-----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, MCqr+E3ofsSHPsTZO0ecv2l0S71nJyrkLPMkkz0yuJMacS9CZtv39wByXRcx3yZm cqSRRFuvI7MXUIJ98j3ZFg== 0001047469-03-019995.txt : 20030529 0001047469-03-019995.hdr.sgml : 20030529 20030529101944 ACCESSION NUMBER: 0001047469-03-019995 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030529 EFFECTIVENESS DATE: 20030529 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEAR STEARNS FUNDS CENTRAL INDEX KEY: 0000931145 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-08798 FILM NUMBER: 03722599 BUSINESS ADDRESS: STREET 1: 383 MADISON AVENUE STREET 2: 23RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10179 BUSINESS PHONE: (212) 272-9027 MAIL ADDRESS: STREET 1: 383 MADISON AVENUE STREET 2: 23RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10179 N-CSR 1 a2109578zn-csr.txt N-CSR ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: November 30, 2005 Estimated average burden hours per response....... 5.0 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-8798 ---------------------------------------------- The Bear Stearns Funds - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 383 Madison Avenue, New York, NY 10179 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Stephen A. Bornstein, Esq. 383 Madison Ave, New York, NY - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-272-2553 ----------------------------- Date of fiscal year end: March 31, 2003 ------------------------------------------- Date of reporting period: April 1, 2002 through March 31, 2003 ------------------------------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. Include a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1). THE BEAR STEARNS FUNDS FIXED INCOME FUNDS Income Portfolio High Yield Total Return Portfolio ANNUAL REPORT MARCH 31, 2003 [BEAR STEARNS LOGO] BSF-R-016-12 THE BEAR STEARNS FUNDS Income Portfolio High Yield Total Return Portfolio LETTER TO SHAREHOLDERS April 30, 2003 Dear Shareholders: We are pleased to present the annual report to shareholders for the Income Portfolio and High Yield Total Return Portfolio ("High Yield Portfolio") for the fiscal year ended March 31, 2003. Detailed performance data for each class of shares of each Portfolio can be found in the "Financial Highlights" and line graph sections of this report. INCOME PORTFOLIO The fiscal year was exceptionally challenging for both equity and fixed income investors. As the year began, a series of large-scale corporate accounting scandals, rising geopolitical risk and news of a slowing U.S. economy drove investors out of both equities and corporate bonds and into Treasuries, causing Treasury yields to fall across the entire maturity spectrum. Yield spreads on the bonds of even high quality corporations with solid accounting practices widened dramatically as investors sought to avoid credit risk. In order to better reflect our focus on the intermediate range of the maturity spectrum, the Income Portfolio's benchmark was changed effective April 2002 to the Lehman Intermediate Government/Credit Index. For the fiscal year, the Income Portfolio underperformed the benchmark, largely due to our allocation to the high yield sector during the first seven months of the year. High yield is typically the hardest-hit sector of the fixed income market during times of heightened uncertainty. The growing number of corporate governance scandals and successive chain of earnings disappointments caused price depreciation and widening spreads in high yield securities. During the fall of 2002, high yield spreads reached their widest levels over Treasuries since 1990. In October of 2002, the fixed income markets experienced a course reversal as investors, believing that many corporate issues had been oversold, began to bid up prices. Corporate bonds rebounded strongly, while Treasuries underperformed. In this rally, the lowest-rated securities experienced the best performance. The new year saw a continuation of this trend, with lower-quality credits outperforming once again as investors sought yield. The high yield sector performed strongly: default rates declined, credit profiles continued to improve, and the sector benefited greatly from asset class rotation. The Income Portfolio outperformed the benchmark in the most recent quarter, largely due to our allocations to investment grade and high yield corporate bonds. Both sectors began the quarter with attractive valuations: yield spreads over Treasuries were at recession-like levels, and were priced with an expectation for negative GDP growth going forward. As the quarter progressed, demand for both sectors increased as it became apparent that GDP growth would remain positive. In addition, because Treasury yields had been driven so low, there was an increase in demand for higher-yielding sectors. As a result, corporate bonds outperformed all other sectors of the fixed income market as investors sought higher returns than Treasuries and the equity markets were likely to offer. Our decision to position the Income Portfolio defensively with respect to our mortgage-backed holdings also contributed positively to performance during the year. We pursued this strategy by allocating less money to the sector, and by focusing on securities with lower coupons, as well as on well-structured collateralized mortgage obligations. Within the mortgage-backed sector, durations became very short due to the high level of mortgage refinancings taking place. Mortgage refinancing activity reached a record high during the year as homeowners sought to take advantage of lower interest rates. This strategy helped insulate the Income Portfolio from record levels of prepayment activity. In the months ahead, we expect the economy to continue to grow at a slow but steady pace. For the fixed income markets, we see room for the corporate sector to outperform, driven more by higher income than by further spread tightening. 1 For the Income Portfolio, we plan to maintain an underweighted position in mortgage-backed securities, with a focus on areas that are least vulnerable to an increase in interest rates. When interest rates begin to rise again, the average duration of mortgage-backed securities will lengthen dramatically as refinancing activity drops off, leading to the potential for significant underperformance. We intend to continue to overweight the corporate sector, which should benefit from a growing economy, as well as asset-backed securities, which are not subject to prepayment uncertainty. HIGH YIELD TOTAL RETURN PORTFOLIO* Fiscal year 2003 was a mixed year. Economic recovery was slow, there were several cases of corporate governance issues, and geopolitical tensions came to a head. The Federal Reserve tried to resuscitate the economy by reducing the already low Federal Funds rate by 50 basis points to an historical low of 1.25%. Against this backdrop, the high yield market had a fairly positive year. The first half of the fiscal year was marked by defaults, downgrades, and general volatility in the broader capital markets. The latter half of the year saw more positive signs for the high yield market, including declining default rates, stronger supply/demand momentum, and improved signs in economic indicators. While investors were cognizant of corporate malfeasance for most of the year, high yield investors were still able to reap positive returns. The transportation, telecommunications, and utilities sectors were the worst performing sectors for the fiscal year. The utilities sector suffered throughout the year, as news of accounting issues and, subsequently, defaults compounded poor fundamentals, weakening the entire sector. We avoided the sector for most of the year, adding small positions at the end of the fiscal year as fundamentals began to turn around. Similarly, we avoided the transportation sector, which was negatively impacted by waning traveler interest stemming from the events of September 11th and consumer spending. As a result of our being underweighted in these sectors, the High Yield Portfolio outperformed against the greater market. Our conservative investment philosophy also led to the avoidance of corporate defaults during the year. We were overweighted in defensive sectors with attractive fundamentals, and generally avoided lower-quality companies in volatile sectors. As a result, the High Yield Portfolio outperformed both the Lehman High Yield Index benchmark and the Lipper High Yield Bond Fund Index. Throughout the year, we were overweighted in higher-quality securities in the technology, healthcare, energy, cable, and gaming & lodging sectors. Technology posted the strongest returns during the year for both the High Yield Portfolio and the overall high yield market. Our overweight in technology was rooted in our conservative focus on investments in better capitalized companies with strong liquidity. As market and economic conditions began to show signs of improvement in the fall of 2002, the sector improved and ended the fiscal year as the top performing sector. The healthcare sector was another strong sector for the High Yield Portfolio during the year. We increased our exposure to the diagnostic imaging sub-sector, which traded at a premium for most of the year based on strong and stable operating fundamentals. We continue to have positive sentiments on the imaging sector based on healthy growth prospects, compelling operating margins, and the aforementioned operating fundamentals. One of the most trying features of the high yield market for most of the year was the amount of defaults brought on primarily by corporate governance issues. Several large companies admitted to various forms of improprieties, leading to a strong deterioration in investor confidence that has yet to dissipate. In May and June 2002, a staggering $68.4 billion of investment grade companies were downgraded into the high yield market. As corporate governance issues and defaults continued to surface for the remainder of the year, regulatory and legislative bodies responded with guidelines that set forth criminal penalties for such activity. On July 30, 2002, President Bush signed the Sarbanes-Oxley Act, broadening the SEC's powers and plugging some of the agency's regulatory holes. The first and most major milestone under the Act was an August 14, 2002 deadline for senior management to certify financial statements. While the High Yield Portfolio had limited exposure to companies with corporate governance issues, the associated anxiety caused many investors to remain uneasy. Looking ahead, we believe the focus will shift from the conflict in Iraq to macro data points, which could intimate signs of an economic turnaround now that most of the war uncertainties have dissolved with the end of the heavy warfare in Iraq. In addition, the high yield market continues to be a compelling asset class for many investors, based on strong 2 supply/demand factors, low default rates, attractive spreads, and its portfolio diversification benefits. As economic improvement unfolds, high yield issuers will likely benefit as increased capital spending and end-market demand drives top-line revenue growth, creating a stronger credit environment that will allow companies to fund future growth and pursue acquisition strategies. We also note that many companies have successfully implemented cost savings and productivity initiatives that have and will likely continue to translate into earnings improvements. In the months ahead, we will maintain our conservative investment philosophy, with a focus on higher quality names in favored sectors until we see evidence of improvement in the economy. 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/ Doni L. Fordyce Doni L. Fordyce President and Trustee The Bear Stearns Funds - ------------ * Investing in high yield debt securities generally involves greater risks than investing in more highly rated debt securities such as the risk of greater price fluctuation and the possible loss of principal and income. Performance results do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. On the accompanying line charts and total return tables found on pages 4 and 5, the returns of each Portfolio assumes reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. 3 BEAR STEARNS FUNDS Income Portfolio COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(5) VS. VARIOUS INDICES [CHART]
LEHMAN INTERMEDIATE SALOMON SMITH BARNEY BROAD LIPPER A RATED CLASS A SHARES CLASS C SHARES GOVERNMENT/CREDIT INDEX INVESTMENT GRADE BOND INDEX BOND FUND INDEX 5-Apr-95 $9,550 $10,000 $10,000 $10,000 $10,000 30-Sep-95 $10,145 $10,602 $10,628 $10,771 $10,884 31-Mar-96 $10,365 $10,811 $10,909 $11,042 $11,114 30-Sep-96 $10,575 $11,009 $11,173 $11,303 $11,346 31-Mar-97 $10,822 $11,244 $11,433 $11,584 $11,625 30-Sep-97 $11,572 $11,998 $12,088 $12,400 $12,500 31-Mar-98 $11,841 $12,243 $12,539 $12,971 $13,035 30-Sep-98 $12,504 $12,887 $13,350 $13,822 $13,776 31-Mar-99 $12,525 $12,858 $13,364 $13,814 $13,692 30-Sep-99 $12,432 $12,720 $13,433 $13,785 $13,546 31-Mar-00 $12,623 $12,887 $13,642 $14,064 $13,812 30-Sep-00 $13,109 $13,340 $14,273 $14,739 $14,333 31-Mar-01 $13,971 $14,170 $15,302 $15,832 $15,374 30-Sep-01 $14,593 $14,750 $16,113 $16,664 $16,040 31-Mar-02 $14,514 $14,619 $16,091 $16,678 $16,038 30-Sep-02 $15,482 $15,543 $17,418 $18,060 $17,182 31-Mar-03 $15,973 $15,984 $17,979 $18,607 $17,721
Past performance is not predictive of future performance.
- ------------------------------------------------------------------------------------------------- TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003 ---------------------------------------------- 5-YEAR SINCE INCEPTION ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7) -------- -------------- ----------------- Income Portfolio(2) Class A shares(5) ......................... 5.08% 5.19% 6.02% Class B shares(4) ......................... 4.34 5.15 5.14 Class C shares(6) ......................... 8.34 5.48 6.04 Class Y shares(3) ......................... 10.35 6.50 6.61 Lehman Intermediate Government/Credit Index(1).. 11.74 7.47 7.62 Salomon Smith Barney Broad Investment Grade Bond Index(1) ............................... 11.56 7.48 8.08 Lipper A Rated Bond Fund Index(1) .............. 10.50 6.34 7.41 - -------------------------------------------------------------------------------------------------
- ------------ (1) The chart assumes a hypothetical $10,000 initial investment in the Income Portfolio and reflects all portfolio expenses. Investors should note that the Income Portfolio is a professionally managed mutual fund while the indices are unmanaged, do not incur sales charges or expenses and are not available for investment. Performance of the indices corresponds to the performance of Class A and C shares. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to reimburse a portion of the Income 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; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The returns of Class Y shares (for which September 8, 1995, was the initial public offering date) are higher than Class A, B and C shares due to the fact that there is no sales load, contingent deferred sales charge or 12b-1 fee charged to Class Y shares. (4) Assuming no redemption of shares at the end of the period, the returns of Class B shares (for which February 2, 1998, was the initial public offering date) would have been higher than Class A shares and would have been substantially the same as Class C shares if operations were commenced on the same day. The higher return is due to the fact that there is no initial sales charge on Class B shares. Total returns reflect the applicable contingent deferred sales charge. Without the applicable sales charge, the total returns would have been 9.34%, 5.48% and 5.29%, respectively, for each period shown. (5) Reflects the initial maximum sales charge of 4.50%. Without the applicable sales charge, the total returns would have been 10.05%, 6.16% and 6.64%, respectively, for each period shown. (6) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total return for the one year ended March 31, 2003 would have been 9.34%. (7) Inception dates: Class A and C shares commenced on April 5, 1995, Class B shares commenced on February 2, 1998 and Class Y shares commenced on September 8, 1995. 4 THE BEAR STEARNS FUNDS High Yield Total Return Portfolio COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A, B AND C SHARES(1)(2)(4)(5) VS. VARIOUS INDICES [CHART]
CREDIT SUISSE FIRST BOSTON HIGH YIELD INDEX, LIPPER HIGH YIELD CLASS A SHARES CLASS B SHARES CLASS C SHARES LEHMAN HIGH YIELD INDEX DEVELOPED COUNTRIES ONLY BOND FUND INDEX 2-Jan-98 $9,550 $10,000 $10,000 $10,000 $10,000 $10,000 31-Mar-98 $10,338 $10,809 $10,809 $10,336 $10,301 $10,440 30-Sep-98 $9,778 $10,188 $10,188 $9,974 $9,790 $9,688 31-Mar-99 $10,176 $10,568 $10,568 $10,375 $10,216 $10,312 30-Sep-99 $9,929 $10,275 $10,275 $10,263 $10,114 $10,196 31-Mar-00 $9,702 $10,006 $10,006 $10,187 $10,075 $10,311 30-Sep-00 $9,613 $9,885 $9,885 $10,362 $10,188 $10,189 31-Mar-01 $9,596 $9,834 $9,834 $10,443 $10,160 $9,776 30-Sep-01 $9,242 $9,439 $9,439 $9,773 $9,670 $8,888 31-Mar-02 $9,999 $10,179 $10,179 $10,511 $10,504 $9,394 30-Sep-02 $9,643 $9,798 $9,798 $9,548 $9,967 $8,604 31-Mar-03 $10,517 $10,584 $10,639 $10,968 $11,306 $9,693
Past performance is not predictive of future performance.
- ---------------------------------------------------------------------------------------------------- TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003 ---------------------------------------------- 5-YEAR SINCE INCEPTION ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7) -------- -------------- ----------------- High Yield Total Return Portfolio(2) Class A shares(4) ..................... 0.49% (0.60)% 0.94% Class B shares(5) ..................... (0.22) (0.56) 1.08 Class C shares(6) ..................... 3.53 (0.33) 1.18 Class Y shares(3) ..................... 5.69 N/A 6.22 Lehman High Yield Index(1) ................. 4.34 1.19 1.77 Credit Suisse First Boston High Yield Index, Developed Countries Only(1) ............. 7.62 1.88 2.36 Lipper High Yield Bond Fund Index(1) ....... 3.18 (1.47) (0.59) - ----------------------------------------------------------------------------------------------------
- ------------ (1) The chart assumes a hypothetical $10,000 initial investment in the High Yield Portfolio and reflects all portfolio expenses. Investors should note that the High Yield Portfolio is a professionally managed mutual fund while the indices are unmanaged, do not incur sales charges or expenses and are not available for investment. The Credit Suisse First Boston High Yield Index, Developed Countries Only, was created on January 1, 1999. Prior to January 1, 1999, the Credit Suisse First Boston High Yield Index was used. The total returns and values for the Credit Suisse First Boston High Yield Index, Developed Countries Only is a blend of the two indices. Performance of the indices corresponds to the performance of Class A, B and C shares. (2) Bear Stearns Asset Management Inc. waived a portion of its advisory fee and agreed to reimburse a portion of the High Yield 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; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The returns of Class Y shares (for which July 11, 2001 was the initial public offering date) are higher than Class A, B and C shares due to the fact that there is no sales load, contingent deferred sales charge or 12b-1 fee charged to Class Y shares. (4) Reflects the initial maximum sales charge of 4.50%. Without the applicable sales charge, the total returns would have been 5.18%, 0.32% and 1.84%, respectively, for each period shown. (5) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total returns would have been 4.63%, (0.30)% and 1.21%, respectively, for each period shown. (6) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total return for the one year ended March 31, 2003 would have been 4.50%. (7) Inception dates: Class A, B and C shares commenced on January 2, 1998 and Class Y shares commenced on July 11, 2001. 5 THE BEAR STEARNS FUNDS Income Portfolio MARCH 31, 2003 (UNAUDITED) ================================================================================ TOP TEN INDUSTRY/SECTOR WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY/SECTOR NET ASSETS ---- ---------------------------------------------------------- ---------- 1. Mortgage-Backed Securities - Pass-Through ................ 20.06 2. U.S. Government Agency Obligations ....................... 14.11 3. Mortgage-Backed Securities - Structured .................. 11.55 4. U.S. Government Obligations .............................. 7.98 5. Asset-Backed Securities .................................. 6.47 6. Bank Holding Companies ................................... 4.70 7. Crude Petroleum & Natural Gas ............................ 3.14 8. Motion Picture & Video Production ........................ 2.46 9. Personal Credit Institutions ............................. 2.37 10. Grocery Stores ........................................... 1.89 ============================================================================================================
TOP TEN HOLDINGS*
- ------------------------------------------------------------------------------------------------------------ PERCENT OF RANK HOLDINGS INDUSTRY/SECTOR NET ASSETS - ---- ---------------------------------------------- ------------------------------------- ---------- 1. Fannie Mae ................................... Mortgage-Backed Securities 14.75 2. Freddie Mac .................................. Mortgage-Backed Securities 9.80 3. U.S. Treasuries .............................. U.S. Government Obligations 7.98 4. Fannie Mae ................................... U.S. Government Agency Obligations 7.06 5. Freddie Mac .................................. U.S. Government Agency Obligations 4.42 6. Federal Home Loan Bank ....................... U.S. Government Agency Obligations 2.63 7. Americredit Automobile Receivables Trust ..... Asset-Backed Securities 1.61 8. AOL Time Warner, Inc. ........................ Motion Picture & Video Production 1.29 9. Nomura Asset Capital Corp. ................... Mortgage-Backed Securities 1.24 10. Comm 2000-C1 ................................. Mortgage-Backed Securities 1.18
- ------------ * Top ten holdings are provided for informational purposes only and should not be deemed as a recommendation to purchase or sell the securities mentioned. The portfolio is actively managed, therefore holdings may not be current. Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may seek to perform investment banking services for the companies listed. 6 THE BEAR STEARNS FUNDS High Yield Total Return Portfolio MARCH 31, 2003 (UNAUDITED) ================================================================================ TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS ---- ---------------------------------------------------------- ---------- 1. Health Care .............................................. 8.95 2. Hotels/Motels/Casinos .................................... 8.45 3. Electronic Components .................................... 7.61 4. Oil & Gas ................................................ 6.72 5. Building/Development ..................................... 5.67 6. Retailers ................................................ 4.88 7. Publishing ............................................... 4.36 8. Radio/Television ......................................... 3.55 9. Leisure .................................................. 3.37 10. Ecological Services/Equipment ............................ 3.34 =======================================================================================================
TOP TEN HOLDINGS*
- ------------------------------------------------------------------------------------------------------- PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS ---- ---------------------------------------------------- ----------------------------- ---------- 1. Ameristar Casinos, Inc. ............................ Hotels/Motels/Casinos 1.98 2. William Carter Co. (The) ........................... Clothing/Textiles 1.83 3. Nextel Communications, Inc. ........................ Wireless Telecommunications 1.70 4. ALARIS Medical, Inc. ............................... Health Care 1.68 5. DIRECTV Holdings/Finance ........................... Cable Television 1.68 6. Simmons Co. ........................................ Home Furnishings 1.64 7. Amkor Technology, Inc. ............................. Electronic Components 1.63 8. R.H. Donnelley Finance Corp. I ..................... Publishing 1.59 9. United Rentals (N.A.), Inc. ........................ Equipment Leasing 1.58 10. Dex Media East LLC & Dex Media East Finance, Inc. .. Publishing 1.54
- ------------- * Top ten holdings are provided for informational purposes only and should not be deemed as a recommendation to purchase or sell the securities mentioned. The portfolio is actively managed, therefore holdings may not be current. Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may seek to perform investment banking services for the companies listed. 7 THE BEAR STEARNS FUNDS Income Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS -- 102.51% ASSET-BACKED SECURITIES - 6.47% $1,300 Americredit Automobile Receivables Trust, Series 2002-EM, Class A3A .................................................. 2.970% 03/06/07 $ 1,329,647 900 CIT Group Home Equity Loan Trust, Series 2002-1, Class AF4 ... 5.970 03/25/29 951,240 250 Citibank Credit Card Master Trust, Series A .................. 5.950 10/07/04 255,171 555 Fannie Mae, Whole Loan, Series 2002-W2, Class AF3 ............ 5.127 02/25/30 575,656 755 Mitsubishi Motors Credit of America, Inc., Automobile Trust, Series 2002-2, Class A3 .................................... 3.670 07/17/06 773,261 675 Triad Auto Receivables Owner Trust, Series 2002-A, Class A4 .. 3.240 08/12/09 692,083 750 WFS Financial Inc., Owner Trust, Series 2002-3, Class A3 ..... 2.760 02/20/07 762,665 ----------- Total Asset-Backed Securities (cost - $5,270,446)............. 5,339,723 ----------- CORPORATE OBLIGATIONS - 42.34% AEROSPACE & DEFENSE - 0.39% 300 K&F Industries, Inc., Unsecured Senior Subordinated Notes, Series B ................................................... 9.625 12/15/10 319,500 ----------- AIR TRANSPORTATION - 0.32% 250 Southwest Airlines Co., Unsecured Notes ...................... 6.500 03/01/12 265,670 ----------- AUTOMOTIVE - 0.30% 250 TRW Automotive Inc., Senior Notes* ........................... 9.375 02/15/13 251,250 ----------- BANK HOLDING COMPANIES - 4.70% 775 Bank of America Corp., Unsecured Senior Notes ................ 4.875 01/15/13 790,316 800 Bank One Corp., Notes ........................................ 6.000 08/01/08 894,011 750 National City Corp., Notes ................................... 3.200 04/01/08 746,304 750 SunTrust Banks, Inc., Unsecured Senior Notes ................. 6.250 06/01/08 860,661 350 Washington Mutual Capital I, Subordinated Capital Income Securities, Company Guaranteed ............................. 8.375 06/01/27 397,688 175 Wells Fargo Financial, Inc., Senior Notes .................... 6.750 06/01/05 193,375 ----------- 3,882,355 ----------- BOTTLED & CANNED SOFT DRINKS - 1.01% 800 Coca-Cola Enterprises, Inc., Unsecured Unsubordinated Notes .. 4.375 09/15/09 831,781 ----------- BUILDING/DEVELOPMENT - 0.37% 300 iStar Financial Inc., Senior Notes ........................... 7.000 03/15/08 305,613 ----------- BUSINESS SERVICES - 1.04% 800 Cendant Corp., Unsecured Notes ............................... 6.875 08/15/06 858,326 ----------- CABLE TELEVISION - 1.03% 500 Comcast Corp., Unsecured Senior Notes, Company Guaranteed .... 5.850 01/15/10 518,854 300 DIRECTV Holdings/Finance, Senior Notes* ...................... 8.375 03/15/13 332,250 ----------- 851,104 -----------
The accompanying notes are an integral part of the financial statements. 8 THE BEAR STEARNS FUNDS Income Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) CEREAL BREAKFAST FOODS - 0.90% $ 675 General Mills, Inc., Notes ................................... 6.000% 02/15/12 $ 741,840 ----------- COMPUTER INTEGRATED SYSTEMS DESIGN - 0.48% 350 Computer Sciences Corp., Unsecured Notes ..................... 7.375 - 7.500 08/08/05 - 06/15/11 396,234 ----------- CONTAINERS - METAL/GLASS - 0.38% 300 Owens-Brockway Glass Container Inc., Secured Notes* .......... 8.750 11/15/12 310,125 ----------- CRUDE PETROLEUM & NATURAL GAS - 3.14% 745 Apache Corp., Unsecured Senior Notes ......................... 6.250 04/15/12 845,324 700 BP Amoco plc, Notes .......................................... 5.900 04/15/09 785,033 700 Conoco Funding, Co., Notes, Company Guaranteed ............... 5.450 10/15/06 762,948 200 Forest Oil Corp., Unsecured Senior Notes, Company Guaranteed . 7.750 05/01/14 202,000 ----------- 2,595,305 ----------- DEPARTMENT STORES - 1.37% 300 JC Penney Co., Inc., Notes ................................... 8.000 03/01/10 312,000 750 Target Corp., Notes .......................................... 5.875 03/01/12 815,993 ----------- 1,127,993 ----------- ECOLOGICAL SERVICES/EQUIPMENT - 0.32% 250 Allied Waste North America, Inc., Senior Subordinated Notes, Series B, Company Guaranteed ............................... 8.500 12/01/08 264,063 ----------- ELECTRIC & ELECTRONIC EQUIPMENT - 0.43% 350 General Electric Co., Notes .................................. 5.000 02/01/13 358,623 ----------- ELECTRONIC COMPONENTS - 0.34% 250 Fairchild Semiconductor International, Inc., Unsecured Senior Subordinated Notes ......................................... 10.500 02/01/09 281,250 ----------- EQUIPMENT LEASING - 0.32% 250 United Rentals (N.A.), Inc., Unsecured Senior Notes, Company Guaranteed* ........................................ 10.750 04/15/08 260,000 ----------- FINANCE SERVICES - 0.90% 661 Unilever Capital Corp., Unsecured Senior Unsubordinated Notes, Company Guaranteed ......................................... 6.875 11/01/05 739,428 ----------- FIRE, MARINE & CASUALTY INSURANCE - 0.88% 650 Allstate Corp., Unsecured Senior Notes ....................... 7.875 05/01/05 726,575 ----------- FOOD & KINDRED PRODUCTS - 0.73% 600 Kraft Foods, Inc., Notes ..................................... 5.625 11/01/11 603,211 ----------- FOOD SERVICES - 0.33% 250 YUM! Brands, Inc., Unsecured Senior Notes .................... 7.700 07/01/12 271,250 -----------
The accompanying notes are an integral part of the financial statements. 9 THE BEAR STEARNS FUNDS Income Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) GAS TRANSMISSION & DISTRIBUTION - 0.85% $ 650 Consolidated Natural Gas Co., Unsecured Senior Unsubordinated Notes, Series B ............................................ 5.375% 11/01/06 $ 703,698 ----------- GENERAL INDUSTRIAL MACHINERY - 0.40% 350 Tyco International Group S.A., Unsecured Yankee Bonds, Company Guaranteed (1) ............................................. 6.125 11/01/08 330,750 ----------- GENERAL MERCHANDISE STORES - 1.15% 800 Wal-Mart Stores, Inc., Unsecured Senior Notes ................ 6.875 08/10/09 946,818 ----------- GROCERY STORES - 1.89% 800 Kroger Co. (The), Unsecured Senior Notes ..................... 7.650 04/15/07 906,322 630 Safeway, Inc., Unsecured Senior Notes ........................ 4.800 07/16/07 654,067 ----------- 1,560,389 ----------- HEALTH CARE - 0.31% 250 Tenet Healthcare Corp., Notes ................................ 7.375 02/01/13 252,500 ----------- INDUSTRIAL EQUIPMENT - 0.32% 250 SPX Corp., Unsecured Senior Notes ............................ 7.500 01/01/13 266,875 ----------- INSURANCE - 0.77% 625 Marsh & McLennan Cos., Inc., Bonds ........................... 4.850 02/15/13 635,634 ----------- LEISURE - 0.26% 250 Bally Total Fitness Holding Corp., Unsecured Senior Subordinated Notes, Series D ............................... 9.875 10/15/07 216,250 ----------- MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS - 1.71% 600 CIT Group, Inc., Notes ....................................... 6.500 02/07/06 639,848 700 National Rural Utilities Cooperative Finance Corp., Collateral Trust Senior Bonds .............................. 6.000 05/15/06 767,230 ----------- 1,407,078 ----------- MOTION PICTURE & VIDEO PRODUCTION - 2.46% 200 AOL Time Warner, Inc., Unsecured Bonds, Company Guaranteed ... 7.700 05/01/32 214,972 800 AOL Time Warner, Inc., Unsecured Notes, Company Guaranteed ... 6.150 05/01/07 849,225 800 Viacom, Inc., Unsecured Senior Notes, Company Guaranteed ..... 7.700 07/30/10 966,072 ----------- 2,030,269 ----------- MOTOR VEHICLES & CAR BODIES - 0.58% 475 DaimlerChrysler N.A. Holdings, Notes ......................... 4.750 01/15/08 482,174 ----------- NATURAL GAS DISTRIBUTION - 0.95% 700 Keyspan Corp., Unsecured Senior Notes ........................ 7.250 11/15/05 786,150 -----------
The accompanying notes are an integral part of the financial statements. 10 THE BEAR STEARNS FUNDS Income Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) NON-FERROUS METALS - 0.31% $ 250 Peabody Energy Corp., Senior Notes* .......................... 6.875% 03/15/13 $ 254,375 ----------- OIL & GAS - 0.68% 300 Denbury Resources Inc., Senior Subordinated Notes* ........... 7.500 04/01/13 301,500 250 Swift Energy Co., Unsecured Senior Subordinated Notes ........ 10.250 08/01/09 262,500 ----------- 564,000 ----------- PAPER COATED & LAMINATED PACKAGING - 0.87% 650 International Paper Co., Notes ............................... 7.000 08/15/06 716,395 ----------- PERSONAL CREDIT INSTITUTIONS - 2.37% 400 Ford Motor Credit Co., Notes ................................. 7.875 06/15/10 382,967 650 General Electric Capital Corp., Medium Term Notes, Series A .. 6.500 12/10/07 738,018 750 Household Financial Corp., Unsecured Senior Notes ............ 6.500 11/15/08 835,054 ----------- 1,956,039 ----------- PETROLEUM REFINING - 0.86% 700 ChevronTexaco Capital Co., Notes ............................. 3.375 02/15/08 709,885 ----------- PHARMACEUTICAL PREPARATIONS - 1.25% 200 Bristol-Myers Squibb Co., Notes .............................. 4.750 10/01/06 212,015 800 Wyeth, Notes ................................................. 5.250 03/15/13 819,525 ----------- 1,031,540 ----------- PUBLISHING - 0.76% 300 Dex Media East LLC & Dex Media East Finance, Inc., Senior Notes* .............................................. 9.875 11/15/09 339,750 250 R.H. Donnelly Finance Corp. I, Senior Subordinated Notes* .... 10.875 12/15/12 286,875 ----------- 626,625 ----------- PULP MILLS - 0.77% 600 Weyerhaeuser Co., Unsecured Notes ............................ 5.500 03/15/05 631,873 ----------- SECURITY BROKERS & DEALERS - 0.72% 550 Goldman Sachs Group, Inc., Unsecured Senior Notes ............ 5.700 - 6.600 01/15/12 - 09/01/12 593,427 ----------- TELEPHONE COMMUNICATIONS - 1.67% 515 AT&T Wireless Services, Inc., Unsecured Senior Notes ......... 7.875 03/01/11 577,036 600 GTE Northwest, Inc., Unsecured Debentures, Series D .......... 5.550 10/15/08 647,793 150 Southern New England Telephone Co., Medium Term Notes, Series C ................................................... 6.125 12/15/03 155,093 ----------- 1,379,922 ----------- UTILITIES HOLDING COMPANY - 0.75% 600 NiSource Finance Corp., Unsecured Senior Notes, Company Guaranteed ......................................... 7.500 11/15/03 619,868 ----------- Total Corporate Obligations (cost - 33,825,250) .............. 34,944,030 -----------
The accompanying notes are an integral part of the financial statements. 11 THE BEAR STEARNS FUNDS Income Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) MORTGAGE-BACKED SECURITIES - 31.61% PASS-THROUGH - 20.06% $ 872 Comm 2000-C1, Commercial Mortgage Pass-Through Certificates, Class A1 ..................................... 7.206% 08/15/33 $ 969,904 7,965 Fannie Mae, Pass-through Pools ............................... 6.000 04/01/16 - 08/01/17 8,339,228 475 Fannie Mae, TBA .............................................. 5.000 04/01/18 487,914 6,000 Freddie Mac, TBA ............................................. 6.000 04/01/33 6,215,627 541 Lehman Brothers Commercial Conduit Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 1998-C1, Class A1 ................................... 6.330 02/18/30 544,250 ----------- 16,556,923 ----------- STRUCTURED - 11.55% 675 Fannie Mae, Series 2001-68, Class PM ......................... 5.000 12/25/24 688,239 1,000 Fannie Mae, Series 2002-93, Class TB ......................... 4.500 02/25/18 1,035,610 689 Fannie Mae, Series 2003-13, Class PG ......................... 5.000 11/25/32 711,955 875 Fannie Mae, Series 2003-16, Class PA ......................... 4.500 11/25/09 909,719 1,000 Freddie Mac, Series 2545, Class HT ........................... 4.500 04/15/18 1,033,438 818 Freddie Mac, Series 2580, Class QJ ........................... 4.000 03/15/18 839,450 875 Government National Mortgage Association, Series 2003-19, Class CA ................................................... 4.500 01/16/24 902,363 675 JP Morgan Commercial Mortgage Finance Corp., Series 1998-C6, Class A2 ................................... 6.533 01/15/30 736,193 475 Lehman Large Loan, Series 1997-LL1, Class A3 ................. 6.900 03/12/07 533,890 900 Nomura Asset Capital Corp., Series 1998-D6, Class A1B ........ 6.590 03/15/30 1,022,449 607 PNC Mortgage Acceptance Corp., Series 2000-C1, Class A1 ...... 7.520 07/15/08 685,060 426 Washington Mutual, Collateralized Mortgage Obligation, Series 2002-S7, Class 4A7 .................................. 6.000 11/25/32 429,760 ----------- 9,528,126 ----------- Total Mortgage-Backed Securities (cost - $25,915,643) ........ 26,085,049 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 14.11% FANNIE MAE - 7.06% 5,320 Unsecured Notes .............................................. 5.250 - 5.625 05/14/04 - 11/15/11 5,823,671 ----------- FEDERAL HOME LOAN BANK - 2.63% 2,125 Unsecured Bonds, Series 7Y07 ................................. 3.500 11/15/07 2,173,752 ----------- FREDDIE MAC - 4.42% 3,550 Unsecured Reference Notes (2) ................................ 3.875 - 5.000 01/15/04 - 09/13/07 3,647,070 ----------- Total U.S. Government Agency Obligations (cost - $11,500,135) 11,644,493 ----------- U.S. GOVERNMENT OBLIGATIONS - 7.98% U.S. TREASURIES - 7.98% 6,070 Notes (cost - $6,507,199) .................................... 3.250 - 5.75 011/15/05 - 02/15/11 6,586,130 ----------- Total Long-Term Debt Investments (cost - $83,018,673) ....................................... 84,599,425 -----------
The accompanying notes are an integral part of the financial statements. 12 THE BEAR STEARNS FUNDS Income Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ----------------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 7.51% U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 7.51% $6,198 Fannie Mae, Discount Notes (2) (cost - $6,197,573) ........... 1.091% 04/14/03 $ 6,197,573 ----------- Total Investments -- 110.02% (cost - $89,216,246) ............ 90,796,998 Liabilities in excess of other assets -- (10.02)% ............ (8,269,557) ----------- Net Assets -- 100.00% ........................................ $82,527,441 ===========
- --------- * SEC Rule 144A security. Such securities are traded only among qualified institutional buyers. (1) Domiciled in Luxembourg. (2) All or a portion of which was segregated as collateral for TBA securities. TBA To Be Announced. The accompanying notes are an integral part of the financial statements. 13 THE BEAR STEARNS FUNDS High Yield Total Return Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS -- 93.85% UNITED STATES - 91.89% AEROSPACE & DEFENSE - 2.01% $1,000 K&F Industries, Inc., Unsecured Senior Subordinated Notes, Series B ...... 9.625% 12/15/10 $ 1,065,000 2,750 TransDigm Inc., Unsecured Senior Subordinated Notes, Company Guaranteed .. 10.375 12/01/08 2,908,125 ----------- 3,973,125 ----------- AUTOMOTIVE - 2.67% 1,500 Collins & Aikman Products Co., Unsecured Senior Notes, Company Guaranteed 10.750 12/31/11 1,456,200 1,800 Stoneridge, Inc., Unsecured Senior Notes, Company Guaranteed ............. 11.500 05/01/12 1,836,000 2,000 TRW Automotive Inc., Senior Notes* ....................................... 9.375 02/15/13 2,010,000 ----------- 5,302,200 ----------- BUILDING/DEVELOPMENT - 5.67% 2,250 Corrections Corp. of America, Unsecured Senior Notes, Company Guaranteed . 9.875 05/01/09 2,435,625 1,000 iStar Financial Inc., Senior Notes ....................................... 7.000 03/15/08 1,018,710 2,000 KB HOME, Senior Subordinated Notes ....................................... 7.750 02/01/10 2,050,000 1,250 Meritage Corp., Unsecured Senior Notes, Company Guaranteed ............... 9.750 06/01/11 1,325,000 2,250 Schuler Homes, Inc., Unsecured Senior Notes, Company Guaranteed .......... 9.000 04/15/08 2,356,875 2,000 WCI Communities, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed ............................................................ 10.625 02/15/11 2,050,000 ----------- 11,236,210 ----------- BUSINESS EQUIPMENT/SERVICES - 1.98% 2,000 Buhrmann US, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed 12.250 11/01/09 1,850,000 2,000 Moore North American Finance, Senior Notes* .............................. 7.875 01/15/11 2,080,000 ----------- 3,930,000 ----------- CABLE TELEVISION - 3.21% 3,000 DIRECTV Holdings/Finance, Senior Notes* .................................. 8.375 03/15/13 3,322,500 2,750 EchoStar DBS Corp., Senior Notes ......................................... 10.375 10/01/07 3,038,750 ----------- 6,361,250 ----------- CHEMICALS/PLASTICS - 2.02% 1,500 Berry Plastics Corp., Unsecured Senior Subordinated Notes, Company Guaranteed ............................................................ 10.750 07/15/12 1,590,000 2,250 Huntsman International LLC, Unsecured Senior Notes, Company Guaranteed ... 9.875 03/01/09 2,407,500 ----------- 3,997,500 ----------- CLOTHING/TEXTILES - 1.83% 3,250 William Carter Co. (The), Unsecured Senior Subordinated Notes, Series B, Company Guaranteed .................................................... 10.875 08/15/11 3,631,875 -----------
The accompanying notes are an integral part of the financial statements. 14 THE BEAR STEARNS FUNDS High Yield Total Return Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) CONTAINERS - METAL/GLASS - 2.77% $2,750 BWAY Corp., Senior Subordinated Notes* .................................... 10.000% 10/15/10 $ 2,901,250 2,500 Owens-Brockway Glass Container Inc., Secured Notes* ....................... 8.750 11/15/12 2,584,375 ----------- 5,485,625 ----------- ECOLOGICAL SERVICES/EQUIPMENT - 3.34% 2,750 Allied Waste North America, Inc., Senior Subordinated Notes, Series B, Company Guaranteed ..................................................... 8.500 12/01/08 2,904,688 1,250 Casella Waste Systems, Inc., Senior Subordinated Notes* ................... 9.750 02/01/13 1,337,500 2,050 Stericycle, Inc., Unsecured Senior Subordinated Notes, Series B, Company Guaranteed ............................................................. 12.375 11/15/09 2,388,250 ----------- 6,630,438 ----------- ELECTRONIC COMPONENTS - 7.61% 2,500 Amkor Technology, Inc., Unsecured Senior Notes ............................ 9.250 05/01/06 2,462,500 800 Amkor Technology, Inc., Unsecured Senior Subordinated Notes ............... 10.500 05/01/09 764,000 2,600 Fairchild Semiconductor International, Inc., Unsecured Senior Subordinated Notes .................................................................. 10.500 02/01/09 2,925,000 2,400 ON Semiconductor Corp., Secured Senior Notes* ............................. 12.000 03/15/10 2,544,000 2,750 Sanmina - SCI Corp., Secured Senior Notes* ................................ 10.375 01/15/10 2,983,750 2,250 Seagate Technology HDD Holdings, Unsecured Notes, Company Guaranteed ...... 8.000 05/15/09 2,368,125 1,000 Solectron Corp., Unsecured Senior Notes ................................... 9.625 02/15/09 1,050,000 ----------- 15,097,375 ----------- EQUIPMENT LEASING - 1.58% 1,750 United Rentals (N.A.), Inc., Unsecured Senior Notes, Company Guaranteed* .. 10.750 04/15/08 1,820,000 1,500 United Rentals (N.A.), Inc., Unsecured Senior Subordinated Notes, Series B, Company Guaranteed ..................................................... 9.250 01/15/09 1,312,500 ----------- 3,132,500 ----------- FOOD PRODUCTS - 1.63% 2,250 American Seafoods Group LLC and American Seafoods, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed ................................. 10.125 04/15/10 2,390,625 800 Dole Food Co., Inc., Senior Notes* ........................................ 8.875 03/15/11 836,000 ----------- 3,226,625 ----------- FOOD SERVICES - 3.21% 2,589 Carrols Corp., Unsecured Senior Subordinated Notes, Company Guaranteed .... 9.500 12/01/08 2,466,023 2,250 Friendly Ice Cream Corp., Unsecured Senior Notes, Company Guaranteed ...... 10.500 12/01/07 2,272,500 1,500 YUM! Brands, Inc., Unsecured Senior Notes ................................. 7.700 07/01/12 1,627,500 ----------- 6,366,023 ----------- FOREST PRODUCTS - 0.80% 1,500 Georgia-Pacific Corp., Unsecured Senior Notes* ............................ 9.375 02/01/13 1,590,000 -----------
The accompanying notes are an integral part of the financial statements. 15 THE BEAR STEARNS FUNDS High Yield Total Return Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) HEALTH CARE - 8.95% $3,250 ALARIS Medical, Inc., Senior Discount Notes (1) ......................... 11.175% 08/01/08 $ 3,331,250 2,750 Alliance Imaging, Inc., Unsecured Senior Subordinated Notes ............. 10.375 04/15/11 2,640,000 2,000 AmeriPath, Inc., Senior Subordinated Notes* ............................. 10.500 04/01/13 2,070,000 2,250 MedQuest, Inc., Unsecured Senior Subordinated Notes, Series B, Company Guaranteed ........................................................... 11.875 08/15/12 2,092,500 2,500 NDCHealth Corp., Unsecured Senior Subordinated Notes, Company Guaranteed* 10.500 12/01/12 2,631,250 2,250 PacifiCare Health Systems, Inc., Unsecured Senior Notes, Company Guaranteed ........................................................... 10.750 06/01/09 2,452,500 2,500 Tenet Healthcare Corp., Notes ........................................... 7.375 02/01/13 2,525,000 ----------- 17,742,500 ----------- HOME FURNISHINGS - 1.64% 3,000 Simmons Co., Unsecured Senior Subordinated Notes, Series B .............. 10.250 03/15/09 3,247,500 ----------- HOTELS/MOTELS/CASINOS - 8.45% 3,600 Ameristar Casinos, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed ........................................................... 10.750 02/15/09 3,924,000 2,000 Boyd Gaming Corp., Unsecured Senior Notes, Company Guaranteed ........... 9.250 08/01/09 2,200,000 2,550 Felcor Lodging L.P., Unsecured Senior Notes, Company Guaranteed ......... 9.500 09/15/08 2,346,000 2,750 HMH Properties, Inc., Secured Senior Notes, Series B, Company Guaranteed 7.875 08/01/08 2,598,750 2,000 Mandalay Resort Group, Unsecured Senior Subordinated Notes .............. 9.375 02/15/10 2,105,000 2,000 Starwood Hotels & Resorts Worldwide, Inc., Notes* ....................... 8.375 05/01/12 2,002,500 1,500 Turning Stone Casino Resort Enterprise, Senior Notes* ................... 9.125 12/15/10 1,575,000 ----------- 16,751,250 ----------- INDUSTRIAL EQUIPMENT - 1.21% 2,250 SPX Corp., Unsecured Senior Notes ....................................... 7.500 01/01/13 2,401,875 ----------- LEISURE - 3.37% 3,250 Bally Total Fitness Holding Corp., Unsecured Senior Subordinated Notes, Series D ............................................................. 9.875 10/15/07 2,811,250 1,850 Intrawest Corp., Unsecured Senior Notes, Company Guaranteed ............. 10.500 02/01/10 1,993,375 1,750 Remington Arms Co., Inc., Unsecured Senior Notes, Company Guaranteed* ... 10.500 02/01/11 1,881,250 ----------- 6,685,875 ----------- NON-FERROUS METALS - 1.94% 1,900 Compass Minerals Group, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed ................................................... 10.000 08/15/11 2,109,000 1,700 Peabody Energy Corp., Senior Notes* ..................................... 6.875 03/15/13 1,729,750 ----------- 3,838,750 -----------
The accompanying notes are an integral part of the financial statements. 16 THE BEAR STEARNS FUNDS High Yield Total Return Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) OIL & GAS - 6.72% $2,825 Comstock Resources, Inc., Unsecured Senior Notes, Company Guaranteed .... 11.250% 05/01/07 $ 3,036,875 2,800 Denbury Resources Inc., Senior Subordinated Notes* ...................... 7.500 04/01/13 2,814,000 1,500 EL Paso Energy Partners, L.P., Senior Subordinated Notes* ............... 10.625 12/01/12 1,665,000 2,750 SESI, L.L.C., Unsecured Senior Notes, Company Guaranteed ................ 8.875 05/15/11 2,928,750 2,750 Swift Energy Co., Unsecured Senior Subordinated Notes ................... 10.250 08/01/09 2,887,500 ----------- 13,332,125 ----------- PUBLISHING - 4.36% 2,250 American Media, Inc., Senior Subordinated Notes* ........................ 8.875 01/15/11 2,441,250 2,700 Dex Media East LLC & Dex Media East Finance, Inc., Senior Notes* ........ 9.875 11/15/09 3,057,750 2,750 R.H. Donnelley Finance Corp. I, Senior Subordinated Notes* .............. 10.875 12/15/12 3,155,625 ----------- 8,654,625 ----------- RADIO/TELEVISION - 3.55% 2,300 Entravision Communications Corp., Unsecured Senior Subordinated Notes, Company Guaranteed ................................................... 8.125 03/15/09 2,374,750 2,250 LBI Media, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed* 10.125 07/15/12 2,393,438 2,250 Salem Communications Corp., Unsecured Senior Subordinated Notes, Company Guaranteed ........................................................... 7.750 12/15/10 2,272,500 ----------- 7,040,688 ----------- RETAILERS - 4.88% 2,500 CSK Auto Inc., Unsecured Senior Notes, Company Guaranteed ............... 12.000 06/15/06 2,725,000 2,750 Mothers Work, Inc., Unsecured Senior Notes, Company Guaranteed .......... 11.250 08/01/10 3,004,375 1,600 Rite Aid Corp., Secured Notes* .......................................... 9.500 02/15/11 1,664,000 2,300 Toys "R" Us, Inc., Unsecured Notes ...................................... 7.625 08/01/11 2,274,615 ----------- 9,667,990 ----------- STEEL - 1.60% 1,200 AK Steel Corp., Unsecured Senior Notes, Company Guaranteed .............. 7.750 06/15/12 1,104,000 2,000 Jorgensen, Earle M. Co., Secured Notes .................................. 9.750 06/01/12 2,070,000 ----------- 3,174,000 ----------- SURFACE TRANSPORTATION - 2.15% 2,265 Accuride Corp., Unsecured Senior Subordinated Notes, Series B ........... 9.250 02/01/08 1,704,413 2,500 General Maritime Corp., Senior Notes* ................................... 10.000 03/15/13 2,562,500 ----------- 4,266,913 ----------- UTILITIES - 1.04% 2,400 AES Corp. (The), Unsecured Senior Notes ................................. 9.500 06/01/09 2,070,000 -----------
The accompanying notes are an integral part of the financial statements. 17 THE BEAR STEARNS FUNDS High Yield Total Return Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) WIRELESS TELECOMMUNICATIONS - 1.70% $3,200 Nextel Communications, Inc., Unsecured Senior Serial Redeemable Notes .. 9.375% 11/15/09 $ 3,376,000 ------------ Total United States (cost - $174,873,096)** ............................ 182,210,837 ------------ CANADA - 1.23% CHEMICALS/PLASTICS - 1.23% 2,250 Acetex Corp., Unsecured Senior Notes (cost - $2,248,814) ............... 10.875 08/01/09 2,446,875 ------------ LUXEMBOURG - 0.73% CONGLOMERATES - 0.73% 1,500 Tyco International Group S.A., Unsecured Senior Yankee Notes, Company Guaranteed (cost - $1,321,680) .............................. 6.750 02/15/11 1,440,000 ------------ Total Long-Term Debt Investments (cost - $178,443,590) ............................................... 186,097,712 ------------ SHARES ------ EQUITY INVESTMENT -- 0.00% PREFERRED STOCK - UNITED STATES - 0.00% CLOTHING/TEXTILES - 0.00% 48 Cluett American Corp., Senior Exchangeable Preferred Stock, Series B (2) (cost - $451) ....................................................... 12.500 -- 972 ------------ SHORT-TERM INVESTMENT -- 3.35% INVESTMENT COMPANY - 3.35% 6,635,645 Federated Government Obligations Fund*** (cost - $6,635,645) ........... 1.160 -- 6,635,645 ------------ Total Investments -- 97.20% (cost - $185,079,686) ...................... 192,734,329 Other assets in excess of liabilities -- 2.80% ......................... 5,564,572 ------------ Net Assets -- 100.00% .................................................. $198,298,901 ============
- ---------- * SEC Rule 144A security. Such securities are traded only among qualified institutional buyers. ** Included in the cost is $8,750 relating to investments in 13 warrants of Imperial Credit Industry Corp. (expiring 01/31/08) and 250 warrants of Mpower Holding Corp. (expiring 10/01/04); with no market value, respectively. *** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2003. (1) Step-up bond; coupon rate is zero until step-up date. Step-up rate is provided. (2) Payment-in-kind; of which all or a portion of the coupon is being capitalized at periodic intervals. The accompanying notes are an integral part of the financial statements. 18 THE BEAR STEARNS FUNDS STATEMENTS OF ASSETS & LIABILITIES MARCH 31, 2003
HIGH YIELD INCOME TOTAL RETURN PORTFOLIO PORTFOLIO ----------- ------------ ASSETS Investments, at value (cost - $89,216,246 and $185,079,686, respectively) .......................... $90,796,998 $192,734,329 Interest and dividends receivable .................................................................. 852,153 4,284,077 Receivable for Portfolio shares sold ............................................................... 128,201 1,333,517 Receivable for investments sold .................................................................... 378,722 824,300 Receivable from investment adviser ................................................................. 8,438 -- Prepaid expenses ................................................................................... 35,224 39,617 ----------- ------------ Total assets .................................................................................. 92,199,736 199,215,840 ----------- ------------ LIABILITIES Payable for investments purchased .................................................................. 7,248,825 -- Loan payable ....................................................................................... 2,025,600 -- Dividends payable .................................................................................. 87,088 450,206 Distribution and service fees payable (Class A, B and C shares) .................................... 89,249 309,728 Payable for Portfolio shares repurchased ........................................................... 168,598 19,796 Advisory fee payable ............................................................................... -- 35,636 Administration fee payable ......................................................................... 10,445 24,721 Custodian fee payable .............................................................................. 1,452 2,274 Accrued expenses ................................................................................... 41,038 74,578 ----------- ------------ Total liabilities ............................................................................. 9,672,295 916,939 ----------- ------------ NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) ............... 6,605 24,468 Paid-in capital .................................................................................... 80,350,726 241,928,665 Undistributed net investment income/(loss) ......................................................... (26,251 34,123 Accumulated net realized gain/(loss) from investments .............................................. 615,609 (51,342,998) Net unrealized appreciation on investments ......................................................... 1,580,752 7,654,643 ----------- ------------ Net assets .................................................................................... $82,527,441 $198,298,901 =========== ============ CLASS A Net assets ......................................................................................... $23,593,709 $ 84,889,266 ----------- ------------ Shares of beneficial interest outstanding .......................................................... 1,887,948 10,475,851 ----------- ------------ Net asset value per share .......................................................................... $12.50 $8.10 ====== ===== Maximum offering price per share (net asset value plus sales charge of 4.50%* of the offering price) $13.09 $8.48 ====== ===== CLASS B Net assets ......................................................................................... $19,184,594 $ 43,853,256 ----------- ------------ Shares of beneficial interest outstanding .......................................................... 1,535,319 5,408,333 ----------- ------------ Net asset value and offering price per share** ..................................................... $12.50 $8.11 ====== ===== CLASS C Net assets ......................................................................................... $11,442,588 $ 46,263,385 ----------- ------------ Shares of beneficial interest outstanding .......................................................... 915,407 5,710,391 ----------- ------------ Net asset value and offering price per share** ..................................................... $12.50 $8.10 ====== ===== CLASS Y Net assets ......................................................................................... $28,306,550 $ 23,292,994 ----------- ------------ Shares of beneficial interest outstanding .......................................................... 2,265,958 2,873,493 ----------- ------------ Net asset value, offering and redemption price per share ........................................... $12.49 $8.11 ====== =====
- ---------- * 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. 19 THE BEAR STEARNS FUNDS STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 2003
HIGH YIELD INCOME TOTAL RETURN PORTFOLIO PORTFOLIO ---------- ----------- INVESTMENT INCOME Interest .......................................................... $2,650,243 $15,212,521 Dividends ......................................................... 9,194 38,742 ---------- ----------- 2,659,437 15,251,263 ---------- ----------- EXPENSES Advisory fees ..................................................... 272,794 994,928 Distribution and service fees - Class A ........................... 56,835 258,257 Distribution and service fees - Class B ........................... 141,527 356,052 Distribution and service fees - Class C ........................... 91,841 356,510 Transfer agent fees and expenses .................................. 153,746 189,266 Administration fees ............................................... 90,932 249,273 Legal and auditing fees ........................................... 58,502 69,499 Accounting fees ................................................... 30,001 68,114 Federal and state registration fees ............................... 44,794 48,048 Reports and notices to shareholders ............................... 14,100 37,697 Custodian fees and expenses ....................................... 16,688 24,525 Trustees' fees and expenses ....................................... 11,985 12,201 Insurance expenses ................................................ 6,851 6,846 Amortization of organization expenses ............................. -- 9,300 Other ............................................................. 3,313 6,477 ---------- ----------- Total expenses before waivers and related reimbursements ..... 993,909 2,686,993 Less: waivers and related reimbursements ..................... (430,892) (638,911) ---------- ----------- Total expenses after waivers and related reimbursements ...... 563,017 2,048,082 ---------- ----------- Net investment income ............................................. 2,096,420 13,203,181 ---------- ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from investments ......................... 1,239,185 (9,773,653) Net change in unrealized appreciation/(depreciation) on investments 2,049,098 5,790,271 ---------- ----------- Net realized and unrealized gain/(loss) on investments ............ 3,288,283 (3,983,382) ---------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................. $5,384,703 $ 9,219,799 ========== ===========
The accompanying notes are an integral part of the financial statements. 20 THE BEAR STEARNS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
INCOME PORTFOLIO --------------------------- FOR THE FISCAL YEARS ENDED MARCH 31, --------------------------- 2003 2002 ------------ ------------ INCREASE IN NET ASSETS FROM OPERATIONS Net investment income ............................................................ $ 2,096,420 $ 1,458,432 Net realized gain/(loss) from investments ........................................ 1,239,185 243,858 Net change in unrealized appreciation/(depreciation) on investments .............. 2,049,098 (826,015) ------------ ------------ Net increase in net assets resulting from operations ............................. 5,384,703 876,275 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares ................................................................. (621,839) (461,744) Class B shares ................................................................. (447,104) (282,636) Class C shares ................................................................. (293,523) (201,480) Class Y shares ................................................................. (881,676) (541,015) ------------ ------------ (2,244,142) (1,486,875) ------------ ------------ Net realized capital gains Class A shares ................................................................. (44,489) -- Class B shares ................................................................. (38,437) -- Class C shares ................................................................. (25,707) -- Class Y shares ................................................................. (61,911) -- ------------ ------------ (170,544) -- ------------ ------------ SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares ............................................. 67,589,024 27,437,838 Cost of shares repurchased ....................................................... (25,383,270) (17,244,182) Shares issued in reinvestment of dividends ....................................... 1,871,830 1,059,856 ------------ ------------ Net increase in net assets derived from shares of beneficial interest transactions 44,077,584 11,253,512 ------------ ------------ Total increase in net assets ..................................................... 47,047,601 10,642,912 NET ASSETS Beginning of year ................................................................ 35,479,840 24,836,928 ------------ ------------ End of year ...................................................................... $ 82,527,441 $ 35,479,840 ============ ============ HIGH YIELD TOTAL RETURN PORTFOLIO ----------------------------- FOR THE FISCAL YEARS ENDED MARCH 31, ----------------------------- 2003 2002 ------------ ------------ INCREASE IN NET ASSETS FROM OPERATIONS Net investment income ............................................................ $ 13,203,181 $ 10,597,794 Net realized gain/(loss) from investments ........................................ (9,773,653) (6,894,426) Net change in unrealized appreciation/(depreciation) on investments .............. 5,790,271 1,060,215 ------------ ------------ Net increase in net assets resulting from operations ............................. 9,219,799 4,763,583 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares ................................................................. (6,054,300) (5,984,172) Class B shares ................................................................. (2,692,060) (2,283,599) Class C shares ................................................................. (2,685,695) (1,887,284) Class Y shares ................................................................. (1,775,411) (466,355) ------------ ------------ (13,207,466) (10,621,410) ------------ ------------ Net realized capital gains Class A shares ................................................................. -- -- Class B shares ................................................................. -- -- Class C shares ................................................................. -- -- Class Y shares ................................................................. -- -- ------------ ------------ -- -- ------------ ------------ SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares ............................................. 102,263,758 70,670,903 Cost of shares repurchased ....................................................... (59,204,597) (37,702,374) Shares issued in reinvestment of dividends ....................................... 8,107,135 6,224,396 ------------ ------------ Net increase in net assets derived from shares of beneficial interest transactions 51,166,296 39,192,925 ------------ ------------ Total increase in net assets ..................................................... 47,178,629 33,335,098 NET ASSETS Beginning of year ................................................................ 151,120,272 117,785,174 ------------ ------------ End of year ...................................................................... $198,298,901* $151,120,272* ============ ============
- ------------- * Includes undistributed net investment income of $34,123 and $35,079, respectively. The accompanying notes are an integral part of the financial statements. 21 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 year indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
NET NET ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS VALUE, NET UNREALIZED FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED OF YEAR INCOME*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS ----------- ------------- ----------------- ----------- --------------- INCOME PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ............ $ 11.84 $ 0.44 $ 0.73 $ (0.48) $ (0.03) For the fiscal year ended March 31, 2002 ............ 11.99 0.60 (0.15) (0.60) -- For the fiscal year ended March 31, 2001 ............ 11.53 0.73 0.46 (0.73) -- For the fiscal year ended March 31, 2000 ............ 12.15 0.70 (0.62) (0.70) -- For the fiscal year ended March 31, 1999 ............ 12.37 0.74 (0.03) (0.74) (0.19) CLASS B For the fiscal year ended March 31, 2003 ............ 11.84 0.36 0.73 (0.40) (0.03) For the fiscal year ended March 31, 2002 ............ 11.99 0.52 (0.15) (0.52) -- For the fiscal year ended March 31, 2001 ............ 11.53 0.65 0.46 (0.65) -- For the fiscal year ended March 31, 2000 ............ 12.15 0.63 (0.62) (0.63) -- For the fiscal year ended March 31, 1999 ............ 12.37 0.65 (0.03) (0.65) (0.19) CLASS C For the fiscal year ended March 31, 2003 ............ 11.84 0.36 0.73 (0.40) (0.03) For the fiscal year ended March 31, 2002 ............ 11.99 0.52 (0.15) (0.52) -- For the fiscal year ended March 31, 2001 ............ 11.53 0.65 0.46 (0.65) -- For the fiscal year ended March 31, 2000 ............ 12.15 0.63 (0.62) (0.63) -- For the fiscal year ended March 31, 1999 ............ 12.37 0.65 (0.03) (0.65) (0.19) CLASS Y For the fiscal year ended March 31, 2003 ............ 11.84 0.48 0.72 (0.52) (0.03) For the fiscal year ended March 31, 2002 ............ 11.99 0.64 (0.15) (0.64) -- For the fiscal year ended March 31, 2001 ............ 11.53 0.77 0.46 (0.77) -- For the fiscal year ended March 31, 2000 ............ 12.15 0.74 (0.62) (0.74) -- For the fiscal year ended March 31, 1999 ............ 12.37 0.78 (0.03) (0.78) (0.19)
- ---------- * Calculated based on average settled shares outstanding during the respective years, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. (1) Reflects waivers and related reimbursements. (2) The amounts shown for a share outstanding throughout the respective years are not in accord with the changes in the aggregate gains and losses on investments during the respective years because of the timing of the sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective years. The accompanying notes are an integral part of the financial statements. 22
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF END OF INVESTMENT END OF YEAR EXPENSES TO YEAR RETURN(3) (000's omitted) AVERAGE NET ASSETS(1) --------- ------------ ----------------- --------------------- INCOME PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ............ $ 12.50 10.05% $23,594 0.80% For the fiscal year ended March 31, 2002 ............ 11.84 3.86 9,757 0.80 For the fiscal year ended March 31, 2001 ............ 11.99 10.68 8,316 0.80 For the fiscal year ended March 31, 2000 ............ 11.53 0.77 5,071 0.80 For the fiscal year ended March 31, 1999 ............ 12.15 5.77 4,775 0.80 CLASS B For the fiscal year ended March 31, 2003 ............ 12.50 9.34 19,185 1.45 For the fiscal year ended March 31, 2002 ............ 11.84 3.19 6,773 1.45 For the fiscal year ended March 31, 2001 ............ 11.99 9.96 4,861 1.45 For the fiscal year ended March 31, 2000 ............ 11.53 0.12 2,027 1.45 For the fiscal year ended March 31, 1999 ............ 12.15 5.09 1,121 1.45 CLASS C For the fiscal year ended March 31, 2003 ............ 12.50 9.34 11,443 1.45 For the fiscal year ended March 31, 2002 ............ 11.84 3.19 6,066 1.45 For the fiscal year ended March 31, 2001 ............ 11.99 9.96 3,339 1.45 For the fiscal year ended March 31, 2000 ............ 11.53 0.12 1,971 1.45 For the fiscal year ended March 31, 1999 ............ 12.15 5.08 2,067 1.45 CLASS Y For the fiscal year ended March 31, 2003 ............ 12.49 10.35 28,307 0.45 For the fiscal year ended March 31, 2002 ............ 11.84 4.22 12,884 0.45 For the fiscal year ended March 31, 2001 ............ 11.99 11.07 8,321 0.45 For the fiscal year ended March 31, 2000 ............ 11.53 1.13 4,763 0.45 For the fiscal year ended March 31, 1999 ............ 12.15 6.13 4,406 0.45 INCREASE/(DECREASE) REFLECTED IN RATIO OF EXPENSE AND NET NET INVESTMENT INVESTMENT INCOME RATIOS PORTFOLIO INCOME TO DUE TO WAIVERS AND TURNOVER AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE --------------------- ------------------------ --------- INCOME PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ............ 3.58% 0.71% 161.09% For the fiscal year ended March 31, 2002 ............ 4.99 1.45 240.84 For the fiscal year ended March 31, 2001 ............ 6.22 2.48 174.46 For the fiscal year ended March 31, 2000 ............ 5.99 3.13 158.47 For the fiscal year ended March 31, 1999 ............ 5.83 2.98 107.21 CLASS B For the fiscal year ended March 31, 2003 ............ 2.91 0.71 161.09 For the fiscal year ended March 31, 2002 ............ 4.27 1.45 240.84 For the fiscal year ended March 31, 2001 ............ 5.55 2.48 174.46 For the fiscal year ended March 31, 2000 ............ 5.34 3.13 158.47 For the fiscal year ended March 31, 1999 ............ 5.16 2.81 107.21 CLASS C For the fiscal year ended March 31, 2003 ............ 2.95 0.71 161.09 For the fiscal year ended March 31, 2002 ............ 4.27 1.45 240.84 For the fiscal year ended March 31, 2001 ............ 5.55 2.48 174.46 For the fiscal year ended March 31, 2000 ............ 5.33 3.13 158.47 For the fiscal year ended March 31, 1999 ............ 5.28 3.18 107.21 CLASS Y For the fiscal year ended March 31, 2003 ............ 3.94 0.71 161.09 For the fiscal year ended March 31, 2002 ............ 5.35 1.45 240.84 For the fiscal year ended March 31, 2001 ............ 6.52 2.48 174.46 For the fiscal year ended March 31, 2000 ............ 6.36 3.13 158.47 For the fiscal year ended March 31, 1999 ............ 6.27 3.23 107.21
- ---------- (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 year reported and includes reinvestment of dividends and distributions. 23 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 ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS VALUE, NET UNREALIZED FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED OF YEAR INCOME*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS ----------- ------------- ----------------- ----------- --------------- HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ............. $ 8.36 $ 0.66 $ (0.26) $ (0.66) -- For the fiscal year ended March 31, 2002 ............. 8.74 0.72 (0.38) (0.72) -- For the fiscal year ended March 31, 2001 ............. 9.78 0.94 (1.04) (0.94) -- For the fiscal year ended March 31, 2000 ............. 11.36 1.08 (1.58) (1.08) -- For the fiscal year ended March 31, 1999 ............. 12.73 1.11 (1.32) (1.11) $ (0.05) CLASS B For the fiscal year ended March 31, 2003 ............. 8.36 0.60 (0.24) (0.61) -- For the fiscal year ended March 31, 2002 ............. 8.74 0.67 (0.38) (0.67) -- For the fiscal year ended March 31, 2001 ............. 9.78 0.88 (1.04) (0.88) -- For the fiscal year ended March 31, 2000 ............. 11.36 1.01 (1.58) (1.01) -- For the fiscal year ended March 31, 1999 ............. 12.73 1.04 (1.32) (1.04) (0.05) CLASS C For the fiscal year ended March 31, 2003 ............. 8.36 0.60 (0.25) (0.61) -- For the fiscal year ended March 31, 2002 ............. 8.74 0.67 (0.38) (0.67) -- For the fiscal year ended March 31, 2001 ............. 9.78 0.88 (1.04) (0.88) -- For the fiscal year ended March 31, 2000 ............. 11.36 1.01 (1.58) (1.01) -- For the fiscal year ended March 31, 1999 ............. 12.73 1.04 (1.32) (1.04) (0.05) CLASS Y For the fiscal year ended March 31, 2003 ............. 8.36 0.68 (0.24) (0.69) -- For the period July 11, 2001** through March 31, 2002. 8.46 0.53 (0.10) (0.53) --
- ---------- * Calculated based on average settled shares outstanding during the respective periods, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. ** Commencement of initial public offering. (1) Reflects waivers and related 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 the 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. 24
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF END OF INVESTMENT END OF YEAR EXPENSES TO YEAR RETURN(3) (000's omitted) AVERAGE NET ASSETS(1) --------- ------------ ---------------- --------------------- HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ............. $ 8.10 5.18% $84,889 1.00% For the fiscal year ended March 31, 2002 ............. 8.36 4.16 72,491 1.00 For the fiscal year ended March 31, 2001 ............. 8.74 (1.07) 69,132 1.00 For the fiscal year ended March 31, 2000 ............. 9.78 (4.68) 44,991 1.00 For the fiscal year ended March 31, 1999 ............. 11.36 (1.57) 55,367 1.00 CLASS B For the fiscal year ended March 31, 2003 ............. 8.11 4.63 43,853 1.65 For the fiscal year ended March 31, 2002 ............. 8.36 3.49 32,233 1.65 For the fiscal year ended March 31, 2001 ............. 8.74 (1.71) 26,336 1.65 For the fiscal year ended March 31, 2000 ............. 9.78 (5.29) 23,520 1.65 For the fiscal year ended March 31, 1999 ............. 11.36 (2.21) 23,395 1.65 CLASS C For the fiscal year ended March 31, 2003 ............. 8.10 4.50 46,263 1.65 For the fiscal year ended March 31, 2002 ............. 8.36 3.49 29,535 1.65 For the fiscal year ended March 31, 2001 ............. 8.74 (1.71) 22,317 1.65 For the fiscal year ended March 31, 2000 ............. 9.78 (5.29) 18,707 1.65 For the fiscal year ended March 31, 1999 ............. 11.36 (2.21) 26,064 1.65 CLASS Y For the fiscal year ended March 31, 2003 ............. 8.11 5.69 23,293 0.65 For the period July 11, 2001** through March 31, 2002. 8.36 4.99(4) 16,862 0.65(5) INCREASE/(DECREASE) REFLECTED IN RATIO OF EXPENSE AND NET NET INVESTMENT INVESTMENT INCOME RATIOS PORTFOLIO INCOME TO DUE TO WAIVERS AND TURNOVER AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE --------------------- ------------------------ --------- HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ............. 8.20% 0.39% 103.22% For the fiscal year ended March 31, 2002 ............. 8.51 0.49 212.94 For the fiscal year ended March 31, 2001 ............. 10.03 0.64 122.83 For the fiscal year ended March 31, 2000 ............. 10.14 0.58 70.61 For the fiscal year ended March 31, 1999 ............. 9.37 0.74 101.75 CLASS B For the fiscal year ended March 31, 2003 ............. 7.55 0.38 103.22 For the fiscal year ended March 31, 2002 ............. 7.86 0.49 212.94 For the fiscal year ended March 31, 2001 ............. 9.45 0.64 122.83 For the fiscal year ended March 31, 2000 ............. 9.49 0.59 70.61 For the fiscal year ended March 31, 1999 ............. 8.76 0.73 101.75 CLASS C For the fiscal year ended March 31, 2003 ............. 7.52 0.38 103.22 For the fiscal year ended March 31, 2002 ............. 7.84 0.49 212.94 For the fiscal year ended March 31, 2001 ............. 9.45 0.64 122.83 For the fiscal year ended March 31, 2000 ............. 9.49 0.59 70.61 For the fiscal year ended March 31, 1999 ............. 8.73 0.73 101.75 CLASS Y For the fiscal year ended March 31, 2003 ............. 8.55 0.39 103.22 For the period July 11, 2001** through March 31, 2002. 8.67(4)(5) 0.49(4)(5) 212.94
- ---------- (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. 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 the timing differences in the commencement of initial public offerings. (5) Annualized. 25 THE BEAR STEARNS FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO NOTES TO FINANCIAL STATEMENTS ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business trust on September 29, 1994, and is registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as an open-end management investment company. The Fund currently consists of ten separate portfolios: six diversified portfolios, Prime Money Market Portfolio, Intrinsic Value Portfolio, Small Cap Value Portfolio, International Equity Portfolio, High Yield Total Return Portfolio ("High Yield Portfolio") and Income Portfolio, and four non-diversified portfolios, The Insiders Select Fund, Alpha Growth Portfolio, S&P STARS Portfolio and S&P STARS Opportunities Portfolio. As of the date hereof, the Income Portfolio and High Yield Portfolio (each a "Portfolio" and collectively, the "Portfolios") offer four classes of shares, which have been designated as Class A, B, C and Y shares. 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. MANAGEMENT ESTIMATES--The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") 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 as of the close of regular trading on The New York Stock Exchange, Inc. (the "Exchange") (generally 4:00 p.m. Eastern time) on each day that the Exchange is open for trading. Substantially all fixed-income securities (including short-term investments that are not valued using the amortized cost method) are valued each business day as of the close of regular trading on the Exchange by one or more independent pricing services (the "Pricing Services") approved by the Fund's Board of Trustees (the "Board"). When quoted bid prices are readily available, the Pricing Services generally value fixed-income securities at the mean of the bid and asked prices, provided that the Pricing Services believe those prices to reflect the fair market value of the securities. Other investments valued by the Pricing Services are carried at fair value as determined by the Pricing Services, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Pricing Services may take other factors into consideration in pricing securities, including institutional size transactions in similar groups of securities as well as developments related to specific securities. Securities that are not valued by a Pricing Service are valued at the average of the most recent bid and asked prices in the market in which such securities are primarily traded, or at the last sales price for securities traded primarily on an exchange or a national securities market. In the absence of reported sales of securities traded primarily on an exchange or a national securities market, the average of the most recent bid and asked prices are used. Bid price is used when no asked price is available. Equity securities, including written covered call options, are valued each business day at the last sale price as of the close of regular trading on the Exchange by one or more Pricing Services. 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. Other assets and securities for which no quotations are readily available or which are restricted as to sale (or resale) are valued by such methods as the Fund's Board deems in good faith to reflect the fair value. Restricted securities, as well as securities or other assets for which market quotations are not readily available, or are not valued by a Pricing Service approved by the Fund's Board, are valued at fair value as determined in good faith by Bear Stearns Asset Management Inc.'s ("BSAM" or the "Adviser") Valuation Committee, pursuant to procedures approved by the Fund's Board. The Board reviews the methods of valuation quarterly. 26 Short-term investments (those acquired with remaining maturities of 60 days or less) are valued at cost, plus or minus any amortized discount or premium, which approximates market value. Expenses and fees, including the respective investment advisory, administration, distribution and service fees, are accrued daily and taken into account for the purpose of determining the net asset value of each Portfolio's shares. Because of the differences in operating expenses incurred by each class, the per share net asset value of each class may 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 transactions are calculated on the identified cost basis. Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date. Discounts and premiums are treated as adjustments to interest income and identified costs of investments over the lives of the respective investments. The Portfolios' net investment income (other than distribution and service fees) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of the settled shares value of each class at the end of the day. U.S. FEDERAL TAX STATUS--Each Portfolio intends to distribute substantially all of its taxable income and 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. The tax character of dividends and distributions paid during the fiscal year ended March 31, 2003 were as follows:
ORDINARY LONG-TERM TOTAL PORTFOLIO INCOME CAPITAL GAIN DISTRIBUTIONS - --------- ----------- ------------ ------------- Income Portfolio....................................................... $ 2,278,773 $98,648 $ 2,377,421 High Yield Portfolio................................................... 13,159,828 -- 13,159,828
At March 31, 2003, the components of distributable earnings on a tax basis were as follows:
ACCUMULATED UNDISTRIBUTED UNDISTRIBUTED CAPITAL TOTAL ORDINARY LONG-TERM AND OTHER UNREALIZED ACCUMULATED PORTFOLIO INCOME CAPITAL GAINS LOSSES APPRECIATION EARNINGS/(DEFICIT) - --------- ------------- ------------- ----------- ------------ ------------------ Income Portfolio........................ $434,654 $156,781 -- $1,578,675 $ 2,170,110 High Yield Portfolio.................... 34,123 -- $(51,236,485) 7,548,130 (43,654,232)
The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales. At March 31, 2003, the High Yield Portfolio had capital loss carryforwards available as a reduction to the extent provided in regulations of any future net capital gains realized before the end of fiscal year 2011. To the extent that the capital loss carryforwards are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders. The High Yield Portfolio had the following capital loss carryforwards at March 31, 2003:
GROSS CAPITAL AMOUNTS EXPIRING IN LOSS --------------------------------------------------------------------- PORTFOLIO CARRYFORWARD 2007 2008 2009 2010 2011 - --------- ------------ -------- ---------- ----------- ----------- ---------- High Yield Portfolio.......... $48,598,104 $175,885 $5,403,558 $13,786,496 $20,187,320 $9,044,845
For U.S. federal income tax purposes, net realized capital losses from investments incurred after October 31, 2002, within the current fiscal year are deemed to arise on the first day of the following fiscal year. The High Yield Portfolio incurred and elected to defer such losses of $2,638,381. 27 For U.S. federal income tax purposes, the cost of securities owned at March 31, 2003, were $89,218,323 and $185,186,199 for the Income Portfolio and High Yield Portfolio, respectively. Accordingly, the net unrealized appreciation on investments for each Portfolio were as follows:
GROSS GROSS NET PORTFOLIO APPRECIATION DEPRECIATION APPRECIATION - --------- ------------ ------------ ------------ Income Portfolio....................................................... $1,716,574 $ (137,899) $1,578,675 High Yield Portfolio................................................... 9,022,566 (1,474,436) 7,548,130
At March 31, 2003, the Income Portfolio reclassified within the composition of net assets, $146,218 from accumulated net realized gain/(loss) from investments, of which $142,277 was reclassified to undistributed net investment income/(loss) and $3,941 was reclassified to paid-in capital. In addition, the High Yield Portfolio reclassified $3,329 from undistributed net investment income/(loss), of which $720 was reclassified to accumulated net realized gain/(loss) from investments and $2,609 was reclassified to paid-in capital. DIVIDENDS AND DISTRIBUTIONS--Each Portfolio declares dividends from net investment income on each day the Exchange is open for business. These dividends are paid usually on or about the twentieth day of each month. Distributions of net realized gains, if any, will be declared and paid at least annually by each Portfolio. 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 GAAP. 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. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES For the fiscal year ended March 31, 2003, BSAM, a wholly-owned subsidiary of The Bear Stearns Companies Inc., served as investment adviser pursuant to an Investment Advisory Agreement with respect to each Portfolio. Under the terms of the Investment Advisory Agreement, the Income Portfolio and High Yield Portfolio have agreed to pay BSAM a monthly fee at an annual rate of 0.45% and 0.60%, respectively, of each Portfolio's average daily net assets. For the fiscal year ended March 31, 2003, Bear Stearns Funds Management Inc. ("BSFM" or the "Administrator") served as administrator to each Portfolio pursuant to an Administration Agreement. BSFM 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 up to $1 billion, 0.12% of the next $1 billion, 0.10% of the next $3 billion and 0.08% of average daily net assets above $5 billion. For the fiscal year ended March 31, 2003, BSAM has undertaken to limit each Portfolio's total operating expenses (exclusive of brokerage commissions, taxes, interest and extraordinary items) to a maximum annual level as a percent of each Portfolio's average daily net assets as follows:
PORTFOLIO CLASS A CLASS B CLASS C CLASS Y - --------- ------- ------- ------- ------- Income Portfolio................................................................ 0.80% 1.45% 1.45% 0.45% High Yield Portfolio............................................................ 1.00 1.65 1.65 0.65
As necessary, this limitation is effected by waivers by the Adviser of its advisory fees and reimbursements of expenses exceeding the advisory fee. For the fiscal year ended March 31, 2003, the advisory fee waivers and reimbursements of expenses (in order to maintain the expense limitation) were as follows:
PORTFOLIO ADVISORY FEE WAIVERS EXPENSE REIMBURSEMENTS - --------- -------------------- ---------------------- Income Portfolio.......................................................... $272,794 $158,098 High Yield Portfolio...................................................... 638,911 --
The Portfolios will not pay BSAM at a later time for any amounts BSAM may waive, nor will the Portfolios reimburse BSAM for any amounts BSAM may assume. 28 Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies Inc. and an affiliate of BSAM, BSFM and Bear, Stearns & Co. Inc. ("Bear Stearns" or the "Distributor"), serves as custodian to each Portfolio. DISTRIBUTION PLAN AND SHAREHOLDER SERVICING PLAN The Fund, on behalf of the Portfolios, has entered into a Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act. Under the Distribution Plan, each Portfolio paid Bear Stearns a fee at an annual rate of 0.10% for Class A shares and 0.75% for both Class B and C shares. The Fund, on behalf of the Portfolios, has adopted a Shareholder Servicing Plan whereby each Portfolio paid Bear Stearns fees of 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 quarterly or at such intervals as the Board may determine. The fees paid to Bear Stearns under the Distribution Plan are payable without regard to actual expenses incurred. Bear Stearns uses the distribution fee to pay broker-dealers or other financial institutions whose clients hold each Portfolio's shares and other distribution-related activities. Bear Stearns uses shareholder servicing fees to pay broker-dealers or other financial institutions that provide personal service in connection with the maintenance of shareholder accounts. For the fiscal year ended March 31, 2003, the distribution and shareholder servicing fees paid to Bear Stearns under each Plan were as follows:
PORTFOLIO DISTRIBUTION FEES SHAREHOLDER SERVICING FEES - --------- ----------------- -------------------------- Income Portfolio....................................................... $191,266 $ 98,937 High Yield Portfolio................................................... 608,210 362,609
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. In addition, Bear Stearns advanced 4.25% and 1.00% in sales commissions on the sale of Class B and C shares, respectively, to dealers at the time of such sales. For the fiscal year ended March 31, 2003, Bear Stearns has advised each Portfolio that it received the amounts noted below in front-end sales charges resulting from sales of Class A shares and contingent deferred sales charges ("CDSC") upon certain redemptions by Class A, B and C shareholders, respectively. The amounts were as follows:
CDSC FRONT-END SALES CHARGES ------------------------------ PORTFOLIO CLASS A CLASS A CLASS B CLASS C - --------- ----------------------- ------- -------- ------- Income Portfolio....................................... $ 68,136 $1,881 $ 76,261 $3,727 High Yield Portfolio................................... 328,491 1,610 138,972 8,580
INVESTMENTS IN SECURITIES For the fiscal year ended March 31, 2003, aggregate purchases and sales of portfolio securities (excluding short-term investments) for each Portfolio were as follows:
PORTFOLIO PURCHASES SALES - --------- ------------ ------------ Income Portfolio.................................................................. $131,301,404 $ 84,496,035 High Yield Portfolio.............................................................. 209,782,697 160,190,668
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 4.50% 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% within the first year of purchase. There is no sales charge or CDSC on Class Y shares, which are offered primarily to institutional investors. 29 Transactions in shares of beneficial interest for each Portfolio were as follows:
INCOME PORTFOLIO HIGH YIELD PORTFOLIO ---------------------------------------- ---------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ------------ ----------- ------------- ----------- ----------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ................................ 1,918,416 892,665 38,049 6,370,363 4,975,324 408,346 Value.................................. $23,511,749 $10,924,899 $466,500 $50,751,493 $39,763,822 $3,257,445 FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares ................................ 794,472 688,148 24,544 3,756,865 3,398,078 407,597 Value.................................. $ 9,532,988 $ 8,218,320 $295,102 $32,035,477 $28,817,466 $3,446,664 CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares................................. 1,516,519 580,387 27,109 2,581,257 1,206,435 177,294 Value.................................. $18,475,988 $ 7,071,143 $332,372 $20,618,000 $ 9,586,223 $1,414,056 FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares................................. 603,678 450,445 13,598 1,370,939 669,402 142,929 Value.................................. $ 7,318,268 $ 5,427,360 $163,506 $11,652,781 $ 5,655,996 $1,207,816 CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares................................. 706,186 325,220 22,051 2,873,843 910,780 213,931 Value.................................. $ 8,630,729 $ 3,975,476 $269,870 $22,966,703 $ 7,229,012 $1,702,053 FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares................................. 429,355 209,437 14,073 1,174,111 328,871 135,936 Value.................................. $ 5,167,296 $ 2,510,222 $169,147 $ 9,955,418 $ 2,780,854 $1,148,557 CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares................................. 1,390,146 278,085 65,567 970,032 331,419 217,625 Value.................................. $16,970,558 $ 3,411,752 $803,088 $ 7,927,562 $ 2,625,540 $1,733,581 FOR THE FISCAL YEAR ENDED MARCH 31, 2002* Shares................................. 449,139 90,492 35,969 2,020,342 53,273 50,186 Value.................................. $ 5,419,286 $ 1,088,280 $432,101 $17,027,227 $ 448,058 $ 421,359
- ---------- * Class Y shares of the High Yield Portfolio commenced its initial public offering on July 11, 2001. CREDIT FACILITY The Fund has entered into a demand promissory note arrangement with JPMorgan Chase Bank (the "Bank") to provide an uncommitted credit facility to the Fund (on behalf of each Portfolio). The credit facility bears interest at the greater of: (i) the rate otherwise in effect for such loan plus 2%, or (ii) that rate of interest from time to time announced by the Bank at its principal office as its prime commercial lending rate plus 2%, with such interest to be payable on demand and upon payment in full of such principal. High Yield Portfolio as a fundamental policy is permitted to borrow in an amount up to 33 1/3% of its total assets. Income Portfolio intends to borrow money only for temporary or emergency (not leveraging) purposes and only in amounts up to 15% of its total assets. Each loan is payable on demand or upon termination of this credit facility or 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 credit facility during the fiscal year ended March 31, 2003, were as follows:
MAXIMUM LOAN AMOUNT PORTFOLIO AVERAGE LOAN BALANCE OUTSTANDING AVERAGE INTEREST RATE - --------- -------------------- ------------------- --------------------- Income Portfolio............................... $22,737 $2,025,600 1.81% High Yield Portfolio........................... 19,982 2,351,500 2.25
The Income Portfolio had $2,025,600 outstanding under the line of credit facility at March 31, 2003. The High Yield Portfolio had no amount outstanding under the credit facility at March 31, 2003. 30 CONCENTRATION OF RISK -- HIGH YIELD PORTFOLIO Lower-rated debt securities (commonly known as "junk bonds") possess speculative characteristics and are subject to greater market fluctuations and risk of lost income and principal than higher-rated debt securities for a variety of reasons. Also, during an economic downturn or substantial period of rising interest rates, highly leveraged issuers may experience financial stress which would adversely affect their ability to service their principal and interest payment obligations, to meet projected business goals and to obtain additional financing. In addition, periods of economic uncertainty and changes can be expected to result in increased volatility of market prices of lower-rated debt securities and the High Yield Portfolio's net asset value. 31 THE BEAR STEARNS FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO INDEPENDENT AUDITORS' REPORT To the Board of Trustees and Shareholders, Income Portfolio High Yield Total Return Portfolio (Series of The Bear Stearns Funds): We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Income Portfolio and High Yield Total Return Portfolio (collectively, the "Portfolios") as of March 31, 2003, and the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Portfolios' management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Portfolios as of March 31, 2003, the results of their operations for the year then ended, and the changes in their net assets and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Deloitte & Touche LLP New York, New York May 9, 2003 32 THE BEAR STEARNS FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO SHAREHOLDER TAX INFORMATION - (UNAUDITED) Each Portfolio is required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise its shareholders within 60 days of each Portfolio's fiscal year end (March 31, 2003) as to the U.S. federal tax status of distributions received by each Portfolio's shareholders in respect of such fiscal year. During the fiscal year ended March 31, 2003, the following dividends and distributions per share were paid by each of the Portfolios:
NET INVESTMENT SHORT-TERM LONG-TERM INCOME CAPITAL GAINS CAPITAL GAINS -------------- -------------- -------------- Income Portfolio: Class A ....................... $0.481346798 $0.0129 $0.0177 Class B ....................... 0.402205564 0.0129 0.0177 Class C ....................... 0.402072497 0.0129 0.0177 Class Y ....................... 0.524799040 0.0129 0.0177 High Yield Total Return Portfolio: Class A ....................... 0.658631864 -- -- Class B ....................... 0.607033054 -- -- Class C ....................... 0.606589985 -- -- Class Y ....................... 0.687795886 -- --
Ordinary income dividends, which include short-term gain distributions, should be reported as dividend income on Form 1040. Income dividends are taxable as ordinary income, as are short-term capital gain distributions. With respect to each Portfolio, none of its ordinary income dividends qualify for the corporate dividends received deduction. Because each Portfolio's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2003. The second notification, which will reflect the amount to be used by calendar year taxpayers on their U.S. federal income tax returns, will be made in conjunction with Form 1099-DIV and will be mailed in January 2004. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their actual ordinary dividends. They will generally not be entitled to a foreign tax credit or deduction for the withholding taxes paid by the Portfolios, if any. In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting. Shareholders are advised to consult with their own tax advisers with respect to the tax consequences of their investment in the Portfolios. 33 THE BEAR STEARNS FUNDS TRUSTEES AND OFFICERS The following information is provided for each Trustee, Officer and the Advisory Trustee of The Bear Stearns Funds (the "Trust") as of March 31, 2003. Each Trustee oversees all 10 portfolios of the Trust. The Statement of Additional Information includes additional information about the Trustees and is available without charge, upon request, by calling PFPC Inc. at 1-800-447-1139 or 1-800-766-4111. The mailing address of the Trustees and Officers is 383 Madison Avenue, New York, New York 10179.
- ------------------------------------------------------------------------------------------------------------------------------------ POSITION(S) WITH THE TRUST AND LENGTH OF TIME OTHER DIRECTORSHIPS NAME AND AGE SERVED(1) PRINCIPAL OCCUPATION(S) IN THE PAST 5 YEARS HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ Peter M. Bren - 69 Trustee, since 1995 Chairman and President, Koll Bren Schreiber None Realty Advisers (realty) - ------------------------------------------------------------------------------------------------------------------------------------ John S. Levy - 67 Trustee, since 2000 Managing Partner, Fayerrwearther Capital SL Green Realty Corp. Partners (private investment partnership) - ------------------------------------------------------------------------------------------------------------------------------------ M.B. Oglesby, Jr. - 59 Trustee, since 1995 Consultant; Vice Chairman, BKSH & None Associates, Washington DC (government lobbyists) (2002 - present); Formerly, Chief of Staff to United States Trade Representative, Executive Office of the President (2001-2002); Consultant, Chairman, Oglesby Properties, Inc.; President and Chief Executive Officer, Association of American Railroads; Vice Chairman, Cassidy & Associates - ------------------------------------------------------------------------------------------------------------------------------------ Robert E. Trustee, since 2000 Retired; Formerly, Vice President, Broker/ None Richardson - 61 Dealer Department, Mellon Bank (financial services) (1991-1999) - ------------------------------------------------------------------------------------------------------------------------------------ "INTERESTED" TRUSTEES(2) - ------------------------------------------------------------------------------------------------------------------------------------ Michael Minikes - 59 Chairman of the Treasurer, The Bear Stearns Companies Inc. None Board and Trustee, and Bear, Stearns & Co. Inc. ("Bear Stearns"); since 1999 Senior Managing Director, Bear Stearns; Co-President, Bear, Stearns Securities Corporation (1999-present); Director, Custodial Trust Company ("CTC") and Bear Stearns Bank plc - ------------------------------------------------------------------------------------------------------------------------------------ Doni L. Fordyce - 43 President and Director, Chairman of the Board, President, None Trustee, since 2000 Senior Managing Director, Bear Stearns Asset Management Inc. (`BSAM") and, since 2000, Chief Executive Officer and Chief Operating Officer - ------------------------------------------------------------------------------------------------------------------------------------ Robert M. Trustee, since 2001 Senior Managing Director, Bear Stearns; None Steinberg - 57 Director of CTC - ------------------------------------------------------------------------------------------------------------------------------------
(1) The term of office for a Trustee is indefinite, until he or she resigns, is removed or a successor has been duly elected and qualified. (2) The Interested Trustees are considered to be "interested persons" (as defined by the Investment Company Act of 1940, as amended) because of their employment with the Trust's adviser or principal underwriter. 34
- -------------------------------------------------------------------------------------------------------------------------- POSITION(S) WITH THE TRUST AND LENGTH OF TIME NAME AND AGE SERVED(1) PRINCIPAL OCCUPATION(S) IN THE PAST 5 YEARS - -------------------------------------------------------------------------------------------------------------------------- ADVISORY TRUSTEE - -------------------------------------------------------------------------------------------------------------------------- Senator Alan Advisory Trustee, Partner - Corporate Business and Legislative Law, Bryan Cave (law firm); Dixon - 76 since 1995 Formerly, United States Senator (1981-1992) - -------------------------------------------------------------------------------------------------------------------------- OFFICERS WHO ARE NOT TRUSTEES - -------------------------------------------------------------------------------------------------------------------------- Barry Executive Vice Senior Managing Director, Bear Stearns (2000-present); Head of Sommers - 34 President, since Marketing and Sales for the Trust (1997-present); Managing Director, 1998 Bear Stearns (1997-2000) - -------------------------------------------------------------------------------------------------------------------------- Stephen A. Vice President and General Counsel, Managing Director/Principal and Executive Vice President, Bornstein - 59 Secretary, since BSAM; Managing Director/Principal, Bear Stearns; Vice President, General 1995 Counsel and Secretary, Bear Stearns Funds Management Inc. ("BSFM") - -------------------------------------------------------------------------------------------------------------------------- Frank J. Vice President and President and Chief Executive Officer, BSFM; Senior Managing Director, Maresca - 44 Treasurer, since 1995 Bear Stearns (2001-present); Managing Director, Bear Stearns - -------------------------------------------------------------------------------------------------------------------------- Vincent L. Assistant Treasurer, Executive Vice President, BSFM; Managing Director (1999-present) and Pereira - 37 since 1995 Associate Director (1997-1999), Bear Stearns - --------------------------------------------------------------------------------------------------------------------------
(1) The term of office for an Officer is indefinite, until he or she resigns, is removed or a successor has been duly elected and qualified. 35 THE BEAR STEARNS FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO PRIVACY NOTICE While information is the cornerstone of our ability to provide superior service, our most important assets are our shareholders and the trust that they place in us. Keeping shareholder information secure and using it only as our shareholders would want us to are top priorities at The Bear Stearns Funds. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information investment goals and risk tolerance. We do not disclose any information about you or about former customers to anyone except as permitted by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and mailers that assist us in the distribution of shareholder materials. This allows us to continue to meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic and procedural safeguards to guard your personal information. You may have received communications regarding information privacy on policies from other financial institutions that gave you the opportunity to "opt-out" of certain information sharing with companies that are not affiliated with that financial institution. The Bear Stearns Funds does not share information with other companies for purposes of marketing solicitations. Therefore, The Bear Stearns Funds does not provide opt-out options to its shareholders. We reserve the right to change our privacy policy at any time. The examples contained within this notice are illustrations; they are not intended to be exclusive. This notice complies with a recently enacted Federal law and new SEC regulations regarding privacy. You may have additional rights under foreign or other domestic laws that may apply to you. 36 The Bear Stearns Funds 383 MADISON AVENUE, NEW YORK, NY 10179 1.800.766.4111 Michael Minikes Chairman of the Board and Trustee Doni L. Fordyce President and Trustee Peter M. Bren Trustee John S. Levy Trustee M. B. Oglesby, Jr. Trustee Robert E. Richardson Trustee Robert M. Steinberg Trustee Barry Sommers Executive Vice President Stephen A. Bornstein Vice President and Secretary Frank J. Maresca Vice President and Treasurer Vincent L. Pereira Assistant Treasurer INVESTMENT ADVISER TRANSFER AND DIVIDEND Bear Stearns Asset DISBURSEMENT AGENT Management Inc. PFPC Inc. 383 Madison Avenue Bellevue Corporate Center New York, NY 10179 400 Bellevue Parkway Wilmington, DE 19809 ADMINISTRATOR Bear Stearns Funds INDEPENDENT AUDITORS Management Inc. Deloitte & Touche LLP 383 Madison Avenue Two World Financial Center New York, NY 10179 New York, NY 10281 DISTRIBUTOR COUNSEL Bear, Stearns & Co. Inc. Kramer Levin 383 Madison Avenue Naftalis & Frankel LLP New York, NY 10179 919 Third Avenue New York, NY 10022 CUSTODIAN Custodial Trust Company 101 Carnegie Center Princeton, NJ 08540 This report is submitted for the general information of the shareholders of each Portfolio. It is not authorized for distribution to prospective investors in each Portfolio unless it is preceded or accompanied by a current prospectus which includes details regarding each Portfolio's objectives, policies, sales commissions and other information. Total investment return is based on historical results and is not intended to indicate future performance. The investment return and principal value of an investment in each Portfolio will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. THE BEAR STEARNS FUNDS EQUITY FUNDS S&P STARS Portfolio S&P STARS Opportunities Portfolio The Insiders Select Fund Intrinsic Value Portfolio Small Cap Value Portfolio Alpha Growth Portfolio International Equity Portfolio ANNUAL REPORT MARCH 31, 2003 BSF-R-015-12 [BEAR STEARNS LOGO] THE BEAR STEARNS FUNDS S&P STARS Portfolio S&P STARS Opportunities Portfolio The Insiders Select Fund Intrinsic Value Portfolio Small Cap Value Portfolio Alpha Growth Portfolio International Equity Portfolio LETTER TO SHAREHOLDERS April 30, 2003 Dear Shareholders: We are pleased to present the annual report to shareholders for the S&P STARS Portfolio, S&P STARS Opportunities Portfolio, The Insiders Select Fund, Intrinsic Value Portfolio, Small Cap Value Portfolio, Alpha Growth Portfolio and International Equity Portfolio (each a "Portfolio"), for the year ended March 31, 2003. Detailed performance data for each class of shares of each Portfolio can be found in the "Financial Highlights" and line graph sections of this report. S&P STARS PORTFOLIO As the fiscal year began in April 2002, the nation's equity markets were heavily impacted by a number of factors. Positive signs of a slowly recovering economy were overshadowed by escalating geopolitical tensions, a liquidity crisis among some of the country's largest growth companies, and a series of highly publicized corporate governance scandals, in which a number of large, well respected corporations from several sectors admitted to fraudulent accounting practices and earnings overstatements in the billions of dollars. Investors reacted with panic, leading to record stock market volatility and a sharp decline in business confidence. In this exceptionally challenging environment, growth stocks in economically sensitive sectors were among the hardest hit. In particular, companies that were heavily dependent on the credit markets saw their stock prices tumble as investors became wary of highly leveraged balance sheets. For the Portfolio, we entered the fiscal year with the view that the economic recovery would continue at a moderate pace, picking up steam as the year progressed. In hindsight, we underestimated the near-term impact on many of the Portfolio's growth stocks of geopolitical and corporate governance concerns and the consequent panicked investor mentality that resulted. In the first fiscal quarter of the year (April to June), our emphasis on growth over value, with a particular emphasis on cable, wireless telecommunications, and technology companies, was the primary driver behind our underperformance versus the S&P 500 Index, the Portfolio's benchmark, for the fiscal year. Our decision to overweight these sectors was based on our expectation that the economic recovery would continue, which, in fact, it has. Unfortunately, our telecommunications and cable holdings were dragged down with the rest of their respective sectors on news of accounting scandals at some of the country's largest providers. Technology stocks also suffered during the period. Since June 2002, many of the Portfolio's stocks that suffered the most have recovered, and we believe these companies remain fundamentally sound. Today, they continue to exhibit growth characteristics well in excess of the average company in the S&P 500 Index, and are attractively valued. Indeed, earnings growth over the next three to five years for all companies we owned as of the fiscal year end was expected to exceed expected growth for all firms in the S&P 500 Index; yet, overall, the Portfolio's stocks still trade at below average price-to-earnings, price-to-cash-flow, price-to-book-value, and price-to-sales ratios. 1 In the months ahead, we plan to keep a close watch on employment levels and consumer sentiment as barometers of the economy's health. With the war over, we expect improvements in consumer confidence to lead to increased household spending. We also expect employment levels to steadily improve. These trends should have the secondary effect of improving business investment, which had shown signs of modest growth in the second half of 2002, but which stagnated in the first quarter due to war anxieties. For the Portfolio, we plan to focus on consumer discretionary and technology, which have historically outperformed during times of economic expansion. It is important for our investors to remember that, although the pace of the economic recovery, as well as that of domestic stock prices, are unclear, it is becoming more likely that we have seen the low points. Historically, the Portfolio has performed well in rising equity markets. As the clouds clear, we believe our focus on growth at a reasonable price will prove quite rewarding to investors who have stayed the course. S&P STARS OPPORTUNITIES PORTFOLIO During the Portfolio's fiscal year, the stock market was profoundly affected by a number of factors. Positive signs from a gradual economic recovery were overshadowed by escalating geopolitical tensions, a series of large-scale corporate governance scandals and the continued negative impact of the prolonged bear market on stock prices. In this turbulent environment, defensive sectors of the economy largely outperformed economically sensitive sectors as investors sought a safe haven from this volatility. The Portfolio underperformed the S&P MidCap 400 Index, its benchmark, for the year. Stock selection within the financial services sector helped performance during the period. Regional banks, as a defensive industry, benefited from high levels of market uncertainty, as well as from an environment of declining interest rates, which led to favorable interest rate spreads. In addition, our investment in a leading rating agency performed well. Over the past two years, falling interest rates have allowed many companies to refinance their balance sheets, a decision that requires the services of rating agencies. Subsequently, our overweighted position in real estate investment trusts (REITs) helped performance. REITs provided a bastion of safety during the year, paying 6% to 7% dividend yields in an environment where both stock prices and bond yields had declined precipitously. Within the industrials sector, our investment in a bankruptcy consulting firm -- one of the Portfolio's largest holding -- performed especially well. This company has benefited from the weak economic environment of the past three years, which has led to an increase in demand for its services. In addition, our exposure to a well diversified engineering and construction company contributed positively to performance. Conversely, while the consumer discretionary sector as a whole performed strongly for the year, the Portfolio's investment decisions in this sector detracted from performance. Specifically, our investments in a leading bookseller and video game retailer experienced disappointing earnings due to a weaker than expected holiday sales season. Soft sales resulted from a decline in consumer confidence, driven by rising unemployment and a falling stock market, among other things. Several of our telecommunications holdings also detracted from performance. Our investment in a wireless telecommunications company was negatively impacted by bankruptcy fears resulting from the corporate fraud and subsequent bankruptcy filing of WorldCom. While the company was not involved in accounting corruption, its highly leveraged balance sheet was viewed unfavorably by investors. Our outlook for the U.S. economy remains cautiously optimistic. Powerful monetary and fiscal stimulus packages are now in place to propel growth, while lower oil prices should begin to take some pressure off the economy. Going forward, the equity markets should benefit from historically low fixed income yields, which we expect will eventually cause investors to look to the equity markets for higher return potential. Should today's geopolitical circumstances continue to be resolved in a constructive fashion, we would expect corporate earnings to move back to higher levels, with stock prices following suit. In the months ahead, we believe mid cap stocks will continue to provide above-average growth opportunities for investors, as these companies have grown beyond the small cap threshold, but have not yet reached full maturity as large caps. 2 THE INSIDERS SELECT FUND The fiscal year proved to be an exceptionally difficult one for the equity markets. Signs of a slowly recovering economy were overshadowed by escalating geopolitical tensions, a series of large-scale corporate governance scandals, plummeting stock prices, and a sharp decline in consumer confidence. As they have often done in the past, investors continued to look in the rearview mirror when making investment decisions, shifting assets away from the worst performing asset class and toward the best performing asset class. This was evidenced by the record amount of money flowing into fixed income mutual funds during the period, as well as by the more than $4 trillion currently positioned in money market funds. In this challenging environment, the Portfolio underperformed the S&P MidCap 400 Index, its benchmark, for the year. For the most part, 2002 witnessed a continuation of the trend that began in 2000 in which insider selling exceeded insider buying by a wide margin. In the fourth quarter of 2002, however, we began to see this trend change, with insider selling stemming off and buying picking up. While the first quarter showed similar results, it is still too early to tell whether this marks the start of a new trend. Share repurchase programs remained strong throughout the year as corporations took advantage of what they perceived to be the undervalued prices of their stocks. The Portfolio's underperformance for the year was largely attributable to stock selection in the consumer discretionary, consumer staples and technology sectors. Within consumer discretionary, our investments in advertising, retail, and fast-food were particularly hard hit. Our investment in an advertising agency was adversely affected by the sluggish economy, which led many companies to cut back on advertising budgets. Our retail holdings were also affected by the economy and by a decline in consumer confidence that led to decreased spending, most notably during the holiday shopping season. Our investment in a fast-food chain posted disappointing results due to heightened competition, and a deterioration in its quality and service. Within consumer staples, one stock detracted from performance during the year. In spite of having above-average fundamentals, our investment in a large grocery store chain suffered from an increase in competition from discount mega-stores. Two of the Portfolio's technology holdings, a semiconductor company and a technology consulting business, also underperformed for the quarter. The semiconductor company was hurt by a decline in demand for personal computers. We sold the position on the belief that it will be difficult for the company to regain the market share it lost in the last year. The technology consulting business was forced to adjust its earnings estimates downward due to accounting issues with some of its clients. By contrast, the Portfolio's investment in a regional hospital chain within the healthcare sector contributed positively to performance as the company is now reaping the benefits from the restructuring it went through in 2000 and 2001. The company's restructuring has led to increasing market share and improving cash flow and earnings growth. In the near-term, the equity markets face some significant difficulties. Anxiety about the war and relatively high unemployment has caused a sharp decline in consumer confidence, putting a damper on spending. In addition, a host of industries face downward earnings pressure due to weak profitability, leaving capital expenditures anemic as a result. Yet, there are several reasons to expect equity returns to pick up as the year progresses. Powerful monetary and fiscal stimulus packages are in place to propel growth, and lower oil prices have taken some pressure off the economy. In addition, the rally in technology stocks that took place in the last half of the fiscal year supports the belief among many investors that the underlying foundation of the economy is sound, and that once the war is behind us, the economy will be poised for a meaningful recovery. Should today's geopolitical concerns be resolved in a positive fashion, we would expect earnings to move back to higher levels, with stock prices following suit. INTRINSIC VALUE PORTFOLIO The fiscal year proved to be an exceptionally difficult one for the equity markets. Signs of a slowly recovering economy were overshadowed by escalating geopolitical tensions, a series of large-scale corporate governance scandals, plummeting stock prices and a sharp decline in consumer confidence. As they have often done in the past, investors continued to look in the rearview mirror when making investment decisions, shifting assets away from the worst performing asset class and toward the best performing asset class. This was evidenced by the record amount of money flowing into fixed income 3 mutual funds during the period, as well as by the more than $4 trillion currently positioned in money market funds. In this challenging environment, the Portfolio's performance trailed the S&P 500 Index, its benchmark. The Portfolio's underperformance for the fiscal year was largely attributable to our stock selection within the consumer discretionary sector, in which we focused on media-related companies. Because they typically perform in line with expectations for the economy, media stocks suffered due to the factors mentioned above. In addition, our decision to overweight consumer discretionary also detracted from performance since the sector underperformed the benchmark. Our underweighted position in the consumer staples sector also hurt performance. As a defensive sector, consumer staples fared better than average in a year in which investors sought a safe haven from more volatile sectors. Even in a down economy, consumers' buying patterns of consumer staples typically stay the same, generally causing the sector to outperform in times of economic uncertainty. By contrast, our decision to overweight financial services -- a sector that performed strongly during the year -- helped performance, as did our stock selection within this category. We were underweighted in the financial stocks that experienced deteriorating fundamentals, as well as those affected by corporate scandals. In addition, our one holding in the utilities sector, a regulated company, contributed positively to performance. We deliberately avoided deregulated utilities, many of which were found to be involved in the corrupt practice of artificially inflating trading revenues, and which were subsequently caught in a downward spiral of electricity prices. In the near-term, the equity markets face some significant difficulties. Anxiety about the war and relatively high unemployment has caused a sharp decline in consumer confidence, putting a damper on spending. In addition, a host of industries face downward earnings pressure due to weak profitability, leaving capital expenditures anemic as a result. Yet, there are several reasons to expect equity returns to pick up as the year progresses. Powerful monetary and fiscal stimulus packages are in place to propel growth, and lower oil prices have taken some pressure off the economy. In addition, the rally in technology stocks that took place in the last half of the fiscal year supports the belief among many investors that the underlying foundation of the economy is sound, and that once the war is behind us, the economy will be poised for a meaningful recovery. Should today's geopolitical concerns be resolved in a positive fashion, we would expect earnings to move back to higher levels, with stock prices following suit. SMALL CAP VALUE PORTFOLIO* The fiscal year proved to be an exceptionally difficult one for the equity markets and for small caps in particular. Signs of a slowly recovering economy were overshadowed by escalating geopolitical tensions, a series of large-scale corporate governance scandals, plummeting stock prices, and a sharp decline in consumer confidence. In this challenging environment, the Portfolio's performance trailed that of the Russell 2000 Index, its benchmark for the year. The Portfolio's underperformance was due in part to our overweighted position in the consumer discretionary sector. From July 2002 onward, the sector suffered from weak sales due to declining levels of consumer confidence. Within the retail industry, apparel manufacturers were particularly hard hit. While consumer spending for big-ticket items such as autos and home furnishings remained surprisingly strong throughout most of the year, spending on apparel weakened considerably, culminating in a disappointing holiday shopping season, which is when retailers typically make between 70% and 80% of their annual profits. Retail was also hurt by a series of winter storms that kept shoppers at home. In addition, our investment in a small oil and gas exploration and production company detracted from performance; in the fourth quarter, the company's stock price fell on news that a major gas project didn't meet productivity expectations. By contrast, our investments in the healthcare sector performed strongly during the year, partly because of our limited exposure to the biotechnology and pharmaceutical industries. In addition, the stocks we did own in these industries performed far better than their competitors. During the year, some of our best-performing companies were a supplier of laboratory materials, and a drug company that experienced success not only with its generic product line, but also with a promising new proprietary drug for breast cancer that was in phase-three trials at the close of the period. Our investments in the materials processing sector also helped performance: specifically, all three of our chemical company holdings announced price increases -- an indicator of strength and of increased earnings potential. As an economically sensitive industry, chemicals tend to perform well in the preliminary stages of an economic recovery. 4 Our outlook for the remainder of the year is for a slow but steady economic recovery. Historically, small caps have tended to outperform other asset classes coming out of economic downturns. Given the current level of small cap valuations and the lack of small cap coverage relative to mid and large cap stocks, we see ample opportunity for above-average performance from this asset class in the months ahead. ALPHA GROWTH PORTFOLIO During the fiscal year, the equity markets experienced their third consecutive year of negative returns -- the first time the markets have delivered three years of negative returns since the Great Depression. It was a troubling time for most equity investors -- a time that required great patience, and the discipline to keep a long-term view in the face of near-term panic. We are pleased to have outperformed the S&P 500 Index, the Portfolio's benchmark, in such a challenging environment. The Portfolio's outperformance was due to a number of factors -- among them, our proprietary systematic screening process, which searches a universe of large cap companies for stocks exhibiting positive price and earnings momentum, high projected earnings growth over the next three to five years, and reasonable valuations. This process led us to underweight the technology sector from the time we took over management of the Portfolio in August 2002, and to overweight technology after the Portfolio underwent its annual rebalancing in January 2003. With the exception of a few weeks in the fourth quarter when technology rallied, both decisions contributed significantly to the Portfolio's outperformance for the year. The Portfolio's overweighted position in the consumer discretionary sector during the first half of the fiscal year also helped performance. In fact, the sector's outperformance more than made up for losses incurred in the second half of the fiscal year, when consumer discretionary underperformed. As an economically sensitive sector, consumer discretionary fared poorly in the second half due to heightened uncertainty about the war with Iraq and evidence of slowing Gross Domestic Product growth. The sector was further strained by a disappointing holiday shopping season, and by a series of severe winter storms, which kept shoppers at home. Finally, given that consumer discretionary stocks had performed so strongly over the past several years, many stocks that had become overvalued traded down to more reasonable levels as the year drew to a close. Our overweighted position in the consumer staples sector also contributed positively to performance. As a defensive sector, consumer staples fared better than average in a year in which investors sought a safe haven from volatility. Even in a down economy, consumers' buying patterns of consumer staples products typically stay the same, causing the sector to outperform during times of economic uncertainty. The Portfolio's consumer staples holdings showed strong relative price strength, and were able to meet earnings estimates in a difficult economic environment. Now that the war has reached a conclusion, we expect to see greater clarity emerge in the stock market. Large cap stocks today are no longer overvalued, in our opinion, but have traded down to fair prices. After three consecutive years of negative returns, large cap growth stocks are due for a rebound, in our view. We therefore believe that now is a good time for investors to maintain or add to large cap growth as part of a well diversified investment strategy. In the months ahead, we expect the Portfolio to continue to add value over its benchmark by maintaining its disciplined approach to investing, which is the hallmark of our investment strategy. INTERNATIONAL EQUITY PORTFOLIO** The fiscal year was an exceptionally difficult one for the global equity markets. Geopolitical concerns and large-scale corporate scandals dominated most of the year, driving stock indices to a low in October 2002. In spite of declining interest rates around the world, growth remained subdued. The equity markets underwent a dramatic reversal in the fourth quarter as investor pessimism gave way to a wave of renewed optimism, driven by investors' belief that many stocks that had traded down during the year had now reached bargain prices. The result was a stock market rotation toward countries and sectors that had been the year's worst performers. Specifically, Sweden, Finland, Germany and France, which had declined approximately 30% from January to September, increased between 15% and 25% during the fourth quarter. Likewise, the technology and telecommunications sectors, which had declined 45%-50% in the first three quarters, outperformed sharply in the fourth quarter, posting gains of 20%-30%. Lower-quality bank and insurance stocks also performed strongly. 5 The Portfolio underperformed the MSCI EAFE Index, its benchmark, for the fiscal year due to our lack of exposure to the lower-quality stocks that benefited the most from the fourth quarter rally. For the Portfolio, we focus on fundamentally strong, well capitalized companies with strong, capable management teams that are typically number one or two in their industries. We believe these stocks have the strongest prospects for growth over the long run. While the Portfolio did hold overweighted positions in the telecommunications and technology sectors during the fourth quarter rally, our investments were focused on the Asia ex-Japan region, which underperformed during the quarter. We also underweighted the lower-quality bank and insurance stocks that participated in the rally. Finally, we were underweighted in Europe, which benefited from a 5% appreciation of the euro versus the U.S. dollar during the quarter. Helping to offset these losses, our decision to overweight the Asia ex-Japan region contributed positively to performance during the first, second and fourth quarters of the Portfolio's fiscal year. Asia ex-Japan's growth was largely centered on China and the transformation taking place there. In spite of the global economic slowdown of the past three years, China has been growing at a rate of about 8% per year. The country's growth is predominantly export driven as China has become increasingly competitive in manufacturing. As a result, about $50 billion of direct foreign investment has been flowing into China per year. Steadily improving employment rates and income levels have led to increases in domestic demand, which has been further supported by the trends of urbanization and private housing. China's success has stimulated growth around the region. To take advantage of this trend, we invested in several companies that operate solely in China during the year, such as utilities and energy companies. We also held a financial services company in Hong Kong that will likely be among the first to take advantage of financial services liberalization in China. In the months ahead, given a reasonable resolution to the Iraqi situation, we believe investors will shift their attention once again to economic conditions. We expect to see moderate economic growth going forward. Global markets are currently highly liquid due to historically low levels of interest rates. For the Portfolio, we plan to maintain our focus on Asia ex-Japan, which has the most dynamic growth prospects and most attractive valuation profile of anywhere in the world, in our opinion. Although Europe saw some improvement during the year, we continue to be cautious on the region due to its high tax rates, restrictive monetary and fiscal policies, and its tight immigration policies and relatively low birth rates, which have brought the region's population growth to close to 0%. 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/ Doni L. Fordyce Doni L. Fordyce 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. Performance results do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. On the accompanying line charts and total return tables found on pages 7 through 13, the returns of each Portfolio assumes reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. 6 THE BEAR STEARNS FUNDS S&P STARS Portfolio [CHART] COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(5) VS. ITS BROAD-BASED INDEX
DOLLARS CLASS A SHARES CLASS C SHARES S&P 500 COMPOSITE INDEX 5-Apr-95 $9,450 $10,000 $10,000 30-Sep-95 $11,357 $11,974 $11,714 31-Mar-96 $12,066 $12,689 $13,086 30-Sep-96 $13,182 $13,835 $14,095 31-Mar-97 $14,100 $14,764 $15,680 30-Sep-97 $19,203 $20,055 $19,797 31-Mar-98 $20,236 $21,077 $23,206 30-Sep-98 $18,909 $19,646 $21,587 31-Mar-99 $25,792 $26,717 $27,489 30-Sep-99 $26,701 $27,604 $27,588 31-Mar-00 $38,901 $40,116 $32,420 30-Sep-00 $40,098 $41,257 $31,253 31-Mar-01 $30,204 $30,994 $25,392 30-Sep-01 $26,257 $26,875 $22,933 31-Mar-02 $27,245 $27,805 $25,454 30-Sep-02 $17,170 $17,481 $18,235 31-Mar-03 $17,148 $17,412 $19,150
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. S&P STARS PORTFOLIO Class A shares $17,148 Class C shares 17,412 S&P 500 Composite Index 19,150
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003 -------------------------------------------------- 5-YEAR SINCE INCEPTION ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7) -------- -------------- ----------------- S&P STARS Portfolio(2) Class A shares(5) ............... (40.52)% (4.35)% 6.98% Class B shares(4) ............... (40.50) (4.11) (1.26) Class C shares(6) ............... (38.01) (3.75) 7.19 Class Y shares(3) ............... (36.60) (2.74) 6.41 S&P 500 Composite Index(1) ........... (24.76) (3.77) 8.47
- ---------- (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 index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The returns of Class Y shares (for which August 7, 1995 was the initial public offering date) are higher than Class A, B and C shares. The higher returns are due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) Reflects the applicable CDSC. Without the applicable sales charge, the total returns would have been (37.37)%, (3.75)% and (1.08)%, respectively, for each period shown. Assuming no redemption of shares at the end of the period, the return of Class B shares (for which January 5, 1998 was the initial public offering date) would have been higher than Class A shares and would have been substantially the same as Class C shares if operations were commenced on the same day. The higher return is due to the fact that there is no initial sales charge on Class B shares. (5) Reflects the initial maximum sales charge of 5.50%, for each period shown. Without the applicable sales charge, the total returns would have been (37.06)%, (3.26)% and 7.74%, respectively, for each period shown. (6) Reflects the applicable CDSC. Without the applicable sales charge, the total return for the one year ended March 31, 2003 would have been (37.38)%. (7) For the period April 5, 1995 (commencement of investment operations) through March 31, 2003, unless otherwise indicated. CDSC - Contingent Deferred Sales Charge 7 THE BEAR STEARNS FUNDS S&P STARS Opportunities Portfolio [CHART] COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A, B AND C SHARES(1)(2)(5) VS. ITS BROAD-BASED INDEX
DOLLARS CLASS A SHARES CLASS B SHARES CLASS C SHARES S&P MIDCAP 400 INDEX 1-Oct-01 $9,450 $10,000 $10,000 $10,000 31-Oct-01 $9,859 $10,433 $10,433 $10,442 30-Nov-01 $10,544 $11,141 $11,150 $11,219 31-Dec-01 $11,103 $11,725 $11,733 $11,799 31-Jan-02 $10,899 $11,508 $11,508 $11,737 28-Feb-02 $10,521 $11,108 $11,107 $11,752 31-Mar-02 $11,237 $11,858 $11,857 $12,592 30-Apr-02 $11,072 $11,682 $11,681 $12,533 31-May-02 $10,812 $11,398 $11,398 $12,322 30-Jun-02 $9,977 $10,507 $10,506 $11,420 31-Jul-02 $8,899 $9,366 $9,365 $10,314 31-Aug-02 $8,954 $9,424 $9,432 $10,365 30-Sep-02 $8,340 $8,765 $8,773 $9,530 31-Oct-02 $8,631 $9,065 $9,073 $9,943 30-Nov-02 $9,229 $9,690 $9,699 $10,519 31-Dec-02 $8,595 $9,027 $9,036 $10,086 31-Jan-03 $8,483 $8,899 $8,910 $9,792 28-Feb-03 $8,307 $8,721 $8,724 $9,559 31-Mar-03 $8,387 $8,450 $8,799 $9,639
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. S&P STARS OPPORTUNITIES PORTFOLIO Class A shares $8,387 Class B shares 8,450 Class C shares 8,799 S&P MidCap 400 Index 9,639
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003 ---------------------------------------------- SINCE INCEPTION ONE YEAR AVERAGE ANNUAL(7) -------- ----------------- S&P STARS Opportunities Portfolio(2) Class A shares(5) ..................... (29.47)% (11.10)% Class B shares(4) ..................... (29.44) (10.62) Class C shares(6) ..................... (26.52) (8.19) Class Y shares(3) ..................... (25.03) (7.26) S&P MidCap 400 Index(1) .................. (23.45) (2.43)
- ---------- (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 index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The returns of Class Y shares are higher than Class A, B and C shares. The higher returns are due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) Reflects the applicable CDSC. Without the applicable sales charge, the total returns would have been (25.79)% and (8.19)%, respectively, for each period shown. Assuming no redemption of shares at the end of the period, the return of Class B shares would have been higher than Class A shares and would have been substantially the same as Class C shares. The higher return is due to the fact that there is no initial sales charge on Class B shares. (5) Reflects the initial maximum sales charge of 5.50%, for each period shown. Without the applicable sales charge, the total returns would have been (25.36)% and (7.67)% respectively, for each period shown. (6) Reflects the applicable CDSC. Without the applicable sales charge, the total return for the one year ended March 31, 2003 would have been (25.79)%. (7) For the period October 1, 2001 (commencement of investment operations) through March 31, 2003. CDSC - Contingent Deferred Sales Charge 8 THE BEAR STEARNS FUNDS The Insiders Select Fund [CHART] COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(5) VS. ITS BROAD-BASED INDEX
DOLLARS CLASS A SHARES CLASS C SHARES S&P MIDCAP 400 INDEX 16-Jun-95 $9,450 $10,000 $10,000 30-Sep-95 $10,387 $10,975 $11,123 31-Mar-96 $11,033 $11,624 $11,977 30-Sep-96 $12,114 $12,732 $12,680 31-Mar-97 $13,055 $13,689 $13,249 30-Sep-97 $16,629 $17,386 $17,639 31-Mar-98 $19,064 $19,873 $19,745 30-Sep-98 $15,845 $16,478 $16,526 31-Mar-99 $19,121 $19,841 $19,834 30-Sep-99 $18,616 $19,273 $20,740 31-Mar-00 $19,198 $19,830 $27,388 30-Sep-00 $21,638 $22,299 $29,702 31-Mar-01 $22,632 $23,264 $25,482 30-Sep-01 $19,957 $20,473 $24,058 31-Mar-02 $23,684 $24,228 $30,294 30-Sep-02 $17,183 $17,529 $22,928 31-Mar-03 $17,337 $17,633 $23,190
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE INSIDERS SELECT FUND Class A shares $17,337 Class C shares 17,633 S&P MidCap 400 Index 23,190
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003 --------------------------------------------------- 5-YEAR SINCE INCEPTION ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7) -------- -------------- ----------------- The Insiders Select Fund(2) Class A shares(5) ................. (30.82)% (2.98)% 7.31% Class B shares(4) ................. (30.74) (2.65) (0.16) Class C shares(6) ................. (27.95) (2.37) 7.55 Class Y shares(3) ................. (26.18) (1.38) 8.49 S&P MidCap 400 Index(1) ................ (23.45) 3.27 11.40
- ---------- (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 index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. ' (3) The returns of Class Y shares (for which June 20, 1995 was the initial public offering date) are higher than Class A, B and C shares. The higher returns are due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) Reflects the applicable CDSC. Without the applicable sales charge, the total returns would have been (27.10)%, (2.35)% and (0.02)%, respectively, for each period shown. Assuming no redemption of shares at the end of the period, the return of Class B shares (for which January 6, 1998 was the initial public offering date) would have been higher than Class A shares and would have been substantially the same as Class C shares if operations were commenced on the same day. The higher return is due to the fact that there is no initial sales charge on Class B shares. (5) Reflects the initial maximum sales charge of 5.50%, for each period shown. Without the applicable sales charge, the total returns would have been (26.80)%, (1.88)% and 8.10% respectively, for each period shown. (6) Reflects the applicable CDSC. Without the applicable sales charge, the total return for the one year ended March 31, 2003 would have been (27.22)%. (7) For the period of June 16, 1995 (commencement of investment operations) through March 31, 2003, unless otherwise indicated. CDSC - Contingent Deferred Sales Charge 9 THE BEAR STEARNS FUNDS Intrinsic Value Portfolio [CHART] COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(5) VS. ITS BROAD-BASED INDEX
DOLLARS CLASS A SHARES CLASS C SHARES S&P 500 COMPOSITE INDEX 4-Apr-95 $9,450 $10,000 $10,000 30-Sep-95 $11,206 $11,824 $11,796 31-Mar-96 $11,941 $12,569 $13,177 30-Sep-96 $12,161 $12,769 $14,194 31-Mar-97 $13,781 $14,422 $15,790 30-Sep-97 $17,385 $18,139 $19,936 31-Mar-98 $19,926 $20,760 $23,369 30-Sep-98 $17,574 $18,259 $21,739 31-Mar-99 $20,660 $21,425 $27,682 30-Sep-99 $20,117 $20,804 $27,782 31-Mar-00 $19,649 $20,273 $32,648 30-Sep-00 $22,128 $22,772 $31,472 31-Mar-01 $24,322 $24,969 $25,570 30-Sep-01 $22,069 $22,605 $23,094 31-Mar-02 $25,471 $26,015 $25,632 30-Sep-02 $18,140 $18,477 $18,363 31-Mar-03 $18,953 $19,263 $19,284
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INTRINSIC VALUE PORTFOLIO Class A shares $18,953 Class C shares 19,263 S&P 500 Composite Index 19,284
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003 ------------------------------------------------ 5-YEAR SINCE INCEPTION ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7) -------- -------------- ----------------- Intrinsic Value Portfolio(2) Class A shares(5) ................. (29.70)% (2.11)% 8.33% Class B shares(4) ................. (29.71) (1.81) 0.87 Class C shares(6) ................. (26.69) (1.48) 8.55 Class Y shares(3) ................. (24.92) (0.42) 8.05 S&P 500 Composite Index(1) ............. (24.76) (3.77) 8.56
- ---------- (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 index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The returns of Class Y shares (for which September 11, 1995 was the initial public offering date) for the one year and 5-year average annual periods are higher than Class A, B and C shares. The higher returns are due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. The Class Y since inception average annual returns are not comparable to Class A, B and C shares due to the timing differences in the commencement of initial public offerings. (4) Reflects the applicable CDSC. Without the applicable sales charge, the total returns would have been (26.02)%, (1.51)% and 1.02%, respectively, for each period shown. Assuming no redemption of shares at the end of the period, the average annual return of Class B shares (for which January 28, 1998 was the initial public offering date) would have been higher than Class A shares and would have been substantially the same as Class C shares if operations were commenced on the same day. The higher return is due to the fact that there is no initial sales charge on Class B shares. (5) Reflects the initial maximum sales charge of 5.50%, for each period shown. Without the applicable sales charge, the total returns would have been (25.60)%, (1.00)% and 9.10% respectively, for each period shown. (6) Reflects the applicable CDSC. Without the applicable sales charge, the total return for the one year ended March 31, 2003 would have been (25.95)%. (7) For the period April 4, 1995 (commencement of investment operations) through March 31, 2003, unless otherwise indicated. CDSC - Contingent Deferred Sales Charge 10 THE BEAR STEARNS FUNDS Small Cap Value Portfolio [CHART] COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(5) VS. ITS BROAD-BASED INDEX
DOLLARS CLASS A SHARES CLASS C SHARES RUSSELL 2000 INDEX 3-Apr-95 $9,450 $10,000 $10,000 30-Sep-95 $11,963 $12,625 $12,000 31-Mar-96 $12,698 $13,361 $12,885 30-Sep-96 $14,139 $14,824 $13,576 31-Mar-97 $14,187 $14,845 $13,543 30-Sep-97 $18,528 $19,337 $18,081 31-Mar-98 $20,832 $21,689 $19,233 30-Sep-98 $14,885 $15,462 $14,643 31-Mar-99 $16,610 $17,203 $16,107 30-Sep-99 $18,898 $19,525 $17,435 31-Mar-00 $22,956 $23,671 $22,114 30-Sep-00 $21,984 $22,601 $21,513 31-Mar-01 $20,283 $20,813 $18,724 30-Sep-01 $19,578 $20,028 $16,951 31-Mar-02 $24,037 $24,508 $21,342 30-Sep-02 $17,022 $17,291 $15,374 31-Mar-03 $16,361 $16,555 $15,588
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. SMALL CAP VALUE PORTFOLIO Class A shares $16,361 Class C shares 16,555 Russell 2000 Index 15,588
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003 ------------------------------------------------- 5-YEAR SINCE INCEPTION ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(7) -------- -------------- ----------------- Small Cap Value Portfolio(2) Class A shares(5) ................. (35.70)% (5.79)% 6.35% Class B shares(4) ................. (35.65) (5.55) (2.20) Class C shares(6) ................. (33.08) (5.25) 6.51 Class Y shares(3) ................. (31.59) (4.25) 6.61 Russell 2000 Index(1) .................. (26.96) (4.12) 5.71
- ---------- (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 index is unmanaged, does not incur sales charges or expenses, and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The returns of Class Y shares (for which June 22, 1995 was the initial public offering date) are higher than Class A, B and C shares. The higher returns are due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) Reflects the applicable CDSC. Without the applicable sales charge, the total returns would have been (32.52)%, (5.28)% and (2.07)%, respectively, for each period shown. Assuming no redemption of shares at the end of the period, the return of Class B shares (for which January 21, 1998 was the initial public offering date) would have been higher than Class A shares and would have been substantially the same as Class C shares if operations were commenced on the same day. The higher return is due to the fact that there is no initial sales charge on Class B shares. (5) Reflects the maximum sales charge of 5.50%, for each period shown. Without the applicable sales charge, the total returns would have been (31.94)%, (4.72)% and 7.11%, respectively, for each period shown. (6) Reflects the applicable CDSC. Without the applicable sales charge, the total return for the one year ended March 31, 2003 would have been (32.45)%. (7) For the period April 3, 1995 (commencement of investment operations) through March 31, 2003, unless otherwise indicated. CDSC - Contingent Deferred Sales Charge 11 THE BEAR STEARNS FUNDS Alpha Growth Portfolio [CHART] COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A, B AND C SHARES(1)(2)(4)(5) VS. ITS BROAD-BASED INDEX
DOLLARS CLASS A SHARES CLASS B SHARES CLASS C SHARES S&P 500 COMPOSITE INDEX 31-Dec-97 $9,450 $10,000 $10,000 $10,000 31-Mar-98 $10,553 $11,149 $11,149 $11,395 30-Sep-98 $9,515 $10,024 $10,024 $10,600 31-Mar-99 $13,664 $14,338 $14,348 $13,498 30-Sep-99 $13,428 $14,046 $14,055 $13,547 31-Mar-00 $16,735 $17,468 $17,477 $15,920 30-Sep-00 $14,643 $15,246 $15,258 $15,346 31-Mar-01 $13,215 $13,738 $13,739 $12,469 30-Sep-01 $12,102 $12,544 $12,546 $11,261 31-Mar-02 $14,863 $15,367 $15,377 $12,499 30-Sep-02 $12,456 $12,862 $12,857 $8,954 31-Mar-03 $12,281 $12,564 $12,681 $9,403
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ALPHA GROWTH PORTFOLIO Class A shares $12,281 Class B shares 12,564 Class C shares 12,681 S&P 500 Composite Index 9,403
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003 ---------------------------------------------------- 5-YEAR SINCE INCEPTION ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(3) -------- -------------- ----------------- Alpha Growth Portfolio(2) Class A shares(4) ................. (21.92)% 1.92% 3.99% Class B shares(5) ................. (21.72) 2.21 4.44 Class C shares(6) ................. (18.36) 2.60 4.62 S&P 500 Composite Index(1) ............. (24.76) (3.77) (0.48)
- ---------- (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 index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to reimburse a portion of the Portfolio's operating expenses 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) For the period of December 29, 1997 (commencement of investment operations) through March 31, 2003. (4) Reflects the initial maximum sales charge of 5.50%, for each period. Without the applicable sales charge, the total returns would have been (17.36)%, 3.08% and 5.12%, respectively, for each period shown. (5) Reflects the applicable CDSC. Without the applicable sales charge, the total returns would have been (17.60)%, 2.58% and 4.60%, respectively, for each period shown. (6) Reflects the applicable CDSC. Without the applicable sales charge, the total return for the one year ended March 31, 2003 would have been (17.54)%. CDSC - Contingent Deferred Sales Charge 12 THE BEAR STEARNS FUNDS International Equity Portfolio [CHART] COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A, B AND C SHARES(1)(2)(5)(6) VS. ITS BROAD-BASED INDEX
DOLLARS CLASS A SHARES CLASS B SHARES CLASS C SHARES MSCI EAFE INDEX 31-Dec-97 $9,450 $10,000 $10,000 $10,000 31-Mar-98 $10,843 $11,458 $11,458 $11,479 30-Sep-98 $10,197 $10,751 $10,751 $9,966 31-Mar-99 $11,924 $12,544 $12,545 $12,209 30-Sep-99 $13,507 $14,170 $14,171 $13,086 31-Mar-00 $22,141 $23,164 $23,165 $15,311 30-Sep-00 $17,028 $17,768 $17,769 $13,535 31-Mar-01 $14,173 $14,754 $14,745 $11,380 30-Sep-01 $11,652 $12,086 $12,086 $9,708 31-Mar-02 $11,821 $12,240 $12,241 $10,444 30-Sep-02 $9,367 $9,675 $9,676 $8,226 31-Mar-03 $8,327 $8,480 $8,573 $8,047
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INTERNATIONAL EQUITY PORTFOLIO Class A shares $8,327 Class B shares 8,480 Class C shares 8,573 MSCI EAFE Index 8,047
TOTAL RETURNS FOR PERIODS ENDED MARCH 31, 2003 ------------------------------------------------- 5-YEAR SINCE INCEPTION ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL(3) -------- -------------- ----------------- International Equity(2) Class A shares(5) ................. (33.44)% (6.21)% (3.43)% Class B shares(6) ................. (33.53) (6.02) (3.09) Class C shares(7) ................. (30.66) (5.63) (2.89) Class Y Shares(4) ................. (29.07) N/A (23.91) MSCI EAFE Index(1) ..................... (22.95) (6.86) (3.65)
- ---------- (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 index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) For the period of December 29, 1997 (commencement of investment operations) through March 31, 2003. (4) The returns of Class Y (for which July 5, 2001 was the initial public offering date) for the one year period are higher than Class A, B and C shares. The higher return is due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. The Class Y since inception average annual returns are not comparable to Class A, B and C shares due to the timing differences in the commencement of initial public offerings. (5) Reflects the initial maximum sales charge of 5.50%, for each period. Without the applicable sales charge, the total returns would have been (29.58)%, (5.15)% and (2.38)% respectively, for each period shown. (6) Reflects the applicable CDSC. Without the applicable sales charge, total returns would have been (30.03)%, (5.65)% and (2.91)%, respectively, for each period shown. (7) Reflects the applicable CDSC. Without the applicable sales charge, the total return for the one year ended March 31, 2003 would have been (29.96)%. CDSC - Contingent Deferred Sales Charge 13 THE BEAR STEARNS FUNDS S&P STARS Portfolio MARCH 31, 2003 (UNAUDITED) ================================================================================ TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ---- --------------------------------------------------------------------------- ---------- 1. Pharmaceutical Preparations ............................................... 6.81 2. Eating Places ............................................................. 4.77 3. Cable & Other Pay TV Services ............................................. 4.02 4. Drilling Oil & Gas Wells .................................................. 3.84 5. Surgical & Medical Instruments ............................................ 3.43 6. Bank Holding Companies .................................................... 3.34 7. Security Brokers & Dealers ................................................ 3.21 8. Crude Petroleum & Natural Gas ............................................. 3.19 9. Prepackaged Software ...................................................... 3.12 10. Telephone Communications .................................................. 3.06
================================================================================ TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ------------------------------------- ----------------------------------- ---------- 1. Pfizer Inc. ......................... Pharmaceutical Preparations 4.44 2. Comcast Corp. ....................... Cable & Other Pay TV Services 4.02 3. Lehman Brothers Holdings Inc. ....... Security Brokers & Dealers 3.21 4. DoubleClick, Inc. ................... Advertising 2.95 5. MetLife, Inc. ....................... Life Insurance 2.77 6. Wendy's International, Inc. ......... Eating Places 2.70 7. Analog Devices, Inc. ................ Semiconductors & Related Devices 2.70 8. Cisco Systems, Inc. ................. Computer Peripheral Equipment 2.67 9. Eaton Vance Corp. ................... Investment Advisory Service 2.53 10. Constellation Brands, Inc. .......... Wines, Brandy & Brandy Spirits 2.46
- ---------- * Top ten holdings are provided for informational purposes only and should not be deemed as a recommendation to purchase or sell securities mentioned. The Portfolio is actively managed, therefore holdings may not be current. Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may seek to perform investment banking services for the companies listed. 14 THE BEAR STEARNS FUNDS S&P STARS Opportunities Portfolio MARCH 31, 2003 (UNAUDITED) ================================================================================ TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ---- --------------------------------------------------------------------------- ---------- 1. Bank Holding Companies .................................................... 6.63 2. Pharmaceutical Preparations ............................................... 6.55 3. Semiconductors & Related Devices .......................................... 4.04 4. Eating Places ............................................................. 3.91 5. Drilling Oil & Gas Wells .................................................. 3.83 6. Prepackaged Software ...................................................... 3.74 7. Business Services ......................................................... 3.16 8. Biological Products ....................................................... 2.64 9. Business Consulting ....................................................... 2.42 10. Real Estate Investment Trusts ............................................. 2.24
================================================================================ TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ---------------------------------------- ----------------------------------- ---------- 1. Laboratory Corp. of America Holdings ... Pharmaceutical Preparations 2.98 2. FTI Consulting, Inc. ................... Business Consulting 2.42 3. Regis Corp. ............................ Beauty Shops 2.02 4. Praxair, Inc. .......................... Chemicals & Allied Products 1.77 5. Constellation Brands, Inc. ............. Wines, Brandy & Brandy Spirits 1.76 6. American Standard Cos. Inc. ............ Refrigeration & Heating Equipment 1.73 7. National Commerce Financial Corp. ...... National Banks 1.72 8. ALLTEL Corp. ........................... Telephone Communications 1.69 9. Lehman Brothers Holdings Inc. .......... Security Brokers & Dealers 1.68 10. Banknorth Group, Inc. .................. Bank Holding Companies 1.65
- ---------- * Top ten holdings are provided for informational purposes only and should not be deemed as a recommendation to purchase or sell securities mentioned. The Portfolio is actively managed, therefore holdings may not be current. Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may seek to perform investment banking services for the companies listed. 15 THE BEAR STEARNS FUNDS The Insiders Select Fund MARCH 31, 2003 (UNAUDITED) ================================================================================ TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ---- --------------------------------------------------------------------------- ---------- 1. Bank Holding Companies .................................................... 9.05 2. Department Stores ......................................................... 5.38 3. Crude Petroleum & Natural Gas ............................................. 5.06 4. Motion Picture & Video Production ......................................... 3.99 5. Life Insurance ............................................................ 3.51 6. General Medical & Surgical Hospitals ...................................... 3.34 7. Electric Services ......................................................... 3.32 8. Woodworking Machinery ..................................................... 3.31 9. Accident & Health Insurance ............................................... 3.26 10. Semiconductors & Related Devices .......................................... 3.20
================================================================================ TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ------------------------------------------ ------------------------------------- ---------- 1. Liberty Media Corp. ...................... Motion Picture & Video Production 3.99 2. Lincoln National Corp. ................... Life Insurance 3.51 3. Washington Mutual, Inc. .................. Bank Holding Companies 3.48 4. PNC Financial Services Group, Inc. (The) . Bank Holding Companies 3.42 5. HCA Inc. ................................. General Medical & Surgical Hospitals 3.34 6. FPL Group, Inc. .......................... Electric Services 3.32 7. Pentair, Inc. ............................ Woodworking Machinery 3.31 8. AFLAC Inc. ............................... Accident & Health Insurance 3.26 9. National Semiconductor Corp. ............. Semiconductors & Related Devices 3.20 10. Sunoco, Inc. ............................. Petroleum Refining 3.19
- ---------- * Top ten holdings are provided for informational purposes only and should not be deemed as a recommendation to purchase or sell securities mentioned. The Portfolio is actively managed, therefore holdings may not be current. Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may seek to perform investment banking services for the companies listed. 16 THE BEAR STEARNS FUNDS Intrinsic Value Portfolio MARCH 31, 2003 (UNAUDITED) ================================================================================ TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ---- --------------------------------------------------------------------------- ---------- 1. Bank Holding Companies .................................................... 10.06 2. Motion Picture & Video Production ......................................... 5.46 3. Petroleum Refining ........................................................ 4.95 4. National Banks ............................................................ 4.92 5. Pharmaceutical Preparations ............................................... 4.65 6. Department Stores ......................................................... 4.39 7. Telephone Communications .................................................. 4.31 8. Fire, Marine & Casualty Insurance ......................................... 4.16 9. Commercial Banks .......................................................... 3.98 10. Life Insurance ............................................................ 3.61
================================================================================ TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ------------------------------------------ ------------------------------------- ---------- 1. Citigroup Inc. ........................... Commercial Banks 3.98 2. Liberty Media Corp. ...................... Motion Picture & Video Production 3.62 3. Fannie Mae ............................... U.S. Government Agency 3.10 4. Bank of America Corp. .................... Bank Holding Companies 2.96 5. General Electric Co. ..................... Electric & Electronic Equipment 2.95 6. Interpublic Group of Cos., Inc. (The) .... Advertising Agencies 2.91 7. American International Group, Inc. ....... Fire, Marine & Casualty Insurance 2.63 8. J.P. Morgan Chase & Co. .................. Bank Holding Companies 2.62 9. McDonald's Corp. ......................... Eating Places 2.60 10. MGIC Investment Corp. .................... Holding Offices 2.58
- ---------- * Top ten holdings are provided for informational purposes only and should not be deemed as a recommendation to purchase or sell securities mentioned. The Portfolio is actively managed, therefore holdings may not be current. Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may seek to perform investment banking services for the companies listed. 17 THE BEAR STEARNS FUNDS Small Cap Value Portfolio MARCH 31, 2003 (UNAUDITED) ================================================================================ TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ---- --------------------------------------------------------------------------- ---------- 1. Bank Holding Companies .................................................... 7.83 2. Real Estate Investment Trusts ............................................. 7.23 3. Electric Services ......................................................... 4.40 4. Semiconductors & Related Devices .......................................... 3.78 5. State Banks ............................................................... 3.39 6. Information Retrieval Services ............................................ 3.16 7. Alkalies & Chlorine ....................................................... 3.08 8. Oil & Gas Field Services .................................................. 3.06 9. Analytical Instruments .................................................... 2.82 10. Plastics Products ......................................................... 2.69
================================================================================ TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ------------------------------------------ ------------------------------------- ---------- 1. FactSet Research Systems Inc. ............ Information Retrieval Services 3.16 2. Olin Corp. ............................... Alkalies & Chlorine 3.08 3. Key Energy Services, Inc. ................ Oil & Gas Field Services 3.06 4. Tupperware Corp. ......................... Plastics Products 2.69 5. Glenborough Realty Trust Inc. ............ Real Estate Investment Trusts 2.63 6. First BanCorp. ........................... State Banks 2.63 7. Adaptec, Inc. ............................ Electronic Computers 2.62 8. Electronics For Imaging, Inc. ............ Prepackaged Software 2.55 9. Mueller Industries, Inc. ................. Copper Foundries 2.55 10. Renal Care Group, Inc. ................... Kidney Dialysis Centers 2.55
- ---------- * Top ten holdings are provided for informational purposes only and should not be deemed as a recommendation to purchase or sell securities mentioned. The Portfolio is actively managed, therefore holdings may not be current. Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may seek to perform investment banking services for the companies listed. 18 THE BEAR STEARNS FUNDS Alpha Growth Portfolio MARCH 31, 2003 (UNAUDITED) ================================================================================ TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ---- --------------------------------------------------------------------------- ---------- 1. Prepackaged Software ...................................................... 5.59 2. Bank Holding Companies .................................................... 5.35 3. Business Services ......................................................... 4.26 4. Crude Petroleum & Natural Gas ............................................. 4.13 5. Computer Peripheral Equipment ............................................. 4.06 6. Electric & Other Services Combined ........................................ 3.88 7. Electric Services ......................................................... 3.54 8. Newspapers ................................................................ 3.48 9. Photographic Equipment & Supplies ......................................... 3.47 10. Misc. Food Stores ......................................................... 2.46
================================================================================ TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ---------------------------------------------- ------------------------------------- ---------- 1. Starbucks Corp. .............................. Misc. Food Stores 2.46 2. eBay Inc. .................................... Business Services 2.46 3. Genzyme General .............................. Diagnostic Substances 2.44 4. Apollo Group, Inc. ........................... Colleges & Universities 2.21 5. Burlington Resources Inc. .................... Crude Petroleum & Natural Gas 2.21 6. Expeditors International of Washington, Inc. . Freight Transportation Arrangement 2.17 7. Lexmark International, Inc. .................. Computer Peripheral Equipment 2.16 8. PACCAR Inc. .................................. Construction Machinery 2.12 9. International Game Technology ................ Manufacturing Industries 2.12 10. Avon Products, Inc. .......................... Toilet Preparations 2.10
- ---------- * Top ten holdings are provided for informational purposes only and should not be deemed as a recommendation to purchase or sell securities mentioned. Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may seek to perform investment banking services for the companies listed. All holdings were equally weighted on January 1, 2003. Differences in percentage holdings of each security after January 1, 2003 are due to market movement. 19 THE BEAR STEARNS FUNDS International Equity Portfolio MARCH 31, 2003 (UNAUDITED) ================================================================================ TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ---- --------------------------------------------------------------------------- ---------- 1. Foreign Banks, Branches & Agencies ........................................ 10.95 2. Photographic Equipment & Supplies ......................................... 6.18 3. Pharmaceutical Preparations ............................................... 5.46 4. Telephone Communications .................................................. 4.94 5. Radio & Telephone Communications .......................................... 4.57 6. Television Broadcasting ................................................... 4.38 7. Coal, Other Minerals & Ores ............................................... 4.19 8. Metal Ores ................................................................ 3.93 9. Bank Holding Companies .................................................... 3.83 10. Electronic Components ..................................................... 3.60
================================================================================ TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ---------------------------------------------- ------------------------------------- ---------- 1. Vodafone Group plc ........................... Radio & Telephone Communications 4.21 2. BHP Billiton Ltd. ............................ Coal, Other Minerals & Ores 4.19 3. Canon, Inc. .................................. Photographic Equipment & Supplies 4.04 4. Rio Tinto plc ................................ Metal Ores 3.93 5. British Sky Broadcasting Group plc ........... Television Broadcasting 3.86 6. Standard Chartered plc ....................... Foreign Banks, Branches & Agencies 3.84 7. HSBC Holdings plc ............................ Bank Holding Companies 3.83 8. Nokia Oyj .................................... Communications Equipment 2.44 9. News Corp. Ltd. (The) ........................ Newspapers 2.41 10. Telefonica, S.A. ............................. Telephone Communications 2.34
- ---------- * Top ten holdings are provided for informational purposes only and should not be deemed as a recommendation to purchase or sell securities mentioned. The Portfolio is actively managed, therefore holdings may not be current. Bear, Stearns & Co. Inc. or its affiliates may hold positions in or may seek to perform investment banking services for the companies listed. 20 THE BEAR STEARNS FUNDS S&P STARS Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS -- 102.42% ADVERTISING - 2.95% 4,450,000 DoubleClick, Inc.++* ............................. $ 34,576,500 -------------- AUTO & HOME SUPPLY STORES - 1.82% 310,000 AutoZone, Inc.* .................................. 21,300,100 -------------- BANK HOLDING COMPANIES - 3.34% 350,000 Bank of America Corp. ............................ 23,394,000 450,000 Sovereign Bancorp, Inc. .......................... 6,232,500 270,000 Washington Mutual, Inc. .......................... 9,522,900 -------------- 39,149,400 -------------- BIOLOGICAL PRODUCTS - 2.41% 490,000 Amgen Inc.* ...................................... 28,199,500 -------------- BLAST FURNACES & STEEL MILLS - 0.96% 295,000 Nucor Corp. ...................................... 11,260,150 -------------- BOOK PUBLISHING - 0.60% 260,000 Scholastic Corp.++ * ............................. 6,994,000 -------------- BOOK STORES - 1.95% 1,200,000 Barnes & Noble, Inc.++ * ......................... 22,788,000 -------------- BOTTLED & CANNED SOFT DRINKS - 1.98% 580,000 PepsiCo, Inc. .................................... 23,200,000 -------------- BUSINESS SERVICES - 0.57% 330,000 Watson Wyatt & Co. Holdings+ * ................... 6,633,000 -------------- CABLE & OTHER PAY TV SERVICES - 4.02% 1,710,000 Comcast Corp., Special Class A* .................. 47,007,900 -------------- CIRCUIT BOARDS - 2.45% 3,290,000 Flextronics International Ltd.* .................. 28,688,800 -------------- COMMERCIAL BANKS - 2.44% 830,000 Citigroup Inc. ................................... 28,593,500 -------------- COMMERCIAL NONPHYSICAL RESEARCH - 0.39% 100,000 Moody's Corp.+ ................................... 4,623,000 -------------- COMPUTER PERIPHERAL EQUIPMENT - 2.67% 2,410,000 Cisco Systems, Inc.* ............................. 31,281,800 -------------- COMPUTER RELATED SERVICES - 1.71% 8,000,000 CNET Networks, Inc.^*(a) ......................... 20,080,000 -------------- CRUDE PETROLEUM & NATURAL GAS - 3.19% 463,000 Apache Corp. ..................................... $ 28,585,620 440,000 Ocean Energy, Inc. ............................... 8,800,000 -------------- 37,385,620 -------------- DRILLING OIL & GAS WELLS - 3.84% 970,000 GlobalSantaFe Corp. .............................. 20,030,500 790,000 Noble Corp.+* .................................... 24,821,800 -------------- 44,852,300 -------------- DRUG STORES & PROPRIETARY STORES - 2.24% 1,100,000 CVS Corp. ........................................ 26,235,000 -------------- DRUGS, PROPRIETARIES & SUNDRIES - 2.29% 470,000 Cardinal Health, Inc. ............................ 26,775,900 -------------- EATING PLACES - 4.77% 860,000 Applebee's International, Inc. ................... 24,114,400 1,150,000 Wendy's International, Inc. ...................... 31,636,500 -------------- 55,750,900 -------------- ELECTRIC SERVICES - 0.36% 2,600,000 Mirant Corp.++* .................................. 4,160,000 -------------- ELECTRONIC RESISTORS - 2.00% 2,300,000 Vishay Intertechnology, Inc.++* .................. 23,414,000 -------------- HEALTH & ALLIED SERVICES - 2.03% 310,000 WellPoint Health Networks Inc.+* ................. 23,792,500 -------------- HOBBY, TOY & GAME SHOPS - 1.50% 2,100,000 Toys "R" Us, Inc.+* .............................. 17,577,000 -------------- INFORMATION RETRIEVAL SERVICES - 0.32% 3,870,000 SportsLine.com, Inc.^*(a) ........................ 3,792,600 -------------- INVESTMENT ADVISORY SERVICE - 2.53% 1,110,000 Eaton Vance Corp.++ .............................. 29,670,300 -------------- LIFE INSURANCE - 2.77% 1,230,000 MetLife, Inc. .................................... 32,447,400 -------------- PAPERBOARD MILLS - 1.12% 980,000 Smurfit-Stone Container Corp.* ................... 13,091,820 -------------- PETROLEUM REFINING - 1.31% 440,000 Exxon Mobil Corp. ................................ 15,378,000 --------------
The accompanying notes are an integral part of the financial statements. 21 THE BEAR STEARNS FUNDS S&P STARS Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) PHARMACEUTICAL PREPARATIONS - 6.81% 930,000 Laboratory Corp. of America Holdings+* ........... $ 27,574,500 1,670,000 Pfizer Inc. ...................................... 52,037,200 -------------- 79,611,700 -------------- PREPACKAGED SOFTWARE - 3.12% 2,180,000 E.piphany, Inc.^* ................................ 8,676,400 1,150,000 Microsoft Corp. .................................. 27,841,500 -------------- 36,517,900 -------------- PUBLIC BUILDING & RELATED FURNITURE - 1.96% 650,000 Lear Corp.* ...................................... 22,977,500 -------------- RAILROADS - 2.25% 480,000 Union Pacific Corp.+ ............................. 26,400,000 -------------- REAL ESTATE INVESTMENT TRUSTS - 2.00% 630,000 Chelsea Property Group, Inc. ..................... 23,467,500 -------------- REFRIGERATION & HEATING EQUIPMENT - 2.35% 400,000 American Standard Cos. Inc.* ..................... 27,508,000 -------------- SECURITY BROKERS & DEALERS - 3.21% 650,000 Lehman Brothers Holdings Inc.(b) ................. 37,537,500 -------------- SECURITY SYSTEMS SERVICES - 1.43% 1,300,000 Tyco International Ltd.++ ........................ 16,718,000 -------------- SEMICONDUCTORS & RELATED DEVICES - 2.70% 1,150,000 Analog Devices, Inc.* ............................ 31,625,000 -------------- SOAP & OTHER DETERGENTS - 2.09% 275,000 Procter & Gamble Co. (The) ....................... 24,488,750 -------------- SPECIAL INDUSTRY MACHINERY - 0.95% 410,000 Novellus Systems, Inc.* .......................... 11,180,700 -------------- SURETY INSURANCE - 2.07% 480,000 Ambac Financial Group, Inc.+ ..................... 24,249,600 -------------- SURGICAL & MEDICAL INSTRUMENTS - 3.43% 490,000 Boston Scientific Corp.* ......................... 19,972,400 3,130,000 Intuitive Surgical, Inc.++*(a) ................... 20,219,800 -------------- 40,192,200 -------------- TELEPHONE COMMUNICATIONS - 3.06% 340,000 ALLTEL Corp. ..................................... $ 15,218,400 4,720,000 Sprint Corp. (PCS Group)+++* ..................... 20,579,200 -------------- 35,797,600 -------------- TRANSMISSION EQUIPMENT - 0.51% 320,000 Kaydon Corp. ..................................... 6,022,400 -------------- WINES, BRANDY & BRANDY SPIRITS - 2.46% 1,270,000 Constellation Brands, Inc., Class A* ............. 28,829,000 -------------- X-RAY APPARATUS & TUBES - 1.49% 500,000 DENTSPLY International Inc. ...................... 17,395,000 -------------- Total Common Stocks (cost -- $1,535,656,140) ....................... 1,199,217,340 -------------- SHORT-TERM INVESTMENT -- 0.00% INVESTMENT COMPANY - 0.00% 91 Federated Government Obligations 1.16%^** (cost - $91) ................................... 91 -------------- Total Investments -- 102.42% (cost - $1,535,656,231) ........................ 1,199,217,431 Securities Lending Collateral(c) -- 4.85% 56,772,017 Liabilities in excess of other assets -- (7.27)% .............................. (85,088,431) -------------- Net Assets -- 100.00% ............................ $1,170,901,017 ==============
The accompanying notes are an integral part of the financial statements. 22 THE BEAR STEARNS FUNDS S&P STARS Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- SHORT SALES OF COMMON STOCKS -- (1.08)% GROCERY STORES - (0.03)% 80,000 Great Atlantic & Pacific Tea Co., Inc. (The)++++* ....................... $ 344,800 ----------- ICE CREAM & FROZEN DESSERTS - (0.71)% 120,000 Dreyer's Grand Ice Cream, Inc.++++ ............... 8,318,400 ----------- MOTOR VEHICLES & CAR BODIES - (0.34)% 160,000 Navistar International Corp.++++ ................. 3,937,600 ----------- Total Short Sales of Common Stocks (proceeds received - $12,228,002) .............. $12,600,800 ===========
- ---------- Unless otherwise indicated, all common stocks held long are ranked as five stars. + Currently ranked as four stars. ++ Currently ranked as three stars. +++ Currently ranked as two stars. ++++ Currently ranked as one star. ^ Not ranked by stars. * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2003. (a) Affiliated company; see additional disclosure in the financial statements and notes thereto. (b) A portion of this security is used as collateral for securities sold short. (c) Cash collateral invested in various money market mutual funds. S&P STARS RANKING: Five stars -- Buy -- Expect to be among best performers over next 12 months and to rise in price. Four stars -- Accumulate -- Expect to be an above average performer. Three stars -- Hold -- Expect to be an average performer. Two stars -- Avoid -- Expect to be a below average performer. One star -- Sell -- Expect to be a well below average performer and to fall in price. The accompanying notes are an integral part of the financial statements. 23 THE BEAR STEARNS FUNDS S&P STARS Opportunities Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS - 97.60% ADVERTISING - 0.74% 45,400 DoubleClick, Inc.++* ............................. $ 352,758 ----------- ALUMINUM FOUNDRIES - 0.95% 16,000 Newell Rubbermaid Inc. ........................... 453,600 ----------- ANALYTICAL INSTRUMENTS - 0.81% 32,000 Molecular Devices Corp.^* ........................ 387,200 ----------- AUTO & HOME SUPPLY STORES - 0.86% 6,000 AutoZone, Inc.* .................................. 412,260 ----------- BAGS - PLASTIC, LAMINATED & COATED - 1.07% 25,200 Pactiv Corp.+* ................................... 511,560 ----------- BANK HOLDING COMPANIES - 6.63% 36,000 Banknorth Group, Inc. ............................ 785,159 15,000 City National Corp. .............................. 659,100 17,000 Commerce Bancorp, Inc. ........................... 675,580 18,000 Compass Bancshares, Inc. ......................... 562,860 34,000 Sovereign Bancorp, Inc. .......................... 470,900 ----------- 3,153,599 ----------- BEAUTY SHOPS - 2.02% 38,600 Regis Corp.+ ..................................... 961,526 ----------- BIOLOGICAL PRODUCTS - 2.64% 13,000 Cephalon, Inc.* .................................. 519,220 24,200 Invitrogen Corp.* ................................ 741,246 ----------- 1,260,466 ----------- BLAST FURNACES & STEEL MILLS - 1.20% 15,000 Nucor Corp. ...................................... 572,550 ----------- BOOK PUBLISHING - 0.76% 13,450 Scholastic Corp.++* .............................. 361,805 ----------- BOOK STORES - 1.22% 30,550 Barnes & Noble, Inc.++*(a) ....................... 580,145 ----------- BUSINESS CONSULTING - 2.42% 25,000 FTI Consulting, Inc.* ............................ 1,155,500 ----------- BUSINESS SERVICES - 3.16% 41,000 Cendant Corp.+* .................................. 520,700 10,000 Fair, Issac & Co., Inc. .......................... 508,200 23,900 Watson Wyatt & Co. Holdings+* .................... 480,390 ----------- 1,509,290 ----------- CALCULATING & ACCOUNTING EQUIPMENT - 1.00% 14,000 Diebold, Inc.++ .................................. $ 475,160 ----------- CHEMICALS & ALLIED PRODUCTS - 1.77% 15,000 Praxair, Inc. .................................... 845,250 ----------- CIRCUIT BOARDS - 1.43% 78,200 Flextronics International Ltd.* .................. 681,904 ----------- COLLEGES & UNIVERSITIES - 0.99% 12,000 Corinthian Colleges, Inc.* ....................... 474,000 ----------- COMMERCIAL NONPHYSICAL RESEARCH - 0.39% 4,000 Moody's Corp.+ ................................... 184,920 ----------- COMPUTER INTEGRATED SYSTEMS DESIGN - 0.02% 1,000 Cadence Design Systems, Inc.+* ................... 10,000 ----------- COMPUTER PROGRAMMING SERVICES -- 0.15% 30,000 Aspen Technology, Inc.^* ......................... 72,000 ----------- COMPUTERS, PERIPHERALS & SOFTWARE - 0.80% 16,000 Tech Data Corp.++* ............................... 383,040 ----------- CRUDE PETROLEUM & NATURAL GAS - 1.98% 5,000 Apache Corp. ..................................... 308,700 14,000 Evergreen Resources, Inc.* ....................... 634,340 ----------- 943,040 ----------- DATA PROCESSING & PREPARATION - 1.48% 16,000 Affiliated Computer Services, Inc., Class A* ..... 708,160 ----------- DEEP SEA PASSENGER TRANSPORTATION - 0.69% 22,000 Royal Caribbean Cruises Ltd.^ .................... 330,660 ----------- DRILLING OIL & GAS WELLS - 3.83% 27,950 GlobalSantaFe Corp. .............................. 577,168 18,000 Nabors Industries Ltd.* .......................... 717,660 16,900 Noble Corp.+* .................................... 530,998 ----------- 1,825,826 ----------- EATING PLACES - 3.91% 25,000 Applebee's International, Inc. ................... 701,000 20,000 Brinker International, Inc.++* ................... 610,000 3,000 P.F. Chang's China Bistro, Inc.* ................. 111,000 16,000 Wendy's International, Inc. ...................... 440,160 ----------- 1,862,160 ----------- ELECTRIC SERVICES - 0.46% 18,000 DQE, Inc.+++ ..................................... 219,420 -----------
The accompanying notes are an integral part of the financial statements. 24 THE BEAR STEARNS FUNDS S&P STARS Opportunities Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ELECTRONIC COMPONENTS - 1.13% 38,000 American Power Conversion Corp.++* ............... $ 541,120 ----------- ELECTRONIC COMPUTERS - 1.26% 100,000 Adaptec, Inc.++* ................................. 603,000 ----------- FIRE, MARINE & CASUALTY INSURANCE - 0.09% 1,000 Chubb Corp. (The)+ ............................... 44,320 ----------- FURNITURE STORES - 0.62% 15,000 Furniture Brands International, Inc.+* ........... 293,400 ----------- GAS TRANSMISSION & DISTRIBUTION - 1.12% 18,000 Questar Corp. .................................... 532,260 ----------- GENERAL INDUSTRIAL MACHINERY - 0.16% 4,000 ATMI Inc.* ....................................... 77,040 ----------- HAND & EDGE TOOLS - 0.50% 7,000 SPX Corp.+* ...................................... 239,120 ----------- HEALTH & ALLIED SERVICES - 1.29% 8,000 WellPoint Health Networks Inc.+* ................. 614,000 ----------- HEAVY CONSTRUCTION - 1.41% 16,000 Jacobs Engineering Group Inc.* ................... 672,160 ----------- HOBBY, TOY & GAME SHOPS - 0.84% 48,000 Toys "R" Us, Inc.+* .............................. 401,760 ----------- INFORMATION RETRIEVAL SERVICES - 0.95% 14,000 FactSet Research Systems Inc.+ ................... 454,300 ----------- INVESTMENT ADVISORY SERVICE - 1.06% 19,000 Eaton Vance Corp.++ .............................. 507,870 ----------- LIFE INSURANCE - 1.33% 24,000 MetLife, Inc. .................................... 633,120 ----------- MATTRESSES & BEDSPRINGS - 0.80% 21,000 Leggett & Platt, Inc.+ ........................... 383,880 ----------- MEN'S & BOYS' CLOTHING - 0.90% 14,000 Quiksilver, Inc.* ................................ 428,680 ----------- MISC. HOME FURNISHING STORES - 0.47% 11,000 Linens 'n Things, Inc.++* ........................ 223,520 ----------- MOTOR VEHICLES & CAR BODIES - 0.24% 8,000 Federal Signal Corp. ............................. $ 113,600 ----------- NATIONAL BANKS - 1.72% 34,600 National Commerce Financial Corp. ................ 820,020 ----------- OIL & GAS FIELD SERVICES - 1.45% 20,100 BJ Services Co.+* ................................ 691,239 ----------- PAPERBOARD MILLS - 1.12% 40,100 Smurfit-Stone Container Corp.* ................... 535,696 ----------- PHARMACEUTICAL PREPARATIONS - 6.55% 4,000 Barr Laboratories, Inc.* ......................... 228,000 13,000 Gilead Sciences, Inc.* ........................... 545,870 48,000 Laboratory Corp. of America Holdings+* ........... 1,423,200 25,000 SICOR Inc.^* ..................................... 417,500 12,000 Teva Pharmaceutical Industries Ltd., ADR ......... 499,800 ----------- 3,114,370 ----------- POULTRY SLAUGHTERING & PROCESSING - 0.55% 34,000 Tyson Foods, Inc., Class A++ ..................... 263,500 ----------- PREPACKAGED SOFTWARE - 3.74% 17,000 Barra, Inc.^* .................................... 504,730 19,000 Business Objects S.A., ADR^* ..................... 310,650 36,000 Sybase, Inc.* .................................... 466,200 2,000 Symantec Corp.* .................................. 78,360 10,000 Synopsys, Inc.+* ................................. 425,600 ----------- 1,785,540 ----------- PUBLIC BUILDING & RELATED FURNITURE - 0.59% 8,000 Lear Corp.* ...................................... 282,800 ----------- RADIO BROADCASTING - 0.42% 15,000 Radio One, Inc., Class D++* ...................... 198,600 ----------- RAILROADS - 1.38% 12,000 Union Pacific Corp.+ ............................. 660,000 ----------- REAL ESTATE INVESTMENT TRUSTS - 2.24% 18,000 Chelsea Property Group, Inc. ..................... 670,500 13,000 Hospitality Properties Trust ..................... 397,150 ----------- 1,067,650 ----------- REFRIGERATION & HEATING EQUIPMENT - 1.73% 12,000 American Standard Cos. Inc.* ..................... 825,240 -----------
The accompanying notes are an integral part of the financial statements. 25 THE BEAR STEARNS FUNDS S&P STARS Opportunities Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) SECURITY BROKERS & DEALERS - 1.68% 13,900 Lehman Brothers Holdings Inc. .................... $ 802,725 ----------- SEMICONDUCTORS & RELATED DEVICES - 4.04% 14,000 Analog Devices, Inc.* ............................ 385,000 37,200 Exar Corp.++++* .................................. 472,812 56,500 Fairchild Semiconductor International, Inc., Class A+* ................................ 590,990 89,000 GlobespanVirata, Inc.^* .......................... 400,500 4,000 Microchip Technology, Inc.+ ...................... 79,600 ----------- 1,928,902 ----------- SINGLE-FAMILY HOUSING CONSTRUCTION - 1.23% 11,000 Lennar Corp. ..................................... 589,050 ----------- SPECIAL INDUSTRY MACHINERY - 0.23% 4,000 Novellus Systems, Inc.* .......................... 109,080 ----------- SURETY INSURANCE - 1.17% 11,000 Ambac Financial Group, Inc.+ ..................... 555,720 ----------- SURGICAL & MEDICAL INSTRUMENTS - 2.09% 18,000 Boston Scientific Corp.* ......................... 733,680 41,000 Intuitive Surgical, Inc.++* ...................... 264,860 ----------- 998,540 ----------- TELEPHONE COMMUNICATIONS - 1.69% 18,000 ALLTEL Corp. ..................................... 805,680 ----------- THEATRICAL PRODUCERS & SERVICES - 0.59% 9,000 Westwood One, Inc.+* ............................. 281,160 ----------- TRANSMISSION EQUIPMENT - 0.95% 24,000 Kaydon Corp. ..................................... 451,680 ----------- TRUCKING - 1.01% 20,000 Yellow Corp.* .................................... 482,600 ----------- WINES, BRANDY & BRANDY SPIRITS - 1.76% 37,000 Constellation Brands, Inc., Class A*(a) .......... 839,900 ----------- WOMEN'S READY-TO-WEAR STORES - 1.22% 29,200 Chico's FAS, Inc.++* ............................. 584,000 ----------- WOVEN CARPETS & RUGS - 0.90% 9,000 Mohawk Industries, Inc.++* ....................... 431,460 ----------- Total Common Stocks (cost - $46,727,732) ........................... 46,556,101 ----------- SHORT-TERM INVESTMENT - 1.30% INVESTMENT COMPANY - 1.30% 620,056 Federated Government Obligations 1.16%^** (cost - $620,056) .............................. $ 620,056 ----------- Total Investments -- 98.90% (cost - $47,347,788) ........................... 47,176,157 Other assets in excess of liabilities -- 1.10% ... 524,577 ----------- Net Assets -- 100.00% ............................ $47,700,734 =========== SHORT SALES OF COMMON STOCKS - (1.55)% AIR TRANSPORTATION - (0.02)% 1,000 Delta Air Lines, Inc.++++ ........................ 8,900 ----------- ELECTRONIC COMPUTERS - (0.36)% 8,000 Cognex Corp.++++* ................................ 169,360 ----------- HOTELS, MOTELS & TOURIST COURTS - (0.28)% 5,000 Four Seasons Hotels Inc.++++ ..................... 135,850 ----------- ICE CREAM & FROZEN DESSERTS - (0.73)% 5,000 Dreyer's Grand Ice Cream, Inc.++++ ............... 346,600 ----------- SEMICONDUCTORS & RELATED DEVICES - (0.16)% 4,000 International Rectifier Corp.++++* ............... 78,680 ----------- Total Short Sales of Common Stocks (proceeds received -- $684,748) .................. $ 739,390 ===========
- ---------- ADR American Depositary Receipts. Unless otherwise indicated, all common stocks held long are ranked as five stars. + Currently ranked as four stars. ++ Currently ranked as three stars. +++ Currently ranked as two stars. ++++ Currently ranked as one star. ^ Not ranked by stars. * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2003. (a) A portion of this security is used as collateral for securities sold short. S&P STARS RANKING: Five stars -- Buy -- Expect to be among best performers over next 12 months and to rise in price. Four stars -- Accumulate -- Expect to be an above average performer. Three stars -- Hold -- Expect to be an average performer. Two stars -- Avoid -- Expect to be a below average performer. One star -- Sell -- Expect to be a well below average performer and to fall in price. The accompanying notes are an integral part of the financial statements. 26 THE BEAR STEARNS FUNDS The Insiders Select Fund PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS -- 95.68% ACCIDENT & HEALTH INSURANCE - 3.26% 27,800 AFLAC Inc. ....................................... $ 890,990 ----------- ADVERTISING AGENCIES - 2.27% 66,800 Interpublic Group of Cos., Inc. (The) ............ 621,240 ----------- AIRCRAFT ENGINES & ENGINE PARTS - 2.98% 14,100 United Technologies Corp. ........................ 814,698 ----------- BANK HOLDING COMPANIES - 9.05% 15,600 Comerica Inc. .................................... 590,928 22,100 PNC Financial Services Group, Inc. (The) ......... 936,598 27,000 Washington Mutual, Inc. .......................... 952,290 ----------- 2,479,816 ----------- CABLE & OTHER PAY TV SERVICES - 3.07% 8,443 Comcast Corp., Class A* .......................... 241,385 21,800 Comcast Corp., Special Class A* .................. 599,282 ----------- 840,667 ----------- COMPUTER RELATED SERVICES - 1.29% 20,000 Electronic Data Systems Corp. .................... 352,000 ----------- CREDIT REPORTING SERVICES - 2.59% 18,500 Dun & Bradstreet Corp. (The)* .................... 707,625 ----------- CRUDE PETROLEUM & NATURAL GAS - 5.06% 9,317 Apache Corp. ..................................... 575,232 30,800 Unocal Corp. ..................................... 810,348 ----------- 1,385,580 ----------- DEPARTMENT STORES - 5.38% 33,100 May Department Stores Co. (The) .................. 658,359 33,800 Sears, Roebuck & Co. ............................. 816,270 ----------- 1,474,629 ----------- EATING PLACES - 2.20% 41,600 McDonald's Corp. ................................. 601,536 ----------- ELECTRIC SERVICES - 3.32% 15,400 FPL Group, Inc. .................................. 907,522 ----------- ELEVATORS & MOVING STAIRWAYS - 2.46% 27,800 Dover Corp. ...................................... 673,316 ----------- FLAT GLASS - 3.16% 19,200 PPG Industries, Inc. ............................. 865,536 GENERAL MEDICAL & SURGICAL HOSPITALS - 3.34% 22,100 HCA Inc. ......................................... $ 914,056 ----------- GROCERY STORES - 2.73% 39,400 Safeway Inc.* .................................... 745,842 ----------- HOLDING OFFICES - 2.64% 18,400 MGIC Investment Corp. ............................ 722,568 ----------- LIFE INSURANCE - 3.51% 34,300 Lincoln National Corp. ........................... 960,400 ----------- LUMBER & OTHER BUILDING MATERIALS - 2.36% 26,500 Home Depot, Inc. (The) ........................... 645,540 ----------- MOTION PICTURE & VIDEO PRODUCTION - 3.99% 112,237 Liberty Media Corp., Class A* .................... 1,092,066 ----------- MOTORS & GENERATORS - 1.21% 7,300 Emerson Electric Co. ............................. 331,055 ----------- NATIONAL BANKS - 3.07% 35,200 FleetBoston Financial Corp. ...................... 840,576 ----------- NEWSPAPERS - 1.69% 7,900 Knight-Ridder, Inc. .............................. 462,150 ----------- PERSONAL CREDIT INSTITUTIONS - 3.08% 25,400 American Express Co. ............................. 844,042 ----------- PETROLEUM REFINING - 3.19% 23,900 Sunoco, Inc. ..................................... 874,023 ----------- SANITARY PAPER PRODUCTS - 2.94% 17,700 Kimberly-Clark Corp. ............................. 804,642 ----------- SECURITY SYSTEMS SERVICES - 1.42% 30,200 Tyco International Ltd. .......................... 388,372 ----------- SEMICONDUCTORS & RELATED DEVICES - 3.20% 51,400 National Semiconductor Corp.* .................... 875,856 ----------- SURETY INSURANCE - 2.54% 18,000 MBIA Inc. ........................................ 695,520 ----------- TELEPHONE COMMUNICATIONS - 1.47% 34,300 Sprint Corp. (FON Group) ......................... 403,025 ----------- U.S. GOVERNMENT AGENCY - 2.22% 9,300 Fannie Mae ....................................... 607,755 -----------
The accompanying notes are an integral part of the financial statements. 27 THE BEAR STEARNS FUNDS The Insiders Select Fund PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) WOMEN'S READY-TO-WEAR STORES - 1.68% 35,700 Limited Brands, Inc. ............................. $ 459,459 ----------- WOODWORKING MACHINERY - 3.31% 25,600 Pentair, Inc. .................................... 904,960 ----------- Total Common Stocks (cost - $29,487,378) ........................... 26,187,062 ----------- SHORT-TERM INVESTMENT -- 4.53% INVESTMENT COMPANY - 4.53% 1,239,903 Federated Government Obligations 1.16%** (cost - $1,239,903) ............................ $ 1,239,903 ----------- Total Investments -- 100.21% (cost - $30,727,281) ........................... 27,426,965 Liabilities in excess of other assets -- (0.21)% .............................. (56,211) ----------- Net Assets -- 100.00% ............................ $27,370,754 ===========
- ---------- * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2003. The accompanying notes are an integral part of the financial statements. 28 THE BEAR STEARNS FUNDS Intrinsic Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS -- 95.60% ADVERTISING AGENCIES - 2.91% 188,300 Interpublic Group of Cos., Inc. (The) ............ $ 1,751,190 ----------- AIRCRAFT ENGINES & ENGINE PARTS - 1.97% 20,500 United Technologies Corp. ........................ 1,184,490 ----------- BANK HOLDING COMPANIES - 10.06% 26,700 Bank of America Corp. ............................ 1,784,628 66,500 J.P. Morgan Chase & Co. .......................... 1,576,715 61,700 MBNA Corp. ....................................... 928,585 13,700 PNC Financial Services Group, Inc. (The) ......... 580,606 33,627 Washington Mutual, Inc. .......................... 1,186,024 ----------- 6,056,558 ----------- CABLE & OTHER PAY TV SERVICES - 0.95% 20,130 Comcast Corp., Class A* .......................... 575,517 ----------- COMMERCIAL BANKS - 3.98% 69,633 Citigroup Inc. ................................... 2,398,857 ----------- COMPUTER RELATED SERVICES - 1.78% 60,800 Electronic Data Systems Corp. .................... 1,070,080 ----------- CRUDE PETROLEUM & NATURAL GAS - 3.02% 30,000 Occidental Petroleum Corp. ....................... 898,800 35,000 Unocal Corp. ..................................... 920,850 ----------- 1,819,650 ----------- DEPARTMENT STORES - 4.39% 59,000 May Department Stores Co. (The) .................. 1,173,510 60,900 Sears, Roebuck & Co. ............................. 1,470,735 ----------- 2,644,245 ----------- EATING PLACES - 2.60% 108,400 McDonald's Corp. ................................. 1,567,464 ----------- ELECTRIC & ELECTRONIC EQUIPMENT - 2.95% 69,800 General Electric Co. ............................. 1,779,900 ----------- ELECTRIC SERVICES - 1.26% 12,900 FPL Group, Inc. .................................. 760,197 ----------- ELECTRONIC COMPUTERS - 1.78% 69,100 Hewlett-Packard Co. .............................. 1,074,505 ----------- ELEVATORS & MOVING STAIRWAYS - 1.36% 33,900 Dover Corp. ...................................... 821,058 ----------- FIRE, MARINE & CASUALTY INSURANCE - 4.16% 27,700 Allstate Corp. (The) ............................. $ 918,809 32,100 American International Group, Inc. ............... 1,587,345 ----------- 2,506,154 ----------- GROCERY STORES - 1.50% 47,700 Safeway Inc.* .................................... 902,961 ----------- HOLDING OFFICES - 2.58% 39,600 MGIC Investment Corp. ............................ 1,555,092 ----------- LIFE INSURANCE - 3.61% 44,000 Lincoln National Corp. ........................... 1,232,000 26,400 Torchmark Corp. .................................. 945,120 ----------- 2,177,120 ----------- LUMBER & OTHER BUILDING MATERIALS - 2.07% 51,200 Home Depot, Inc. (The) ........................... 1,247,232 ----------- MOTION PICTURE & VIDEO PRODUCTION - 5.46% 102,100 AOL Time Warner Inc.* ............................ 1,108,806 224,006 Liberty Media Corp., Class A* .................... 2,179,578 ----------- 3,288,384 ----------- NATIONAL BANKS - 4.92% 62,600 FleetBoston Financial Corp. ...................... 1,494,888 77,600 U.S. Bancorp ..................................... 1,472,848 ----------- 2,967,736 ----------- OFFICE MACHINES - 0.76% 14,400 Pitney Bowes Inc. ................................ 459,648 ----------- PERSONAL CREDIT INSTITUTIONS - 2.37% 42,900 American Express Co. ............................. 1,425,567 ----------- PETROLEUM REFINING - 4.95% 23,575 ChevronTexaco Corp. .............................. 1,524,124 41,800 Exxon Mobil Corp. ................................ 1,460,910 ----------- 2,985,034 ----------- PHARMACEUTICAL PREPARATIONS - 4.65% 33,600 Abbott Laboratories .............................. 1,263,696 11,100 Merck & Co., Inc. ................................ 608,058 29,900 Pfizer Inc. ...................................... 931,684 ----------- 2,803,438 ----------- RADIO & TV COMMUNICATIONS EQUIPMENT - 1.95% 75,400 Koninklijke Philips Electronics N.V. ............. 1,175,486 -----------
The accompanying notes are an integral part of the financial statements. 29 THE BEAR STEARNS FUNDS Intrinsic Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) SANITARY PAPER PRODUCTS - 2.56% 33,900 Kimberly-Clark Corp. ............................. $ 1,541,094 ----------- SECURITY BROKERS & DEALERS - 1.52% 23,900 Morgan Stanley ................................... 916,565 ----------- SECURITY SYSTEMS SERVICES - 2.02% 94,600 Tyco International Ltd. .......................... 1,216,556 ----------- SURETY INSURANCE - 0.38% 6,000 MBIA Inc. ........................................ 231,840 ----------- TELEPHONE COMMUNICATIONS - 4.31% 45,100 SBC Communications Inc. .......................... 904,706 74,800 Sprint Corp. (FON Group) ......................... 878,900 23,100 Verizon Communications Inc. ...................... 816,585 ----------- 2,600,191 ----------- TELEVISION BROADCASTING - 0.96% 21,700 USA Interactive, Inc.* ........................... 581,343 ----------- U.S. GOVERNMENT AGENCY - 3.10% 28,600 Fannie Mae ....................................... 1,869,010 ----------- WOMEN'S READY-TO-WEAR STORES - 2.76% 74,200 Limited Brands, Inc. ............................. 954,954 40,400 TJX Cos., Inc. (The) ............................. 711,040 ----------- 1,665,994 ----------- Total Common Stocks (cost - $68,350,664) ........................... 57,620,156 ----------- SHORT-TERM INVESTMENTS -- 5.25% INVESTMENT COMPANY - 0.69% 417,830 Federated Government Obligations 1.16%** (cost - $417,830) .............................. $ 417,830 ----------- PRINCIPAL AMOUNT (000'S) - --------- U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 4.56% $2,750 Fannie Mae, Discount Notes, 1.22%, 04/01/03 (cost - $2,750,000) ................... 2,750,000 ----------- Total Short-Term Investments (cost - $3,167,830) ............................ 3,167,830 ----------- Total Investments -- 100.85% (cost - $71,518,494) ........................... 60,787,986 Liabilities in excess of other assets -- (0.85)% .............................. (510,792) ----------- Net Assets -- 100.00% ............................ $60,277,194 ===========
- ---------- * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2003. The accompanying notes are an integral part of the financial statements. 30 THE BEAR STEARNS FUNDS Small Cap Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS -- 91.29% AIRCRAFT ENGINES & ENGINE PARTS - 0.97% 13,200 Woodward Governor Co. ............................ $ 461,868 ----------- ALKALIES & CHLORINE - 3.08% 80,700 Olin Corp. ....................................... 1,466,319 ----------- ANALYTICAL INSTRUMENTS - 2.82% 19,900 Bio-Rad Laboratories, Inc., Class A* ............. 711,425 52,400 Molecular Devices Corp.* ......................... 634,040 ----------- 1,345,465 ----------- BANK HOLDING COMPANIES - 7.83% 30,000 MAF Bancorp, Inc. ................................ 1,009,500 18,733 Pacific Capital Bancorp .......................... 555,246 42,700 Provident Bankshares Corp. ....................... 985,516 50,500 Republic Bancorp, Inc. ........................... 594,890 28,200 Susquehanna Bancshares, Inc. ..................... 584,304 ----------- 3,729,456 ----------- COMPUTER INTEGRATED SYSTEMS DESIGN - 1.27% 60,100 JDA Software Group, Inc.* ........................ 607,611 ----------- COPPER FOUNDRIES - 2.55% 48,700 Mueller Industries, Inc.* ........................ 1,216,039 ----------- DEPARTMENT STORES - 0.60% 13,600 Stage Stores, Inc.* .............................. 288,048 ----------- EATING PLACES - 1.18% 31,000 Jack in the Box Inc.* ............................ 561,410 ----------- ELECTRIC SERVICES - 4.40% 39,100 Great Plains Energy Inc. ......................... 933,317 67,300 UniSource Energy Corp. ........................... 1,164,290 ----------- 2,097,607 ----------- ELECTRONIC CAPACITORS - 0.69% 42,000 KEMET Corp.* ..................................... 327,600 ----------- ELECTRONIC COMPONENTS - 2.21% 207,000 Three-Five Systems, Inc.* ........................ 1,055,700 ----------- ELECTRONIC COMPUTERS - 2.62% 207,200 Adaptec, Inc.* ................................... 1,249,416 ----------- EMPLOYMENT AGENCIES - 1.63% 66,800 Heidrick & Struggles International, Inc.* ........ 774,880 ----------- FURNITURE STORES - 0.98% 23,900 Furniture Brands International, Inc.* ............ $ 467,484 ----------- GAMES, TOYS & CHILDREN'S VEHICLES - 1.81% 42,900 Shuffle Master, Inc.* ............................ 864,478 ----------- GAS TRANSMISSION & DISTRIBUTION - 2.21% 32,800 Energen Corp. .................................... 1,051,568 ----------- INFORMATION RETRIEVAL SERVICES - 3.16% 46,400 FactSet Research Systems Inc. .................... 1,505,680 ----------- INORGANIC PIGMENTS - 0.99% 29,200 NL Industries, Inc. .............................. 470,120 ----------- KIDNEY DIALYSIS CENTERS - 2.55% 39,000 Renal Care Group, Inc.* .......................... 1,216,020 ----------- MEAT PACKING PLANTS - 1.00% 397,473 Hibernia Foods plc, ADR* ......................... 476,968 ----------- MOTOR VEHICLE PARTS & ACCESSORIES - 1.87% 18,600 BorgWarner Inc. .................................. 889,824 ----------- NONFERROUS WIRE DRAWING & INSULATING - 1.16% 100,200 Andrew Corp.* ...................................... 551,100 ----------- OIL & GAS FIELD SERVICES - 3.06% 144,500 Key Energy Services, Inc.* ....................... 1,456,560 ----------- PATENT OWNERS & LESSORS - 1.34% 54,300 4Kids Entertainment, Inc.* ....................... 640,740 ----------- PERSONAL CREDIT INSTITUTIONS - 1.02% 5,000 Student Loan Corp. (The) ......................... 488,000 ----------- PHARMACEUTICAL PREPARATIONS - 2.33% 93,400 Perrigo Co. ...................................... 1,109,592 ----------- PLASTICS PRODUCTS - 2.69% 92,900 Tupperware Corp. ................................. 1,283,878 ----------- PLASTICS, MATERIALS & RESINS - 0.87% 35,600 Millennium Chemicals Inc. ........................ 415,808 ----------- PREPACKAGED SOFTWARE - 2.55% 68,800 Electronics For Imaging, Inc.* ................... 1,217,003 ----------- PRESSED & BLOWN GLASS - 0.56% 13,400 DuPont Photomasks, Inc.* ......................... 268,804 -----------
The accompanying notes are an integral part of the financial statements. 31 THE BEAR STEARNS FUNDS Small Cap Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) PROCESS CONTROL INSTRUMENTS - 0.86% 28,500 Rudolph Technologies, Inc.* ...................... $ 411,825 ----------- PUMPS & PUMPING EQUIPMENT - 1.31% 53,500 Flowserve Corp.* ................................. 623,275 ----------- RADIO, TV & ELECTRONIC STORES - 1.42% 144,500 InterTAN, Inc.* .................................. 679,150 ----------- REAL ESTATE INVESTMENT TRUSTS - 7.23% 31,700 Colonial Properties Trust ........................ 1,048,636 81,100 Glenborough Realty Trust Inc. .................... 1,253,806 66,600 Keystone Property Trust .......................... 1,145,520 ----------- 3,447,962 ----------- SAVINGS & LOAN ASSOCIATIONS - 1.45% 28,000 First Financial Holdings, Inc. ................... 690,760 ----------- SECURITY BROKERS & DEALERS - 1.85% 62,800 SWS Group, Inc. .................................. 884,224 ----------- SEMICONDUCTORS & RELATED DEVICES - 3.78% 108,200 Lattice Semiconductor Corp.* ..................... 815,828 90,100 Microsemi Corp.* ................................. 986,595 ----------- 1,802,423 ----------- SHOE STORES - 2.32% 77,700 Genesco Inc.* .................................... 1,104,894 ----------- SPECIALTY OUTPATIENT CLINICS - 1.03% 44,000 U.S. Physical Therapy, Inc.* ..................... 489,280 ----------- STATE BANKS - 3.39% 46,450 First BanCorp .................................... 1,253,221 21,800 Mid-State Bancshares ............................. 364,278 ----------- 1,617,499 ----------- TRANSPORTATION EQUIPMENT - 0.59% 18,100 Arctic Cat Inc. .................................. 282,541 ----------- TRUCKING - 2.13% 42,000 Yellow Corp.* .................................... 1,013,460 ----------- TURBINES & TURBINE GENERATOR SETS - 1.93% 84,600 Stewart & Stevenson Services, Inc. ............... $ 922,140 ----------- Total Common Stocks (cost - $49,174,951) ............................. 43,524,479 ----------- SHORT-TERM INVESTMENTS -- 9.20% INVESTMENT COMPANY - 0.81% 384,933 Federated Government Obligations 1.16%** (cost - $384,933) .............................. 384,933 ----------- PRINCIPAL AMOUNT (000'S) - --------- U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 8.39% $4,000 Fannie Mae, Discount Notes, 1.22%, 04/01/03 (cost - $4,000,000) ............................ 4,000,000 ----------- Total Short-Term Investments (cost - $4,384,933) ............................ 4,384,933 ----------- Total Investments -- 100.49% (cost - $53,559,884) ........................... 47,909,412 Securities Lending Collateral (a) -- 3.24% 1,543,200 Liabilities in excess of other assets -- (3.73)% (1,776,424) ----------- Net Assets -- 100.00% $47,676,188 ===========
- ---------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2003. (a) Cash collateral invested in various money market mutual funds. The accompanying notes are an integral part of the financial statements. 32 THE BEAR STEARNS FUNDS Alpha Growth Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS -- 99.38% ACCIDENT & HEALTH INSURANCE - 2.05% 44,200 AFLAC Inc. ....................................... $ 1,416,610 ----------- ALUMINUM FOUNDRIES - 1.85% 45,100 Newell Rubbermaid Inc. ........................... 1,278,585 ----------- BANK HOLDING COMPANIES - 5.35% 37,100 BANK ONE CORP. ................................... 1,284,402 18,900 Golden West Financial Corp. ...................... 1,359,477 69,500 MBNA Corp. ....................................... 1,045,975 ----------- 3,689,854 ----------- BUSINESS SERVICES - 4.26% 19,900 eBay Inc.* ....................................... 1,697,271 21,900 United Parcel Service, Inc., Class B ............. 1,248,300 ----------- 2,945,571 ----------- CHEMICALS & ALLIED PRODUCTS - 1.94% 23,800 Praxair, Inc. .................................... 1,341,130 ----------- CHEWING & SMOKING TOBACCO - 1.65% 41,200 UST Inc. ......................................... 1,137,120 ----------- CHEWING GUM - 2.01% 24,600 Wm. Wrigley Jr. Co. .............................. 1,389,900 ----------- CIGARETTES - 1.97% 35,600 Gallaher Group plc, ADR .......................... 1,363,836 ----------- COLLEGES & UNIVERSITIES - 2.21% 30,600 Apollo Group, Inc., Class A* ..................... 1,526,940 ----------- COMPUTER INTEGRATED SYSTEMS DESIGN - 1.99% 104,500 Citrix Systems, Inc.* ............................ 1,375,220 ----------- COMPUTER PERIPHERAL EQUIPMENT - 4.06% 101,300 Cisco Systems, Inc.* ............................. 1,314,874 22,300 Lexmark International, Inc.* ..................... 1,492,985 ----------- 2,807,859 ----------- CONSTRUCTION MACHINERY - 2.12% 29,200 PACCAR Inc. ...................................... 1,467,884 ----------- CRUDE PETROLEUM & NATURAL GAS - 4.13% 119,900 BHP Billiton Ltd., ADR ........................... 1,330,890 32,000 Burlington Resources Inc. ........................ 1,526,720 ----------- 2,857,610 ----------- DIAGNOSTIC SUBSTANCES - 2.44% 46,300 Genzyme General* ................................. $ 1,687,635 ----------- ELECTRIC & OTHER SERVICES COMBINED - 3.88% 32,000 Consolidated Edison, Inc. ........................ 1,231,040 30,100 Entergy Corp. .................................... 1,449,315 ----------- 2,680,355 ----------- ELECTRIC SERVICES - 3.54% 29,900 DTE Energy Co. ................................... 1,155,635 25,600 Exelon Corp. ..................................... 1,290,496 ----------- 2,446,131 ----------- FAMILY CLOTHING STORES - 1.98% 24,200 Kohl's Corp.* .................................... 1,369,236 ----------- FREIGHT TRANSPORTATION ARRANGEMENT - 2.17% 41,700 Expeditors International of Washington, Inc. ............................... 1,499,115 ----------- FROZEN BAKERY PRODUCTS - 1.65% 60,800 Sara Lee Corp. ................................... 1,136,960 ----------- GARMENT PRESSING & CLEANERS' AGENTS - 1.42% 29,900 Cintas Corp. ..................................... 983,710 ----------- GOLD ORES - 1.79% 47,300 Newmont Mining Corp. ............................. 1,236,895 ----------- GROCERIES - 1.69% 46,000 SYSCO Corp. ...................................... 1,170,240 ----------- MANUFACTURING INDUSTRIES - 2.12% 17,900 International Game Technology* ................... 1,466,010 ----------- MISC. FOOD & KINDRED PRODUCTS - 1.95% 36,400 Unilever plc, ADR ................................ 1,348,620 ----------- MISC. FOOD STORES - 2.46% 66,000 Starbucks Corp.* ................................. 1,700,160 ----------- MISC. HOME FURNISHINGS STORES - 1.96% 39,300 Bed Bath & Beyond Inc.* .......................... 1,357,422 ----------- MOTOR VEHICLE PARTS & ACCESSORIES - 1.76% 17,400 Eaton Corp. ...................................... 1,217,130 ----------- MOTOR VEHICLES & CAR BODIES - 1.69% 87,800 Nissan Motor Co. Ltd., ADR ....................... 1,168,618 -----------
The accompanying notes are an integral part of the financial statements. 33 THE BEAR STEARNS FUNDS Alpha Growth Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) NATIONAL BANKS - 1.67% 36,700 BB&T Corp. ....................................... $ 1,153,481 ----------- NEWSPAPERS - 3.48% 17,400 E.W. Scripps Co. (The), Class A .................. 1,317,876 1,600 Washington Post Co. (The), Class B ............... 1,090,176 ----------- 2,408,052 ----------- PERSONAL CREDIT INSTITUTIONS - 1.82% 37,900 American Express Co. ............................. 1,259,417 ----------- PHARMACEUTICAL PREPARATIONS - 2.06% 26,400 Forest Laboratories, Inc.* ....................... 1,424,808 ----------- PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 3.47% 36,800 Canon Inc., ADR .................................. 1,291,312 37,300 Eastman Kodak Co. ................................ 1,104,080 ----------- 2,395,392 ----------- POLISHES & SANITATION GOODS - 1.99% 27,900 Ecolab Inc. ...................................... 1,376,307 ----------- PREPACKAGED SOFTWARE - 5.59% 52,400 Microsoft Corp. .................................. 1,268,604 122,800 Oracle Corp.* .................................... 1,332,257 32,000 Symantec Corp.* .................................. 1,253,760 ----------- 3,854,621 ----------- RADIO & TV COMMUNICATIONS EQUIPMENT - 2.01% 38,500 QUALCOMM Inc. .................................... 1,388,310 ----------- SAUSAGES & OTHER PREPARED MEATS - 1.58% 54,300 ConAgra Foods, Inc. .............................. 1,090,344 ----------- SURGICAL APPLIANCES & SUPPLIES - 2.02% 20,300 Stryker Corp. .................................... 1,393,595 ----------- SURGICAL & MEDICAL INSTRUMENTS - 1.87% 31,700 Boston Scientific Corp.* ......................... 1,292,092 ----------- THEATRICAL PRODUCERS & SERVICES - 1.63% 36,000 Westwood One, Inc.* .............................. 1,124,640 ----------- TOILET PREPARATIONS - 2.10% 25,500 Avon Products, Inc. .............................. 1,454,775 ----------- Total Common Stocks (cost - $70,887,829) ........................... 68,682,190 ----------- SHORT-TERM INVESTMENT -- 0.91% INVESTMENT COMPANY - 0.91% 630,091 Federated Government Obligations 1.16%** (cost - $630,091) .............................. $ 630,091 ----------- Total Investments -- 100.29% (cost - $71,517,920) ........................... 69,312,281 Liabilities in excess of other assets -- (0.29)% .............................. (199,906) ----------- Net Assets -- 100.00% ............................ $69,112,375 ===========
- ---------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2003. The accompanying notes are an integral part of the financial statements. 34 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS -- 97.08% AUSTRALIA - 7.21% COAL, OTHER MINERALS & ORES - 4.19% 406,882 BHP Billiton Ltd. ................................ $ 2,281,755 ----------- INSURANCE CARRIERS - 0.61% 65,400 QBE Insurance Group Ltd. ......................... 331,583 ----------- NEWSPAPERS - 2.41% 201,800 News Corp. Ltd. (The) ............................ 1,313,377 ----------- Total Australia (cost - $3,916,829) ............................ 3,926,715 ----------- BELGIUM - 0.49% REGULATION, ADMINISTRATION OF UTILITIES - 0.49% 1,100 Electrabel S.A.* (cost - $261,656) .............................. 265,271 ----------- CANADA - 4.84% COMMERCIAL BANKS - 1.52% 30,400 Bank of Montreal ................................. 829,157 ----------- COMPUTER-INTEGRATED SYSTEMS - 0.56% 23,400 Research in Motion Ltd.* ......................... 305,370 ----------- FOREIGN BANKS, BRANCHES & AGENCIES - 2.20% 12,300 Bank of Nova Scotia (The) ........................ 433,985 19,600 Royal Bank of Canada ............................. 761,374 ----------- 1,195,359 ----------- PHARMACEUTICAL PREPARATIONS - 0.56% 7,700 Biovail Corp.* ................................... 306,999 ----------- Total Canada (cost - $2,475,612) ............................ 2,636,885 ----------- CHINA - 3.73% DRILLING OIL & GAS WELLS - 0.50% 1,354,000 China Petroleum & Chemical Corp., Class H 270,819 ----------- ELECTRIC SERVICES - 1.81% 1,048,000 Huaneng Power International, Inc. ................ 987,608 ----------- OIL & GAS EXPLORATION SERVICES - 1.42% 3,672,000 PetroChina Co. Ltd., Class H ..................... 772,116 ----------- Total China (cost - $1,722,988) ............................ 2,030,543 ----------- DENMARK - 0.53% PHARMACEUTICAL PREPARATIONS - 0.53% 8,700 Novo Nordisk A/S, Class B* (cost - $274,839) .............................. $ 286,992 ----------- FINLAND - 2.44% COMMUNICATIONS EQUIPMENT - 2.44% 96,200 Nokia Oyj (cost - $1,761,252) ............................ 1,328,964 ----------- FRANCE - 4.02% FLUID MILK - 1.27% 5,500 Groupe Danone .................................... 694,385 ----------- INTERNET SERVICE PROVIDERS - 0.55% 52,600 Groupe Wanadoo SA* ............................... 297,891 ----------- TELEPHONE COMMUNICATIONS - 0.58% 39,700 Orange SA* ....................................... 318,407 ----------- TOILET PREPARATIONS - 1.62% 14,500 L' Oreal SA ...................................... 878,143 ----------- Total France (cost - $2,405,682) ............................ 2,188,826 ----------- HONG KONG - 3.43% ELECTRICAL SERVICES - 0.71% 94,000 CLP Holdings Ltd. ................................ 389,284 ----------- FOREIGN BANKS, BRANCHES & AGENCIES - 0.44% 23,400 Hang Seng Bank Ltd. .............................. 238,517 ----------- GAS TRANSMISSION & DISTRIBUTION - 0.71% 315,000 Hong Kong & China Gas Co. Ltd. ................... 387,720 ----------- OIL & GAS EXPLORATION SERVICES - 1.57% 638,500 CNOOC Ltd. ....................................... 851,393 ----------- Total Hong Kong (cost - $1,910,677) ............................ 1,866,914 ----------- IRELAND - 0.54% COMMERCIAL BANKS - 0.54% 21,500 Allied Irish Banks, p.l.c. (cost - $299,728) .............................. 296,075 -----------
The accompanying notes are an integral part of the financial statements. 35 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ISRAEL - 1.68% PHARMACEUTICAL PREPARATIONS - 1.68% 22,000 Teva Pharmaceutical Industries Ltd., ADR (cost - $791,057) .............................. $ 916,300 ----------- ITALY - 1.44% TELEPHONE COMMUNICATIONS - 0.92% 122,500 Telecom Italia Mobile S.p.A. ..................... 499,933 ----------- TELEVISION BROADCASTING - 0.52% 37,000 Mediaset S.p.A. .................................. 281,006 ----------- Total Italy (cost - $937,869) .............................. 780,939 ----------- JAPAN - 22.71% CHEMICALS - 0.71% 12,400 Shin-Etsu Chemical Co. Ltd. ...................... 383,775 ----------- CHEMICALS & ALLIED PRODUCTS - 0.94% 13,700 Takeda Chemical Industries Ltd. .................. 511,815 ----------- CONSTRUCTION MACHINERY - 0.34% 51,000 Komatsu Ltd. ..................................... 187,519 ----------- ELECTRIC & ELECTRONIC EQUIPMENT - 0.34% 1,210 Keyence Corp. .................................... 187,143 ----------- ELECTRIC, GAS & SANITARY SERVICES - 0.59% 103,000 Tokyo Gas Co. Ltd. ............................... 319,649 ----------- ELECTRONIC COMPONENTS - 1.13% 5,700 Rohm Co. Ltd. .................................... 617,684 ----------- HOUSEHOLD AUDIO & VIDEO EQUIPMENT - 2.79% 31,400 Pioneer Corp. .................................... 652,732 88,000 Sharp Corp. ...................................... 868,275 ----------- 1,521,007 ----------- MALT BEVERAGES - 1.06% 77,000 Kirin Brewery Co. Ltd. ........................... 575,974 ----------- MOTOR VEHICLES & CAR BODIES - 3.11% 10,100 Honda Motor Co. Ltd. ............................. 336,440 117,000 Nissan Motor Co. Ltd. ............................ 779,473 26,100 Toyota Motor Corp. ............................... 579,976 ----------- 1,695,889 ----------- JAPAN (CONTINUED) OPTICAL INSTRUMENTS & LENSES - 0.41% 3,700 Hoya Corp. ....................................... $ 223,098 ----------- PAINT, GLASS & WALLPAPER STORES - 0.49% 50,000 Asahi Glass Co. Ltd. ............................. 268,173 ----------- PHARMACEUTICAL PREPARATIONS - 2.15% 20,000 Sankyo Co. Ltd. .................................. 264,800 34,700 Yamanouchi Pharmaceutical Co. Ltd. ............... 904,225 ----------- 1,169,025 ----------- PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 6.18% 63,000 Canon, Inc. ...................................... 2,199,528 38,000 Fuji Photo Film Co. Ltd. ......................... 1,166,470 ----------- 3,365,998 ----------- SECURITY & COMMODITY SERVICES - 1.76% 92,000 Nomura Holdings, Inc. ............................ 958,172 ----------- SOAP, CLEANERS & TOILET GOODS - 0.71% 19,000 Kao Corp. ........................................ 383,749 ----------- Total Japan (cost - $13,537,734) ........................... 12,368,670 ----------- NETHERLANDS - 0.68% MISC. FOOD & KINDRED PRODUCTS - 0.68% 6,200 Unilever NV (cost - $371,745) .............................. 369,055 ----------- PORTUGAL - 1.10% TELEPHONE COMMUNICATIONS - 1.10% 86,400 Portugal Telecom, SGPS, S.A. (cost - $617,240) .............................. 598,676 ----------- SINGAPORE - 1.79% BOOKS, PERIODICALS & NEWSPAPERS - 0.81% 44,000 Singapore Press Holdings Ltd. .................... 443,702 ----------- CIRCUIT BOARDS - 0.48% 30,200 Flextronics International Ltd.* .................. 263,344 ----------- ELECTRONIC COMPONENTS - 0.50% 34,000 Venture Manufacturing (Singapore) Ltd. ........... 269,665 ----------- Total Singapore (cost - $1,160,329) ............................ 976,711 -----------
The accompanying notes are an integral part of the financial statements. 36 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) SOUTH AFRICA - 0.48% GOLD ORES - 0.48% 8,700 AngloGold Ltd., ADR (cost - $319,837) .............................. $ 262,566 ----------- SOUTH KOREA - 2.35% ELECTRONIC COMPONENTS - 1.97% 9,500 Samsung Electronics Co. Ltd., GDR(a) ............ 1,073,500 ----------- IRON & STEEL FORGINGS - 0.38% 10,500 POSCO, ADR ....................................... 206,850 ----------- Total South Korea (cost - $1,484,626) ............................ 1,280,350 ----------- SPAIN - 4.73% FOREIGN BANKS, BRANCHES & AGENCIES - 1.31% 16,500 Banco Popular Espanol, S.A. ...................... 712,990 ----------- PETROLEUM REFINING - 1.08% 40,600 Repsol YPF, S.A. ................................. 585,682 ----------- TELEPHONE COMMUNICATIONS - 2.34% 136,498 Telefonica, S.A.* ................................ 1,276,473 ----------- Total Spain (cost - $2,580,756) ............................ 2,575,145 ----------- SWEDEN - 2.77% FAMILY CLOTHING STORES - 1.81% 47,000 Hennes & Mauritz AB (H&M) ........................ 986,679 ----------- HOUSEHOLD VACUUMS - 0.69% 23,600 Electrolux AB, Series B .......................... 374,362 ----------- MACHINE TOOLS - 0.27% 6,600 Sandvik AB* ...................................... 148,674 ----------- Total Sweden (cost - $1,543,473) ............................ 1,509,715 ----------- SWITZERLAND - 2.86% FOREIGN BANKS, BRANCHES & AGENCIES - 1.42% 18,200 UBS AG* .......................................... 774,353 ----------- PHARMACEUTICAL PREPARATIONS - 0.54% 7,980 Novartis AG ...................................... 295,534 ----------- SWITZERLAND (CONTINUED) SEMICONDUCTORS & RELATED SERVICES - 0.90% 25,800 STMicroelectronics NV ............................ $ 488,454 ----------- Total Switzerland (cost - $1,752,203) ............................ 1,558,341 ----------- THAILAND - 1.23% FOREIGN BANKS, BRANCHES & AGENCIES - 0.87% 235,000 Bangkok Bank Public Co. Ltd.* .................... 350,704 151,000 Thai Farmers Bank Public Co. Ltd.* ............... 123,237 ----------- 473,941 ----------- RADIO & TELEPHONE COMMUNICATIONS - 0.36% 200,000 Advanced Info Service Public Co. Ltd. ............ 198,205 ----------- Total Thailand (cost - $728,303) .............................. 672,146 ----------- UNITED KINGDOM - 26.03% BANK HOLDING COMPANIES - 3.83% 202,800 HSBC Holdings plc, Ord 31.6p ..................... 2,086,647 ----------- FOREIGN BANKS, BRANCHES & AGENCIES - 4.71% 21,200 Royal Bank of Scotland Group plc, Ord 25p ........ 477,514 196,200 Standard Chartered plc, Ord 31.6p ................ 2,088,682 ----------- 2,566,196 ----------- LUMBER & OTHER BUILDING PRODUCTS - 0.48% 71,700 Kingfisher plc, Ord 13.75p ....................... 260,665 ----------- MEDICAL INSTRUMENTS & SUPPLIES - 1.27% 113,400 Smith & Nephew plc, Ord 12.222p .................. 693,681 ----------- METAL ORES - 3.93% 114,900 Rio Tinto plc, Ord 10p ........................... 2,141,261 ----------- MISC. FOOD & KINDRED PRODUCTS - 1.87% 109,700 Unilever plc, Ord 1.4p ........................... 1,016,108 ----------- NON-METALLIC MINERALS - 1.13% 43,400 Anglo American plc, Ord 31.6p .................... 616,716 ----------- RADIO & TELEPHONE COMMUNICATIONS - 4.21% 1,284,800 Vodafone Group plc, Ord 6.3p ..................... 2,294,826 ----------- SOAP & OTHER DETERGENTS - 0.74% 24,600 Reckitt Benckiser plc, Ord 10.526p ............... 403,227 -----------
The accompanying notes are an integral part of the financial statements. 37 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) UNITED KINGDOM (CONTINUED) TELEVISION BROADCASTING - 3.86% 211,900 British Sky Broadcasting Group plc, Ord 50p* $ 2,098,397 ----------- Total United Kingdom (cost - $14,848,306) ........................... 14,177,724 ----------- Total Common Stocks (cost - $55,702,741) ........................... 52,873,523 ----------- SHORT-TERM INVESTMENTS -- 1.95% UNITED STATES - 1.95% INVESTMENT COMPANIES - 1.95% 903,743 Federated Automated Government Money Trust, 0.71%** ........................... $ 903,743 156,977 Federated Government Obligations 1.16%** ......... 156,977 ----------- Total Short-Term Investments (cost - $1,060,720) ............................ 1,060,720 ----------- Total Investments -- 99.03% (cost - $56,763,461) ........................... 53,934,243 Other assets in excess of liabilities -- 0.97% 526,824 ----------- Net Assets -- 100.00% ............................ $54,461,067 ===========
- ---------- ADR American Depositary Receipts. GDR Global Depositary Receipts. * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2003. (a) SEC Rule 144A security. Such securities are traded only among qualified institutional buyers. The accompanying notes are an integral part of the financial statements. 38 THE BEAR STEARNS FUNDS STATEMENTS OF ASSETS & LIABILITIES MARCH 31, 2003
S&P STARS INTRINSIC S&P STARS OPPORTUNITIES THE INSIDERS VALUE PORTFOLIO PORTFOLIO SELECT FUND PORTFOLIO -------------- -------------- -------------- -------------- ASSETS Investments, at value (cost - $1,535,656,231, $47,347,788, $30,727,281, $71,518,494, $53,559,884, $71,517,920, and $56,763,461, respectively) .......... $ 1,199,217,431 $ 47,176,157 $27,426,965 $ 60,787,986 Deposit with broker for securities sold short .......................... 12,824,876 818,311 -- -- Collateral received for securities loaned .............................. 56,772,017 -- -- -- Dividend, interest and reclaims receivable .......................... 709,504 40,084 45,262 128,089 Receivable for Portfolio shares sold ... 438,222 65,758 53,488 61,606 Receivable for investments sold ........ 4,764,642 658,595 -- 359,188 Open and closed forward foreign currency exchange contracts ......... -- -- -- -- Receivable from investment adviser ..... -- 20,002 -- -- Prepaid expenses and other assets ...... 3,063 49,758 32,268 29,019 --------------- ------------ ----------- ------------ Total assets ................... 1,274,729,755 48,828,665 27,557,983 61,365,888 --------------- ------------ ----------- ------------ LIABILITIES Securities sold short, at value (proceeds received - $12,228,002 and $684,748, respectively) ......... 12,600,800 739,390 -- -- Payable upon return for securities loaned .............................. 56,772,017 -- -- -- Payable for investments purchased ...... 14,271,923 116,425 -- 894,284 Loan payable ........................... 13,619,800 -- -- -- Payable for Portfolio shares repurchased ......................... 2,816,922 135,043 75,869 54,959 Advisory fee payable ................... 855,473 -- 10,723 17,954 Administration fee payable ............. 145,166 6,087 3,457 7,603 Distribution and service fees payable (Class A, B, and C shares) .......... 2,355,085 94,717 55,623 83,103 Custodian fee payable .................. 11,502 3,580 829 680 Accrued expenses ....................... 380,050 32,689 40,728 30,111 --------------- ------------ ----------- ------------ Total liabilities .............. 103,828,738 1,127,931 187,229 1,088,694 --------------- ------------ ----------- ------------ NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) ................ 75,002 4,569 2,268 4,082 Paid-in capital ........................ 2,551,856,180 62,917,143 32,253,520 73,710,163 Undistributed net investment income/(loss) ....................... -- -- 53,348 368,133 Accumulated net realized loss from investments, foreign currency related transactions and securities sold short, if any .................. (1,044,218,567) (14,994,705) (1,638,066) (3,074,676) Net unrealized depreciation on investments, foreign currency related transactions and securities sold short, if any .................. (336,811,598) (226,273) (3,300,316) (10,730,508) --------------- ------------ ----------- ------------ Net assets ................... $ 1,170,901,017 $ 47,700,734 $27,370,754 $ 60,277,194 --------------- ------------ ----------- ------------ SMALL CAP ALPHA INTERNATIONAL VALUE GROWTH EQUITY PORTFOLIO PORTFOLIO PORTFOLIO ------------ ----------- ------------- ASSETS Investments, at value (cost - $1,535,656,231, $47,347,788, $30,727,281, $71,518,494, $53,559,884, $71,517,920, and $56,763,461, respectively) .......... $ 47,909,412 $69,312,281 $ 53,934,243 Deposit with broker for securities sold short .......................... -- -- -- Collateral received for securities loaned .............................. 1,543,200 -- -- Dividend, interest and reclaims receivable .......................... 75,232 103,516 385,393 Receivable for Portfolio shares sold ... 13,445 431,072 72,216 Receivable for investments sold ........ -- -- 387,764 Open and closed forward foreign currency exchange contracts ......... -- -- 27,334 Receivable from investment adviser ..... -- 4,349 11,336 Prepaid expenses and other assets ...... 27,674 35,759 25,363 ------------ ----------- ------------ Total assets ................... 49,568,963 69,886,977 54,843,649 ------------ ----------- ------------ LIABILITIES Securities sold short, at value (proceeds received - $12,228,002 and $684,748, respectively) ......... -- -- -- Payable upon return for securities loaned .............................. 1,543,200 -- -- Payable for investments purchased ...... 234,847 591,626 -- Loan payable ........................... -- -- -- Payable for Portfolio shares repurchased ......................... 4,190 20,382 244,526 Advisory fee payable ................... 9,455 -- -- Administration fee payable ............. 6,023 8,440 7,066 Distribution and service fees payable (Class A, B, and C shares) .......... 53,992 117,429 74,495 Custodian fee payable .................. 3,261 1,606 7,508 Accrued expenses ....................... 37,807 35,119 48,987 ------------ ----------- ------------ Total liabilities .............. 1,892,775 774,602 382,582 ------------ ----------- ------------ NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) ................ 3,703 4,488 5,313 Paid-in capital ........................ 63,426,035 72,771,723 118,497,758 Undistributed net investment income/(loss) ....................... 185,345 -- (1,003,145) Accumulated net realized loss from investments, foreign currency related transactions and securities sold short, if any .................. (10,288,423) (1,458,197) (60,266,684) Net unrealized depreciation on investments, foreign currency related transactions and securities sold short, if any .................. (5,650,472) (2,205,639) (2,772,175) ------------ ----------- ------------ Net assets ..................... $ 47,676,188 $69,112,375 $ 54,461,067 ------------ ----------- ------------
The accompanying notes are an integral part of the financial statements. 39 THE BEAR STEARNS FUNDS STATEMENTS OF ASSETS & LIABILITIES MARCH 31, 2003
S&P STARS INTRINSIC S&P STARS OPPORTUNITIES THE INSIDERS VALUE PORTFOLIO PORTFOLIO SELECT FUND PORTFOLIO -------------- -------------- -------------- -------------- CLASS A Net assets ............................. $ 484,873,060 $ 20,520,774 $ 13,049,346 $ 17,733,762 -------------- -------------- -------------- -------------- Shares of beneficial interest outstanding ......................... 30,672,373 1,956,756 1,057,998 1,197,227 -------------- -------------- -------------- -------------- Net asset value per share .............. $15.81 $10.49 $12.33 $14.81 ====== ====== ====== ====== Maximum offering price per share (net asset value plus sales charge of 5.50%* of the offering price)..... $16.73 $11.10 $13.05 $15.67 ====== ====== ====== ====== CLASS B Net assets ............................. $ 323,424,996 $ 14,783,546 $ 8,392,026 $ 10,489,470 -------------- -------------- -------------- -------------- Shares of beneficial interest outstanding ......................... 21,106,444 1,421,696 710,177 723,588 -------------- -------------- -------------- -------------- Net asset value and offering price per share** ................... $15.32 $10.40 $11.82 $14.50 ====== ====== ====== ====== CLASS C Net assets ............................. $ 253,390,555 $ 11,638,124 $ 5,542,781 $ 11,123,148 -------------- -------------- -------------- -------------- Shares of beneficial interest outstanding ......................... 16,549,908 1,118,724 469,542 762,687 -------------- -------------- -------------- -------------- Net asset value and offering price per share** ................... $15.31 $10.40 $11.80 $14.58 ====== ====== ====== ====== CLASS Y Net assets ............................. $ 109,212,406 $ 758,290 $ 386,601 $ 20,930,814 -------------- -------------- -------------- -------------- Shares of beneficial interest outstanding ......................... 6,673,418 71,804 30,370 1,398,626 -------------- -------------- -------------- -------------- Net asset value, offering and redemption price per share ......... $16.37 $10.56 $12.73 $14.97 ====== ====== ====== ====== SMALL CAP ALPHA INTERNATIONAL VALUE GROWTH EQUITY PORTFOLIO PORTFOLIO PORTFOLIO -------------- -------------- -------------- CLASS A Net assets ............................. $ 12,771,310 $ 39,817,269 $ 20,518,016 -------------- -------------- -------------- Shares of beneficial interest outstanding ......................... 990,333 2,557,453 1,990,895 -------------- -------------- -------------- Net asset value per share .............. $12.90 $15.57 $10.31 ====== ====== ====== Maximum offering price per share (net asset value plus sales charge of 5.50%* of the offering price) .... $13.65 $16.48 $10.91 ====== ====== ====== CLASS B Net assets ............................. $ 4,975,092 $ 16,058,648 $ 4,217,834 -------------- -------------- -------------- Shares of beneficial interest outstanding ......................... 401,152 1,058,837 420,773 -------------- -------------- -------------- Net asset value and offering price per share** ................... $12.40 $15.17 $10.02 ====== ====== ====== CLASS C Net assets ............................. $ 9,203,867 $ 13,236,458 $ 13,256,754 -------------- -------------- -------------- Shares of beneficial interest outstanding ......................... 741,009 871,612 1,321,656 -------------- -------------- -------------- Net asset value and offering price per share** ................... $12.42 $15.19 $10.03 ====== ====== ====== CLASS Y Net assets ............................. $ 20,725,919 -- $ 16,468,463 -------------- -------------- -------------- Shares of beneficial interest outstanding ......................... 1,570,142 -- 1,580,052 -------------- -------------- -------------- Net asset value, offering and redemption price per share ......... $13.20 -- $10.42 ====== ====== ======
- ---------- * 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. 40 THE BEAR STEARNS FUNDS STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 2003
S&P STARS INTRINSIC S&P STARS OPPORTUNITIES THE INSIDERS VALUE PORTFOLIO PORTFOLIO SELECT FUND PORTFOLIO ------------- -------------- ----------- ------------ INVESTMENT INCOME Dividends .............................. $ 8,768,200 $ 325,648 $ 651,859 $ 1,527,654 Interest ............................... 173,049 11,970 36,787 19,523 Securities lending income .............. 135,090 800 -- -- Less: Foreign taxes withheld ...... -- -- -- -- ------------- ------------ ------------ ------------ 9,076,339 338,418 688,646 1,547,177 ------------- ------------ ------------ ------------ EXPENSES Advisory fees .......................... 12,146,262 437,381 198,855 475,657 Administration fees .................... 2,176,306 87,517 50,245 95,695 Distribution and service fees - Class A 3,494,032 124,277 80,095 93,929 Distribution and service fees - Class B 4,299,442 180,128 99,126 103,523 Distribution and service fees - Class C 3,526,873 141,343 70,707 123,200 Transfer agent fees and expenses ....... 2,977,700 159,750 150,963 160,125 Accounting fees ........................ 527,023 30,982 18,917 30,622 Legal and auditing fees ................ 95,211 59,898 63,658 60,626 Custodian fees and expenses ............ 178,360 31,382 10,094 10,741 Insurance expenses ..................... 9,487 986 6,960 6,961 Amortization of organization expenses .. -- -- -- -- Federal and state registration fees .... 141,157 7,158 40,975 46,680 Reports and notices to shareholders .... 235,744 9,001 4,991 7,416 Trustees' fees and expenses ............ 12,801 12,325 11,718 11,704 Other .................................. 177,348 3,881 2,218 3,458 ------------- ------------ ------------ ------------ Total expenses before waivers and related reimbursements ....... 29,997,746 1,286,009 809,522 1,230,337 Less: waivers and related reimbursements ............... (2,484,380) (256,772) (174,426) (274,718) ------------- ------------ ------------ ------------ Total expenses after waivers and related reimbursements ....... 27,513,366 1,029,237 635,096 955,619 ------------- ------------ ------------ ------------ Net investment income/(loss) ........... (18,437,027) (690,819) 53,550 591,558 ------------- ------------ ------------ ------------ NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized gain/(loss) from: Investments .......................... (530,872,886) (14,494,223) (1,496,027) (2,993,556) Foreign currency related transactions -- -- -- -- Securities sold short ................ (3,819,086) 399,989 -- -- Net change in unrealized appreciation/ (depreciation) on: Investments and foreign currency related transactions, if any ......... (349,004,459) (4,621,135) (9,619,724) (17,383,948) Securities sold short ................ (372,798) (44,542) -- -- ------------- ------------ ------------ ------------ Net realized and unrealized loss on investments ....................... (884,069,229) (18,759,911) (11,115,751) (20,377,504) ------------- ------------ ------------ ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................... $(902,506,256) $(19,450,730) $(11,062,201) $(19,785,946) ============= ============ ============ ============ SMALL CAP ALPHA INTERNATIONAL VALUE GROWTH EQUITY PORTFOLIO PORTFOLIO PORTFOLIO ------------ ------------ ------------- INVESTMENT INCOME Dividends .............................. $ 1,031,271 $ 573,089 $ 1,593,879 Interest ............................... 28,976 52,617 110,412 Securities lending income .............. 6,474 -- 297 Less: Foreign taxes withheld ...... -- -- (150,884) ------------ ------------ ------------ 1,066,721 625,706 1,553,704 ------------ ------------ ------------ EXPENSES Advisory fees .......................... 461,792 324,065 674,950 Administration fees .................... 92,359 75,311 101,243 Distribution and service fees - Class A 86,165 144,010 128,642 Distribution and service fees - Class B 60,233 122,476 58,510 Distribution and service fees - Class C 118,724 88,065 174,923 Transfer agent fees and expenses ....... 164,141 130,261 161,903 Accounting fees ........................ 33,279 25,742 32,504 Legal and auditing fees ................ 62,740 64,100 66,200 Custodian fees and expenses ............ 23,383 29,131 76,798 Insurance expenses ..................... 7,146 6,961 7,320 Amortization of organization expenses .. -- 5,830 20,666 Federal and state registration fees .... 43,431 45,325 51,416 Reports and notices to shareholders .... 7,337 5,600 13,001 Trustees' fees and expenses ............ 10,628 11,625 13,001 Other .................................. 4,210 4,240 5,300 ------------ ------------ ------------ Total expenses before waivers and related reimbursements ....... 1,175,568 1,082,742 1,586,377 Less: waivers and related reimbursements ............... (294,546) (279,499) (380,613) ------------ ------------ ------------ Total expenses after waivers and related reimbursements ....... 881,022 803,243 1,205,764 ------------ ------------ ------------ Net investment income/(loss) ........... 185,699 (177,537) 347,940 ------------ ------------ ------------ NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized gain/(loss) from: Investments .......................... (10,169,674) 2,029,943 (15,284,247) Foreign currency related transactions -- -- (1,947,870) Securities sold short ................ -- -- -- Net change in unrealized appreciation/ (depreciation) on: Investments and foreign currency related transactions, if any ......... (16,055,862) (11,016,230) (6,833,766) Securities sold short ................ -- -- -- ------------ ------------ ------------ Net realized and unrealized loss on investments ....................... (26,225,536) (8,986,287) (24,065,883) ------------ ------------ ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................... $(26,039,837) $ (9,163,824) $(23,717,943) ============ ============ ============
The accompanying notes are an integral part of the financial statements. 41 THE BEAR STEARNS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
S&P STARS PORTFOLIO -------------------------------- FOR THE FISCAL YEARS ENDED MARCH 31, -------------------------------- 2003 2002 -------------- -------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) .................................. $ (18,437,027) $ (35,959,530) Net realized gain/(loss) from investments, foreign currency related transactions and securities sold short, if any ...... (534,691,972) (344,992,054) Net change in unrealized appreciation/(depreciation) on investments, foreign currency related transactions and securities sold short, if any ............................... (349,377,257) 73,379,674 -------------- -------------- Net increase/(decrease) in net assets, resulting from operations ............................................. (902,506,256) (307,571,910) -------------- -------------- 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 B shares .............................................. -- -- Class C shares .............................................. -- -- Class Y shares .............................................. -- -- -------------- -------------- -- -- -------------- -------------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares .......................... 163,983,729 902,204,412 Cost of shares repurchased .................................... (687,251,200) (508,590,833) Shares issued in reinvestment of dividends and distributions .. -- -- -------------- -------------- Net increase/(decrease) in net assets derived from shares of beneficial interest transactions .................. (523,267,471) 393,613,579 -------------- -------------- Total increase/(decrease) in net assets ....................... (1,425,773,727) 86,041,669 NET ASSETS Beginning of period ......................................... 2,596,674,744 2,510,633,075 -------------- -------------- End of period** ............................................. $1,170,901,017 $2,596,674,744 ============== ============== S&P STARS OPPORTUNITIES PORTFOLIO --------------------------------- FOR THE FOR THE PERIOD FISCAL YEAR OCTOBER 1, 2001* ENDED MARCH 31, THROUGH MARCH 31, ---------------------------------- 2003 2002 -------------- ----------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) .................................. $ (690,819) $ (239,747) Net realized gain/(loss) from investments, foreign currency related transactions and securities sold short, if any ...... (14,094,234) 177,671 Net change in unrealized appreciation/(depreciation) on investments, foreign currency related transactions and securities sold short, if any ............................... (4,665,677) 4,439,404 ------------ ----------- Net increase/(decrease) in net assets, resulting from operations ............................................. (19,450,730) 4,377,328 ------------ ----------- 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 .............................................. (358,229) -- Class B shares .............................................. (258,797) -- Class C shares .............................................. (203,086) -- Class Y shares .............................................. (16,521) -- ------------ ----------- (836,633) -- ------------ ----------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares .......................... 24,602,311 72,480,849 Cost of shares repurchased .................................... (27,421,582) (6,826,090) Shares issued in reinvestment of dividends and distributions .. 775,281 -- ------------ ----------- Net increase/(decrease) in net assets derived from shares of beneficial interest transactions .................. (2,043,990) 65,654,759 ------------ ----------- Total increase/(decrease) in net assets ....................... (22,331,353) 70,032,087 NET ASSETS Beginning of period ......................................... 70,032,087 -- ------------ ----------- End of period** ............................................. $ 47,700,734 $70,032,087 ============ =========== THE INSIDERS SELECT FUND -------------------------------- FOR THE FISCAL YEARS ENDED MARCH 31, -------------------------------- 2003 2002 ------------ ----------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) .................................. $ 53,550 $ (90,796) Net realized gain/(loss) from investments, foreign currency related transactions and securities sold short, if any ...... (1,496,027) 12,305 Net change in unrealized appreciation/(depreciation) on investments, foreign currency related transactions and securities sold short, if any ............................... (9,619,724) 1,476,933 ------------ ----------- Net increase/(decrease) in net assets, resulting from operations ............................................. (11,062,201) 1,398,442 ------------ ----------- 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 .............................................. (25,126) (1,609,248) Class B shares .............................................. (15,796) (957,044) Class C shares .............................................. (11,229) (802,040) Class Y shares .............................................. (640) (68,330) ------------ ----------- (52,791) (3,436,662) ------------ ----------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares .......................... 13,299,638 13,976,474 Cost of shares repurchased .................................... (13,545,245) (9,339,567) Shares issued in reinvestment of dividends and distributions .. 48,418 3,201,070 ------------ ----------- Net increase/(decrease) in net assets derived from shares of beneficial interest transactions .................. (197,189) 7,837,977 ------------ ----------- Total increase/(decrease) in net assets ....................... (11,312,181) 5,799,757 NET ASSETS Beginning of period ......................................... 38,682,935 32,883,178 ------------ ----------- End of period** ............................................. $ 27,370,754 $38,682,935 ============ ===========
- ---------- * Commencement of operations. ** Includes undistributed net investment income as follows:
FOR THE FISCAL YEARS ENDED ---------------------------------- MARCH 31, 2003 MARCH 31, 2002 -------------- -------------- The Insiders Select Fund ................... $ 53,348 -- Intrinsic Value Portfolio .................. 368,133 $218,791 Small Cap Value Portfolio .................. 185,345 --
The accompanying notes are an integral part of the financial statements. 42
INTRINSIC VALUE PORTFOLIO ---------------------------- FOR THE FISCAL YEARS ENDED MARCH 31, ---------------------------- 2003 2002 ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) .................................. $ 591,558 $ 212,434 Net realized gain/(loss) from investments, foreign currency related transactions and securities sold short, if any ... (2,993,556) 6,021 Net change in unrealized appreciation/(depreciation) on investments, foreign currency related transactions and securities sold short, if any ............................ (17,383,948) 1,982,246 ------------ ------------ Net increase/(decrease) in net assets, resulting from operations .......................................... (19,785,946) 2,200,701 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares ........................................... (124,710) (9,294) Class B shares ........................................... (26,585) -- Class C shares ........................................... (30,467) -- Class Y shares ........................................... (252,926) (29,318) ------------ ------------ (434,688) (38,612) ------------ ------------ Net realized capital gains Class A shares ........................................... -- (451,116) Class B shares ........................................... -- (203,076) Class C shares ........................................... -- (270,475) Class Y shares ........................................... -- (474,371) ------------ ------------ -- (1,399,038) ------------ ------------ SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares .......................... 31,578,358 49,387,251 Cost of shares repurchased .................................... (18,042,549) (13,354,763) Shares issued in reinvestment of dividends and distributions .. 406,998 1,376,746 ------------ ------------ Net increase/(decrease) in net assets derived from shares of beneficial interest transactions ............... 13,942,807 37,409,234 ------------ ------------ Total increase/(decrease) in net assets ....................... (6,277,827) 38,172,285 NET ASSETS Beginning of period ...................................... 66,555,021 28,382,736 ------------ ------------ End of period** .......................................... $ 60,277,194 $ 66,555,021 ============ ============ SMALL CAP VALUE PORTFOLIO ---------------------------- FOR THE FISCAL YEARS ENDED MARCH 31, ---------------------------- 2003 2002 ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) .................................. $ 185,699 $ (111,729) Net realized gain/(loss) from investments, foreign currency related transactions and securities sold short, if any ... (10,169,674) 5,377,979 Net change in unrealized appreciation/(depreciation) on investments, foreign currency related transactions and securities sold short, if any ............................ (16,055,862) 7,192,546 ------------ ------------ Net increase/(decrease) in net assets, resulting from operations .......................................... (26,039,837) 12,458,796 ------------ ------------ 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 ........................................... (1,262,957) (1,013,046) Class B shares ........................................... (427,272) (300,405) Class C shares ........................................... (826,472) (723,299) Class Y shares ........................................... (1,639,686) (1,443,389) ------------ ------------ (4,156,387) (3,480,139) ------------ ------------ SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares .......................... 17,139,387 29,204,613 Cost of shares repurchased .................................... (24,768,254) (25,898,472) Shares issued in reinvestment of dividends and distributions .. 3,708,819 3,103,122 ------------ ------------ Net increase/(decrease) in net assets derived from shares of beneficial interest transactions ............... (3,920,048) 6,409,263 ------------ ------------ Total increase/(decrease) in net assets ....................... (34,116,272) 15,387,920 NET ASSETS Beginning of period ...................................... 81,792,460 66,404,540 ------------ ------------ End of period** .......................................... $ 47,676,188 $ 81,792,460 ============ ============ ALPHA GROWTH PORTFOLIO ---------------------------- FOR THE FISCAL YEARS ENDED MARCH 31, ---------------------------- 2003 2002 ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) .................................. $ (177,537) $ (192,256) Net realized gain/(loss) from investments, foreign currency related transactions and securities sold short, if any ... 2,029,943 (1,271,500) Net change in unrealized appreciation/(depreciation) on investments, foreign currency related transactions and securities sold short, if any ............................ (11,016,230) 5,113,617 ------------ ------------ Net increase/(decrease) in net assets, resulting from operations .......................................... (9,163,824) 3,649,861 ------------ ------------ 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 B shares ........................................... -- -- Class C shares ........................................... -- -- Class Y shares ........................................... -- -- ------------ ------------ -- -- ------------ ------------ SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares .......................... 60,680,183 17,614,962 Cost of shares repurchased .................................... (21,187,371) (12,211,138) Shares issued in reinvestment of dividends and distributions .. -- -- ------------ ------------ Net increase/(decrease) in net assets derived from shares of beneficial interest transactions ............... 39,492,812 5,403,824 ------------ ------------ Total increase/(decrease) in net assets ....................... 30,328,988 9,053,685 NET ASSETS Beginning of period ...................................... 38,783,387 29,729,702 ------------ ------------ End of period** .......................................... $ 69,112,375 $ 38,783,387 ============ ============ INTERNATIONAL EQUITY PORTFOLIO ------------------------------ FOR THE FISCAL YEARS ENDED MARCH 31, ------------------------------ 2003 2002 ------------- ------------ INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) .................................. $ 347,940 $ (198,779) Net realized gain/(loss) from investments, foreign currency related transactions and securities sold short, if any ... (17,232,117) (26,169,644) Net change in unrealized appreciation/(depreciation) on investments, foreign currency related transactions and securities sold short, if any ............................ (6,833,766) 11,419,276 ------------ ------------ Net increase/(decrease) in net assets, resulting from operations .......................................... (23,717,943) (14,949,147) ------------ ------------ 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 B shares ........................................... -- -- Class C shares ........................................... -- -- Class Y shares ........................................... -- -- ------------ ------------ -- -- ------------ ------------ SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares .......................... 18,424,391 69,154,576 Cost of shares repurchased .................................... (22,089,897) (64,044,379) Shares issued in reinvestment of dividends and distributions .. -- -- ------------ ------------ Net increase/(decrease) in net assets derived from shares of beneficial interest transactions ............... (3,665,506) 5,110,197 ------------ ------------ Total increase/(decrease) in net assets ....................... (27,383,449) (9,838,950) NET ASSETS Beginning of period ...................................... 81,844,516 91,683,466 ------------ ------------ End of period** .......................................... $ 54,461,067 $ 81,844,516 ============ ============
43 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 year indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
NET NET NET ASSET REALIZED AND DISTRIBUTIONS ASSET VALUE, NET UNREALIZED FROM NET VALUE BEGINNING INVESTMENT GAIN/(LOSS) ON REALIZED END OF OF YEAR LOSS*(1) INVESTMENTS*(2) CAPITAL GAINS YEAR ---------- ---------- --------------- ------------- ------- S&P STARS PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ................. $25.11 $(0.21) $(9.09) -- $15.81 For the fiscal year ended March 31, 2002 ................. 27.85 (0.30) (2.44) -- 25.11 For the fiscal year ended March 31, 2001 ................. 36.42 (0.27) (7.82) $(0.48) 27.85 For the fiscal year ended March 31, 2000 ................. 24.39 (0.21) 12.53 (0.29) 36.42 For the fiscal year ended March 31, 1999 ................. 19.97 (0.12) 5.46 (0.92) 24.39 CLASS B For the fiscal year ended March 31, 2003 ................. 24.46 (0.29) (8.85) -- 15.32 For the fiscal year ended March 31, 2002 ................. 27.26 (0.41) (2.39) -- 24.46 For the fiscal year ended March 31, 2001 ................. 35.83 (0.37) (7.72) (0.48) 27.26 For the fiscal year ended March 31, 2000 ................. 24.11 (0.27) 12.28 (0.29) 35.83 For the fiscal year ended March 31, 1999 ................. 19.86 (0.12) 5.29 (0.92) 24.11 CLASS C For the fiscal year ended March 31, 2003 ................. 24.45 (0.31) (8.83) -- 15.31 For the fiscal year ended March 31, 2002 ................. 27.25 (0.42) (2.38) -- 24.45 For the fiscal year ended March 31, 2001 ................. 35.82 (0.38) (7.71) (0.48) 27.25 For the fiscal year ended March 31, 2000 ................. 24.10 (0.30) 12.31 (0.29) 35.82 For the fiscal year ended March 31, 1999 ................. 19.85 (0.22) 5.39 (0.92) 24.10 CLASS Y For the fiscal year ended March 31, 2003 ................. 25.82 (0.09) (9.36) -- 16.37 For the fiscal year ended March 31, 2002 ................. 28.49 (0.16) (2.51) -- 25.82 For the fiscal year ended March 31, 2001 ................. 37.05 (0.14) (7.94) (0.48) 28.49 For the fiscal year ended March 31, 2000 ................. 24.68 (0.12) 12.78 (0.29) 37.05 For the fiscal year ended March 31, 1999 ................. 20.11 (0.05) 5.54 (0.92) 24.68
- ---------- * Calculated based on shares outstanding on the first and last day of the respective years, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. (1) Reflects waivers and related reimbursements, if any. (2) The amounts shown for a share outstanding throughout the respective years are not in accord with the changes in the aggregate gains and losses on investments during the respective years because of the timing of the sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective years. Net realized and unrealized gain/(loss) on investments include short sale transactions, if any. The accompanying notes are an integral part of the financial statements. 44
RATIO OF TOTAL NET ASSETS, RATIO OF NET INVESTMENT INVESTMENT END OF YEAR EXPENSES TO LOSS TO RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1) ---------- --------------- ----------------------- ---------------------- S&P STARS PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ..... (37.06)% $ 484,873 1.50% (0.95)% For the fiscal year ended March 31, 2002 ..... (9.80) 1,151,482 1.50 (1.12) For the fiscal year ended March 31, 2001 ..... (22.36) 1,173,464 1.50 (1.04) For the fiscal year ended March 31, 2000 ..... 50.82 673,550 1.50 (1.12) For the fiscal year ended March 31, 1999 ..... 27.46 206,130 1.50 (0.73) CLASS B For the fiscal year ended March 31, 2003 ..... (37.37) 323,425 2.00 (1.44) For the fiscal year ended March 31, 2002 ..... (10.27) 672,833 2.00 (1.65) For the fiscal year ended March 31, 2001 ..... (22.73) 620,784 2.00 (1.58) For the fiscal year ended March 31, 2000 ..... 50.13 300,693 2.00 (1.63) For the fiscal year ended March 31, 1999 ..... 26.75 49,319 2.00 (1.23) CLASS C For the fiscal year ended March 31, 2003 ..... (37.38) 253,391 2.00 (1.44) For the fiscal year ended March 31, 2002 ..... (10.28) 568,726 2.00 (1.65) For the fiscal year ended March 31, 2001 ..... (22.74) 540,150 2.00 (1.58) For the fiscal year ended March 31, 2000 ..... 50.15 314,794 2.00 (1.63) For the fiscal year ended March 31, 1999 ..... 26.75 97,654 2.00 (1.23) CLASS Y For the fiscal year ended March 31, 2003 ..... (36.60) 109,212 1.00 (0.43) For the fiscal year ended March 31, 2002 ..... (9.37) 203,633 1.00 (0.65) For the fiscal year ended March 31, 2001 ..... (21.95) 176,235 1.00 (0.47) For the fiscal year ended March 31, 2000 ..... 51.61 154,015 1.00 (0.56) For the fiscal year ended March 31, 1999 ..... 28.02 52,483 1.00 (0.23) INCREASE/(DECREASE) REFLECTED IN EXPENSE AND NET INVESTMENT LOSS PORTFOLIO RATIOS DUE TO WAIVERS AND TURNOVER RELATED REIMBURSEMENTS RATE ------------------------- --------- S&P STARS PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ................. 0.16% 122.29% For the fiscal year ended March 31, 2002 ................. 0.08 110.80 For the fiscal year ended March 31, 2001 ................. 0.10 42.93 For the fiscal year ended March 31, 2000 ................. 0.18 54.67 For the fiscal year ended March 31, 1999 ................. 0.27 76.17 CLASS B For the fiscal year ended March 31, 2003 ................. 0.16 122.29 For the fiscal year ended March 31, 2002 ................. 0.08 110.80 For the fiscal year ended March 31, 2001 ................. 0.10 42.93 For the fiscal year ended March 31, 2000 ................. 0.18 54.67 For the fiscal year ended March 31, 1999 ................. 0.27 76.17 CLASS C For the fiscal year ended March 31, 2003 ................. 0.16 122.29 For the fiscal year ended March 31, 2002 ................. 0.08 110.80 For the fiscal year ended March 31, 2001 ................. 0.10 42.93 For the fiscal year ended March 31, 2000 ................. 0.18 54.67 For the fiscal year ended March 31, 1999 ................. 0.27 76.17 CLASS Y For the fiscal year ended March 31, 2003 ................. 0.16 122.29 For the fiscal year ended March 31, 2002 ................. 0.08 110.80 For the fiscal year ended March 31, 2001 ................. 0.10 42.93 For the fiscal year ended March 31, 2000 ................. 0.18 54.67 For the fiscal year ended March 31, 1999 ................. 0.27 76.17
- ---------- (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 year reported and includes reinvestment of dividends and distributions, if any. 45 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 NET ASSET REALIZED AND DISTRIBUTIONS ASSET VALUE, NET UNREALIZED FROM NET VALUE, BEGINNING INVESTMENT GAIN/(LOSS) ON REALIZED END OF OF PERIOD LOSS**(1) INVESTMENTS**(2) CAPITAL GAINS PERIOD ---------- ---------- ---------------- ------------- --------- S&P STARS OPPORTUNITIES PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 .................. $14.27 $(0.12) $(3.49) $(0.17) $10.49 For the period October 1, 2001* through March 31, 2002 .... 12.00 (0.04) 2.31 -- 14.27 CLASS B For the fiscal year ended March 31, 2003 .................. 14.23 (0.18) (3.48) (0.17) 10.40 For the period October 1, 2001* through March 31, 2002 .... 12.00 (0.06) 2.29 -- 14.23 CLASS C For the fiscal year ended March 31, 2003 .................. 14.23 (0.18) (3.48) (0.17) 10.40 For the period October 1, 2001* through March 31, 2002 .... 12.00 (0.06) 2.29 -- 14.23 CLASS Y For the fiscal year ended March 31, 2003 .................. 14.30 (0.08) (3.49) (0.17) 10.56 For the period October 1, 2001* through March 31, 2002 .... 12.00 (0.02) 2.32 -- 14.30
- ---------- * Commencement of operations. ** Calculated based on shares outstanding on the first and last day of the respective periods, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. (1) Reflects waivers and related reimbursements, if any. (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 the sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective periods. Net realized and unrealized gain/(loss) on investments include short sale transactions. The accompanying notes are an integral part of the financial statements. 46
TOTAL NET ASSETS, RATIO OF INVESTMENT END OF PERIOD EXPENSES TO RETURN(3) (000'S omitted) AVERAGE NET ASSETS(1) ----------- --------------- ------------------------ S&P STARS OPPORTUNITIES PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ................. (25.36)% $20,521 1.50% For the period October 1, 2001* through March 31, 2002 ... 18.92 30,004 1.50(4) CLASS B For the fiscal year ended March 31, 2003 ................. (25.79) 14,784 2.00 For the period October 1, 2001* through March 31, 2002 ... 18.58 21,094 2.00(4) CLASS C For the fiscal year ended March 31, 2003 ................. (25.79) 11,638 2.00 For the period October 1, 2001* through March 31, 2002 ... 18.58 16,412 2.00(4) CLASS Y For the fiscal year ended March 31, 2003 ................. (25.03) 758 1.00 For the period October 1, 2001* through March 31, 2002 ... 19.17 2,522 1.00(4) INCREASE/(DECREASE) REFLECTED IN RATIO OF EXPENSE AND NET INVESTMENT NET INVESTMENT LOSS PORTFOLIO LOSS TO RATIOS DUE TO WAIVERS AND TURNOVER AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE ---------------------- ------------------------- --------- S&P STARS OPPORTUNITIES PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ................. (0.92)% 0.44% 174.82% For the period October 1, 2001* through March 31, 2002 ... (0.90)(4) 0.85(4) 66.89 CLASS B For the fiscal year ended March 31, 2003 ................. (1.42) 0.44 174.82% For the period October 1, 2001* through March 31, 2002 ... (1.48)(4) 0.85(4) 66.89 CLASS C For the fiscal year ended March 31, 2003 ................. (1.42) 0.44% 174.82% For the period October 1, 2001* through March 31, 2002 ... (1.43)(4) 0.85(4) 66.89 CLASS Y For the fiscal year ended March 31, 2003 ................. (0.45) 0.44 174.82% For the period October 1, 2001* through March 31, 2002 ... (0.40)(4) 0.85(4) 66.89
- ---------- (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) Annualized. 47 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 year indicated. This information has been derived from information provided in the financial - --------------------------------------------------------------------------------
NET NET ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS VALUE, NET UNREALIZED FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED OF YEAR INCOME/(LOSS)*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS ------------ ----------------- --------------- ---------- ------------- THE INSIDERS SELECT FUND CLASS A For the fiscal year ended March 31, 2003 ......... $16.87 $0.06 $(4.58) -- $(0.02) For the fiscal year ended March 31, 2002 ......... 17.84 (0.01) 0.73 -- (1.69) For the fiscal year ended March 31, 2001 ......... 16.90 0.01 3.05 -- (2.12) For the fiscal year ended March 31, 2000 ......... 17.02 -- 0.07 -- (0.19) For the fiscal year ended March 31, 1999 ......... 17.88 -- (0.01) -- (0.85) CLASS B For the fiscal year ended March 31, 2003 ......... 16.24 (0.01) (4.39) -- (0.02) For the fiscal year ended March 31, 2002 ......... 17.32 (0.07) 0.68 -- (1.69) For the fiscal year ended March 31, 2001 ......... 16.54 (0.05) 2.95 -- (2.12) For the fiscal year ended March 31, 2000 ......... 16.75 (0.05) 0.03 -- (0.19) For the fiscal year ended March 31, 1999 ......... 17.69 -- (0.09) -- (0.85) CLASS C For the fiscal year ended March 31, 2003 ......... 16.24 (0.01) (4.41) -- (0.02) For the fiscal year ended March 31, 2002 ......... 17.32 (0.08) 0.69 -- (1.69) For the fiscal year ended March 31, 2001 ......... 16.54 (0.07) 2.97 -- (2.12) For the fiscal year ended March 31, 2000 ......... 16.74 (0.05) 0.04 -- (0.19) For the fiscal year ended March 31, 1999 ......... 17.68 -- (0.09) -- (0.85) CLASS Y For the fiscal year ended March 31, 2003 ......... 17.27 0.14 (4.66) -- (0.02) For the fiscal year ended March 31, 2002 ......... 18.13 0.07 0.76 -- (1.69) For the fiscal year ended March 31, 2001 ......... 17.09 0.09 3.07 -- (2.12) For the fiscal year ended March 31, 2000 ......... 17.33 -- 0.13 $(0.18) (0.19) For the fiscal year ended March 31, 1999 ......... 18.09 -- 0.09 -- (0.85)
- ---------- * Calculated based on shares outstanding on the first and last day of the respective years, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. (1) Reflects waivers and related reimbursements, if any. (2) The amounts shown for a share outstanding throughout the respective years are not in accord with the changes in the aggregate gains and losses on investments during the respective years because of the timing of the sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective years. The accompanying notes are an integral part of the financial statements. 48
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF END OF INVESTMENT END OF YEAR EXPENSES TO YEAR RETURN(3) (000'S OMMITTED) AVERAGE NET ASSETS(1) ------ ---------- ---------------- --------------------- THE INSIDERS SELECT FUND CLASS A For the fiscal year ended March 31, 2003 ...... $12.33 (26.80)% $13,049 1.65% For the fiscal year ended March 31, 2002 ...... 16.87 4.62 19,060 1.65 For the fiscal year ended March 31, 2001 ...... 17.84 17.92 17,372 1.65 For the fiscal year ended March 31, 2000 ...... 16.90 0.40 15,187 1.65 For the fiscal year ended March 31, 1999 ...... 17.02 0.29 24,395 1.65 CLASS B For the fiscal year ended March 31, 2003 ...... 11.82 (27.10) 8,392 2.15 For the fiscal year ended March 31, 2002 ...... 16.24 4.11 10,357 2.15 For the fiscal year ended March 31, 2001 ...... 17.32 17.32 7,378 2.15 For the fiscal year ended March 31, 2000 ...... 16.54 (0.13) 5,469 2.15 For the fiscal year ended March 31, 1999 ...... 16.75 (0.16) 8,426 2.15 CLASS C For the fiscal year ended March 31, 2003 ...... 11.80 (27.22) 5,543 2.15 For the fiscal year ended March 31, 2002 ...... 16.24 4.11 8,566 2.15 For the fiscal year ended March 31, 2001 ...... 17.32 17.32 7,328 2.15 For the fiscal year ended March 31, 2000 ...... 16.54 (0.07) 6,908 2.15 For the fiscal year ended March 31, 1999 ...... 16.74 (0.16) 11,902 2.15 CLASS Y For the fiscal year ended March 31, 2003 ...... 12.73 (26.18) 387 1.15 For the fiscal year ended March 31, 2002 ...... 17.27 5.17 701 1.15 For the fiscal year ended March 31, 2001 ...... 18.13 18.30 805 1.15 For the fiscal year ended March 31, 2000 ...... 17.09 0.72 796 1.15 For the fiscal year ended March 31, 1999 ...... 17.33 0.85 914 1.15 INCREASE/(DECREASE) REFLECTED IN RATIO OF EXPENSE AND NET INVESTMENT NET INVESTMENT INCOME/(LOSS) PORTFOLIO INCOME/(LOSS) TO RATIOS DUE TO WAIVERS AND TURNOVER AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE --------------------- ---------------------------- --------- THE INSIDERS SELECT FUND CLASS A For the fiscal year ended March 31, 2003 ...... 0.40% 0.52% 30.81% For the fiscal year ended March 31, 2002 ...... (0.04) 1.23 57.26 For the fiscal year ended March 31, 2001 ...... 0.08 1.14 99.36 For the fiscal year ended March 31, 2000 ...... 0.10 0.81 76.06 For the fiscal year ended March 31, 1999 ...... 0.02 0.81 99.71 CLASS B For the fiscal year ended March 31, 2003 ...... (0.08) 0.52 30.81 For the fiscal year ended March 31, 2002 ...... (0.49) 1.23 57.26 For the fiscal year ended March 31, 2001 ...... (0.42) 1.14 99.36 For the fiscal year ended March 31, 2000 ...... (0.40) 0.81 76.06 For the fiscal year ended March 31, 1999 ...... 0.03 0.81 99.71 CLASS C For the fiscal year ended March 31, 2003 ...... (0.10) 0.52 30.81 For the fiscal year ended March 31, 2002 ...... (0.52) 1.23 57.26 For the fiscal year ended March 31, 2001 ...... (0.42) 1.14 99.36 For the fiscal year ended March 31, 2000 ...... (0.40) 0.81 76.06 For the fiscal year ended March 31, 1999 ...... 0.02 0.81 99.71 CLASS Y For the fiscal year ended March 31, 2003 ...... 0.88 0.52 30.81 For the fiscal year ended March 31, 2002 ...... 0.39 1.23 57.26 For the fiscal year ended March 31, 2001 ...... 0.58 1.14 99.36 For the fiscal year ended March 31, 2000 ...... 0.60 0.81 76.06 For the fiscal year ended March 31, 1999 ...... 0.02 0.81 99.71
- ---------- (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 year reported and includes reinvestment of dividends and distributions, if any. 49 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 year indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
NET NET ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS VALUE, NET UNREALIZED FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT OF YEAR INCOME/(LOSS)*(1) INVESTMENTS*(2) INCOME INCOME ---------- ----------------- --------------- ---------- ------------- INTRINSIC VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ...... $20.04 $0.14 $(5.26) $(0.11) -- For the fiscal year ended March 31, 2002 ...... 19.63 0.04 0.87 (0.01) $(0.49) For the fiscal year ended March 31, 2001 ...... 16.71 0.11 3.85 (0.13) (0.91) For the fiscal year ended March 31, 2000 ...... 19.74 0.11 (0.94) (0.10) (2.10) For the fiscal year ended March 31, 1999 ...... 20.83 0.11 0.59 (0.11) (1.68) CLASS B For the fiscal year ended March 31, 2003 ...... 19.65 0.05 (5.16) (0.04) -- For the fiscal year ended March 31, 2002 ...... 19.35 (0.02) 0.81 -- (0.49) For the fiscal year ended March 31, 2001 ...... 16.49 0.03 3.78 (0.04) (0.91) For the fiscal year ended March 31, 2000 ...... 19.51 0.01 (0.93) -- (2.10) For the fiscal year ended March 31, 1999 ...... 20.66 0.08 0.52 (0.07) (1.68) CLASS C For the fiscal year ended March 31, 2003 ...... 19.74 0.06 (5.18) (0.04) -- For the fiscal year ended March 31, 2002 ...... 19.43 (0.01) 0.81 -- (0.49) For the fiscal year ended March 31, 2001 ...... 16.55 0.02 3.80 (0.03) (0.91) For the fiscal year ended March 31, 2000 ...... 19.57 0.01 (0.93) -- (2.10) For the fiscal year ended March 31, 1999 ...... 20.66 0.07 0.53 (0.01) (1.68) CLASS Y For the fiscal year ended March 31, 2003 ...... 20.17 0.22 (5.23) (0.19) -- For the fiscal year ended March 31, 2002 ...... 19.67 0.11 0.91 (0.03) (0.49) For the fiscal year ended March 31, 2001 ...... 16.73 0.26 3.80 (0.21) (0.91) For the fiscal year ended March 31, 2000 ...... 19.78 0.22 (0.97) (0.20) (2.10) For the fiscal year ended March 31, 1999 ...... 20.84 0.17 0.65 (0.20) (1.68)
- ---------- * Calculated based on shares outstanding on the first and last day of the respective years, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. (1) Reflects waivers and related reimbursements, if any. (2) The amounts shown for a share outstanding throughout the respective years are not in accord with the changes in the aggregate gains and losses on investments during the respective years because of the timing of the sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective years. The accompanying notes are an integral part of the financial statements. 50
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF END OF INVESTMENT END OF YEAR EXPENSES TO YEAR RETURN(3) (000'S OMMITTED) AVERAGE NET ASSETS(1) ------ ---------- ---------------- --------------------- INTRINSIC VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ...... $14.81 (25.60)% $17,734 1.50% For the fiscal year ended March 31, 2002 ...... 20.04 4.72 20,953 1.50 For the fiscal year ended March 31, 2001 ...... 19.63 23.79 11,983 1.50 For the fiscal year ended March 31, 2000 ...... 16.71 (4.91) 7,950 1.50 For the fiscal year ended March 31, 1999 ...... 19.74 3.68 9,677 1.50 CLASS B For the fiscal year ended March 31, 2003 ...... 14.50 (26.02) 10,489 2.00 For the fiscal year ended March 31, 2002 ...... 19.65 4.17 9,733 2.00 For the fiscal year ended March 31, 2001 ...... 19.35 23.19 3,687 2.00 For the fiscal year ended March 31, 2000 ...... 16.49 (5.41) 1,379 2.00 For the fiscal year ended March 31, 1999 ...... 19.51 3.21 1,911 2.00 CLASS C For the fiscal year ended March 31, 2003 ...... 14.58 (25.95) 11,123 2.00 For the fiscal year ended March 31, 2002 ...... 19.74 4.20 13,528 2.00 For the fiscal year ended March 31, 2001 ...... 19.43 23.16 5,675 2.00 For the fiscal year ended March 31, 2000 ...... 16.55 (5.39) 3,359 2.00 For the fiscal year ended March 31, 1999 ...... 19.57 3.22 5,250 2.00 CLASS Y For the fiscal year ended March 31, 2003 ...... 14.97 (24.92) 20,931 1.00 For the fiscal year ended March 31, 2002 ...... 20.17 5.28 22,341 1.00 For the fiscal year ended March 31, 2001 ...... 19.67 24.38 7,038 1.00 For the fiscal year ended March 31, 2000 ...... 16.73 (4.51) 3,438 1.00 For the fiscal year ended March 31, 1999 ...... 19.78 4.29 4,741 1.00 INCREASE/(DECREASE) REFLECTED IN RATIO OF EXPENSE AND NET INVESTMENT NET INVESTMENT INCOME/(LOSS) PORTFOLIO INCOME/(LOSS) TO RATIOS DUE TO WAIVERS AND TURNOVER AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE --------------------- ---------------------------- --------- INTRINSIC VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ...... 0.93% 0.43% 52.98% For the fiscal year ended March 31, 2002 ...... 0.38 0.75 20.60 For the fiscal year ended March 31, 2001 ...... 0.72 1.50 60.46 For the fiscal year ended March 31, 2000 ...... 0.56 1.78 55.66 For the fiscal year ended March 31, 1999 ...... 0.54 1.46 38.27 CLASS B For the fiscal year ended March 31, 2003 ...... 0.45 0.43 52.98 For the fiscal year ended March 31, 2002 ...... (0.07) 0.75 20.60 For the fiscal year ended March 31, 2001 ...... 0.15 1.50 60.46 For the fiscal year ended March 31, 2000 ...... 0.03 1.75 55.66 For the fiscal year ended March 31, 1999 ...... 0.08 1.46 38.27 CLASS C For the fiscal year ended March 31, 2003 ...... 0.44 0.43 52.98 For the fiscal year ended March 31, 2002 ...... 0.02 0.75 20.60 For the fiscal year ended March 31, 2001 ...... 0.11 1.50 60.46 For the fiscal year ended March 31, 2000 ...... 0.03 1.75 55.66 For the fiscal year ended March 31, 1999 ...... 0.08 1.46 38.27 CLASS Y For the fiscal year ended March 31, 2003 ...... 1.44 0.43 52.98 For the fiscal year ended March 31, 2002 ...... 0.92 0.75 20.60 For the fiscal year ended March 31, 2001 ...... 1.65 1.50 60.46 For the fiscal year ended March 31, 2000 ...... 0.98 1.77 55.66 For the fiscal year ended March 31, 1999 ...... 1.08 1.46 38.27
- ---------- (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 year reported and includes reinvestment of dividends and distributions, if any. 51 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 year indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
NET NET NET ASSET REALIZED AND DISTRIBUTIONS ASSET VALUE, NET UNREALIZED FROM NET VALUE, BEGINNING INVESTMENT GAIN/(LOSS) ON REALIZED END OF OF YEAR INCOME/(LOSS)*(1) INVESTMENTS*(2) CAPITAL GAINS YEAR --------- ----------------- --------------- --------------- -------- SMALL CAP VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 .......... $20.39 $0.04 $(6.47) $(1.06) $12.90 For the fiscal year ended March 31, 2002 .......... 18.13 (0.04) 3.30 (1.00) 20.39 For the fiscal year ended March 31, 2001 .......... 23.10 (0.14) (2.61) (2.22) 18.13 For the fiscal year ended March 31, 2000 .......... 17.93 (0.15) 6.69 (1.37) 23.10 For the fiscal year ended March 31, 1999 .......... 23.65 (0.13) (4.65) (0.94) 17.93 CLASS B For the fiscal year ended March 31, 2003 .......... 19.82 (0.04) (6.32) (1.06) 12.40 For the fiscal year ended March 31, 2002 .......... 17.76 (0.12) 3.18 (1.00) 19.82 For the fiscal year ended March 31, 2001 .......... 22.80 (0.20) (2.62) (2.22) 17.76 For the fiscal year ended March 31, 2000 .......... 17.71 (0.24) 6.60 (1.27) 22.80 For the fiscal year ended March 31, 1999 .......... 23.48 (0.16) (4.67) (0.94) 17.71 CLASS C For the fiscal year ended March 31, 2003 .......... 19.83 (0.04) (6.31) (1.06) 12.42 For the fiscal year ended March 31, 2002 .......... 17.77 (0.12) 3.18 (1.00) 19.83 For the fiscal year ended March 31, 2001 .......... 22.80 (0.22) (2.59) (2.22) 17.77 For the fiscal year ended March 31, 2000 .......... 17.70 (0.26) 6.62 (1.26) 22.80 For the fiscal year ended March 31, 1999 .......... 23.48 (0.26) (4.58) (0.94) 17.70 CLASS Y For the fiscal year ended March 31, 2003 .......... 20.73 0.12 (6.59) (1.06) 13.20 For the fiscal year ended March 31, 2002 .......... 18.34 0.05 3.34 (1.00) 20.73 For the fiscal year ended March 31, 2001 .......... 23.23 (0.03) (2.64) (2.22) 18.34 For the fiscal year ended March 31, 2000 .......... 18.03 (0.05) 6.72 (1.47) 23.23 For the fiscal year ended March 31, 1999 .......... 23.65 (0.02) (4.66) (0.94) 18.03
- ---------- * Calculated based on shares outstanding on the first and last day of the respective years, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. (1) Reflects waivers and related reimbursements, if any. (2) The amounts shown for a share outstanding throughout the respective years are not in accord with the changes in the aggregate gains and losses on investments during the respective years because of the timing of the sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective years. The accompanying notes are an integral part of the financial statements. 52
RATIO OF TOTAL NET ASSETS, RATIO OF NET INVESTMENT INVESTMENT END OF YEAR EXPENSES TO INCOME/(LOSS) TO RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1) ---------- --------------- --------------------- --------------------- SMALL CAP VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 .......... (31.94)% $12,771 1.50% 0.23% For the fiscal year ended March 31, 2002 .......... 18.51 23,902 1.50 (0.24) For the fiscal year ended March 31, 2001 .......... (11.64) 17,194 1.50 (0.63) For the fiscal year ended March 31, 2000 .......... 38.21 24,086 1.50 (0.75) For the fiscal year ended March 31, 1999 .......... (20.26) 18,520 1.50 (0.60) CLASS B For the fiscal year ended March 31, 2003 .......... (32.52) 4,975 2.00 (0.26) For the fiscal year ended March 31, 2002 .......... 17.76 6,944 2.00 (0.74) For the fiscal year ended March 31, 2001 .......... (12.12) 4,301 2.00 (1.14) For the fiscal year ended March 31, 2000 .......... 37.53 4,030 2.00 (1.24) For the fiscal year ended March 31, 1999 .......... (20.63) 2,716 2.00 (1.10) CLASS C For the fiscal year ended March 31, 2003 .......... (32.45) 9,204 2.00 (0.27) For the fiscal year ended March 31, 2002 .......... 17.75 16,112 2.00 (0.74) For the fiscal year ended March 31, 2001 .......... (12.07) 11,460 2.00 (1.14) For the fiscal year ended March 31, 2000 .......... 37.54 13,399 2.00 (1.24) For the fiscal year ended March 31, 1999 .......... (20.67) 11,112 2.00 (1.10) CLASS Y For the fiscal year ended March 31, 2003 .......... (31.59) 20,726 1.00 0.74 For the fiscal year ended March 31, 2002 .......... 19.02 34,834 1.00 0.26 For the fiscal year ended March 31, 2001 .......... (11.22) 33,449 1.00 (0.13) For the fiscal year ended March 31, 2000 .......... 38.86 31,091 1.00 (0.24) For the fiscal year ended March 31, 1999 .......... (19.84) 24,087 1.00 (0.10) INCREASE/(DECREASE) REFLECTED IN EXPENSE AND NET INVESTMENT INCOME/(LOSS) PORTFOLIO RATIOS DUE TO WAIVERS AND TURNOVER RELATED REIMBURSEMENTS RATE ---------------------------- ---------- SMALL CAP VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 .......... 0.48% 92.42% For the fiscal year ended March 31, 2002 .......... 0.53 75.76 For the fiscal year ended March 31, 2001 .......... 1.02 65.32 For the fiscal year ended March 31, 2000 .......... 0.65 65.85 For the fiscal year ended March 31, 1999 .......... 0.65 84.12 CLASS B For the fiscal year ended March 31, 2003 .......... 0.48 92.42 For the fiscal year ended March 31, 2002 .......... 0.53 75.76 For the fiscal year ended March 31, 2001 .......... 1.02 65.32 For the fiscal year ended March 31, 2000 .......... 0.65 65.85 For the fiscal year ended March 31, 1999 .......... 0.65 84.12 CLASS C For the fiscal year ended March 31, 2003 .......... 0.48 92.42 For the fiscal year ended March 31, 2002 .......... 0.53 75.76 For the fiscal year ended March 31, 2001 .......... 1.02 65.32 For the fiscal year ended March 31, 2000 .......... 0.65 65.85 For the fiscal year ended March 31, 1999 .......... 0.65 84.12 CLASS Y For the fiscal year ended March 31, 2003 .......... 0.48 92.42 For the fiscal year ended March 31, 2002 .......... 0.53 75.76 For the fiscal year ended March 31, 2001 .......... 1.02 65.32 For the fiscal year ended March 31, 2000 .......... 0.65 65.85 For the fiscal year ended March 31, 1999 .......... 0.65 84.12
- ---------- (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 year reported and includes reinvestment of dividends and distributions, if any. 53 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 year indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
NET NET NET ASSET REALIZED AND DISTRIBUTIONS ASSET VALUE, NET UNREALIZED FROM NET VALUE, BEGINNING INVESTMENT GAIN/(LOSS) ON REALIZED END OF OF YEAR LOSS*(1) INVESTMENTS*(2) CAPITAL GAINS YEAR ------------- --------------- --------------- ------------- ---------- ALPHA GROWTH PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 ... $18.84 $(0.02) $(3.25) -- $15.57 For the fiscal year ended March 31, 2002 ... 16.75 (0.03) 2.12 -- 18.84 For the fiscal year ended March 31, 2001 ... 21.21 (0.09) (4.37) -- 16.75 For the fiscal year ended March 31, 2000 ... 17.32 (0.07) 3.96 -- 21.21 For the fiscal year ended March 31, 1999 ... 13.40 (0.07) 4.01 $(0.02) 17.32 CLASS B For the fiscal year ended March 31, 2003 ... 18.41 (0.08) (3.16) -- 15.17 For the fiscal year ended March 31, 2002 ... 16.46 (0.06) 2.01 -- 18.41 For the fiscal year ended March 31, 2001 ... 20.93 (0.17) (4.30) -- 16.46 For the fiscal year ended March 31, 2000 ... 17.18 (0.16) 3.91 -- 20.93 For the fiscal year ended March 31, 1999 ... 13.38 (0.13) 3.95 (0.02) 17.18 CLASS C For the fiscal year ended March 31, 2003 ... 18.42 (0.06) (3.17) -- 15.19 For the fiscal year ended March 31, 2002 ... 16.46 (0.06) 2.02 -- 18.42 For the fiscal year ended March 31, 2001 ... 20.94 (0.17) (4.31) -- 16.46 For the fiscal year ended March 31, 2000 ... 17.19 (0.18) 3.93 -- 20.94 For the fiscal year ended March 31, 1999 ... 13.38 (0.13) 3.96 (0.02) 17.19
- ---------- * Calculated based on shares outstanding on the first and last day of the respective years, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. (1) Reflects waivers and related reimbursements. (2) The amounts shown for a share outstanding throughout the respective years are not in accord with the changes in the aggregate gains and losses on investments during the respective years because of the timing of the sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective years. The accompanying notes are an integral part of the financial statements. 54
RATIO OF TOTAL NET ASSETS, RATIO OF NET INVESTMENT INVESTMENT END OF YEAR EXPENSES TO LOSS TO RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1) --------------- --------------- --------------------- --------------------- ALPHA GROWTH PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 .... (17.36)% $39,817 1.40% (0.15)% For the fiscal year ended March 31, 2002 .... 12.48 23,176 1.40 (0.42) For the fiscal year ended March 31, 2001 .... (21.03) 17,316 1.40 (0.46) For the fiscal year ended March 31, 2000 .... 22.46 22,580 1.40 (0.63) For the fiscal year ended March 31, 1999 .... 29.47 6,542 1.40 (0.57) CLASS B For the fiscal year ended March 31, 2003 .... (17.60) 16,059 1.90 (0.65) For the fiscal year ended March 31, 2002 .... 11.85 9,061 1.90 (0.92) For the fiscal year ended March 31, 2001 .... (21.36) 7,441 1.90 (0.96) For the fiscal year ended March 31, 2000 .... 21.83 9,124 1.90 (1.11) For the fiscal year ended March 31, 1999 .... 28.61 4,460 1.90 (1.07) CLASS C For the fiscal year ended March 31, 2003 .... (17.54) 13,236 1.90 (0.63) For the fiscal year ended March 31, 2002 .... 11.91 6,546 1.90 (0.92) For the fiscal year ended March 31, 2001 .... (21.40) 4,973 1.90 (0.96) For the fiscal year ended March 31, 2000 .... 21.81 6,398 1.90 (1.09) For the fiscal year ended March 31, 1999 .... 28.69 3,304 1.90 (1.07) INCREASE/(DECREASE) REFLECTED IN EXPENSE AND NET INVESTMENT LOSS PORTFOLIO RATIOS DUE TO WAIVERS AND TURNOVER RELATED REIMBURSEMENTS RATE ------------------------- ----------- ALPHA GROWTH PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 .... 0.56% 185.33% For the fiscal year ended March 31, 2002 .... 1.06 82.40 For the fiscal year ended March 31, 2001 .... 0.97 81.37 For the fiscal year ended March 31, 2000 .... 1.33 56.26 For the fiscal year ended March 31, 1999 .... 2.89 84.49 CLASS B For the fiscal year ended March 31, 2003 .... 0.56 185.33 For the fiscal year ended March 31, 2002 .... 1.06 82.40 For the fiscal year ended March 31, 2001 .... 0.97 81.37 For the fiscal year ended March 31, 2000 .... 1.33 56.26 For the fiscal year ended March 31, 1999 .... 2.89 84.49 CLASS C For the fiscal year ended March 31, 2003 .... 0.56 185.33 For the fiscal year ended March 31, 2002 .... 1.06 82.40 For the fiscal year ended March 31, 2001 .... 0.97 81.37 For the fiscal year ended March 31, 2000 .... 1.33 56.26 For the fiscal year ended March 31, 1999 .... 2.89 84.49
- ---------- (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 year reported and includes reinvestment of dividends and distributions, if any. 55 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 ASSET NET REALIZED AND DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT UNREALIZED FROM NET FROM NET BEGINNING INCOME GAIN/(LOSS) ON INVESTMENT REALIZED OF PERIOD LOSS**(1) INVESTMENTS**(2) CAPITAL GAINS CAPITAL GAINS --------------- --------------- ---------------- ------------- ------------- INTERNATIONAL EQUITY PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 .... $14.64 $0.07 $(4.40) -- -- For the fiscal year ended March 31, 2002 .... 17.55 (0.04) (2.87) -- -- For the fiscal year ended March 31, 2001 .... 27.84 (0.06) (9.92) -- $(0.31) For the fiscal year ended March 31, 2000 .... 15.14 (0.05) 12.98 -- (0.23) For the fiscal year ended March 31, 1999 .... 13.77 (0.03) 1.40 --+ -- CLASS B For the fiscal year ended March 31, 2003 .... 14.32 0.01 (4.31) -- -- For the fiscal year ended March 31, 2002 .... 17.26 (0.12) (2.82) -- -- For the fiscal year ended March 31, 2001 .... 27.52 (0.18) (9.77) -- (0.31) For the fiscal year ended March 31, 2000 .... 15.05 (0.10) 12.80 -- (0.23) For the fiscal year ended March 31, 1999 .... 13.75 (0.02) 1.32 --+ -- CLASS C For the fiscal year ended March 31, 2003 .... 14.32 0.01 (4.30) -- -- For the fiscal year ended March 31, 2002 .... 17.25 (0.10) (2.83) -- -- For the fiscal year ended March 31, 2001 .... 27.52 (0.15) (9.81) -- (0.31) For the fiscal year ended March 31, 2000 .... 15.05 (0.09) 12.79 -- (0.23) For the fiscal year ended March 31, 1999 .... 13.75 (0.02) 1.32 --+ -- CLASS Y For the fiscal year ended March 31, 2003 .... 14.69 0.12 (4.39) -- -- For the period July 5, 2001* through March 31, 2002 ............................. 16.75 0.06 (2.12) -- --
- ---------- * Commencement of initial public offering. ** Calculated based on shares outstanding on the first and last day of the respective periods, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. + Amount is less than $0.01 per share. (1) Reflects waivers and related 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 the 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. 56
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF BEGINNING INVESTMENT END OF YEAR EXPENSES TO OF PERIOD RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) --------------- --------------- --------------- --------------------- INTERNATIONAL EQUITY PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 .... $10.31 (29.58)% $20,518 1.75% For the fiscal year ended March 31, 2002 .... 14.64 (16.58) 31,455 1.75 For the fiscal year ended March 31, 2001 .... 17.55 (35.99) 54,096 1.75 For the fiscal year ended March 31, 2000 .... 27.84 85.67 61,508 1.75 For the fiscal year ended March 31, 1999 .... 15.14 9.97 8,299 1.75 CLASS B For the fiscal year ended March 31, 2003 .... 10.02 (30.03) 4,218 2.25 For the fiscal year ended March 31, 2002 .... 14.32 (17.03) 7,751 2.25 For the fiscal year ended March 31, 2001 .... 17.26 (36.30) 11,754 2.25 For the fiscal year ended March 31, 2000 .... 27.52 84.66 15,656 2.25 For the fiscal year ended March 31, 1999 .... 15.05 9.48 3,156 2.25 CLASS C For the fiscal year ended March 31, 2003 .... 10.03 (29.96) 13,257 2.25 For the fiscal year ended March 31, 2002 .... 14.32 (16.99) 21,025 2.25 For the fiscal year ended March 31, 2001 .... 17.25 (36.34) 25,833 2.25 For the fiscal year ended March 31, 2000 .... 27.52 84.65 18,238 2.25 For the fiscal year ended March 31, 1999 .... 15.05 9.48 2,926 2.25 CLASS Y For the fiscal year ended March 31, 2003 .... 10.42 (29.07) 16,468 1.25 For the period July 5, 2001* through March 31, 2002 ..................... 14.69 (12.30)(4) 21,614 1.25(4)(5) INCREASE/(DECREASE) REFLECTED IN RATIO OF EXPENSE AND NET INVESTMENT NET INVESTMENT LOSS PORTFOLIO INCOME/(LOSS) TO RATIOS DUE TO WAIVERS AND TURNOVER AVERAGE NET ASSETS(1) RELATED REIMBURSEMENTS RATE --------------------- ------------------------- ----------- INTERNATIONAL EQUITY PORTFOLIO CLASS A For the fiscal year ended March 31, 2003 .... 0.55% 0.57% 147.32% For the fiscal year ended March 31, 2002 .... (0.09) 0.57 168.32 For the fiscal year ended March 31, 2001 .... (0.31) 0.53 168.04 For the fiscal year ended March 31, 2000 .... (0.77) 1.12 96.36 For the fiscal year ended March 31, 1999 .... 0.05 2.38 114.68 CLASS B For the fiscal year ended March 31, 2003 .... 0.07 0.57 147.32 For the fiscal year ended March 31, 2002 .... (0.59) 0.57 168.32 For the fiscal year ended March 31, 2001 .... (0.81) 0.53 168.04 For the fiscal year ended March 31, 2000 .... (1.27) 1.12 96.36 For the fiscal year ended March 31, 1999 .... (0.45) 2.38 114.68 CLASS C For the fiscal year ended March 31, 2003 .... 0.05 0.57 147.32 For the fiscal year ended March 31, 2002 .... (0.59) 0.57 168.32 For the fiscal year ended March 31, 2001 .... (0.81) 0.53 168.04 For the fiscal year ended March 31, 2000 .... (1.27) 1.12 96.36 For the fiscal year ended March 31, 1999 .... (0.45) 2.38 114.68 CLASS Y For the fiscal year ended March 31, 2003 .... 1.05 0.57 147.32 For the period July 5, 2001* through March 31, 2002 ..................... 0.55(4)(5) 0.51(4)(5) 168.32
- ---------- (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 the timing differences in the commencement of initial public offerings. (5) Annualized. 57 THE BEAR STEARNS FUNDS S&P STARS Portfolio S&P STARS Opportunities Portfolio The Insiders Select Fund Intrinsic Value Portfolio Small Cap Value Portfolio Alpha Growth Portfolio International Equity Portfolio NOTES TO FINANCIAL STATEMENTS ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business trust on September 29, 1994 and is registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as an open-end management investment company. The Fund currently consists of ten separate portfolios: six diversified portfolios, Prime Money Market Portfolio, Intrinsic Value Portfolio ("Intrinsic Value"), Small Cap Value Portfolio ("Small Cap"), International Equity Portfolio ("International Equity"), High Yield Total Return Portfolio and Income Portfolio, and four non-diversified portfolios, The Insiders Select Fund ("Insiders Select"), Alpha Growth Portfolio ("Alpha Growth"), S&P STARS Portfolio ("S&P STARS") and S&P STARS Opportunities Portfolio ("S&P STARS Opportunities") (each a "Portfolio" and collectively the "Portfolios"). 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 Alpha Growth have not commenced its initial public offering. 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. MANAGEMENT ESTIMATES--The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") 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 as of the close of regular trading on the New York Stock Exchange, Inc. (the "Exchange") (generally 4:00 p.m. Eastern time) on each day that the Exchange is open for trading. Equity securities, including written covered call options, are valued each business day at the last sale price as of the close of regular trading on the Exchange by one or more independent pricing services ("Pricing Services") approved by the Board of Trustees (the "Board"). 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. Other assets and securities for which no quotations are readily available or which are restricted as to sale (or resale) are valued by such methods as the Fund's Board deems in good faith to reflect the fair value. Restricted securities, as well as securities or other assets for which market quotations are not readily available, or are not valued by a Pricing Service approved by the Fund's Board, are valued at fair value as determined in good faith by Bear Stearns Asset Management Inc.'s ("BSAM" or the "Adviser") Valuation Committee, pursuant to procedures approved by the Fund's Board. The Board reviews the methods of valuation quarterly. Short-term investments (those acquired with remaining maturities of 60 days or less) are valued at cost, plus or minus any amortized discount or premium, which approximates market value. 58 Expenses and fees, including the respective investment advisory, administration and distribution fees, are accrued daily and taken into account for the purpose of determining the net asset value of each Portfolio's shares. Because of the differences in operating expenses incurred by each class, the per share net asset value of each class may 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. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Each Portfolio's net investment income (other than distribution and service 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. SHORT SELLING--When the Portfolio makes a short sale, an amount equal to the proceeds received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the short sale. Until the Portfolio replaces the borrowed security, the Portfolio will maintain a segregated account with cash, U.S. government securities or other liquid securities sufficient to cover its short position on a daily basis. Short sales represent obligations of the Portfolio to make future delivery of specific securities and correspondingly creates an obligation to purchase the security at market prices prevailing at the later delivery date (or to deliver the security if already owned by the Portfolio). Upon the termination of a short sale, the 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. S&P STARS and S&P STARS Opportunities are the only Portfolios that have engaged in short sales for the fiscal year ended March 31, 2003. S&P STARS has segregated sufficient liquid assets in a separate account as collateral for open short sales. Securities sold short at March 31, 2003 for S&P STARS were as follows:
MARKET UNREALIZED SECURITY PROCEEDS VALUE GAIN/(LOSS) - -------- ----------- ----------- ---------- Dreyer's Grand Ice Cream, Inc.................... $ 8,124,487 $ 8,318,400 $(193,913) Great Atlantic & Pacific Tea Co., Inc. (The)..... 508,943 344,800 164,143 Navistar International Corp...................... 3,594,572 3,937,600 (343,028) ----------- ----------- --------- Total............................................ $12,228,002 $12,600,800 $(372,798) =========== =========== =========
S&P STARS Opportunities has segregated sufficient liquid assets in a separate account as collateral for open short sales. Securities sold short at March 31, 2003 for S&P STARS Opportunities were as follows:
MARKET UNREALIZED SECURITY PROCEEDS VALUE GAIN/(LOSS) - -------- ----------- -------- ----------- Cognex Corp...................................... $146,746 $169,360 $(22,614) Delta Air Lines, Inc............................. 6,710 8,900 (2,190) Dreyer's Grand Ice Cream, Inc.................... 317,410 346,600 (29,190) Four Seasons Hotels Inc.......................... 124,760 135,850 (11,090) International Rectifier Corp..................... 89,122 78,680 10,442 -------- -------- -------- Total............................................ $684,748 $739,390 $(54,642) ======== ======== ========
SECURITIES LENDING--Loans of securities are required to be initially secured by collateral at least equal to 100% of the market value of the securities on loan and maintained at a level at least equal to the value of loaned securities. 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, 59 the lending agent has agreed to pay the amount of the shortfall to the Portfolios. The market value of securities on loan to brokers at March 31, 2003, were as follows:
MARKET VALUE OF PORTFOLIO SECURITIES ON LOAN - --------- ------------------ S&P STARS..................... $52,172,304 Small Cap..................... 1,435,324
In addition, S&P STARS Opportunities and International Equity engaged in security lending transactions during the fiscal year ended March 31, 2003, although none were outstanding as of March 31, 2003. All such income is included in the Statements of Operations. No other Portfolios had security lending transactions during the fiscal year ended March 31, 2003. Pursuant to an exemptive order received from the Securities and Exchange Commission (the "Order"), Custodial Trust Company ("CTC"), a wholly-owned subsidiary of The Bear Stearns Companies Inc., custodian to each of the Portfolios and an affiliate of BSAM, Bear Stearns Funds Management Inc. ("BSFM" or the "Administrator") and Bear Stearns & Co. Inc., ("Bear Stearns" or the "Distributor") served as the securities lending agent for the Portfolios and, subject to the Order, participated in the lending income earned by the Portfolios. During the fiscal year, CTC has been compensated approximately $15,469, $199 and $1,026 from S&P STARS, S&P STARS Opportunities and Small Cap, respectively. In addition, the Order permits (subject to limitations) a Portfolio to loan its securities to its affiliates. During the fiscal year, Bear, Stearns Securities Corp., an affiliate of the Portfolios received rebates in connection with such loans amounting to $59,922, $35 and $858 for S&P STARS, S&P STARS Opportunities and Small Cap, respectively. 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 Statements 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, if any, is categorized as foreign exchange gain or loss for both financial reporting and income tax reporting purposes. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS--The Portfolios may enter into forward foreign currency exchange contracts ("forward currency contracts") to hedge against adverse changes in the relationship of the U.S. dollar to foreign currencies. The Portfolios may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Portfolios may also use these contracts to hedge the U.S. dollar value of securities it already owns that are 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 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. For the fiscal year ended March 31, 2003, only International Equity entered into such forward currency contracts. International Equity's open forward currency contract at March 31, 2003, was as follows:
DELIVERY VALUE SETTLEMENT UNREALIZED CURRENCY (LOCAL CURRENCY) DATE COMMITMENT VALUE LOSS - -------- ---------------- ---------- ---------- ---------- ---------- SALE: Japanese Yen.... 619,030,000 04/04/03 $5,219,650 $5,221,233 $1,583 ======
60 U.S. FEDERAL TAX STATUS--Each Portfolio intends to distribute substantially all of its taxable income and 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. The tax character of dividends and distributions paid during the fiscal year ended March 31, 2003 were as follows:
ORDINARY LONG-TERM TOTAL PORTFOLIO INCOME CAPITAL GAIN DISTRIBUTIONS - --------- -------- ------------ ------------- S&P STARS Opportunites....... $ 836,305 -- $ 836,305 Insiders Select.............. 202 $ 52,589 52,791 Intrinsic Value.............. 424,797 9,891 434,688 Small Cap.................... 1,608,679 2,547,708 4,156,387
At March 31, 2003, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED ACCUMULATED TOTAL ORDINARY CAPITAL AND UNREALIZED ACCUMULATED PORTFOLIO INCOME OTHER LOSSES DEPRECIATION DEFICIT - --------- ------------- -------------- -------------- ---------------- S&P STARS............................ -- $(989,296,952) $(391,733,213) $(1,381,030,165) S&P STARS Opportunites............... -- (13,183,080) (2,037,898) (15,220,978) Insiders Select...................... $ 53,348 (1,496,721) (3,441,661) (4,885,034) Intrinsic Value...................... 368,133 (2,637,251) (11,167,933) (13,437,051) Small Cap............................ 185,345 (9,847,003) (6,091,892) (15,753,550) Alpha Growth......................... -- (1,347,640) (2,316,196) (3,663,836) International Equity................. -- (61,192,165) (2,849,837) (64,042,002)
The difference between book basis and tax-basis unrealized depreciation is attributable primarily to the tax deferral of losses on wash sales. At March 31, 2003, the Portfolios indicated below had capital loss carryforwards available as a reduction, to the extent provided in regulations, of any future net capital gains realized before the end of fiscal year 2011. To the extent that the capital loss carryforwards are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders. The Portfolios which had capital loss carryforwards at March 31, 2003 were as follows:
AMOUNT EXPIRING IN GROSS CAPITAL LOSS -------------------------------------------- PORTFOLIO CARRYFORWARD 2009 2010 2011 - --------- ------------------ ----------- ------------ ------------ S&P STARS.................... $845,563,457 $75,578,722 $224,199,591 $545,785,144 S&P STARS Opportunities...... 9,462,013 -- -- 9,462,013 Insiders Select.............. 1,100,678 -- -- 1,100,678 Intrinsic Value.............. 880,718 -- -- 880,718 Small Cap.................... 6,119,606 -- -- 6,119,606 Alpha Growth................. 325,792 -- 325,792 -- International Equity......... 54,100,556 11,036,571 22,469,555 20,594,430
For U.S. federal income tax purposes, net realized capital losses or foreign exchange losses incurred after October 31, 2002 within the current fiscal year are deemed to arise on the first day of the following fiscal year. S&P STARS, S&P STARS Opportunities, Insiders Select, Intrinsic Value, Small Cap, Alpha Growth and International Equity incurred and elected to defer such losses of $143,733,495, $3,721,067, $396,043, $1,756,533, $3,727,397, $1,021,848 and $6,115,800, respectively. For U.S. federal income tax purposes, the cost of securities owned, gross appreciation, gross depreciation and net unrealized depreciation of investments at March 31, 2003 for each Portfolio were as follows:
GROSS GROSS NET PORTFOLIO COST APPRECIATION DEPRECIATION DEPRECIATION - --------- -------------- ------------- -------------- -------------- S&P STARS.................... $1,578,349,844 $35,740,531 $(427,473,744) $(391,733,213) S&P STARS Opportunities...... 48,474,665 2,498,060 (4,535,958) (2,037,898) Insiders Select.............. 30,868,626 2,690,841 (6,132,502) (3,441,661) Intrinsic Value.............. 71,955,919 2,151,856 (13,319,789) (11,167,933) Small Cap.................... 54,001,304 2,721,468 (8,813,360) (6,091,892) Alpha Growth................. 71,628,477 2,592,047 (4,908,243) (2,316,196) International Equity......... 56,813,789 1,155,411 (4,034,957) (2,879,546)
61 DIVIDENDS AND DISTRIBUTIONS--Each Portfolio intends to distribute at least annually 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 GAAP. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within capital accounts based on their U.S. federal tax-basis treatment. Temporary differences do not require reclassification. At March 31, 2003, the reclassifications within the composition of net assets were as follows: S&P STARS, S&P STARS Opportunities and Alpha Growth reclassified from net investment losses of $18,343,528, $688,567 and $177,537, respectively, to paid-in capital. In addition, S&P STARS and S&P STARS Opportunities reclassified net investment losses of $93,499 and $2,252, respectively, to accumulated net realized losses. International Equity reclassified foreign exchange losses of $1,925,382 to net investment losses. In addition, International Equity reclassified net investment losses of $574,297 to paid-in capital. Insiders Select and Small Cap reclassified realized accumulated losses of $202 and $350, respectively, to undistributed net investment income. Insiders Select reclassified from realized accumulated losses a previous year miscellaneous adjustment of $50 to paid-in capital. Small Cap reclassified from undistributed net investment income a previous year miscellaneous adjustment of $4 to paid-in capital. Intrinsic Value reclassified undistributed net investment income of $7,528 to realized accumulated losses. 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 fiscal year ended March 31, 2003, BSAM, a wholly-owned subsidiary of The Bear Stearns Companies Inc., served as the investment adviser pursuant to an Investment Advisory Agreement with respect to 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, S&P STARS Opportunities, Intrinsic Value and Small Cap, 0.65% of average daily net assets for Alpha Growth, and 1.00% of average daily net assets for International Equity. 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, 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 Insiders Select's average daily net assets. For the fiscal year ended March 31, 2003, the performance adjustment fee decreased the total advisory fee by $164,766 or 0.49% based on the value of Insider Select's average daily net assets due to underperformance of such Portfolio on a trailing 12-month basis in comparison to the performance of the S&P MidCap 400 Index, the Portfolio's benchmark index, for the twelve months ended March 31, 2003. As a result, the annual rate was adjusted to 0.51% before any reduction for fee waivers or expense reimbursements. BSAM has engaged Marvin & Palmer Associates, Inc. ("Marvin & Palmer") as 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 (not the Portfolio) 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 International Equity's net assets in excess of $65 million at the relevant month end. For the fiscal year ended March 31, 2003, Marvin & Palmer earned a fee of $136,477. For the fiscal year ended March 31, 2003, BSFM 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 62 average daily net assets up to $1 billion, 0.12% of the next $1 billion, 0.10% of the next $3 billion and 0.08% of the average daily net assets above $5 billion. For the fiscal year ended March 31, 2003, BSAM has continued its undertaking to limit each Portfolio's total operating expenses (exclusive of brokerage commissions, taxes, interest and extraordinary items) to a maximum annual level as a percent of each Portfolio's average daily net assets as follows:
PORTFOLIO CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Y SHARES - --------- -------------- -------------- -------------- -------------- S&P STARS.................... 1.50% 2.00% 2.00% 1.00% S&P STARS Opportunities...... 1.50 2.00 2.00 1.00 Insiders Select.............. 1.65 2.15 2.15 1.15 Intrinsic Value.............. 1.50 2.00 2.00 1.00 Small Cap.................... 1.50 2.00 2.00 1.00 Alpha Growth................. 1.40 1.90 1.90 -- International Equity......... 1.75 2.25 2.25 1.25
As necessary, this limitation is effected by waivers by the Adviser of its advisory fees and reimbursements of expenses exceeding the advisory fee. For the fiscal year ended March 31, 2003, the investment advisory fee waivers and reimbursements of expenses (in order to maintain the expense limitation) were as follows:
PORTFOLIO ADVISORY FEE WAIVERS EXPENSE REIMBURSEMENTS - --------- -------------------- ---------------------- S&P STARS.................... $2,484,380 -- S&P STARS Opportunities...... 236,770 $20,002 Insiders Select.............. 174,426 -- Intrinsic Value.............. 274,718 -- Small Cap.................... 294,546 -- Alpha Growth................. 275,150 4,349 International Equity......... 369,277 11,336
The Portfolios will not pay BSAM at a later time for any amounts BSAM may waive, nor will the Portfolios reimburse BSAM for any amounts BSAM may assume. For the fiscal year ended March 31, 2003, Bear Stearns, an affiliate of the Adviser and the Administrator, earned $1,228,242, $81,393, $15,378, $10,944, $4,626 and $88,621 in brokerage commissions from portfolio transactions executed on behalf of S&P STARS, S&P STARS Opportunities, Insiders Select, Intrinsic Value, Small Cap and Alpha Growth, respectively. DISTRIBUTION PLAN AND SHAREHOLDER SERVICING PLAN The Portfolios listed below have entered into a Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act and a Shareholder Servicing Plan which are as follows:
CLASS A CLASS B CLASS C ------------------------- ------------------------- ------------------------- DISTRIBUTION SHAREHOLDER DISTRIBUTION SHAREHOLDER DISTRIBUTION SHAREHOLDER PORTFOLIO PLAN SERVICING PLAN SERVICING PLAN SERVICING - --------- ------------ ----------- ------------ ----------- ------------ ----------- S&P STARS.................... 0.25% 0.25% 0.75% 0.25% 0.75% 0.25% S&P STARS Opportunities...... 0.25 0.25 0.75 0.25 0.75 0.25 Insiders Select.............. 0.25 0.25 0.75 0.25 0.75 0.25 Intrinsic Value.............. 0.25 0.25 0.75 0.25 0.75 0.25 Small Cap.................... 0.25 0.25 0.75 0.25 0.75 0.25 Alpha Growth................. 0.25 0.25 0.75 0.25 0.75 0.25 International Equity......... 0.25 0.25 0.75 0.25 0.75 0.25
Such fees are based on the average daily net assets in each class of the respective Portfolios and are accrued daily and paid quarterly or at such intervals as the Board may determine. The fees paid to Bear Stearns under the Distribution Plan are payable without regard to actual expenses incurred. Bear Stearns uses the distribution fees to pay broker-dealers or other financial 63 institutions whose clients hold each Portfolio's shares and for other distribution-related activities. Bear Stearns uses shareholder servicing fees to pay broker-dealers or other financial institutions that provide personal service in connection with the maintenance of shareholder accounts. For the fiscal year ended March 31, 2003, the distribution and shareholder servicing fees paid to Bear Stearns under each Plan were as follows:
PORTFOLIO DISTRIBUTION FEES SHAREHOLDER SERVICING FEES - --------- ----------------- -------------------------- S&P STARS.................... $7,616,752 $3,703,595 S&P STARS Opportunities...... 303,242 142,506 Insiders Select.............. 167,424 82,504 Intrinsic Value.............. 217,008 103,644 Small Cap.................... 177,304 87,818 Alpha Growth................. 229,912 124,639 International Equity......... 239,397 122,678
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. In addition, Bear Stearns advanced 4.25% and 1.00% in sales commissions on the sale of Class B and C shares, respectively, to dealers at the time of such sales. For the fiscal year ended March 31, 2003, Bear Stearns has advised each Portfolio that it received the amounts noted below in front-end sales charges resulting from sales of Class A shares and contingent deferred sales charges ("CDSC") upon certain redemptions by Class A, B and C shareholders, respectively. The amounts were as follows:
FRONT-END SALES CHARGES CDSC CDSC CDSC PORTFOLIO CLASS A SHARES CLASS A SHARES CLASS B SHARES CLASS C SHARES - --------- ----------------------- -------------- -------------- -------------- S&P STARS.................... $1,137,238 $22,800 $3,054,572 $149,039 S&P STARS Opportunities...... 176,737 684 105,492 28,023 Insiders Select.............. 66,288 30 52,790 2,374 Intrinsic Value.............. 56,104 12 65,027 2,756 Small Cap.................... 31,612 -- 25,986 1,858 Alpha Growth................. 331,846 -- 61,957 3,202 International Equity......... 26,329 -- 43,284 815
INVESTMENTS IN SECURITIES For the fiscal year ended March 31, 2003, aggregate purchases and sales of investment securities (excluding short-term investments) for each Portfolio were as follows:
PORTFOLIO PURCHASES SALES - --------- -------------- -------------- S&P STARS.................... $2,021,866,249 $2,547,867,334 S&P STARS Opportunities...... 100,422,053 103,056,023 Insiders Select.............. 11,013,922 9,611,060 Intrinsic Value.............. 46,894,124 32,543,052 Small Cap.................... 54,827,860 63,278,782 Alpha Growth................. 132,568,597 86,629,005 International Equity......... 95,967,680 97,434,605
INVESTMENTS IN AFFILIATES A summary of transactions for each issuer, which is or was an affiliate at or during the fiscal year ended March 31, 2003, were as follows:
NUMBER OF CAPITAL UNREALIZED PORTFOLIO AFFILIATE SHARES LOSS LOSS VALUE - --------- ------------------------ --------- -------- ----------- ----------- S&P STARS CNET Networks, Inc. 8,000,000 $306,343 $27,932,958 $20,080,000 Intuitive Surgical, Inc. 3,130,000 951,628 15,493,320 20,219,800 SportsLine.com, Inc. 3,870,000 -- 33,603,711 3,792,600
64 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% within the first year of purchase. There is no sales charge or CDSC on the sale of Class Y shares, which are offered primarily to institutional investors. Transactions in shares of beneficial interest for each Portfolio were as follows:
S&P STARS ------------------------------------------- SALES REPURCHASES REINVESTMENTS ------------ ------------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ................................................................ 3,895,224 19,073,752 -- Value ................................................................. $ 76,281,246 $347,895,463 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares ................................................................ 14,368,636 10,651,161 -- Value ................................................................. $395,690,142 $281,440,211 -- CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ................................................................ 1,674,642 8,079,666 -- Value ................................................................. $ 31,438,483 $143,765,252 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares ................................................................ 8,494,754 3,756,954 -- Value ................................................................. $229,724,959 $ 96,832,796 -- CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ................................................................ 1,707,019 8,417,201 -- Value ................................................................. $ 32,256,708 $149,851,445 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares ................................................................ 7,209,028 3,770,094 -- Value ................................................................. $194,284,555 $ 96,254,761 -- CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ................................................................ 1,265,616 2,478,336 -- Value ................................................................. $ 24,007,292 $ 45,739,040 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares ................................................................ 2,961,302 1,260,352 -- Value ................................................................. $ 82,504,756 $ 34,063,065 --
S&P STARS OPPORTUNITIES ----------------------------------------- SALES REPURCHASES REINVESTMENTS ----------- ----------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ................................................................ 878,968 1,055,372 30,110 Value ................................................................. $10,928,634 $12,146,430 $339,034 FOR THE PERIOD OCTOBER 1, 2001* THROUGH MARCH 31, 2002 Shares ................................................................ 2,325,455 222,405 Value ................................................................. $31,028,865 $ 3,017,221 CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ................................................................ 546,134 627,113 20,418 Value ................................................................. $ 6,865,066 $ 7,170,373 $228,272 FOR THE PERIOD OCTOBER 1, 2001* THROUGH MARCH 31, 2002 Shares ................................................................ 1,578,013 95,756 -- Value ................................................................. $21,236,871 $ 1,286,791 -- CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ................................................................ 532,785 584,820 17,250 Value ................................................................. $ 6,672,259 $ 6,669,475 $193,031 FOR THE PERIOD OCTOBER 1, 2001* THROUGH MARCH 31, 2002 Shares ................................................................ 1,288,530 135,021 -- Value ................................................................. $17,195,434 $ 1,810,728 -- CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ................................................................ 11,479 117,341 1,320 Value ................................................................. $ 136,352 $ 1,435,304 $ 14,944 FOR THE PERIOD OCTOBER 1, 2001* THROUGH MARCH 31, 2002 Shares ................................................................ 228,429 52,083 -- Value ................................................................. $ 3,019,679 $ 711,350 --
- ---------- * Commencement of operations. 65
INSIDERS SELECT INTRINSIC VALUE --------------------------------------- ---------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ---------- ----------- ------------- ----------- ----------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares .................................... 381,563 455,090 1,714 513,159 368,820 7,061 Value ..................................... $5,369,724 $6,163,183 $ 22,765 $ 8,715,103 $6,017,945 $114,948 FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares .................................... 384,291 323,743 95,352 669,302 256,724 22,742 Value ..................................... $6,621,242 $5,591,340 $1,514,178 $13,051,249 $4,904,724 $436,638 CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares .................................... 383,024 311,664 1,163 496,503 269,735 1,505 Value ..................................... $5,327,083 $3,978,471 $ 14,814 $ 8,340,638 $4,238,099 $ 23,997 FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares .................................... 270,831 119,236 60,118 566,093 271,529 10,167 Value ..................................... $4,571,486 $1,900,056 $ 920,405 $10,849,923 $5,133,383 $191,757 CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares .................................... 191,683 250,383 802 298,748 223,304 1,770 Value ..................................... $2,601,331 $3,264,497 $ 10,211 $ 5,076,626 $3,561,759 $28,400 FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares .................................... 164,299 105,639 45,664 470,809 90,971 13,470 Value ..................................... $2,778,796 $1,705,742 $ 699,111 $ 8,981,522 $1,715,561 $255,120 CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares .................................... 115 10,358 46 537,624 261,360 14,640 Value ..................................... $ 1,500 $ 139,094 $ 628 $ 9,445,991 $4,224,746 $239,653 FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares .................................... 311 8,310 4,151 808,588 84,184 25,556 Value ..................................... $ 4,950 $ 142,429 $ 67,376 $16,504,557 $1,601,095 $493,231
SMALL CAP ALPHA GROWTH ---------------------------------------- ---------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ----------- ----------- ------------- ----------- ----------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares .................................... 364,832 625,507 78,806 2,127,629 800,655 -- Value ..................................... $ 6,037,964 $ 9,671,143 $1,102,665 $35,129,114 $13,225,130 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares .................................... 586,779 412,601 49,702 627,708 430,929 -- Value ..................................... $11,408,425 $ 7,900,324 $ 925,947 $11,013,070 $ 7,410,507 -- CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares .................................... 230,356 208,957 29,431 893,338 326,659 -- Value ..................................... $ 3,875,019 $ 3,154,162 $ 396,144 $14,555,453 $ 5,201,059 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares .................................... 164,001 70,927 15,031 193,946 153,981 -- Value ..................................... $ 3,253,319 $ 1,283,967 $ 272,654 $ 3,401,228 $ 2,575,446 -- CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares .................................... 165,696 289,911 52,759 686,358 170,113 -- Value ..................................... $ 2,592,228 $ 4,318,724 $ 711,205 $10,995,616 $ 2,761,182 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares .................................... 222,060 87,502 32,859 185,401 132,091 -- Value ..................................... $ 4,265,305 $ 1,626,664 $ 506,392 $ 3,200,664 $ 2,225,185 -- CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares .................................... 291,446 507,414 105,401 -- -- -- Value ..................................... $ 4,634,176 $ 7,624,225 $1,498,805 -- -- -- FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares .................................... 535,829 747,698 69,176 -- -- -- Value ..................................... $10,277,564 $15,087,517 $1,308,129 -- -- --
66
INTERNATIONAL EQUITY ---------------------------------------- SALES REPURCHASES REINVESTMENTS ----------- ----------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ............................................ 950,740 1,108,654 -- Value ............................................. $11,728,521 $13,680,368 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares ............................................ 1,978,777 2,912,106 -- Value ............................................. $33,391,989 $47,655,604 -- CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ............................................ 38,380 158,816 -- Value ............................................. $ 492,186 $ 1,947,580 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares ............................................ 84,838 224,692 -- Value ............................................. $ 1,318,717 $ 3,399,318 -- CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ............................................ 101,211 247,980 -- Value ............................................. $ 1,369,054 $ 2,869,518 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2002 Shares ............................................ 744,550 773,372 -- Value ............................................. $12,251,095 $12,713,567 -- CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares ............................................ 396,376 287,464 -- Value ............................................. $ 4,834,630 $ 3,592,431 -- FOR THE PERIOD JULY 5, 2001* THROUGH MARCH 31, 2002 Shares ............................................ 1,490,131 18,991 -- Value ............................................. $22,192,775 $ 275,890 --
- ---------- * Commencement of its initial public offering. CREDIT FACILITY The Fund has entered into a demand promissory note arrangement with JPMorgan Chase Bank (the "Bank") to provide an uncommitted credit facility to the Fund (on behalf of each Portfolio). The credit facility bears interest at the greater of: (i) the rate otherwise in effect for such loan plus 2%, or (ii) that rate of interest from time to time announced by the Bank at its principal office as its prime commercial lending rate plus 2%, with such interest to be payable on demand and upon payment in full of such principal. Each Portfolio, as a fundamental policy, is permitted to borrow in an amount up to 331/3% of the value of each Portfolio's total assets. However, each Portfolio intends to borrow money only for temporary or emergency (not leveraging) purposes and only in amounts not to exceed 15% of its net assets. Each loan is payable on demand or upon termination of this credit facility or 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 credit facility during the fiscal year ended March 31, 2003, were as follows:
MAXIMUM LOAN AMOUNT PORTFOLIO AVERAGE LOAN BALANCE OUTSTANDING AVERAGE INTEREST RATE - --------- -------------------- ------------------- --------------------- S&P STARS...................................... $7,249,018 $34,728,500 2.00% S&P STARS Opportunities........................ 17,590 801,900 2.14 Insiders Select................................ 956 95,100 1.92 Small Cap...................................... 6,187 2,208,200 1.93 Alpha Growth................................... 39,939 2,070,100 1.83
S&P STARS had a loan balance of $13,619,800 outstanding under the line of credit facility at March 31, 2003. None of the other Portfolios had any amounts outstanding under the line of credit facility at March 31, 2003. 67 THE BEAR STEARNS FUNDS S&P STARS Portfolio S&P STARS Opportunities Portfolio The Insiders Select Fund Intrinsic Value Portfolio Small Cap Value Portfolio Alpha Growth Portfolio International Equity Portfolio INDEPENDENT AUDITORS' REPORT To the Board of Trustees and Shareholders, S&P STARS Portfolio S&P STARS Opportunities Portfolio The Insiders Select Fund Intrinsic Value Portfolio Small Cap Value Portfolio Alpha Growth Portfolio International Equity Portfolio (Series of The Bear Stearns Funds): We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of S&P STARS Portfolio, S&P STARS Opportunities Portfolio, The Insiders Select Fund, Intrinsic Value Portfolio, Small Cap Value Portfolio, Alpha Growth Portfolio, and International Equity Portfolio (collectively, the "Portfolios") as of March 31, 2003, and the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Portfolios' management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Portfolios as of March 31, 2003, the results of their operations for the year then ended, the changes in their net assets, and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Deloitte & Touche LLP New York, New York May 9, 2003 68 THE BEAR STEARNS FUNDS S&P STARS Opportunities Portfolio The Insiders Select Fund Intrinsic Value Portfolio Small Cap Value Portfolio SHAREHOLDER TAX INFORMATION - (UNAUDITED) Each Portfolio is required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise its shareholders within 60 days of each Portfolio's fiscal year end (March 31, 2003) as to the U.S. federal tax status of distributions received by the Portfolio's shareholders in respect of such fiscal year. During the fiscal year ended March 31, 2003, the following dividends and distributions per share were paid by each of the Portfolios:
S&P STARS OPPORTUNITIES THE INSIDERS INTRINSIC SMALL CAP PORTFOLIO SELECT FUND VALUE PORTFOLIO VALUE PORTFOLIO ------------- ----------- --------------- --------------- Payment Date: 12/20/02 12/20/02 12/20/02 12/20/02 Net Investment Income: Class A -- -- $0.1100 -- Class B -- -- 0.0400 -- Class C -- -- 0.0400 -- Class Y -- -- 0.1900 -- Short-Term Capital Gains: Class A $0.1723 -- -- $0.4093 Class B 0.1723 -- -- 0.4093 Class C 0.1723 -- -- 0.4093 Class Y 0.1723 -- -- 0.4093 Long-Term Capital Gains: Class A -- $0.0210 -- $0.6483 Class B -- 0.0210 -- 0.6483 Class C -- 0.0210 -- 0.6483 Class Y -- 0.0210 -- 0.6483
Ordinary income dividends, which include short-term capital gain distributions, should be reported as dividend income on Form 1040. Income dividends are taxable as ordinary income, as are short-term capital gain distributions. Because each Portfolio's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2003. The second notification, which will reflect the amount to be used by calendar year taxpayers on their U.S. federal income tax returns, will be made in conjunction with Form 1099-DIV and will be mailed in January 2004. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their actual ordinary dividends. They will generally not be entitled to a foreign tax credit or deduction for the withholding taxes paid by the Portfolios, if any. In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Portfolios. 69 THE BEAR STEARNS FUNDS TRUSTEES AND OFFICERS The following information is provided for each Trustee, Officer and the Advisory Trustee of The Bear Stearns Funds (the "Trust") as of March 31, 2003. Each Trustee oversees all 10 portfolios of the Trust. The Statement of Additional Information includes additional information about the Trustees and is available without charge, upon request, by calling PFPC Inc. at 1-800-447-1139 or 1-800-766-4111. The mailing address of the Trustees and Officers is 383 Madison Avenue, New York, New York 10179.
- ------------------------------------------------------------------------------------------------------------------------ POSITION(S) WITH THE TRUST AND LENGTH OF TIME OTHER DIRECTORSHIPS NAME AND AGE SERVED(1) PRINCIPAL OCCUPATION(S) IN THE PAST 5 YEARS HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------ Peter M. Bren - 69 Trustee, since 1995 Chairman and President, Koll Bren Schreiber None Realty Advisers (realty) - ------------------------------------------------------------------------------------------------------------------------ John S. Levy - 67 Trustee, since 2000 Managing Partner, Fayerwearther Capital SL Green Realty Corp. Partners (private investment partnership) - ------------------------------------------------------------------------------------------------------------------------ M.B. Oglesby, Jr. - 59 Trustee, since 1995 Consultant; Vice Chairman, BKSH & Associates, None Washington DC (government lobbyists) (2002 - present); Formerly, Chief of Staff to United States Trade Representative, Executive Office of the President (2001-2002); Consultant, Chairman, Oglesby Properties, Inc.; President and Chief Executive Officer, Association of American Railroads; Vice Chairman, Cassidy & Associates - ------------------------------------------------------------------------------------------------------------------------ Robert E. Trustee, since 2000 Retired; Formerly, Vice President, None Richardson - 61 Broker/Dealer Department, Mellon Bank (financial services) (1991-1999) - ------------------------------------------------------------------------------------------------------------------------ "INTERESTED" TRUSTEES(2) - ------------------------------------------------------------------------------------------------------------------------ Michael Minikes - 59 Chairman of the Treasurer, The Bear Stearns Companies Inc. None Board and Trustee, and Bear, Stearns & Co. Inc. ("Bear Stearns"); since 1999 Senior Managing Director, Bear Stearns; Co-President, Bear, Stearns Securities Corporation (1999-present); Director, Custodial Trust Company ("CTC") and Bear Stearns Bank plc - ------------------------------------------------------------------------------------------------------------------------ Doni L. Fordyce - 43 President and Director, Chairman of the Board, President, None Trustee, since 2000 Senior Managing Director, Bear Stearns Asset Management Inc. ("BSAM") and, since 2000, Chief Executive Officer and Chief Operating Officer - ------------------------------------------------------------------------------------------------------------------------ Robert M. Trustee, since 2001 Senior Managing Director, Bear Stearns; None Steinberg - 57 Director of CTC - ------------------------------------------------------------------------------------------------------------------------
(1) The term of office for a Trustee is indefinite, until he or she resigns, is removed or a successor has been duly elected and qualified. (2) The Interested Trustees are considered to be "interested persons" (as defined by the Investment Company Act of 1940), as amended, because of their employment with the Trust's adviser or principal underwriter. 70
- --------------------------------------------------------------------------------------------------------------------------- POSITION WITH THE TRUST AND LENGTH OF TIME NAME AND AGE SERVED(1) PRINCIPAL OCCUPATION(s) IN THE PAST 5 YEARS - --------------------------------------------------------------------------------------------------------------------------- ADVISORY TRUSTEE - --------------------------------------------------------------------------------------------------------------------------- Senator Alan Advisory Trustee, Partner - Corporate Business and Legislative Law, Bryan Cave (law firm); Dixon - 76 since 1995 Formerly, United States Senator (1981-1992) - --------------------------------------------------------------------------------------------------------------------------- OFFICERS WHO ARE NOT TRUSTEES - --------------------------------------------------------------------------------------------------------------------------- Barry Sommers - 34 Executive Vice Senior Managing Director (2000-present); Head of Marketing and Sales for President, since 1998 the Trust (1997-present); Managing Director, Bear Stearns (1997-2000) - --------------------------------------------------------------------------------------------------------------------------- Stephen A. Vice President and General Counsel, Managing Director/Principal and Executive Vice President, Bornstein - 59 Secretary, since 1995 BSAM; Managing Director/Principal, Bear Stearns; Vice President, General Counsel and Secretary, Bear Stearns Funds Management Inc. ("BSFM") - --------------------------------------------------------------------------------------------------------------------------- Frank J. Maresca - 44 Vice President and President and Chief Executive Officer, BSFM; Senior Managing Director, Treasurer, since 1995 Bear Stearns (2001-present); Managing Director, Bear Stearns - --------------------------------------------------------------------------------------------------------------------------- Vincent L. Assistant Treasurer, Executive Vice President, BSFM; Managing Director, (1999-present) and Pereira - 37 since 1995 Associate Director (1997-1999), Bear Stearns - ---------------------------------------------------------------------------------------------------------------------------
(1) The term of the office for an Officer is indefinite, until he or she resigns, is removed or a successor has been duly elected and qualified. 71 THE BEAR STEARNS FUNDS S&P STARS Portfolio S&P STARS Opportunities Portfolio The Insiders Select Fund Intrinsic Value Portfolio Small Cap Value Portfolio Alpha Growth Portfolio International Equity Portfolio PRIVACY NOTICE While information is the cornerstone of our ability to provide superior service, our most important assets are our shareholders and the trust that they place in us. Keeping shareholder information secure and using it only as our shareholders would want us to are top priorities at The Bear Stearns Funds. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information on investment goals and risk tolerance. We do not disclose any information about you or about former customers to anyone except as permitted by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and mailers that assist us in the distribution of shareholder materials. This allows us to continue to meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic and procedural safeguards to guard your personal information. You may have received communications regarding information privacy on policies from other financial institutions that gave you the opportunity to "opt-out" of certain information sharing with companies that are not affiliated with that financial institution. The Bear Stearns Funds does not share information with other companies for purposes of marketing solicitations. Therefore, The Bear Stearns Funds does not provide opt-out options to its shareholders. We reserve the right to change our privacy policy at any time. The examples contained within this notice are illustrations; they are not intended to be exclusive. This notice complies with a recently enacted Federal law and new SEC regulations regarding privacy. You may have additional rights under foreign or other domestic laws that may apply to you. 72 The Bear Stearns Funds 383 MADISON AVENUE, NEW YORK, NY 10179 1.800.766.4111 Michael Minikes Chairman of the Board and Trustee Doni L. Fordyce President and Trustee Peter M. Bren Trustee John S. Levy Trustee M. B. Oglesby, Jr. Trustee Robert E. Richardson Trustee Robert M. Steinberg Trustee Barry Sommers Executive Vice President Stephen A. Bornstein Vice President and Secretary Frank J. Maresca Vice President and Treasurer Vincent L. Pereira Assistant Treasurer INVESTMENT ADVISER Bear Stearns Asset Management Inc. 383 Madison Avenue New York, NY 10179 SUB-ADVISER INTERNATIONAL EQUITY PORTFOLIO Marvin & Palmer Associates, Inc. 1201 N. Market Street Suite 2300 Wilmington, DE 19801 ADMINISTRATOR Bear Stearns Funds Management Inc. 383 Madison Avenue New York, NY 10179 CUSTODIAN Custodial Trust Company 101 Carnegie Center Princeton, NJ 08540 DISTRIBUTOR Bear, Stearns & Co. Inc. 383 Madison Avenue New York, NY 10179 COUNSEL Kramer Levin Naftalis & Frankel LLP 919 Third Avenue New York, NY 10022 TRANSFER AND DIVIDEND DISBURSEMENT AGENT PFPC Inc. Bellevue Corporate Center 400 Bellevue Parkway Wilmington, DE 19809 INDEPENDENT AUDITORS Deloitte & Touche LLP Two World Financial Center New York, NY 10281 This report is submitted for the general information of the shareholders of each Portfolio. It is not authorized for distribution to prospective investors in each Portfolio unless it is preceded or accompanied by a current prospectus which includes details regarding each Portfolio's objectives, policies, sales commissions and other information. Total investment return is based on historical results and is not intended to indicate future performance. The investment return and principal value of an investment in each Portfolio will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. "Standard & Poor's(R)" and "S&P(R)" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Bear, Stearns & Co. Inc. S&P STARS Portfolio and S&P STARS Opportunities Portfolio are not sponsored, managed, advised, sold or promoted by Standard & Poor's. THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO ANNUAL REPORT MARCH 31, 2003 [BEAR STEARNS LOGO] BSF-R-017-12 THE BEAR STEARNS FUNDS Prime Money Market Portfolio LETTER TO SHAREHOLDERS April 28, 2003 Dear Shareholders: We are pleased to present you with the annual report for the Prime Money Market Portfolio (the "Portfolio") for the fiscal year ended March 31, 2003. For much of the Portfolio's fiscal year, corporate governance scandals, slower-than-expected economic growth, and rising geopolitical risk drove investors out of equities and into fixed income, causing the U.S.Treasury market to rally and yields to fall across the entire maturity spectrum. This flight to quality led to a record amount of money flowing into fixed income mutual funds during the period. By the close of the year, more than $4 trillion was positioned in money market funds. To maximize returns, we opportunistically added securities with a yield advantage in various sectors to the Portfolio throughout the year; securities such as callable government agency issues, callable certificates of deposit, and high-grade commercial paper. The Portfolio ranked in the 17th percentile of its peer group (a universe consisting of 252 funds) for the year ended March 31, 2003, as represented by iMoney Net tier-one institutional money funds. As the fiscal year began, the LIBOR(1) yield curve was positive-sloping (longer maturity rates were higher than shorter maturity rates) at the short end of the maturity spectrum (from three months to one year), reflecting investors' hopefulness that the economic recovery would continue, and that the Federal Reserve would begin to raise rates. The Portfolio's average maturity was 47 days; a level we held until it became clear that the economy was not growing as quickly as anticipated. During the summer, a series of large-scale corporate governance scandals and evidence of slowing growth led to a more pessimistic outlook. Interest rates responded by shifting downward. By September, the yield curve had become inverted at the short end (longer maturity rates were lower than shorter maturity rates), reflecting this gloomier outlook for the economy and an expectation of further Fed easing. In agreement with this expectation, we increased the Portfolio's average maturity to 54 days by the end of September. In an environment of declining interest rates, having a higher average maturity enabled us to lock in higher rates, thus reducing the risk of having to reinvest Portfolio assets at lower rates in the future. As expected, the Fed decreased the targeted Federal Funds rate at its November meeting from 1.75% to 1.25%; its lowest level in 44 years. By November, positive sentiment briefly returned to the markets, causing equities to rally. The yield curve shifted from slightly inverted to flat, and then to positively-sloping on the expectation that economic growth would once again begin to accelerate. In response, we lowered the Portfolio's average maturity to 47 days. The New Year brought escalating uncertainties about the possibility of war with Iraq, however, along with additional evidence of slowing economic growth, causing consumer confidence to drop sharply. By the end of the fiscal year, the yield curve had once again become inverted at the short end, reflecting an expectation for further Fed easing. In response, we raised the Portfolio's average maturity back up to 50 days. Looking ahead, there is much uncertainty as to what the Fed's next move will be. A difficult, lengthy resolution to the Iraqi situation could dampen consumer confidence, prompting the Fed to lower rates further. Conversely, a quick resolution and smooth transition out of Iraq could increase consumer confidence, causing the Fed to hold rates steady. Because of this uncertainty, we have positioned the Portfolio to be neutral within its targeted maturity range, which will enable us to take advantage of an interest rate move in either direction. 1 In the months ahead, we will continue our strategy of investing opportunistically in money market sectors that offer a yield advantage, while at the same time continuing to focus on high quality issuance. We will keep a vigilant watch on the Fed's guidance, the release of key economic data, and the Fed Funds futures market for signs of interest rate movements in either direction. We appreciate your continued support. Please feel free to call at 1-800-766-4111 with any questions or concerns you may have. Sincerely, /s/ Doni L. Fordyce - ------------------- Doni L. Fordyce President and Trustee The Bear Stearns Funds - ---------- (1) The London Interbank Offer Rate (LIBOR) is the rate at which the most creditworthy international banks dealing in Eurodollars charge each other for large loans. 2 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------ PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ BANKERS ACCEPTANCE - 0.41% BANKS - DOMESTIC - 0.41% $ 10,000 Wachovia Bank N.A. [A-1, P-1] (cost - $9,965,104)..................................... 1.276 - 1.284% 05/23/03 - 08/28/03 $ 9,965,104 -------------- CERTIFICATES OF DEPOSIT - 30.23% BANKS - DOMESTIC - 5.47% 9,000 Bank of New York [A-1+, P-1]............................... 2.540 07/07/03 9,033,532 14,500 Citibank N.A. [A-1+, P-1].................................. 1.250 06/10/03 14,500,000 57,000 State Street Bank & Trust Co. [A-1+, P-1].................. 1.440 - 2.290 06/18/03 - 03/23/04 57,009,257 52,000 Wells Fargo Bank N.A. [A-1+, P-1] ......................... 1.250 - 1.260 04/28/03 - 05/06/03 52,000,696 -------------- 132,543,485 ============== BANKS - EURO - AUSTRALIA - 1.03% 25,000 National Australia Bank [A-1+, P-1]........................ 1.550 12/10/03 25,041,207 ============== BANKS - EURO - FRANCE - 3.22% 25,000 BNP Paribas [A-1+, P-1] ................................... 1.350 - 1.410 04/09/03 - 09/18/03 25,000,064 12,000 Credit Agricole Indosuez [A-1+, P-1] ...................... 1.220 05/14/03 12,000,285 41,000 Societe Generale [A-1+, P-1] .............................. 1.250 - 1.280 05/02/03 - 06/10/03 41,000,309 -------------- 78,000,658 -------------- BANKS - EURO - GERMANY - 2.97% 51,000 Landesbank Hessen-Thuringen Girozentrale [A-1+, P-1]....... 1.320 - 1.900 09/12/03 - 10/24/03 51,005,115 21,000 Norddeutsche Landesbank [A-1+, P-1] ....................... 1.270 06/03/03 21,000,363 -------------- 72,005,478 -------------- BANKS - EURO - NETHERLANDS - 1.78% 43,000 ING Bank N.V. [A-1+, P-1] ................................. 1.260 - 1.900 04/22/03 - 09/12/03 43,000,000 -------------- BANKS - EURO - UNITED KINGDOM - 2.31% 16,000 Barclays Bank plc [A-1+, P-1] ............................. 1.610 12/10/03 16,017,542 40,000 Lloyds TSB Bank plc [A-1+, P-1] ........................... 2.600 - 2.650 05/16/03 - 05/20/03 40,018,323 -------------- 56,035,865 -------------- BANKS - YANKEE - AUSTRALIA - 0.74% 18,000 Westpac Banking Corp. [A-1+, P-1].......................... 1.160 09/05/03 18,001,204 -------------- BANKS - YANKEE - CANADA - 1.98% 15,000 Bank of Nova Scotia [A-1, P-1]............................. 1.220 04/22/03 14,999,560 15,000 Canadian Imperial Bank of Commerce [A-1, P-1].............. 1.240 06/13/03 15,000,000 18,000 Toronto Dominion Bank NY [A-1, P-1] ....................... 1.310 07/07/03 18,005,132 -------------- 48,004,692 -------------- BANKS - YANKEE - FRANCE - 1.26% 30,500 Credit Agricole Indosuez [A-1+, P-1] ...................... 1.270 - 2.980 04/07/03 - 04/21/03 30,501,587 --------------
The accompanying notes are an integral part of the financial statements. 3 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------ PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CERTIFICATES OF DEPOSIT (CONTINUED) BANKS - YANKEE - GERMANY - 3.06% $ 11,000 Bayerische Landesbank Girozentrale [A-1+, P-1]................. 1.495% 11/18/03 $ 11,000,000 63,000 Westdeutsche Landesbank Girozentrale [A-1+, P-1]............... 1.260 - 1.780 04/22/03 - 05/21/03 63,000,000 ------------ 74,000,000 ------------ BANKS - YANKEE - NETHERLANDS - 1.28% 30,900 ABN-AMRO Bank N.V. [A-1+, P-1]................................. 2.510 - 2.605 04/04/03 - 06/06/03 30,911,035 ------------ BANKS - YANKEE - SWEDEN - 1.16% 28,000 Svenska Handelsbanken [A-1, P-1]............................... 1.310 04/09/03 28,000,240 ------------ BANKS - YANKEE - UNITED KINGDOM - 3.97% 16,000 Abbey National Treasury Service [A-1+, P-1].................... 1.260 05/06/03 15,999,998 16,000 Abbey National Treasury Service* [A-1+, P-1]................... 1.300 04/01/03 15,999,971 11,000 Lloyds TSB Bank plc [A-1+, P-1]................................ 1.255 04/28/03 11,000,035 53,000 Royal Bank of Scotland plc [A-1+, P-1]......................... 1.195 - 2.730 04/14/03 - 06/18/03 53,003,193 ------------ 96,003,197 ------------ Total Certificates of Deposit (cost - $732,048,648).......................................... 732,048,648 ------------ COMMERCIAL PAPER - 27.49% BANKS - YANKEE - NETHERLANDS - 2.27% 55,000 Rabobank Nederland N.V. NY [A-1+, P-1]......................... 1.340 04/01/03 55,000,000 ------------ COMMERCIAL FINANCE - 3.92% 7,500 General Electric Capital Corp. [A-1+, P-1]..................... 1.251 04/24/03 7,494,010 29,000 Toyota Motor Credit Corp. [A-1+, P-1].......................... 1.202 - 1.252 04/10/03 - 04/24/03 28,986,850 58,400 UBS Finance LLC [A-1+, P-1].................................... 1.251 - 1.390 04/01/03 - 04/24/03 58,379,420 ------------ 94,860,280 ------------ CORPORATE LOAN CONDUIT - 0.11% 2,565 Greyhawk Funding LLC [A-1+, P-1]............................... 1.273 05/19/03 2,560,657 ------------ DEPARTMENT STORES - 1.49% 36,000 Wal-Mart Stores, Inc. [A-1+, P-1].............................. 1.271 - 1.350 04/02/03 - 04/08/03 35,995,718 ------------ DIVERSIFIED RECEIVABLES CONDUIT - 13.78% 30,000 Alpine Securitization Corp. [A-1, P-1]......................... 1.221 - 1.400 04/08/03 - 04/17/03 29,988,971 5,860 Barton Capital Corp. [A-1+, P-1]............................... 1.231 04/02/03 5,859,800 58,500 Enterprise Funding Corp. [A-1+, P-1]........................... 1.231 - 1.301 04/11/03 - 04/25/03 58,469,151 24,900 Eureka Securitization [A-1+, P-1].............................. 1.282 04/07/03 24,894,687 7,900 Govco, Inc. [A-1+, P-1]........................................ 1.222 05/13/03 7,888,756 5,000 Mont Blanc Capital Corp. [A-1+, P-1]........................... 1.301 04/24/03 4,995,847 52,000 Old Line Funding Corp. [A-1+, P-1]............................. 1.253 - 1.450 04/01/03 - 05/23/03 51,957,247
The accompanying notes are an integral part of the financial statements. 4 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------------- COMMERCIAL PAPER (CONTINUED) DIVERSIFIED RECEIVABLES CONDUIT (CONTINUED) $ 44,796 Park Avenue Receivables Corp. [A-1, P-1]................... 1.223 - 1.380% 04/01/03 - 05/19/03 $ 44,771,229 56,345 Sheffield Receivables Corp. [A-1+, P-1] ................... 1.251 - 1.291 04/11/03 - 04/25/03 56,310,882 48,500 Windmill Funding Corp. [A-1+, P-1]......................... 1.271 - 1.283 04/02/03 - 05/06/03 48,477,138 ------------ 333,613,708 ------------ DRUGS - 1.03% 25,000 Pharmacia Corp. [A-1+, P-1]................................ 1.261 04/08/03 24,993,875 ------------ GAS & OIL - 2.07% 50,200 Koch Industries, Inc. [A-1+, P-1] ......................... 1.251 - 1.390 04/01/03 - 04/16/03 50,190,875 ------------ INVESTMENT STRUCTURE - 1.30% 31,630 Sigma Finance, Inc. [A-1+, P-1]............................ 1.213 - 1.314 04/03/03 - 05/23/03 31,603,317 ------------ METAL - ALUMINUM - 0.37% 9,000 Alcoa Inc. [A-1, P-1] ..................................... 1.251 04/10/03 8,997,188 ------------ SECURITY BROKERS & DEALERS - 1.15% 16,020 Goldman Sachs Group, Inc. (The) [A-1, P-1] ................ 1.279 09/12/03 15,927,315 12,000 Morgan Stanley* [A-1, P-1] ................................ 1.480 04/01/03 12,000,000 ------------ 27,927,315 ------------ Total Commercial Paper (cost - $665,742,933)...................................... 665,742,933 ------------ CORPORATE OBLIGATIONS - 9.23% BANKS - DOMESTIC - 2.33% 18,500 Bank One N.A.* [A-1, P-1] ................................. 1.438 04/07/03 18,500,392 12,000 First Union National Bank* [A-1, P-1] ..................... 1.499 06/16/03 12,034,898 26,000 US Bank N.A.* [A-1, P-1]................................... 1.350 - 1.431 04/16/03 - 04/22/03 26,019,647 ------------ 56,554,937 ------------ BANKS - YANKEE - CANADA - 0.68% 16,500 Royal Bank of Canada* [A-1+, P-1].......................... 1.221 04/22/03 16,497,487 ------------ BANKS - YANKEE - GERMANY - 0.64% 15,500 Norddeutsche Landesbank Girozentrale* [A-1+, P-1].......... 1.250 04/22/03 15,498,542 ------------ COMMERCIAL FINANCE - 0.87% 21,000 General Electric Capital Corp.* [A-1+, P-1]................ 1.310 - 1.390 04/01/03 - 04/17/03 21,000,567 ------------
The accompanying notes are an integral part of the financial statements. 5 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------ PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CORPORATE OBLIGATIONS (CONTINUED) INSURANCE - 2.48% $ 20,000 General Electric Capital Assurance Co.* [A-1+, P-1] ..................... 1.412% 04/07/03 $ 20,000,000 40,000 Travelers Insurance Co.* [A-1+, P-1] .................................... 1.380 - 1.411 04/28/03 40,000,000 ------------ 60,000,000 ------------ INVESTMENT STRUCTURE - 0.91% 22,000 Sigma Finance, Inc.* [A-1+, P-1] ........................................ 1.281 - 1.305 04/09/03 - 04/23/03 21,998,767 ------------ SECURITY BROKERS & DEALERS - 1.32% 20,000 Goldman Sachs Group, Inc. (The)* [A-1, P-1].............................. 1.395 04/01/03 20,000,000 12,000 Merrill Lynch & Co., Inc.* [A-1, P-1].................................... 1.518 04/02/03 12,010,609 ------------ 32,010,609 ------------ Total Corporate Obligations (cost - $223,560,909).................................................... 223,560,909 ------------ SHARES - ----------- INVESTMENT COMPANIES - 4.98% 30,145,949 American AAdvantage Money Market Select Fund** [AAAm/Aaa] ............... 1.220 - 30,145,949 30,106,900 Federated Prime Cash Obligations Fund - Institutional Class** [AAAm/Aaa]. 1.230 - 30,106,900 515 Federated Trust Prime Obligations Fund** [AAAm/Aaa]...................... 1.240 - 515 30,107,582 One Group Prime Money Market - Institutional Class** [AAAm/Aaa].......... 1.250 - 30,107,582 30,139,516 Reserve Primary Fund** [AAAm/Aaa]........................................ 1.310 - 30,139,516 ------------ Total Investment Companies (cost - $120,500,462).................................................... 120,500,462 ------------ PRINCIPAL AMOUNT (000'S) - ----------- REPURCHASE AGREEMENTS*** - 23.46% $209,000 Bank of America LLC [A-1+, P-1].......................................... 1.350 04/01/03 209,000,000 150,000 UBS Warburg [A-1+, F-1+] ................................................ 1.320 04/01/03 150,000,000 209,106 Wachovia Securities Inc. [A-1, P-1] ..................................... 1.380 04/01/03 209,106,000 ------------ Total Repurchase Agreements (cost - $568,106,000).................................................... 568,106,000 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS - 5.43% FANNIE MAE - 1.66% 40,000 Unsecured Notes ......................................................... 1.450 - 4.750 11/14/03 - 04/19/04 40,247,408 ------------ FEDERAL HOME LOAN BANK - 3.53% 85,500 Unsecured Bonds ......................................................... 1.400 - 2.000 11/21/03 - 04/13/04 85,500,000 ------------
The accompanying notes are an integral part of the financial statements. 6 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------ PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED) FREDDIE MAC - 0.24% $ 5,700 Unsecured Notes, MTN....................................................... 1.650% 12/23/03 $ 5,700,000 -------------- Total U.S. Government Agency Obligations (cost - $131,447,408)...................................................... 131,447,408 -------------- Total Investments - 101.23% (cost - $2,451,371,464)**** ............................................... 2,451,371,464 Liabilities in excess of other assets - (1.23)% ........................... (29,803,219) -------------- Net Assets - 100.00% ...................................................... $2,421,568,245 ==============
- -------- MTN Medium Term Note. * Variable Rate Obligations - The rate shown is the rate as of March 31, 2003 and the maturity date as shown is the date the interest rate resets. ** Money market fund; interest rate reflects SEC seven-day yield at March 31, 2003. *** See notes to financial statements for description of underlying collateral. **** The cost of investments for federal income tax purposes is substantially the same for financial reporting purposes. The accompanying notes are an integral part of the financial statements. 7 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2003
ASSETS Investments, at amortized cost which approximates market value (identified and tax cost - $2,451,371,464) ....................................... $2,451,371,464 Interest receivable ................................................................ 6,069,692 Prepaid expenses ................................................................... 66,583 -------------- Total assets ................................................................... 2,457,507,739 -------------- LIABILITIES Payable for investments purchased .................................................. 33,062,772 Dividends payable .................................................................. 2,423,727 Advisory fee payable ............................................................... 238,105 Administration fee payable ......................................................... 104,856 Custodian fee payable .............................................................. 44,870 Accrued expenses ................................................................... 65,164 -------------- Total liabilities .............................................................. 35,939,494 -------------- NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) 2,421,600 Paid-in capital .................................................................... 2,419,177,927 Accumulated net realized loss from investments ..................................... (31,282) -------------- Net assets ..................................................................... $2,421,568,245 ============== CLASS Y Net Assets ......................................................................... $2,421,568,245 -------------- Shares of beneficial interest outstanding .......................................... 2,421,599,527 -------------- Net asset value, offering and redemption price per share ........................... $1.00 =====
The accompanying notes are an integral part of the financial statements. 8 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 2003
INVESTMENT INCOME Interest ......................................... $ 42,884,991 ------------ EXPENSES Advisory fees .................................... 4,833,252 Administration fees .............................. 1,208,290 Accounting fees .................................. 381,362 Custodian fees and expenses ...................... 244,867 Legal and auditing fees .......................... 84,399 Transfer agent fees and expenses ................. 29,609 Reports and notices to shareholders .............. 18,638 Federal and state registration fees .............. 14,972 Trustees' fees and expenses ...................... 13,701 Insurance expenses ............................... 8,476 Amortization of organization expenses ............ 3,884 Other ............................................ 53,542 ------------ Total expenses before waivers ................ 6,894,992 Less: waivers ................................ (2,061,690) ------------ Total expenses after waivers ................. 4,833,302 ------------ Net investment income ............................ 38,051,689 ------------ NET REALIZED GAIN ON INVESTMENTS ................... 4,464 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 38,056,153 ============
The accompanying notes are an integral part of the financial statements. 9 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FISCAL YEARS ENDED MARCH 31, ---------------------------------- 2003 2002 --------------- --------------- INCREASE IN NET ASSETS FROM OPERATIONS Net investment income ................................... $ 38,051,689 $ 62,276,088 Net realized gain on investments ........................ 4,464 117 --------------- --------------- Net increase in net assets resulting from operations .... 38,056,153 62,276,205 --------------- --------------- DIVIDENDS TO SHAREHOLDERS FROM Net investment income ................................... (38,051,689) (62,276,088) --------------- --------------- SHARES OF BENEFICIAL INTEREST* Net proceeds from the sale of shares .................... 8,240,980,188 8,686,821,236 Cost of shares repurchased .............................. (8,491,253,839) (8,071,947,269) Shares issued in reinvestment of dividends .............. 34,116,859 59,200,452 --------------- --------------- Net increase/(decrease) in net assets derived from shares of beneficial interest transactions ................... (216,156,792) 674,074,419 --------------- --------------- Total increase/(decrease) in net assets ................. (216,152,328) 674,074,536 NET ASSETS Beginning of year ....................................... 2,637,720,573 1,963,646,037 --------------- --------------- End of year ............................................. $ 2,421,568,245 $ 2,637,720,573 =============== ===============
- ------- * Share transactions at net asset value of $1.00 per share. The accompanying notes are an integral part of the financial statements. 10 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Contained below is per share operating performance data for each share outstanding, total investment return, ratios to average net assets and other supplemental data for each year indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
FOR THE FISCAL YEARS ENDED MARCH 31, -------------------------------------------------------------- 2003 2002 2001 2000 1999 ---------- ---------- ---------- ---------- ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year ........ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 Net investment income (1) ................. 0.0158 0.0308 0.0622 0.0526 0.0524 ---------- ---------- ---------- ---------- ---------- Net increase in net assets resulting from operations ......................... 0.0158 0.0308 0.0622 0.0526 0.0524 ---------- ---------- ---------- ---------- ---------- Dividends to shareholders from net investment income ....................... (0.0158) (0.0308) (0.0622) (0.0526) (0.0524) ---------- ---------- ---------- ---------- ---------- Net asset value, end of year .............. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 ========== ========== ========== ========== ========== Total investment return (2) ............... 1.59% 3.13% 6.40% 5.39% 5.37% ========== ========== ========== ========== ========== RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) .. $2,421,568 $2,637,721 $1,963,646 $913,907 $386,201 Ratio of expenses to average net assets (1) 0.20% 0.20% 0.20% 0.20% 0.20% Ratio of net investment income to average net assets (1) .................. 1.57% 2.95% 6.15% 5.36% 5.24% Increase/(decrease) reflected in above expense and net investment income ratios due to waivers and related reimbursements 0.09% 0.10% 0.13% 0.17% 0.25%
- ---------- (1) Reflects waivers and related reimbursements. (2) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the the last day of each year reported and includes reinvestment of dividends. The accompanying notes are an integral part of the financial statements. 11 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business trust on September 29, 1994, and is registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as an open-end management investment company. The Fund currently consists of ten separate portfolios: six diversified portfolios, Prime Money Market Portfolio (the "Portfolio"), Intrinsic Value Portfolio, Small Cap Value Portfolio, International Equity Portfolio, High Yield Total Return Portfolio and Income Portfolio, and four non-diversified portfolios, The Insiders Select Fund, Alpha Growth Portfolio, S&P STARS Portfolio and S&P STARS Opportunities Portfolio. As of the date hereof, the Portfolio offers one class of shares, which has been designated as Class Y shares. Each portfolio is treated as a separate entity for certain matters under the Investment Company Act, and for other purposes, a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. MANAGEMENT ESTIMATES -- The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") 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 -- Portfolio securities are valued under the amortized cost method, which approximates current market value. Securities are valued at cost when purchased, and thereafter a constant proportionate amortization of any discount or premium is recorded until maturity of the security. Regular review and monitoring of the valuations are performed in an attempt to avoid dilution or other unfair results to shareholders. The Portfolio seeks to maintain a net asset value of $1.00 per share, although there is no assurance that it will be able to do so on a continuing basis. 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 transactions are calculated on the identified cost basis for both financial reporting and income tax purposes. Interest income and expenses are recorded on the accrual basis. U.S. FEDERAL TAX STATUS -- The Portfolio intends to distribute substantially all of its taxable income and 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, the Portfolio intends not to be subject to a U.S. federal excise tax. The tax character of distributions paid during the fiscal year ended March 31, 2003 was entirely from ordinary income. At March 31, 2003, the components of distributable earnings on a tax basis were equal to that shown on the Statement of Assets and Liabilities. At March 31, 2003, the Portfolio had capital loss carryforwards available as a reduction, to the extent provided in regulations, of any future net capital gains realized before the end of fiscal year 2009. To the extent that the capital loss carryforward is used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders. The Portfolio had capital loss carryforwards at March 31, 2003 as follows:
AMOUNTS EXPIRING IN GROSS CAPITAL LOSS ---------------------------------- CARRYFORWARD 2007 2008 2009 - ------------------ ---- ---- ---- $31,282 $29,962 $1,279 $41
12 DIVIDENDS AND DISTRIBUTIONS -- Dividends from net investment income are declared daily and paid monthly. Any net realized capital gains are distributed at least annually if not offset by capital loss carryforwards. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from GAAP. 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. REPURCHASE AGREEMENTS -- The Portfolio may purchase securities from financial institutions subject to the seller's agreement to repurchase and the Portfolio's agreement to resell the securities at par. The investment adviser only enters into repurchase agreements with financial institutions that are primary dealers and deemed to be creditworthy by the investment adviser in accordance with procedures adopted by the Board of Trustees. Securities purchased subject to repurchase agreements are maintained with the custodian of the Portfolio and must have, at all times, an aggregate market value greater than or equal to the repurchase price plus accrued interest. If the value of the underlying securities falls below 102% of the value of the repurchase price plus accrued interest, the Portfolio will require the seller to deposit additional collateral by the next Portfolio business day. In the event that the seller under the agreement defaults on its repurchase obligation or fails to deposit sufficient collateral, the Portfolio has the contractual right, subject to the requirements of applicable bankruptcy and insolvency laws, to sell the underlying securities and may claim any resulting loss from the seller. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES For the fiscal year ended March 31, 2003, Bear Stearns Asset Management Inc. ("BSAM" or the "Adviser"), a wholly-owned subsidiary of The Bear Stearns Companies Inc., served as investment adviser pursuant to an advisory agreement with the Portfolio. Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive from the Portfolio a monthly fee equal to an annual rate of 0.20% of the Portfolio's average daily net assets. For the fiscal year ended March 31, 2003, Bear Stearns Funds Management Inc. ("BSFM" or the "Administrator") served as administrator to the Portfolio pursuant to an Administration Agreement. The Administrator is entitled to receive from the Portfolio a monthly fee equal to an annual rate of 0.05% of the Portfolio's average daily net assets. For the fiscal year ended March 31, 2003, the Adviser has undertaken to limit the Portfolio's operating expenses (exclusive of brokerage commissions, taxes, interest and extraordinary items) to a maximum annual level of no more than 0.20% of its average daily net assets. As necessary, this limitation is effected by waivers by the Adviser of its advisory fees. For the fiscal year ended March 31, 2003, the Adviser waived advisory fees of $2,061,690 in order to maintain the expense limitation. The Portfolio will not pay BSAM at a later time for any amounts BSAM may waive, nor will the Portfolio reimburse BSAM for any amounts BSAM may assume. Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies Inc., and an affiliate of BSAM, BSFM and Bear, Stearns & Co. Inc., serves as custodian to the Portfolio. SHARES OF BENEFICIAL INTEREST The Portfolio currently offers Class Y shares. There is no sales charge or contingent deferred sales charge on Class Y shares, which are offered primarily to institutional investors. At March 31, 2003, there was an unlimited amount of $0.001 par value shares of beneficial interest authorized for the Portfolio, of which Bear Stearns and its affiliates owned 455,797,517 of Class Y shares or approximately 19% of the shares outstanding. 13 COLLATERAL FOR REPURCHASE AGREEMENTS Listed below is the collateral associated with the repurchase agreements outstanding at March 31, 2003:
PRINCIPAL ACCRUED ISSUER AMOUNT MATURITY DATE(S) INTEREST RATE(S) MARKET VALUE INTEREST TOTAL VALUE - ------ ------ ---------------- ---------------- ------------ -------- ----------- BANK OF AMERICA LLC - ------------------- Freddie Mac, Pass-through Pools...... $221,589,042 03/01/23 - 08/01/32 5.500 - 6.500% $212,165,543 $1,014,458 $213,180,001 ============ ========== ============ UBS WARBURG - ----------- Fannie Mae, Pass-through Pools...... $147,807,992 02/01/18 - 03/01/33 5.000 - 8.500% $127,930,630 $575,926 $128,506,556 Freddie Mac, Pass-through Pools...... 51,145,042 03/01/13 - 02/01/27 5.500 - 9.000 24,376,200 119,522 24,495,722 ------------ ---------- ------------ $152,306,830 $695,448 $153,002,278 ============ ========== ============ WACHOVIA SECURITIES INC. - ------------------------ Fannie Mae, Pass-through Pools...... $193,659,526 03/01/33 - 04/01/33 4.768 - 5.500% $197,323,799 $871,470 $198,195,269 Freddie Mac, Pass-through Pools...... 14,503,014 03/01/33 6.000 15,020,337 72,515 15,092,852 ------------ ---------- ------------ $212,344,136 $943,985 $213,288,121 ============ ========== ============
CREDIT FACILITY The Fund has entered into a demand promissory note agreement with JPMorgan Chase Bank (the "Bank") to provide an uncommitted credit facility to the Fund (on behalf of the Portfolio). The credit facility bears interest at the greater of (i) the rate otherwise in effect for such loan plus 2%, or (ii) that rate of interest from time to time announced by the Bank at its principal office as its prime commercial lending rate plus 2%, with such interest to be payable on demand and upon payment in full of such principal. The Portfolio, as a fundamental policy, is permitted to borrow in an amount up to 33 1/3% of its total assets. Loans are payable on demand or upon termination of this credit facility 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 is advanced. The Portfolio had no amounts outstanding under the credit facility at or for the fiscal year ended March 31, 2003. 14 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO INDEPENDENT AUDITORS' REPORT The Board of Trustees and Shareholders, Prime Money Market Portfolio (Series of The Bear Stearns Funds): We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Prime Money Market Portfolio (the "Portfolio") as of March 31, 2003, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Portfolio as of March 31, 2003, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP - ------------------------- Deloitte & Touche LLP New York, New York May 9, 2003 15 THE BEAR STEARNS FUNDS TRUSTEES AND OFFICERS The following information is provided for each Trustee, Officer and the Advisory Trustee of The Bear Stearns Funds (the "Trust") as of March 31, 2003. Each Trustee oversees all 10 portfolios of the Trust. The Statement of Additional Information includes additional information about the Trustees and is available without charge, upon request, by calling PFPC Inc. at 1-800-447-1139 or 1-800-766-4111. The mailing address of the Trustees and Officers is 383 Madison Avenue, New York, New York 10179.
- --------------------------------------------------------------------------------------------------------------------------------- POSITION(S) WITH THE NAME AND TRUST AND LENGTH PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AGE OF TIME SERVED(1) IN THE PAST 5 YEARS HELD BY TRUSTEE - --------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------------------------- Peter M. Bren - 69 Trustee, since 1995 Chairman and President, Koll Bren Schreiber None Realty Advisers (realty) - --------------------------------------------------------------------------------------------------------------------------------- John S. Levy - 67 Trustee, since 2000 Managing Partner, Fayerwearther Capital Partners SL Green Realty Corp. (private investment partnership) - --------------------------------------------------------------------------------------------------------------------------------- M.B. Oglesby, Jr. - 59 Trustee, since 1995 Consultant;Vice Chairman, BKSH & Associates, None Washington DC (government lobbyists) (2002- present); Formerly, Chief of Staff to United States Trade Representative, Executive Office of the President (2001-2002); Consultant, Chairman, Oglesby Properties, Inc.; President and Chief Executive Officer, Association of American Railroads;Vice Chairman, Cassidy & Associates - --------------------------------------------------------------------------------------------------------------------------------- Robert E. Richardson - 61 Trustee, since 2000 Retired; Formerly,Vice President, Broker/Dealer None Department, Mellon Bank (financial services) (1991-1999) - --------------------------------------------------------------------------------------------------------------------------------- "INTERESTED" TRUSTEES(2) - --------------------------------------------------------------------------------------------------------------------------------- Michael Minikes - 59 Chairman of the Board Treasurer,The Bear Stearns Companies Inc. and None and Trustee, since 1999 Bear, Stearns & Co. Inc. ("Bear Stearns"); Senior Managing Director, Bear Stearns; Co-President, Bear, Stearns Securities Corporation (1999- present); Director, Custodial Trust Company ("CTC") and Bear Stearns Bank plc - --------------------------------------------------------------------------------------------------------------------------------- Doni L. Fordyce - 43 President and Trustee, Director, Chairman of the Board, President, Senior None since 2000 Managing Director, Bear Stearns Asset Management Inc. (`BSAM") and, since 2000, Chief Executive Officer and Chief Operating Officer - --------------------------------------------------------------------------------------------------------------------------------- Robert M. Steinberg - 57 Trustee, since 2001 Senior Managing Director, Bear Stearns; None Director of CTC - ---------------------------------------------------------------------------------------------------------------------------------
(1) The term of office for a Trustee is indefinite, until he or she resigns, is removed or a successor has been duly elected and qualified. (2) The Interested Trustees are considered to be "interested persons" (as defined by the Investment Company Act of 1940, as amended) because of their employment with the Trust's adviser or principal underwriter. 16
POSITION(S) WITH THE NAME AND TRUST AND LENGTH AGE OF TIME SERVED(1) PRINCIPAL OCCUPATION(S) IN THE PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------------------------ ADVISORY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Senator Alan Dixon - 76 Advisory Trustee since Partner - Corporate Business and Legislative Law, Bryan Cave (law firm); 1995 Formerly, United States Senator (1981-1992) - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS WHO ARE NOT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ Barry Sommers - 34 Executive Vice President, Senior Managing Director, Bear Stearns (2000-present); Head of Marketing and since 1998 Sales for the Trust (1997-present); Managing Director, Bear Stearns (1997-2000) - ------------------------------------------------------------------------------------------------------------------------------------ Stephen A. Bornstein - 59 Vice President and General Counsel, Managing Director/Principal and Executive Vice President, BSAM; Secretary, since 1995 Managing Director/Principal, Bear Stearns;Vice President, General Counsel and Secretary, Bear Stearns Funds Management Inc. ("BSFM") - ------------------------------------------------------------------------------------------------------------------------------------ Frank J. Maresca - 44 Vice President and President and Chief Executive Officer, BSFM; Senior Managing Director, Bear Stearns Treasurer, since 1995 (2001-present); Managing Director, Bear Stearns - ------------------------------------------------------------------------------------------------------------------------------------ Vincent L. Pereira - 37 Assistant Treasurer, Executive Vice President, BSFM; Managing Director (1999-present) and Associate since 1995 Director (1997-1999), Bear Stearns - ------------------------------------------------------------------------------------------------------------------------------------
(1) The term of office for an Officer is indefinite, until he or she resigns, is removed or a successor has been duly elected and qualified. 17 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO PRIVACY NOTICE While information is the cornerstone of our ability to provide superior service, our most important assets are our shareholders and the trust that they place in us. Keeping shareholder information secure and using it only as our shareholders would want us to are top priorities at The Bear Stearns Funds. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information investment goals and risk tolerance. We do not disclose any information about you or about former customers to anyone except as permitted by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and mailers that assist us in the distribution of shareholder materials. This allows us to continue to meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic and procedural safeguards to guard your personal information. You may have received communications regarding information privacy on policies from other financial institutions that gave you the opportunity to "opt-out" of certain information sharing with companies that are not affiliated with that financial institution. The Bear Stearns Funds does not share information with other companies for purposes of marketing solicitations. Therefore, The Bear Stearns Funds does not provide opt-out options to its shareholders. We reserve the right to change our privacy policy at any time. The examples contained within this notice are illustrations; they are not intended to be exclusive. This notice complies with a recently enacted Federal law and new SEC regulations regarding privacy. You may have additional rights under foreign or other domestic laws that may apply to you. 18 THE BEAR STEARNS FUNDS 383 MADISON AVENUE, NEW YORK, NY 10179 1.800.766.4111 Michael Minikes Chairman of the Board and Trustee Doni L. Fordyce President and Trustee Peter M. Bren Trustee John S. Levy Trustee M.B. Oglesby, Jr. Trustee Robert E. Richardson Trustee Robert M. Steinberg Trustee Barry Sommers Executive Vice President Stephen A. Bornstein Vice President and Secretary Frank J. Maresca Vice President and Treasurer Vincent L. Pereira Assistant Treasurer INVESTMENT ADVISER DISTRIBUTOR Bear Stearns Asset Bear, Stearns & Co. Inc. Management Inc. 383 Madison Avenue 383 Madison Avenue New York, NY 10179 New York, NY 10179 TRANSFER AND DIVIDEND ADMINISTRATOR DISBURSEMENT AGENT Bear Stearns Funds PFPC Inc. Management Inc. Bellevue Corporate Center 383 Madison Avenue 400 Bellevue Parkway New York, NY 10179 Wilmington, DE 19808 CUSTODIAN INDEPENDENT AUDITORS Custodial Trust Company Deloitte & Touche LLP 101 Carnegie Center Two World Financial Center Princeton, NJ 08540 New York, NY 10281 COUNSEL Kramer Levin Naftalis & Frankel LLP 919 Third Avenue New York, NY 10022 This report is submitted for the general information of the shareholders of the Portfolio. It is not authorized for distribution to prospective investors in the Portfolio unless it is preceded or accompanied by a current prospectus which includes details regarding the Portfolio's objectives, policies, and other information. Total investment return is based on historical results and is not intended to indicate future performance. Prime Money Market Portfolio is neither insured nor guaranteed by the U.S. Government, and there can be no assurance that the Prime Money Market Portfolio will be able to maintain a stable net asset value of $1.00 per share. ITEM 2. CODE OF ETHICS. (a) Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so. NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR AFTER JULY 15, 2003. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a) (1) Disclose that the registrant's board of directors has determined that the registrant either: (i) Has at least one audit committee financial expert serving on its audit committee; or (ii) Does not have an audit committee financial expert serving on its audit committee. (2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is "independent." In order to be considered "independent" for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or (ii) Be an "interested person" of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)). (3) If the registrant provides the disclosure required by paragraph (a)(1)(ii) of this Item, it must explain why it does not have an audit committee financial expert. NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR AFTER JULY 15, 2003. 2 ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (c) Disclose, under the caption TAX FEES, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (e) (1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. (2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. (h) Disclose whether the registrant's audit committee of the board of directors has considered whether the provision of nonaudit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR AFTER DECEMBER 15, 2003. ITEMS 5-6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company's investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company's investment adviser, or any other third party, that the company uses, or that are used on the company's behalf, to determine how to vote proxies relating to portfolio securities. NOT APPLICABLE 3 ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Disclose the conclusions of the registrant's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, about the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph. NOT APPLICABLE - ONLY EFFECTIVE FOR FISCAL PERIODS ENDING ON OR AFTER APRIL 1, 2003. (b) THERE WERE NO SIGNIFICANT CHANGES IN THE REGISTRANT'S INTERNAL CONTROLS OR IN OTHER FACTORS THAT COULD SIGNIFICANTLY AFFECT THESE CONTROLS SUBSEQUENT TO THE DATE OF THEIR EVALUATION, INCLUDING ANY CORRECTIVE ACTIONS WITH REGARD TO SIGNIFICANT DEFICIENCIES AND MATERIAL WEAKNESSES. ITEM 10. EXHIBITS. File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. NOT APPLICABLE. (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) 4 SIGNATURES [See General Instruction F] Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) The Bear Stearns Funds -------------------------------------------------------------------- By (Signature and Title)* /S/ Frank J. Maresca ------------------------------------------------------- Frank J. Maresca, Vice President and Treasurer ------------------------------------------------------- Date May 27, 2003 -------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /S/ Frank J. Maresca ------------------------------------------------------- Frank J. Maresca, Vice President and Treasurer ------------------------------------------------------- Date May 27, 2003 -------------------------------------- By (Signature and Title)* /S/ Doni L. Fordyce ------------------------------------------------------- Doni L. Fordyce, President ------------------------------------------------------- Date May 27, 2003 -------------------------------------- * Print the name and title of each signing officer under his or her signature. - -------------------------------------------------------------------------------- ALL CERTIFICATIONS (UNDER THE ACT'S SECTION 302 AND 906) SHOULD BE INCLUDED IN ONE EDGAR EX-99.CERT EXHIBIT DOCUMENT TO FORM N-CSR) EX-99.CERT 3 a2109578zex-99_cert.txt EXHIBIT 99.CERT EX 99.Cert Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Doni L. Fordyce, President of The Bear Stearns Funds, certify that: 1. I have reviewed this report on Form N-CSR of The Bear Stearns Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. Date: May 27, 2003 /s/ Doni L. Fordyce -------------------------------------- Doni L. Fordyce, President EX 99.Cert Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Frank J. Maresca, Vice President and Treasurer of The Bear Stearns Funds, certify that: 1. I have reviewed this report on Form N-CSR of The Bear Stearns Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. Date: May 27, 2003 /s/ Frank J. Maresca -------------------------------------- Frank J. Maresca, Vice President and Treasurer EX-99.1 4 a2109578zex-99_1.txt EXHIBIT 99.1 Ex99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 I, Doni L. Fordyce, President of The Bear Stearns Funds (the "Fund"), certify that: 1. The Form N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: May 27, 2003 /s/ Doni L. Fordyce -------------------------------------- Doni L. Fordyce, President Ex99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 I, Frank J. Maresca, Vice President and Treasurer of The Bear Stearns Funds ("the Fund"), certify that: 1. The Form N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: May 27, 2003 /s/ Frank J. Maresca -------------------------------------- Frank J. Maresca, Vice President and Treasurer -----END PRIVACY-ENHANCED MESSAGE-----