (cost - $1,653,791) ........ 1,802,962 -------------- Total Common Stocks (cost - $8,694,915) ........................... 8,986,823 --------------
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS -- 11.19% INVESTMENT COMPANIES - 0.93% 68 Federated Automated Government Money Trust ** ... $ 68 90,330 Trust for Short-Term U.S. Government Securities** .................................. 90,330 -------------- Total Investment Companies (cost - $90,398) .............................. 90,398 -------------- PRINCIPAL AMOUNT (000'S) - ----------- U.S. GOVERNMENT AGENCY OBLIGATION - 10.26% $ 1,000 Federal Home Loan Bank Discount Notes, 4.95%, 10/01/98 (cost - $1,000,000) ........................... 1,000,000 -------------- Total Short-Term Investments (cost - $1,090,398) ................................... 1,090,398 -------------- Total Investments -- 103.42% (cost - $9,785,313) ................................... 10,077,221 Liabilities in excess of other assets -- (3.42)% ....................................... (333,658) -------------- Net Assets -- 100.00% ........................... $ 9,743,563 -------------- --------------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. The accompanying notes are an integral part of the financial statements. 34 THE BEAR STEARNS FUNDS STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1998 (UNAUDITED)
LARGE CAP SMALL CAP INTERNATIONAL S&P STARS THE INSIDERS VALUE VALUE FOCUS LIST BALANCED EQUITY PORTFOLIO SELECT FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------ ------------ ----------- ----------- ---------- ----------- ------------- ASSETS Investments, at value (cost - $207,824,928, $44,976,631, $18,175,360, $56,421,822, $9,141,775, $15,762,219 and $9,785,313, respectively).... $224,080,222 $43,387,970 $20,796,089 $54,320,860 $9,122,978 $15,499,084 $10,077,221 Receivable for investments sold......................... 2,401,795 1,742,304 49,438 1,336,540 -- -- -- Receivable for Portfolio shares sold......................... 1,174,752 345,202 2,076 1,891,275 1,719 4,725 500 Dividends and interest receivable................... 60,196 53,595 31,619 20,690 3,744 98,744 47,328 Receivable from investment adviser...................... -- 19,688 4,028 33,618 -- 15,711 -- Deferred organization expenses and other assets............. 94,576 94,422 44,835 51,104 79,703 94,033 83,188 ------------ ------------ ----------- ----------- ---------- ----------- ------------- Total assets............. 227,811,541 45,643,181 20,928,085 57,654,087 9,208,144 15,712,297 10,208,237 ------------ ------------ ----------- ----------- ---------- ----------- ------------- LIABILITIES Payable for investments purchased.................... 821,200 1,268,958 27,895 668,853 -- 41,937 238,288 Payable for Portfolio shares repurchased.................. 279,301 99,472 5,402 284,938 49,764 7,992 20,997 Distribution and service fees payable (Class A, B and C shares)...................... 353,762 107,223 28,886 91,963 31,729 20,607 35,182 Advisory fee payable........... 135,059 1,164 -- -- -- -- 7,147 Administration fee payable..... 27,800 5,322 2,100 6,931 8,119 13,015 9,797 Custodian fee payable.......... 8,427 3,908 3,105 1,985 2,367 3,831 1,574 Organization expenses payable...................... -- -- -- -- 31,751 45,856 29,914 Accrued expenses............... 107,680 75,018 54,206 83,331 115,189 119,914 121,775 ------------ ------------ ----------- ----------- ---------- ----------- ------------- Total liabilities........ 1,733,229 1,561,065 121,594 1,138,001 238,919 253,152 464,674 ------------ ------------ ----------- ----------- ---------- ----------- ------------- NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized).................. 12,132 2,983 1,136 3,350 745 1,261 755 Paid-in capital................ 197,357,078 43,056,327 16,348,723 56,097,447 9,415,054 15,657,624 9,757,816 Undistributed net investment income/(loss)................ (1,065,687) 15,236 78,470 (206,760) (28,014) 34,131 11,048 Accumulated net realized gain/(loss) from investments, securities sold short, options and foreign currency related transactions, if any.......................... 13,519,495 2,596,231 1,757,433 2,723,011 (399,763) 29,264 (320,020) Net unrealized appreciation/(depreciation) on investments, options and foreign currency related transactions, if any......... 16,255,294 (1,588,661) 2,620,729 (2,100,962) (18,797) (263,135) 293,964 ------------ ------------ ----------- ----------- ---------- ----------- ------------- Net assets............... $226,078,312 $44,082,116 $20,806,491 $56,516,086 $8,969,225 $15,459,145 $9,743,563 ------------ ------------ ----------- ----------- ---------- ----------- ------------- ------------ ------------ ----------- ----------- ---------- ----------- ------------- CLASS A Net assets..................... $113,995,311 $23,847,665 $ 9,069,159 $18,253,377 $4,163,995 $ 4,735,576 $5,006,468 ------------ ------------ ----------- ----------- ---------- ----------- ------------- Shares of beneficial interest outstanding.................. 6,108,073 1,604,973 493,768 1,080,217 344,704 386,590 386,642 ------------ ------------ ----------- ----------- ---------- ----------- ------------- Net asset value per share...... $18.66 $14.86 $18.37 $16.90 $12.08 $12.25 $12.95 ------------ ------------ ----------- ----------- ---------- ----------- ------------- ------------ ------------ ----------- ----------- ---------- ----------- ------------- Maximum offering price per share (net asset value plus sales charge of. 5.50%* of the offering price) $19.75 $15.72 $19.44 $17.88 $12.78 $12.96 $13.70 ------------ ------------ ----------- ----------- ---------- ----------- ------------- ------------ ------------ ----------- ----------- ---------- ----------- ------------- CLASS B Net assets..................... $ 15,420,249 $ 7,028,607 $ 1,405,737 $ 2,087,403 $2,858,343 $ 1,321,642 $2,443,335 ------------ ------------ ----------- ----------- ---------- ----------- ------------- Shares of beneficial interest outstanding.................. 833,208 479,037 77,361 124,643 237,675 108,145 189,336 ------------ ------------ ----------- ----------- ---------- ----------- ------------- Net asset value and offering price per share**............ $18.51 $14.67 $18.17 $16.75 $12.03 $12.22 $12.90 ------------ ------------ ----------- ----------- ---------- ----------- ------------- ------------ ------------ ----------- ----------- ---------- ----------- ------------- CLASS C Net assets..................... $ 62,275,521 $12,231,762 $ 5,180,001 $12,989,055 $1,946,887 $ 887,682 $2,293,760 ------------ ------------ ----------- ----------- ---------- ----------- ------------- Shares of beneficial interest outstanding.................. 3,365,495 834,156 285,068 776,108 161,770 72,659 177,779 ------------ ------------ ----------- ----------- ---------- ----------- ------------- Net asset value and offering price per share**............ $18.50 $14.66 $18.17 $16.74 $12.03 $12.22 $12.90 ------------ ------------ ----------- ----------- ---------- ----------- ------------- ------------ ------------ ----------- ----------- ---------- ----------- ------------- CLASS Y Net assets..................... $ 34,387,231 $ 974,082 $ 5,151,594 $23,186,251 -- $ 8,514,245 -- ------------ ------------ ----------- ----------- ---------- ----------- ------------- Shares of beneficial interest outstanding.................. 1,825,339 64,610 279,577 1,368,269 -- 693,368 -- ------------ ------------ ----------- ----------- ---------- ----------- ------------- Net asset value, offering and redemption price per share... $18.84 $15.08 $18.43 $16.95 -- $12.28 -- ------------ ------------ ----------- ----------- ---------- ----------- ------------- ------------ ------------ ----------- ----------- ---------- ----------- -------------
- ------------ *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. 35 THE BEAR STEARNS FUNDS STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
LARGE CAP SMALL CAP INTERNATIONAL S&P STARS THE INSIDERS VALUE VALUE FOCUS LIST BALANCED EQUITY PORTFOLIO SELECT FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------ ------------ ----------- ----------- ---------- ----------- ------------- INVESTMENT INCOME Dividends...................... $ 689,124* $ 286,430* $ 190,738 $ 180,071 $ 36,576 * $ 57,174 $ 79,062* Interest....................... 89,022 141,812 36,330 122,836 9,190 219,949 30,895 ------------ ------------ ----------- ----------- ---------- ----------- ------------- 778,146 428,242 227,068 302,907 45,766 277,123 109,957 ------------ ------------ ----------- ----------- ---------- ----------- ------------- EXPENSES Advisory fees.................. 868,182 238,957 82,066 266,779 28,434 46,577 50,589 Distribution and service fees - Class A...................... 293,677 61,009 22,837 59,822 9,705 10,204 12,502 Distribution and service fees - Class B...................... 54,747 27,359 5,207 8,736 14,465 5,960 12,960 Distribution and service fees - Class C...................... 333,574 67,838 27,297 85,147 9,870 4,504 12,625 Accounting fees................ 120,598 69,087 52,796 75,786 13,963 31,596 17,213 Transfer agent fees and expenses..................... 124,561 64,570 47,580 67,558 5,737 19,691 23,620 Administration fees............ 173,637 33,466 16,413 53,347 6,562 10,749 7,588 Legal and auditing fees........ 45,615 22,048 18,254 18,633 33,293 20,374 21,254 Federal and state registration fees......................... 30,280 21,050 17,971 30,947 44,058 42,297 39,695 Reports and notices to shareholders................. 25,807 11,542 6,035 13,035 -- 2,030 4,681 Amortization of organization expenses..................... 20,415 18,110 7,869 10,832 4,052 5,894 6,118 Custodian fees and expenses.... 29,842 13,531 5,014 12,718 8,185 11,445 11,553 Insurance expenses............. 3,905 3,506 3,440 3,640 3,175 3,175 3,175 Trustees' fees and expenses.... 4,755 4,011 1,281 3,510 2,057 2,127 2,067 Other.......................... 7,770 1,712 2,153 2,101 2,134 2,885 984 ------------ ------------ ----------- ----------- ---------- ----------- ------------- Total expenses before waivers and related reimbursements........... 2,137,365 657,796 316,213 712,591 185,690 219,508 226,624 Less: waivers and related reimbursements........... (293,532) (244,790) (151,355) (202,924) (111,910 ) (148,667 ) (125,254) ------------ ------------ ----------- ----------- ---------- ----------- ------------- Total expenses after waivers and related reimbursements........... 1,843,833 413,006 164,858 509,667 73,780 70,841 101,370 ------------ ------------ ----------- ----------- ---------- ----------- ------------- Net investment income/(loss)... (1,065,687) 15,236 62,210 (206,760) (28,014 ) 206,282 8,587 ------------ ------------ ----------- ----------- ---------- ----------- ------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized gain/(loss) from: Investments.................. 6,199,564 85,603 259,069 (552,114) (416,789 ) 16,941 (29,257) Option transactions.......... 1,430,342 -- -- -- -- -- -- Securities sold short........ -- (12,202) -- -- -- -- -- Foreign currency related transactions............... -- -- -- -- -- -- (173,653) Net change in unrealized appreciation on: Investments.................. (23,501,097) (8,821,368) (3,016,894) (21,660,357) (518,452 ) (869,443 ) (619,305) Foreign currency related transactions............... -- -- -- -- -- (45,279) ------------ ------------ ----------- ----------- ---------- ----------- ------------- Net realized and unrealized loss on investments.......... (15,871,191) (8,747,967) (2,757,825) (22,212,471) (935,241 ) (852,502 ) (867,494) ------------ ------------ ----------- ----------- ---------- ----------- ------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $(16,936,878) $(8,732,731) $(2,695,615) $(22,419,231) $(963,255 ) $ (646,220 ) $ (858,907) ------------ ------------ ----------- ----------- ---------- ----------- ------------- ------------ ------------ ----------- ----------- ---------- ----------- -------------
- --------- *Net of foreign withholding taxes of $5,217, $525, $860 and $18,118 for S&P STARS Portfolio, The Insiders Select Fund, Focus List Portfolio and International Equity Portfolio, respectively. The accompanying notes are an integral part of the financial statements. 36 (This page has been left blank intentionally.) 37 THE BEAR STEARNS FUNDS STATEMENT OF CHANGES IN NET ASSETS
S&P STARS PORTFOLIO THE INSIDERS SELECT FUND LARGE CAP VALUE PORTFOLIO ------------------------------- ------------------------------- ------------------------------- FOR THE FOR THE FOR THE SIX MONTHS SIX MONTHS SIX MONTHS ENDED FOR THE ENDED FOR THE ENDED FOR THE SEPTEMBER 30, FISCAL SEPTEMBER 30, FISCAL SEPTEMBER 30, FISCAL 1998 YEAR ENDED 1998 YEAR ENDED 1998 YEAR ENDED (UNAUDITED) MARCH 31, 1998 (UNAUDITED) MARCH 31, 1998 (UNAUDITED) MARCH 31, 1998 -------------- -------------- -------------- -------------- -------------- -------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss)... $ (1,065,687) $ (1,516,182) $ 15,236 $ (31,926) $ 62,210 $ 81,316 Net realized gain/(loss) on investments..... 7,629,906 20,429,272 73,401 6,125,491 259,069 2,468,368 Net change in unrealized appreciation/ (depreciation) on investments..... (23,501,097) 37,801,568 (8,821,368) 4,989,395 (3,016,894) 4,011,497 -------------- -------------- -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations...... (16,936,878) 56,714,658 (8,732,731) 11,082,960 (2,695,615) 6,561,181 -------------- -------------- -------------- -------------- -------------- -------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares........ -- -- -- -- -- (6,738) Class B shares........ -- -- -- -- -- -- Class C shares........ -- -- -- -- -- -- Class Y shares........ -- -- -- -- -- (66,694) -------------- -------------- -------------- -------------- -------------- -------------- -- -- -- -- -- (73,432) -------------- -------------- -------------- -------------- -------------- -------------- Net realized capital gains Class A shares........ -- (12,011,452) -- (2,877,613) -- (1,061,580) Class C shares........ -- (7,215,795) -- (1,511,446) -- (688,493) Class Y shares........ -- (3,784,124) -- (272,772) -- (1,872,935) -------------- -------------- -------------- -------------- -------------- -------------- -- (23,011,371) -- (4,661,831) -- (3,623,008) -------------- -------------- -------------- -------------- -------------- -------------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares.......... 70,910,550 85,871,383 21,438,443 13,066,709 5,789,454 8,081,705 Cost of shares repurchased..... (42,268,288) (46,357,215) (6,350,885) (11,007,952) (3,341,453) (7,019,459) Shares issued in reinvestment of dividends....... -- 21,279,449 -- 4,312,328 -- 3,045,286 -------------- -------------- -------------- -------------- -------------- -------------- Net increase in net assets derived from shares of beneficial interest transactions.... 28,642,262 60,793,617 15,087,558 6,371,085 2,448,001 4,107,532 -------------- -------------- -------------- -------------- -------------- -------------- Total increase/(decrease) in net assets... 11,705,384 94,496,904 6,354,827 12,792,214 (247,614) 6,972,273 NET ASSETS Beginning of period.......... 214,372,928 119,876,024 37,727,289 24,935,075 21,054,105 14,081,832 -------------- -------------- -------------- -------------- -------------- -------------- End of period**... $ 226,078,312 $214,372,928 $ 44,082,116 $37,727,289 $20,806,491 $ 21,054,105 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ---------- * Commencement of operations. ** Includes undistributed net investment income of $15,236, $78,470, $34,131, and $11,048 for The Insiders Select Fund, Large Cap Value Portfolio, Balanced Portfolio and International Equity Portfolio, respectively, for the six months ended September 30, 1998 and $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. The accompanying notes are an integral part of the financial statements. 38
SMALL CAP VALUE PORTFOLIO FOCUS LIST PORTFOLIO BALANCED PORTFOLIO ------------------------------- ------------------------------- ------------------------------- FOR THE FOR THE FOR THE SIX MONTHS SIX MONTHS FOR THE PERIOD SIX MONTHS FOR THE PERIOD ENDED FOR THE ENDED DECEMBER 29, ENDED DECEMBER 29, SEPTEMBER 30, FISCAL SEPTEMBER 30, 1997* SEPTEMBER 30, 1997* 1998 YEAR ENDED 1998 THROUGH 1998 THROUGH (UNAUDITED) MARCH 31, 1998 (UNAUDITED) MARCH 31, 1998 (UNAUDITED) MARCH 31, 1998 -------------- -------------- -------------- -------------- -------------- -------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss)... $ (206,760) $ (36,627) $ (28,014) $ (5,316) $ 206,282 $ 47,628 Net realized gain/(loss) on investments..... (552,114) 8,869,769 (416,789) 22,342 16,941 12,323 Net change in unrealized appreciation/ (depreciation) on investments..... (21,660,357) 13,475,276 (518,452) 499,655 (869,443) 606,308 -------------- -------------- -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations...... (22,419,231) 21,981,418 (963,255) 516,681 (646,220) 666,259 -------------- -------------- -------------- -------------- -------------- -------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares........ -- -- -- -- (49,901) (10,210) Class B shares........ -- -- -- -- (13,853) (2,353) Class C shares........ -- -- -- -- (10,265) (1,857) Class Y shares........ -- -- -- -- (114,898) (16,442) -------------- -------------- -------------- -------------- -------------- -------------- -- -- -- -- (188,917) (30,862) -------------- -------------- -------------- -------------- -------------- -------------- Net realized capital gains Class A shares........ -- (1,714,612) -- -- -- -- Class C shares........ -- (1,249,650) -- -- -- -- Class Y shares........ -- (1,869,317) -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- -- (4,833,579) -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares.......... 14,850,406 26,127,616 3,510,705 7,046,653 5,431,888 10,954,435 Cost of shares repurchased..... (11,150,220) (13,322,599) (865,765) (275,794) (674,600) (166,905) Shares issued in reinvestment of dividends....... -- 4,344,751 -- -- 97,282 16,785 -------------- -------------- -------------- -------------- -------------- -------------- Net increase in net assets derived from shares of beneficial interest transactions.... 3,700,186 17,149,768 2,644,940 6,770,859 4,854,570 10,804,315 -------------- -------------- -------------- -------------- -------------- -------------- Total increase/(decrease) in net assets... (18,719,045) 34,297,607 1,681,685 7,287,540 4,019,433 11,439,712 NET ASSETS Beginning of period.......... 75,235,131 40,937,524 7,287,540 -- 11,439,712 -- -------------- -------------- -------------- -------------- -------------- -------------- End of period**... $ 56,516,086 $ 75,235,131 $ 8,969,225 $ 7,287,540 $ 15,459,145 $ 11,439,712 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- INTERNATIONAL EQUITY PORTFOLIO ------------------------------- FOR THE SIX MONTHS FOR THE PERIOD ENDED DECEMBER 29, SEPTEMBER 30, 1997* 1998 THROUGH (UNAUDITED) MARCH 31, 1998 -------------- -------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss)... $ 8,587 $ 2,461 Net realized gain/(loss) on investments..... (202,910) (117,110) Net change in unrealized appreciation/ (depreciation) on investments..... (664,584) 958,548 -------------- -------------- Net increase/(decrease) in net assets resulting from operations...... (858,907) 843,899 -------------- -------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares........ -- -- Class B shares........ -- -- Class C shares........ -- -- Class Y shares........ -- -- -------------- -------------- -- -- -------------- -------------- Net realized capital gains Class A shares........ -- -- Class C shares........ -- -- Class Y shares........ -- -- -------------- -------------- -- -- -------------- -------------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares.......... 3,311,882 7,265,097 Cost of shares repurchased..... (783,968) (34,440) Shares issued in reinvestment of dividends....... -- -- -------------- -------------- Net increase in net assets derived from shares of beneficial interest transactions.... 2,527,914 7,230,657 -------------- -------------- Total increase/(decrease) in net assets... 1,669,007 8,074,556 NET ASSETS Beginning of period.......... 8,074,556 -- -------------- -------------- End of period**... $ 9,743,563 $ 8,074,556 -------------- -------------- -------------- --------------
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/(LOSS) ON INVESTMENT CAPITAL END OF OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD --------- ---------- ---------------- ---------- ------------- ------ S&P STARS PORTFOLIO CLASS A For the six months ended September 30, 1998 (unaudited).... $19.97 $(0.08) $(1.23) $ -- $ -- $18.66 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 six months ended September 30, 1998 (unaudited).... 19.86 (0.09) (1.26) -- -- 18.51 For the period January 5, 1998* through March 31, 1998...... 17.37 (0.04) 2.53 -- -- 19.86 CLASS C For the six months ended September 30, 1998 (unaudited).... 19.85 (0.13) (1.22) -- -- 18.50 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 six months ended September 30, 1998 (unaudited).... 20.11 (0.03) (1.24) -- -- 18.84 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 six months ended September 30, 1998 (unaudited).... 17.88 0.02 (3.04) -- -- 14.86 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 six months ended September 30, 1998 (unaudited).... 17.69 (0.02) (3.00) -- -- 14.67 For the period January 6, 1998* through March 31, 1998...... 15.72 0.01 1.96 -- -- 17.69 CLASS C For the six months ended September 30, 1998 (unaudited).... 17.68 (0.02) (3.00) -- -- 14.66 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 six months ended September 30, 1998 (unaudited).... 18.09 0.08 (3.09) -- -- 15.08 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 six months ended September 30, 1998 (unaudited).... 20.83 0.04 (2.50) -- -- 18.37 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 six months ended September 30, 1998 (unaudited).... 20.66 0.01 (2.50) -- -- 18.17 For the period January 28, 1998* through March 31, 1998...... 18.17 (0.01) 2.50 -- -- (6.80 CLASS C For the six months ended September 30, 1998 (unaudited).... 20.66 0.01 (2.50) -- -- 18.17 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 six months ended September 30, 1998 (unaudited).... 20.84 0.08 (2.49) -- -- 18.43 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 the 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 ASSETS, RATIO OF INVESTMENT INVESTMENT TOTAL END OF EXPENSES TO INCOME/(LOSS) INCOME/(LOSS) PORTFOLIO INVESTMENT PERIOD AVERAGE NET TO AVERAGE DUE TO WAIVERS AND TURNOVER RETURN(3) (000'S OMITTED) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS RATE ----------- --------------- ----------- ------------- ------------------- --------- S&P STARS PORTFOLIO CLASS A For the six months ended September 30, 1998 (unaudited).... (6.56)% $113,995 1.50%(5) (0.83)%(5) 0.25%(5) 57.05% For the fiscal year ended March 31, 1998................ 43.53 109,591 1.50(6) (0.83)(6) 0.38 172.78(7) For the fiscal year ended March 31, 1997................ 16.87 67,491 1.50(6) (0.59)(6) 0.70 220.00(7) For the period April 3, 1995* through March 31, 1996...... 27.68 45,049 1.50(5)(6) (0.01)(5)(6) 0.89(5) 295.97(7) CLASS B For the six months ended September 30, 1998 (unaudited).... (6.80) 15,420 2.00(5) (1.33)(5) 0.25(5) 57.05 For the period January 5, 1998* through March 31, 1998...... 14.34(4) 5,800 2.00(5) (1.47)(4)(5) 0.53(4)(5) 172.78(7) CLASS C For the six months ended September 30, 1998 (unaudited).... (6.80) 62,275 2.00(5) (1.33)(5) 0.25(5) 57.05 For the fiscal year ended March 31, 1998................ 42.80 63,330 2.00(6) (1.32)(6) 0.38 172.78(7) For the fiscal year ended March 31, 1997................ 16.33 37,622 2.00(6) (1.09)(6) 0.70 220.00(7) For the period April 3, 1995* through March 31, 1996...... 26.91 28,081 2.00(5)(6) (0.45)(5)(6) 0.92(5) 295.97(7) CLASS Y For the six months ended September 30, 1998 (unaudited).... (6.32) 34,387 1.00(5) (0.33)(6) 0.25(5) 57.05 For the fiscal year ended March 31, 1998................ 44.22 35,652 1.00(6) (0.32)(6) 0.38 172.78(7) For the fiscal year ended March 31, 1997................ 17.48 14,763 1.00(6) (0.10)(6) 0.70 220.00(7) For the period August 7, 1995* through March 31, 1996...... 9.09(4) 8,779 1.00(5)(6) 0.82(4)(5)(6) 0.99(4)(5) 295.97(7) THE INSIDERS SELECT FUND CLASS A For the six months ended September 30, 1998 (unaudited).... (16.89) 23,848 1.65(5) 0.27(5) 1.10(5) 40.37 For the fiscal year ended March 31, 1998................ 46.02 21,912 1.65 0.03 1.09 115.64 For the fiscal year ended March 31, 1997................ 18.31 13,860 1.65 0.11 1.82 128.42 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 CLASS B For the six months ended September 30, 1998 (unaudited).... (17.07) 7,029 2.15(5) (0.23)(5) 1.10(5) 40.37 For the period January 6, 1998* through March 31, 1998...... 12.53(4) 2,253 2.15(5) (0.95)(4)(5) 1.82(4)(5) 115.64 CLASS C For the six months ended September 30, 1998 (unaudited).... (17.08) 12,232 2.15(5) (0.23)(5) 1.10(5) 40.37 For the fiscal year ended March 31, 1998................ 45.17 12,297 2.15 (0.46) 1.10 115.64 For the fiscal year ended March 31, 1997................ 17.69 9,519 2.15 (0.38) 1.81 128.42 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 CLASS Y For the six months ended September 30, 1998 (unaudited).... (16.64) 974 1.15(5) 0.77(5) 1.10(5) 40.37 For the fiscal year ended March 31, 1998................ 46.68 1,265 1.15 0.55 1.07 115.64 For the fiscal year ended March 31, 1997................ 18.81 1,557 1.15 0.60 1.81 128.42 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 LARGE CAP VALUE PORTFOLIO CLASS A For the six months ended September 30, 1998 (unaudited).... (11.81) 9,069 1.50(5) 0.57(5) 1.39(5) 14.49 For the fiscal year ended March 31, 1998................ 44.59 8,358 1.50 0.32 1.73 61.75 For the fiscal year ended March 31, 1997................ 15.44 4,987 1.50 0.43 1.58 136.67 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 CLASS B For the six months ended September 30, 1998 (unaudited).... (12.05) 1,406 2.00(5) 0.07(5) 1.39(5) 14.49 For the period January 28, 1998* through March 31, 1998...... 13.70(4) 446 2.00(5) (0.73)(4)(5) 1.05(4)(5) 61.75 CLASS C For the six months ended September 30, 1998 (unaudited).... (12.05) 5,180 2.00(5) 0.07(5) 1.39(5) 14.49 For the fiscal year ended March 31, 1998................ 43.94 4,987 2.00 (0.19) 1.73 61.75 For the fiscal year ended March 31, 1997................ 14.87 2,986 2.00 (0.08) 1.61 136.67 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 CLASS Y For the six months ended September 30, 1998 (unaudited).... (11.56) 5,152 1.00(5) 1.07(5) 1.39(5) 14.49 For the fiscal year ended March 31, 1998................ 45.27 7,263 1.00 0.83 1.76 61.75 For the fiscal year ended March 31, 1997................ 16.04 6,109 1.00 1.00 1.50 136.67 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
- ---------- (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 a class of shares are not necessarily comparable to those of any other outstanding class of shares, due to timing differences in the commencement of the intial public offerings. (5) Annualized. (6) Includes S&P STARS' share of S&P STARS Master Series' expenses for the period prior to June 25, 1997. (7) Portfolio turnover rate is related to S&P STARS Master Series for the period prior to June 25, 1997. 41 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/(LOSS) ON INVESTMENT CAPITAL END OF OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD --------- ---------- ---------------- ---------- ------------- ------ SMALL CAP VALUE PORTFOLIO CLASS A For the six months ended September 30, 1998 (unaudited).... $23.65 $(0.07) $(6.68) $ -- $ -- $16.90 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 six months ended September 30, 1998 (unaudited).... 23.48 (0.08) (6.65) -- -- 16.75 For the period January 21, 1998* through March 31, 1998...... 19.95 -- 3.53 -- -- 23.48 CLASS C For the six months ended September 30, 1998 (unaudited).... 23.48 (0.13) (6.61) -- -- 16.74 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 six months ended September 30, 1998 (unaudited).... 23.65 (0.02) (6.68) -- -- 16.95 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 six months ended September 30, 1998 (unaudited).... 13.40 (0.02) (1.30) -- -- 12.08 For the period December 29, 1997* through March 31, 1998................ 12.00 (0.01) 1.41 -- -- 13.40 CLASS B For the six months ended September 30, 1998 (unaudited).... 13.38 (0.05) (1.30) -- -- 12.03 For the period December 29, 1997* through March 31, 1998................ 12.00 (0.01) 1.39 -- -- 13.38 CLASS C For the six months ended September 30, 1998 (unaudited).... 13.38 (0.05) (1.30) -- -- 12.03 For the period December 29, 1997* through March 31, 1998................ 12.00 (0.01) 1.39 -- -- 13.38 BALANCED PORTFOLIO CLASS A For the six months ended September 30, 1998 (unaudited).... 12.93 0.17 (0.69) (0.16) -- 12.25 For the period December 29, 1997* through March 31, 1998................ 12.00 0.06 0.91 (0.04) -- 12.93 CLASS B For the six months ended September 30, 1998 (unaudited).... 12.92 0.14 (0.69) (0.15) -- 12.22 For the period December 29, 1997* through March 31, 1998................ 12.00 0.05 0.90 (0.03) -- 12.92 CLASS C For the six months ended September 30, 1998 (unaudited).... 12.92 0.14 (0.69) (0.15) -- 12.22 For the period December 29, 1997* through March 31, 1998................ 12.00 0.05 0.90 (0.03) -- 12.92 CLASS Y For the six months ended September 30, 1998 (unaudited).... 12.95 0.18 (0.68) (0.17) -- 12.28 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 six months ended September 30, 1998 (unaudited).... 13.77 0.02 (0.84) -- -- 12.95 For the period December 29, 1997* through March 31, 1998................ 12.00 0.01 1.76 -- -- 13.77 CLASS B For the six months ended September 30, 1998 (unaudited).... 13.75 -- (0.85) -- -- 12.90 For the period December 29, 1997* through March 31, 1998................ 12.00 -- 1.75 -- -- 13.75 CLASS C For the six months ended September 30, 1998 (unaudited).... 13.75 -- (0.85) -- -- 12.90 For the period December 29, 1997* through March 31, 1998................ 12.00 -- 1.75 -- -- 13.75
- ---------- * Commencement of operations. ** Calculated based on the 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. 42
INCREASE/(DECREASE) REFLECTED IN EXPENSE RATIOS AND NET RATIO OF NET NET ASSETS, RATIO OF INVESTMENT INVESTMENT TOTAL END OF EXPENSES TO INCOME/(LOSS) INCOME/(LOSS) PORTFOLIO INVESTMENT PERIOD AVERAGE NET TO AVERAGE DUE TO WAIVERS AND TURNOVER RETURN(3) (000'S OMITTED) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS RATE ----------- --------------- ----------- ------------- ------------------- --------- SMALL CAP VALUE PORTFOLIO CLASS A For the six months ended September 30, 1998 (unaudited).... (28.54)% $18,253 1.50%(5) (0.65)%(5) 0.57%(5) 38.72% For the fiscal year ended March 31, 1998................ 46.86 25,111 1.50 (0.71) 0.76 90.39 For the fiscal year ended March 31, 1997................ 11.71 13,143 1.50 (0.81) 1.00 56.88 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 CLASS B For the six months ended September 30, 1998 (unaudited).... (28.66) 2,087 2.00(5) (1.15)(5) 0.57(5) 38.72 For the period January 21, 1998* through March 31, 1998...... 17.69(4) 901 2.00(5) (1.49)(4)(5) 1.31(4)(5) 90.39 CLASS C For the six months ended September 30, 1998 (unaudited).... (28.71) 12,989 2.00(5) (1.15)(5) 0.57(5) 38.72 For the fiscal year ended March 31, 1998................ 46.10 18,082 2.00 (1.21) 0.76 90.39 For the fiscal year ended March 31, 1997................ 11.12 11,071 2.00 (1.31) 0.99 56.88 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 CLASS Y For the six months ended September 30, 1998 (unaudited).... (28.33) 23,186 1.00(5) (0.15)(5) 0.57(5) 38.72 For the fiscal year ended March 31, 1998................ 47.54 31,141 1.00 (0.21) 0.77 90.39 For the fiscal year ended March 31, 1997................ 12.19 16,724 1.00 (0.31) 1.00 56.88 For the period June 22, 1995* through March 31, 1996...... 23.52(4) 8,989 1.00(5) -- 2.45(4)(5) 40.79 FOCUS LIST PORTFOLIO CLASS A For the six months ended September 30, 1998 (unaudited).... (9.85) 4,164 1.41(5) (0.37)(5) 2.60(5) 47.59 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 CLASS B For the six months ended September 30, 1998 (unaudited).... (10.09) 2,858 1.91(5) (0.86)(5) 2.60(5) 47.59 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 CLASS C For the six months ended September 30, 1998 (unaudited).... (10.09) 1,947 1.91(5) (0.86)(5) 2.60(5) 47.59 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 BALANCED PORTFOLIO CLASS A For the six months ended September 30, 1998 (unaudited).... (4.09) 4,736 1.20(5) 2.67(5) 2.08(5) 22.34 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 CLASS B For the six months ended September 30, 1998 (unaudited).... (4.32) 1,322 1.70(5) 2.17(5) 2.08(5) 22.34 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 CLASS C For the six months ended September 30, 1998 (unaudited).... (4.32) 888 1.70(5) 2.17(5) 2.08(5) 22.34 For the period December 29, 1997* through March 31, 1998................ 7.92 858 1.70(5) 1.95(5) 3.33(5) 12.72 CLASS Y For the six months ended September 30, 1998 (unaudited).... (3.89) 8,514 0.70(5) 3.17(5) 2.08(5) 22.34 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 INTERNATIONAL EQUITY PORTFOLIO CLASS A For the six months ended September 30, 1998 (unaudited).... (5.95) 5,006 1.75(5) 0.43(5) 2.48(5) 53.38 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 CLASS B For the six months ended September 30, 1998 (unaudited).... (6.18) 2,443 2.25(5) (0.07)(5) 2.48(5) 53.38 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 CLASS C For the six months ended September 30, 1998 (unaudited).... (6.18) 2,294 2.25(5) (0.07)(5) 2.48(5) 53.38 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
- ---------- (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 a class of shares are not necessarily comparable to those of any other outstanding class of shares, due to timing differences in the commencement of the intial public offerings. (5) Annualized. 43 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 -- (UNAUDITED) 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, Income Portfolio and Prime Money Market Portfolio and three non-diversified portfolios, S&P STARS Portfolio ("S&P STARS"), The 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. 44 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. Any securities or other assets for which recent market quotations are not readily available are valued at fair value as determined in good faith by the Fund's Board of Trustees. 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 Portfolios' 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 transactions except for those listed below. 45 Option activity for the six months ended September 30, 1998 was as follows:
S&P STARS ---------------------------------------------- CALL OPTIONS PUT OPTIONS ----------------------- --------------------- CONTRACTS PREMIUMS CONTRACTS PREMIUMS --------- ----------- --------- --------- Outstanding at beginning of period....................... -- -- -- -- Options written............... 5,600 $ 2,371,262 -- -- Options purchased............. -- -- 3,500 $1,217,695 Options closed or expired..... (5,600) (2,371,262) (3,500) (1,217,695) --------- ----------- --------- --------- Outstanding at end of period....................... -- -- -- -- --------- ----------- --------- --------- --------- ----------- --------- ---------
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 a 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 a 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 the 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 a Portfolio owns. None of the Portfolios had open short sales at September 30, 1998. SECURITIES LENDING -- Loans of securities are required at all times to be secured by collateral at least equal to 102% of the market value of the securities on loan. However, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. In the event that the borrower fails to return securities, and cash collateral being maintained by the borrower is insufficient to cover the value of loaned securities and provided such collateral insufficiency is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Portfolios. At September 30, 1998, none of the Portfolios had securities on loan. During the six months ended September 30, 1998, income from securities lending was $33,569 for S&P STARS. Such income from securities lending is included under the caption INTEREST in the Statement of Operations. 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 the Statement of 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/(losses) 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 -- A Portfolio may enter into forward 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 the Portfolio as an unrealized gain or loss. When the contract is closed, the Portfolio records a realized gain or 46 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 the 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. None of the Portfolios had open forward currency contracts at September 30, 1998. 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. 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 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 For the six months ended September 30, 1998, Bear Stearns Asset Management Inc. ("BSAM" or the "Adviser"), 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. 47 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 increased the total advisory fee by $15,854 or .07% of the value of Insider's average daily net assets due to greater performance in comparison to the S&P 500 Composite Index for the four months ended January 31, 1998 and to the S&P MidCap 400 Index for the eight months ended September 30, 1998. 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. During the six months ended September 30, 1998, Marvin & Palmer did not earn a fee since the Portfolio's net assets were below $25 million. For the six months ended September 30, 1998, Bear Stearns Funds Management Inc. ("BSFM" or the "Administrator") served as administrator to each Portfolio pursuant to an Administration 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 of $150,000 for each Portfolio. During the six months ended September 30, 1998, PFPC has voluntarily waived a portion of its fee in all Portfolios except S&P STARS. For the six months ended September 30, 1998, BSAM voluntarily undertook to limit each Portfolio's total operating expenses 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 six months ended September 30, 1998, the investment advisory fee waivers and reimbursements of expenses (in order to maintain the voluntary expense limitation) were as follows:
PORTFOLIO ADVISORY FEE WAIVERS EXPENSE REIMBURSEMENTS - ------------------------------ -------------------- ---------------------- S&P STARS..................... $293,532 $ -- Insiders Select............... 220,242 24,548 Large Cap..................... 82,066 69,289 Small Cap..................... 202,924 -- Focus List.................... 28,434 83,476 Balanced...................... 46,577 102,090 International Equity.......... 50,589 74,665
48 For the six months ended September 30, 1998, Bear Stearns, an affiliate of the Adviser and the Administrator, earned approximately $291,555, $8,006, $1,134, $2,400, $14,244, and $3,090 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 and Small Cap 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 and Small Cap paid Bear Stearns at an annual rate of 0.25% for Class A shares and 0.75% for Class C shares. S&P STARS, Insiders Select, Large Cap and Small Cap paid Bear Stearns at an annual rate of 0.75% for Class B shares. With respect to the Portfolio's Class A shares, up to 0.25% will compensate institutions for personal service and maintenance of accounts holding such shares. The Fund, on behalf of Class B shares of the Portfolios has adopted a Shareholder Servicing Plan whereby the Portfolios are paid fees of up to 0.25%. The Fund, on behalf of Class A, B and C shares of Focus List, 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, Focus List, Balanced and International Equity has paid Bear Stearns a fee at an annual rate of 0.25% for Class A shares and 0.75% for Class B and C shares, respectively. The Fund, on behalf of Class A, B and C shares of Focus List, Balanced and International Equity, has adopted a Shareholder Servicing Plan (the "Shareholder Servicing Plan"). Under the Shareholder Servicing Plan, Focus List, 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 six months ended September 30, 1998, 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..................... $438,079 $243,919 Insiders Select............... 101,904 54,302 Large Cap..................... 35,796 19,545 Small Cap..................... 100,323 53,382 Focus List.................... 23,103 10,937 Balanced...................... 12,950 7,718 International Equity.......... 25,440 12,647
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. 49 For the six months ended September 30, 1998, 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 sales charges to dealers who in turn paid commissions to sales persons) and contingent deferred sales charges ("CDSC") upon certain redemptions by Class B and C shareholders, respectively. The amounts were as follows:
FRONT-END SALES CHARGES CDSC CDSC PORTFOLIO CLASS A SHARES CLASS B SHARES CLASS C SHARES - ------------------------------ ----------------------- ----------------------- -------------- S&P STARS..................... $ 706,643 $ 13,119 $14,201 Insiders Select............... 329,194 21,053 5,018 Large Cap..................... 51,740 931 906 Small Cap..................... 102,092 5,252 3,103 Focus List.................... 52,148 9,211 113 Balanced...................... 25,932 54 -- International Equity.......... 61,780 4,122 371
INVESTMENTS IN SECURITIES For U.S. federal income tax purposes, the cost of securities owned, gross appreciation, gross depreciation and net unrealized appreciation/(depreciation) of investments at September 30, 1998 for each Portfolio were as follows:
NET GROSS GROSS APPRECIATION/ PORTFOLIO COST APPRECIATION DEPRECIATION (DEPRECIATION) - ------------------------- ------------- ----------- --------------- ------------ S&P STARS................ $ 209,523,036 $35,155,363 $ (20,598,177) $14,557,186 Insiders Select.......... 44,980,639 2,700,189 (4,292,858) (1,592,669 ) Large Cap................ 18,175,968 3,541,732 (921,611) 2,620,121 Small Cap................ 56,421,822 5,926,643 (8,027,605) (2,100,962 ) Focus List............... 9,141,775 911,768 (930,565) (18,797 ) Balanced................. 15,762,219 591,495 (854,630) (263,135 ) International Equity..... 9,789,048 763,114 (474,941) 288,173
For the six months ended September 30, 1998, aggregate purchases and sales of investment securities (excluding short-term securities) for each Portfolio were as follows:
PORTFOLIO PURCHASES SALES - ------------------------------ ------------ ------------ S&P STARS..................... $152,924,246 $126,865,868 Insiders Select............... 28,121,596 15,377,501 Large Cap..................... 5,494,003 2,989,239 Small Cap..................... 25,220,337 26,945,604 Focus List.................... 6,234,317 3,875,395 Balanced...................... 7,680,619 3,096,421 International Equity.......... 7,467,432 4,818,828
SHARES OF BENEFICIAL INTEREST Each Portfolio offers Class A, B, C and Y shares. Class A shares are sold with a front-end sales charge of up to 5.50% for each Portfolio. Class B shares are sold with a CDSC of up to 5.00% within six years of purchase. 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. 50 At September 30, 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 56,331 International Equity.......... 138,890 138,890 138,890
Transactions in each Portfolio's shares of beneficial interest were as follows:
S&P STARS INSIDERS SELECT ---------------------------------------- --------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ----------- ------------ ------------- ---------- ----------- ------------- CLASS A FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares.................................. 2,152,078 1,533,032 -- 628,076 248,891 -- Value................................... $43,546,382 $30,621,486 -- $10,925,492 $4,272,471 -- 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 CLASS B FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares.................................. 561,884 20,770 -- 387,245 35,608 -- Value................................... $11,375,186 $ 417,072 -- $6,633,919 $ 592,429 -- FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................. 292,094 -- -- 127,400 -- -- Value................................... $ 5,301,891 -- -- $2,149,181 -- -- CLASS C FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares.................................. 511,545 336,538 -- 221,617 82,859 -- Value................................... $10,396,487 $ 6,726,585 -- $3,847,548 $1,361,585 -- 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 CLASS Y FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares.................................. 272,460 220,373 -- 1,730 7,059 -- Value................................... $ 5,592,495 $ 4,503,145 -- $ 31,484 $ 124,400 -- 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
51
LARGE CAP SMALL CAP --------------------------------------- ---------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ----------- ----------- ------------- ----------- ----------- ------------- CLASS A FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares................................... 147,354 54,845 -- 359,182 340,835 -- Value.................................... $ 3,030,141 $1,150,185 -- $ 7,275,732 $6,500,749 -- 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 CLASS B FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares................................... 56,715 960 -- 93,660 7,404 -- Value.................................... $ 1,149,708 $ 18,628 -- $ 1,956,855 $ 120,966 -- FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................... 21,870 264 -- 38,387 -- -- Value.................................... $ 441,820 $ 5,391 -- $ 830,356 -- -- CLASS C FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares................................... 57,144 13,508 -- 92,490 86,607 -- Value.................................... $ 1,169,415 $ 279,815 -- $ 2,070,862 $1,765,364 -- 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 CLASS Y FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares................................... 21,893 90,757 -- 194,705 142,957 -- Value.................................... $ 440,190 $1,892,825 -- $ 3,546,957 $2,763,141 -- 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
52
FOCUS LIST* BALANCED* --------------------------------------- ---------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ---------- ----------- ------------- ---------- ----------- -------------- CLASS A FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares.................................. 145,639 39,843 -- 129,745 42,888 1,910 Value................................... $1,900,907 $518,318 -- $1,643,946 $558,071 $24,024 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................. 261,602 22,694 -- 297,413 167 577 Value................................... $3,226,172 $257,794 -- $3,630,397 $ 1,965 $ 1,404 CLASS B FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares.................................. 83,673 25,254 -- 26,982 82 452 Value................................... $1,112,500 $324,975 -- $ 342,188 $ 1,072 $ 5,669 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................. 179,256 -- -- 80,740 -- 53 Value................................... $2,256,277 -- -- $ 977,533 -- $ 682 CLASS C FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares.................................. 37,469 1,776 -- 5,430 -- 803 Value................................... $ 497,298 $ 22,472 -- $ 70,333 -- $10,079 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................. 126,077 -- -- 66,284 -- 142 Value................................... $1,564,204 -- -- $ 800,467 -- $ 1,819 CLASS Y FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares.................................. -- -- -- 258,591 8,863 4,562 Value................................... -- -- -- $3,375,421 $115,457 $57,510 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................. -- -- -- 451,987 13,445 536 Value................................... -- -- -- $5,546,038 $164,940 $ 6,880
INTERNATIONAL EQUITY* --------------------------------------- SALES REPURCHASES REINVESTMENTS ---------- ----------- ------------- CLASS A FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares.................................. 155,779 42,667 -- Value................................... $2,329,811 $ 608,969 -- FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................. 273,821 291 -- Value................................... $3,433,979 $ 3,918 -- CLASS B FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares.................................. 40,124 6,166 -- Value................................... $ 600,925 $ 82,440 -- FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................. 155,378 -- -- Value................................... $1,882,062 -- -- CLASS C FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 Shares.................................. 25,915 6,150 -- Value................................... $ 381,146 $ 92,559 -- FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................. 160,283 2,269 -- Value................................... $1,949,056 $ 30,522 --
- ------- * Commenced operations on December 29, 1997. 53 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 in an amount 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 six months ended September 30, 1998, were as follows:
MAXIMUM LOAN PORTFOLIO AVERAGE LOAN BALANCE AMOUNTS OUTSTANDING AVERAGE INTEREST RATE - ------------------------------ -------------------- ------------------- --------------------- S&P STARS..................... $113,804 $2,354,700 7.46% Insiders Select............... 4,823 259,300 8.62 Large Cap..................... 2,275 66,300 8.62 Small Cap..................... 1,093 50,000 8.62 Focus List.................... 10,520 641,700 7.03 Balanced...................... 273 50,000 8.62 International Equity.......... 1,109 203,000 8.62
The Portfolios had no amounts outstanding under the line of credit agreement at September 30, 1998. 54 -----END PRIVACY-ENHANCED MESSAGE-----