-----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, OHwREIPxnYJq6rjT2ARZwC51C+zs6F5MV3jGpsFnHyFc4Mw1ZfOspkhS4PFTAUqa vYzZ1WoClap92adF9q/ZcA== 0001047469-03-039715.txt : 20031208 0001047469-03-039715.hdr.sgml : 20031208 20031208165015 ACCESSION NUMBER: 0001047469-03-039715 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031208 EFFECTIVENESS DATE: 20031208 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-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-08798 FILM NUMBER: 031042940 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-CSRS 1 a2123877zn-csrs.txt N-CSRS 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 Avenue, 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, 2004 ----------------------- Date of reporting period: April 1, 2003 through September 30, 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. THE BEAR STEARNS FUNDS FIXED INCOME FUNDS INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO SEMI-ANNUAL REPORT SEPTEMBER 30, 2003 [BEAR STEARNS LOGO] THE BEAR STEARNS FUNDS INCOME PORTFOLIO SEPTEMBER 30, 2003 (UNAUDITED) TOP TEN INDUSTRY/SECTOR WEIGHTINGS
PERCENT OF RANK INDUSTRY/SECTOR NET ASSETS - ---- ------------------------------------------------------------------------------- ---------- 1. U.S. Government Agency Obligations 13.62 2. Asset-Backed Securities 10.64 3. Mortgage-Backed Securities - Pass-Through 10.03 4. Mortgage-Backed Securities - Structured 8.09 5. Bank Holding Companies 5.81 6. Personal Credit Institutions 3.73 7. U.S. Government Obligations 3.72 8. Motion Picture & Video Production 2.55 9. Telephone Communications 2.36 10. Security Brokers & Dealers 2.21
TOP TEN HOLDINGS*
PERCENT OF RANK HOLDINGS INDUSTRY/SECTOR NET ASSETS - ---- ---------------------------------------- ------------------------------------ ---------- 1. Fannie Mae Mortgage-Backed Securities 10.17 2. Fannie Mae U.S. Government Agency Obligations 9.10 3. U.S. Treasuries U.S. Government Obligations 3.72 4. Federal Home Loan Bank U.S. Government Agency Obligations 2.32 5. Goldman Sachs Group, Inc. (The) Security Brokers & Dealers 2.21 6. Freddie Mac U.S. Government Agency Obligations 2.20 7. AmeriCredit Automobile Receivables Trust Asset-Backed Securities 2.14 8. Block Mortgage Finance Inc. Asset-Backed Securities 1.45 9. Viacom, Inc. Motion Picture & Video Production 1.28 10. Wal-Mart Stores, Inc. General Merchandise Stores 1.24
- ---------- * 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. 1 HIGH YIELD TOTAL RETURN PORTFOLIO SEPTEMBER 30, 2003 (UNAUDITED) TOP TEN INDUSTRY WEIGHTINGS
PERCENT OF RANK INDUSTRY NET ASSETS - ---- ------------------------------------------------------------------------------- ---------- 1. Health Care 9.16 2. Electronic Components 7.76 3. Hotels/Motels/Casinos 7.23 4. Retailers 6.78 5. Oil & Gas 6.72 6. Publishing 6.38 7. Building/Development 5.13 8. Leisure 4.11 9. Aerospace & Defense 3.97 10. Surface Transportation 3.71
TOP TEN HOLDINGS*
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ---------------------------------------- ------------------------------------ ---------- 1. Nextel Communications, Inc. Wireless Telecommunications 1.77 2. Ameristar Casinos, Inc. Hotels/Motels/Casinos 1.76 3. Allied Waste North America, Inc. Ecological Services/Equipment 1.72 4. Swift Energy Co. Oil & Gas 1.63 5. General Maritime Corp. Surface Transportation 1.56 6. William Carter Co. (The) Clothing/Textiles 1.56 7. Sonic Automotive, Inc. Retailers 1.51 8. United Rentals (N.A.), Inc. Equipment Leasing 1.50 9. PacifiCare Health Systems, Inc. Health Care 1.48 10. AmeriPath, Inc. Health Care 1.47
- ---------- * 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. 2 INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2003 (UNAUDITED)
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS -- 95.46% ASSET-BACKED SECURITIES - 10.64% $ 1,300 AmeriCredit Automobile Receivables Trust, Series 2002-EM, Class A3A 2.970% 03/06/07 $ 1,325,591 300 AmeriCredit Automobile Receivables Trust, Series 2003-AM, Class A3A 2.370 06/06/07 301,701 1,050 Block Mortgage Finance Inc., Series 1999-1, Class A4 6.600 02/25/30 1,101,189 900 CIT Group Home Equity Loan Trust, Series 2002-1, Class AF4 5.970 03/25/29 936,315 631 Delta Funding Home Equity Loan Trust, Series 2000-2, Class A6F 7.970 08/15/30 662,497 626 Fannie Mae, Whole Loan, Series 2002-W2, Class AF3 5.127 02/25/30 635,768 35 M&I Auto Loan Trust, Series 2001-1, Class A3 4.490 04/20/06 35,474 755 Mitsubishi Motors Credit of America, Inc., Automobile Trust, Series 2002-2, Class A3 3.670 07/17/06 765,241 875 Navistar International Corp., Owner Trust, Series 2003-A, Class A4 2.240 11/15/09 872,825 750 Residential Asset Mortgage Products, Inc., Series 2003-RS5, Class AI2 2.130 06/25/24 751,547 675 Triad Auto Receivables Owner Trust, Series 2002-A, Class A4 3.240 08/12/09 694,082 --------------- Total Asset-Backed Securities (cost - $8,064,816) 8,082,230 --------------- CORPORATE OBLIGATIONS - 49.36% AEROSPACE & DEFENSE - 0.65% 500 L-3 Communications Corp., Unsecured Senior Subordinated Notes, Company Guaranteed 6.125 07/15/13 497,500 --------------- ALUMINUM FOUNDRIES - 0.22% 170 Newell Rubbermaid Inc., Notes 4.000 05/01/10 164,008 --------------- BANK HOLDING COMPANIES - 5.81% 775 Bank of America Corp., Unsecured Senior Notes 4.875 01/15/13 790,398 800 Bank One Corp., Notes 6.000 08/01/08 892,861 500 MBNA Corp., Notes 4.625 09/15/08 526,421 750 National City Corp., Notes 3.200 04/01/08 749,998 750 SunTrust Banks, Inc., Unsecured Senior Notes 6.250 06/01/08 854,599 350 Washington Mutual Capital I, Subordinated Capital Income Securities, Company Guaranteed 8.375 06/01/27 416,361 175 Wells Fargo Financial, Inc., Senior Notes 6.750 06/01/05 189,722 --------------- 4,420,360 --------------- BOTTLED & CANNED SOFT DRINKS - 1.18% 800 Coca-Cola Enterprises, Inc., Unsecured Unsubordinated Notes 6.125 08/15/11 899,181 --------------- BUILDING/DEVELOPMENT - 0.41% 300 K. Hovnanian Enterprises, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed* 7.750 05/15/13 310,500 ---------------
The accompanying notes are an integral part of the financial statements. 3
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) CABLE TELEVISION - 1.67% $ 750 Comcast Corp., Unsecured Senior Notes, Company Guaranteed 5.850% 01/15/10 $ 812,329 155 Cox Communications, Inc., Unsecured Notes 3.875 10/01/08 156,744 300 EchoStar DBS Corp., Senior Notes* 6.375 10/01/11 301,500 --------------- 1,270,573 --------------- CONGLOMERATES - 1.62% 625 Tyco International Group S.A., Unsecured Yankee Bonds, Company Guaranteed (1) 6.125 11/01/08 656,250 500 Vivendi Universal S.A., Senior Notes*(2) 9.250 04/15/10 576,875 --------------- 1,233,125 --------------- CONTAINERS - METAL/GLASS - 0.43% 300 Owens-Brockway Glass Container Inc., Secured Senior Notes 8.750 11/15/12 323,250 --------------- CRUDE PETROLEUM & NATURAL GAS - 2.05% 700 BP Amoco plc, Notes 5.900 04/15/09 789,797 700 Conoco Funding, Co., Notes, Company Guaranteed 5.450 10/15/06 762,434 --------------- 1,552,231 --------------- ECOLOGICAL SERVICES/EQUIPMENT - 0.55% 400 Allied Waste North America, Inc., Senior Notes 7.875 04/15/13 421,000 --------------- ELECTRIC & ELECTRONIC EQUIPMENT - 0.47% 350 General Electric Co., Notes 5.000 02/01/13 359,459 --------------- ELECTRIC & OTHER SERVICES COMBINED - 1.06% 800 Peco Energy Co., 1st Mortgage 3.500 05/01/08 808,540 --------------- ELECTRONIC COMPONENTS - 1.12% 400 Amkor Technology, Inc., Senior Notes* 7.750 05/15/13 404,000 400 Fairchild Semiconductor International, Inc., Unsecured Senior Subordinated Notes 10.500 02/01/09 447,000 --------------- 851,000 --------------- EQUIPMENT LEASING - 0.37% 250 United Rentals (N.A.), Inc., Unsecured Senior Notes, Series B, Company Guaranteed 10.750 04/15/08 278,125 --------------- EQUIPMENT RENTAL & LEASING - 1.14% 820 International Lease Finance Corp., Notes 5.875 05/01/13 867,744 --------------- FINANCE SERVICES - 1.77% 800 Prudential Financial, Inc., Medium Term Senior Notes 3.750 05/01/08 811,756 450 Unilever Capital Corp., Notes, Company Guaranteed 7.125 11/01/10 534,091 --------------- 1,345,847 ---------------
The accompanying notes are an integral part of the financial statements. 4
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) FIRE, MARINE & CASUALTY INSURANCE - 0.94% $ 650 Allstate Corp., Unsecured Senior Notes 7.875% 05/01/05 $ 712,884 --------------- GAS TRANSMISSION & DISTRIBUTION - 1.07% 750 Consolidated Natural Gas Co., Unsecured Senior Unsubordinated Notes, Series B 5.375 11/01/06 810,082 --------------- GENERAL MERCHANDISE STORES - 1.24% 800 Wal-Mart Stores, Inc., Unsecured Senior Notes 6.875 08/10/09 941,567 --------------- GROCERY STORES - 0.87% 630 Safeway, Inc., Unsecured Senior Notes 4.800 07/16/07 664,044 --------------- INDUSTRIAL EQUIPMENT - 0.66% 500 SPX Corp., Senior Notes 6.250 06/15/11 498,750 --------------- INSURANCE - 1.14% 850 Marsh & McLennan Cos., Inc., Bonds 4.850 02/15/13 863,868 --------------- LEISURE - 0.32% 250 Bally Total Fitness Holding Corp., Unsecured Senior Subordinated Notes, Series D 9.875 10/15/07 241,250 --------------- MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS - 1.80% 600 CIT Group, Inc., Notes 6.500 02/07/06 656,357 700 National Rural Utilities Cooperative Finance Corp., Collateral Trust Notes 4.375 10/01/10 708,360 --------------- 1,364,717 --------------- MOTION PICTURE & VIDEO PRODUCTION - 2.55% 465 AOL Time Warner, Inc., Notes, Company Guaranteed 6.750 04/15/11 520,189 450 Liberty Media Corp., Notes 3.500 09/25/06 448,913 800 Viacom, Inc., Unsecured Senior Notes, Company Guaranteed 7.700 07/30/10 969,308 --------------- 1,938,410 --------------- MOTOR VEHICLES & CAR BODIES - 1.08% 800 DaimlerChrysler N.A. Holdings, Notes 4.750 01/15/08 819,086 --------------- MOTORS AND GENERATORS - 0.37% 280 Emerson Electric Co., Bonds 4.500 05/01/13 279,883 --------------- OIL & GAS - 0.76% 300 Denbury Resources Inc., Senior Subordinated Notes, Company Guaranteed 7.500 04/01/13 305,250 250 Swift Energy Co., Unsecured Senior Subordinated Notes 10.250 08/01/09 271,875 --------------- 577,125 --------------- PAPER COATED & LAMINATED PACKAGING - 0.95% 650 International Paper Co., Notes 7.000 08/15/06 725,243 ---------------
The accompanying notes are an integral part of the financial statements. 5
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) PERSONAL CREDIT INSTITUTIONS - 3.73% $ 320 Capital One Financial Corp., Notes 5.750% 09/15/10 $ 337,292 400 Ford Motor Credit Co., Notes 7.000 10/01/13 403,257 690 General Electric Capital Corp., Medium Term Notes, Series A 6.875 11/15/10 803,552 500 General Motors Acceptance Corp., Notes 6.875 09/15/11 519,794 700 Household Finance Corp., Notes 6.375 11/27/12 777,929 --------------- 2,841,824 --------------- PHARMACEUTICAL PREPARATIONS - 1.13% 825 Wyeth, Notes 5.250 03/15/13 857,048 --------------- PUBLISHING - 0.99% 400 Dex Media East LLC and Dex Media East Finance Co., Unsecured Senior Notes, Company Guaranteed 9.875 11/15/09 455,000 250 R.H. Donnelley Finance Corp. I, Unsecured Senior Subordinated Notes, Company Guaranteed* 10.875 12/15/12 296,250 --------------- 751,250 --------------- PULP MILLS - 0.83% 600 Weyerhaeuser Co., Unsecured Notes 5.500 03/15/05 630,363 --------------- REAL ESTATE INVESTMENT TRUST - 1.12% 870 Duke Realty L.P., Unsecured Senior Notes 4.625 05/15/13 850,166 --------------- RETAILERS - 1.10% 300 J.C. Penney Co., Inc., Unsecured Notes 8.000 03/01/10 330,750 460 Toys "R" Us, Inc., Unsecured Senior Notes 7.875 04/15/13 503,892 --------------- 834,642 --------------- SECURITY BROKERS & DEALERS - 2.21% 850 Goldman Sachs Group, Inc. (The), Medium Term Notes, Series B (3) 1.290 04/20/06 851,493 370 Goldman Sachs Group, Inc. (The), Notes 4.750 07/15/13 366,885 430 Goldman Sachs Group, Inc. (The), Unsecured Senior Notes 5.700 09/01/12 460,783 --------------- 1,679,161 --------------- TELEPHONE COMMUNICATIONS - 2.36% 800 AT&T Wireless Services, Inc., Unsecured Senior Notes 7.875 03/01/11 932,847 800 Verizon Pennsylvania Inc., Notes, Series A 5.650 11/15/11 858,560 --------------- 1,791,407 --------------- UTILITIES - 0.56% 400 AES Corp. (The), Secured Notes* 9.000 05/15/15 425,000 ---------------
The accompanying notes are an integral part of the financial statements. 6
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) UTILITIES HOLDING COMPANY - 1.06% $ 800 NiSource Finance Corp., Unsecured Senior Notes, Company Guaranteed 7.500% 11/15/03 $ 805,134 --------------- Total Corporate Obligations (cost - $36,512,191) 37,505,347 --------------- MORTGAGE-BACKED SECURITIES - 18.12% PASS-THROUGH - 10.03% 806 Comm 2000-C1, Commercial Mortgage Pass-Through Certificates, Class A1 7.206 08/15/33 882,392 4,718 Fannie Mae, Pass-through Pools 6.000 04/01/16 - 08/01/17 4,927,043 1,350 Fannie Mae, TBA 4.500 - 5.000 10/01/18 - 10/05/33 1,354,484 415 Federal Gold Home Loan Mortgage Corp., Pool #G01477 6.000 12/01/32 428,833 27 Lehman Brothers Commercial Conduit Mortgage Trust, Commercial Mortgage Pass-through Certificates, Series 1998-C1, Class A1 6.330 02/18/30 27,016 --------------- 7,619,768 --------------- STRUCTURED - 8.09% 609 Fannie Mae, Series 2003-13, Class PG 5.000 11/25/32 628,088 800 Fannie Mae, Series 2003-33, Class PB 4.000 02/25/22 812,986 818 Freddie Mac, Series 2580, Class QJ 4.000 03/15/18 838,547 819 Government National Mortgage Association, Series 2003-19, Class CA 4.500 01/16/24 842,045 675 JP Morgan Commercial Mortgage Finance Corp., Series 1998-C6, Class A2 6.533 01/15/30 726,567 575 Lehman Large Loan, Series 1997-LL1, Class A3 6.900 10/12/34 644,858 750 Mortgage Capital Funding, Inc., Series 1997-MC1, Class A3 7.288 02/20/27 810,524 745 PNC Mortgage Acceptance Corp., Series 2000-C1, Class A1 7.520 07/15/08 840,398 --------------- 6,144,013 --------------- Total Mortgage-Backed Securities (cost - $13,623,791) 13,763,781 --------------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 13.62% FANNIE MAE - 9.10% 800 Unsecured Bonds 3.250 01/15/08 812,148 5,645 Unsecured Notes 5.250 - 6.250 01/15/09 - 11/15/11 6,100,960 --------------- 6,913,108 --------------- FEDERAL HOME LOAN BANK - 2.32% 1,725 Unsecured Bonds, Series 7Y07 3.500 11/15/07 1,764,209 --------------- FREDDIE MAC - 2.20% 1,000 Unsecured Medium Term Notes 1.250 06/30/06 998,904 650 Unsecured Reference Notes 4.210 09/13/07 669,364 --------------- 1,668,268 --------------- Total U.S. Government Agency Obligations (cost - $10,269,595) 10,345,585 ---------------
The accompanying notes are an integral part of the financial statements. 7
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) U.S. GOVERNMENT OBLIGATIONS - 3.72% U.S. TREASURIES - 3.72% $ 2,750 Notes (cost - $2,741,789) 3.875 - 4.750% 11/15/08 - 02/15/13 $ 2,823,596 --------------- Total Long-Term Debt Investments (cost - $71,212,182) 72,520,539 --------------- SHARES ------ SHORT-TERM INVESTMENTS -- 8.29% INVESTMENT COMPANY - 0.79% 601,953 Federated Government Obligations Fund** 0.910 -- 601,953 --------------- PRINCIPAL AMOUNT (000'S) - --------- U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 7.50% $ 1,199 Fannie Mae, Discount Notes (4) 1.000 10/15/03 - 10/20/03 1,199,431 4,500 Federal Home Loan Bank, Discount Notes (4) 0.950 10/01/03 4,500,000 --------------- 5,699,431 --------------- Total Short-Term Investments (cost - $6,301,384) 6,301,384 --------------- Total Investments -- 103.75% (cost - $77,513,566) 78,821,923 Liabilities in excess of other assets -- (3.75)% (2,851,474) --------------- Net Assets -- 100.00% $ 75,970,449 ===============
- ---------- * SEC Rule 144A security. Such securities are traded only among qualified institutional buyers. ** Money market fund; interest rate reflects SEC seven-day yield at September 30, 2003. (1) Domiciled in Luxembourg. (2) Domiciled in France. (3) Floating Rate Note; rate based on the London Interbank Offered Rate (LIBOR). (4) 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. 8 HIGH YIELD TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2003 (UNAUDITED)
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS -- 94.75% UNITED STATES - 89.69% AEROSPACE & DEFENSE - 3.97% $ 1,600 Armor Holdings, Inc., Senior Subordinated Notes* 8.250% 08/15/13 $ 1,700,000 2,000 L-3 Communications Corp., Unsecured Senior Subordinated Notes, Company Guaranteed 6.125 07/15/13 1,990,000 2,500 TD Funding Corp., Unsecured Senior Subordinated Notes, Company Guaranteed* 8.375 07/15/11 2,700,000 2,800 Vought Aircraft Industries, Inc., Senior Notes* 8.000 07/15/11 2,870,000 --------------- 9,260,000 --------------- AUTOMOTIVE - 2.88% 1,800 Stoneridge, Inc., Unsecured Senior Notes, Company Guaranteed 11.500 05/01/12 2,065,500 2,450 Tenneco Automotive Inc., Secured Senior Notes* 10.250 07/15/13 2,670,500 1,900 United Components Inc., Senior Subordinated Notes* 9.375 06/15/13 1,985,500 --------------- 6,721,500 --------------- BUILDING/DEVELOPMENT - 5.13% 2,250 Corrections Corp. of America, Unsecured Senior Notes, Company Guaranteed 9.875 05/01/09 2,536,875 500 K. Hovnanian Enterprises, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed* 7.750 05/15/13 517,500 1,000 K. Hovnanian Enterprises, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed 8.875 04/01/12 1,075,000 2,000 KB HOME, Senior Subordinated Notes 7.750 02/01/10 2,120,000 1,600 Meritage Corp., Senior Notes* 9.750 06/01/11 1,760,000 1,600 Texas Industries, Inc., Senior Notes* 10.250 06/15/11 1,760,000 2,000 WCI Communities, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed 10.625 02/15/11 2,200,000 --------------- 11,969,375 --------------- BUSINESS EQUIPMENT/SERVICES - 1.30% 2,000 Buhrmann US, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed 12.250 11/01/09 2,230,000 800 Xerox Corp., Unsecured Senior Notes 7.625 06/15/13 793,000 --------------- 3,023,000 --------------- CABLE TELEVISION - 1.38% 1,600 Charter Communications Holdings II, Unsecured Senior Notes* 10.250 09/15/10 1,620,000 1,600 EchoStar DBS Corp., Senior Notes* 6.375 10/01/11 1,608,000 --------------- 3,228,000 --------------- CHEMICALS/PLASTICS - 2.43% 750 Huntsman International LLC, Senior Notes* 9.875 03/01/09 791,250 2,250 Huntsman International LLC, Unsecured Senior Notes, Company Guaranteed 9.875 03/01/09 2,373,750 2,400 Westlake Chemical Corp., Unsecured Senior Notes, Company Guaranteed* 8.750 07/15/11 2,502,000 --------------- 5,667,000 --------------- CLOTHING/TEXTILES - 1.56% 3,250 William Carter Co. (The), Unsecured Senior Subordinated Notes, Series B, Company Guaranteed 10.875 08/15/11 3,640,000 ---------------
The accompanying notes are an integral part of the financial statements. 9
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) CONGLOMERATES - 0.72% $ 1,600 Eagle-Picher Industries, Inc., Senior Notes* 9.750% 09/01/13 $ 1,688,000 --------------- CONTAINERS - METAL/GLASS - 1.15% 2,500 Owens-Brockway Glass Container Inc., Secured Senior Notes 8.750 11/15/12 2,693,750 --------------- ECOLOGICAL SERVICES/EQUIPMENT - 1.72% 2,000 Allied Waste North America, Inc., Senior Notes 7.875 04/15/13 2,105,000 1,750 Allied Waste North America, Inc., Senior Subordinated Notes, Series B, Company Guaranteed 8.500 12/01/08 1,898,750 --------------- 4,003,750 --------------- ELECTRONIC COMPONENTS - 6.69% 1,600 Amkor Technology, Inc., Senior Notes* 7.750 05/15/13 1,616,000 1,500 Amkor Technology, Inc., Unsecured Senior Subordinated Notes 10.500 05/01/09 1,605,000 2,150 Fairchild Semiconductor International, Inc., Unsecured Senior Subordinated Notes 10.500 02/01/09 2,402,625 2,750 ON Semiconductor Corp., Secured Senior Notes, Company Guaranteed 13.000 05/15/08 3,148,750 800 Rayovac Corp., Senior Subordinated Notes* 8.500 10/01/13 828,000 2,750 Sanmina - SCI Corp., Secured Senior Notes, Company Guaranteed 10.375 01/15/10 3,238,125 2,500 Solectron Corp., Unsecured Senior Notes 9.625 02/15/09 2,768,750 --------------- 15,607,250 --------------- EQUIPMENT LEASING - 1.50% 1,750 United Rentals (N.A.), Inc., Unsecured Senior Notes, Series B, Company Guaranteed 10.750 04/15/08 1,946,875 1,500 United Rentals (N.A.), Inc., Unsecured Senior Subordinated Notes, Series B, Company Guaranteed 9.250 01/15/09 1,560,000 --------------- 3,506,875 --------------- FARMING/AGRICULTURE - 2.10% 3,000 Case New Holland Inc., Senior Notes* 9.250 08/01/11 3,240,000 1,600 IMC Global Inc., Senior Notes* 10.875 08/01/13 1,664,000 --------------- 4,904,000 --------------- FOOD PRODUCTS - 1.45% 2,875 American Seafoods Group LLC and American Seafoods, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed 10.125 04/15/10 3,378,125 --------------- FOOD SERVICES - 3.37% 2,339 Carrols Corp., Unsecured Senior Subordinated Notes, Company Guaranteed 9.500 12/01/08 2,379,933 2,000 Domino's, Inc., Senior Subordinated Notes* 8.250 07/01/11 2,122,500 3,250 Friendly Ice Cream Corp., Unsecured Senior Notes, Company Guaranteed 10.500 12/01/07 3,371,875 --------------- 7,874,308 ---------------
The accompanying notes are an integral part of the financial statements. 10
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) HEALTH CARE - 9.16% $ 2,000 Alliance Imaging, Inc., Unsecured Senior Subordinated Notes 10.375% 04/15/11 $ 2,090,000 3,200 AmeriPath, Inc., Unsecured Senior Notes, Company Guaranteed 10.500 04/01/13 3,440,000 2,500 Medex, Inc., Senior Subordinated Notes* 8.875 05/15/13 2,656,250 2,250 MedQuest, Inc., Unsecured Senior Subordinated Notes, Series B, Company Guaranteed 11.875 08/15/12 2,385,000 2,500 NDCHealth Corp., Unsecured Senior Subordinated Notes, Company Guaranteed 10.500 12/01/12 2,725,000 3,000 PacifiCare Health Systems, Inc., Unsecured Senior Notes, Company Guaranteed 10.750 06/01/09 3,465,000 2,000 Select Medical Corp., Senior Subordinated Notes* 7.500 08/01/13 2,075,000 2,500 Tenet Healthcare Corp., Notes 7.375 02/01/13 2,531,250 --------------- 21,367,500 --------------- HOME FURNISHINGS - 1.37% 3,000 Simmons Co., Unsecured Senior Subordinated Notes, Series B 10.250 03/15/09 3,202,500 --------------- HOTELS/MOTELS/CASINOS - 7.23% 3,600 Ameristar Casinos, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed 10.750 02/15/09 4,113,000 2,550 Felcor Lodging L.P., Unsecured Senior Notes, Company Guaranteed 10.000 09/15/08 2,754,000 2,750 HMH Properties, Inc., Secured Senior Notes, Series B, Company Guaranteed 7.875 08/01/08 2,839,375 1,000 Majestic Star Casino LLC, Secured Senior Notes, Company Guaranteed* 9.500 10/15/10 1,032,500 2,000 Mandalay Resort Group, Unsecured Senior Subordinated Notes 9.375 02/15/10 2,305,000 2,000 Starwood Hotels & Resorts Worldwide, Inc., Senior Notes, Company Guaranteed 7.875 05/01/12 2,200,000 1,500 Turning Stone Casino Resort Enterprise, Senior Notes* 9.125 12/15/10 1,618,125 --------------- 16,862,000 --------------- INDUSTRIAL EQUIPMENT - 1.23% 500 SPX Corp., Senior Notes 6.250 06/15/11 498,750 2,250 SPX Corp., Unsecured Senior Notes 7.500 01/01/13 2,379,375 --------------- 2,878,125 --------------- LEISURE - 3.23% 2,750 Bally Total Fitness Holding Corp., Unsecured Senior Subordinated Notes, Series D 9.875 10/15/07 2,653,750 1,700 Samsonite Corp., Unsecured Senior Subordinated Notes 10.750 06/15/08 1,785,000 2,750 Universal City Development, Senior Notes* 11.750 04/01/10 3,107,500 --------------- 7,546,250 --------------- NON-FERROUS METALS - 0.91% 1,900 Compass Minerals Group, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed 10.000 08/15/11 2,118,500 ---------------
The accompanying notes are an integral part of the financial statements. 11
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 $ 3,079,250 800 Denbury Resources Inc., Senior Subordinated Notes, Company Guaranteed 7.500 04/01/13 814,000 400 Dynegy Holdings Inc., Secured Notes* 9.875 07/15/10 418,000 2,750 SESI, L.L.C., Unsecured Senior Notes, Company Guaranteed 8.875 05/15/11 2,928,750 3,500 Swift Energy Co., Unsecured Senior Subordinated Notes 10.250 08/01/09 3,806,250 1,600 TransMontaigne Inc., Senior Subordinated Notes* 9.125 06/01/10 1,712,000 2,750 Williams Cos., Inc., Senior Notes 8.625 06/01/10 2,935,625 --------------- 15,693,875 --------------- PUBLISHING - 6.38% 2,250 American Media Operations, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed 8.875 01/15/11 2,421,563 2,700 Dex Media East LLC and Dex Media East Finance Co., Unsecured Senior Notes, Company Guaranteed 9.875 11/15/09 3,071,250 2,500 Dex Media West LLC and Dex Media West Finance Co., Senior Subordinated Notes* 9.875 08/15/13 2,837,500 3,250 PRIMEDIA Inc., Senior Notes* 8.000 05/15/13 3,298,750 2,750 R.H. Donnelley Finance Corp. I, Unsecured Senior Subordinated Notes, Company Guaranteed* 10.875 12/15/12 3,258,750 --------------- 14,887,813 --------------- RADIO/TELEVISION - 0.71% 1,500 LBI Media, Inc., Unsecured Senior Subordinated Notes, Company Guaranteed 10.125 07/15/12 1,650,000 --------------- RETAILERS - 6.78% 2,500 CSK Auto, Inc., Unsecured Senior Notes, Company Guaranteed 12.000 06/15/06 2,806,250 1,500 J.C. Penney Co., Inc., Unsecured Notes 8.000 03/01/10 1,653,750 2,750 Mothers Work, Inc., Unsecured Senior Notes, Company Guaranteed 11.250 08/01/10 3,052,500 2,000 Rite Aid Corp., Secured Senior Notes, Company Guaranteed 9.500 02/15/11 2,270,000 3,250 Sonic Automotive, Inc., Senior Subordinated Notes* 8.625 08/15/13 3,526,250 2,300 Toys "R" Us, Inc., Unsecured Notes 7.625 08/01/11 2,507,784 --------------- 15,816,534 --------------- STEEL - 0.92% 2,000 Jorgensen, Earle M. Co., Secured Notes 9.750 06/01/12 2,140,000 --------------- SURFACE TRANSPORTATION - 3.71% 2,265 Accuride Corp., Unsecured Senior Subordinated Notes, Series B 9.250 02/01/08 2,270,663 3,250 General Maritime Corp., Senior Notes 10.000 03/15/13 3,648,125 2,500 Navistar International Corp., Unsecured Senior Notes, Series B, Company Guaranteed 9.375 06/01/06 2,740,625 --------------- 8,659,413 ---------------
The accompanying notes are an integral part of the financial statements. 12
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT INVESTMENTS (CONTINUED) UTILITIES - 1.42% $ 2,500 AES Corp. (The), Unsecured Senior Notes 9.500% 06/01/09 $ 2,587,500 800 Reliant Resources, Inc., Secured Senior Notes* 9.250 - 9.500 07/15/10 - 07/15/13 726,000 --------------- 3,313,500 --------------- WIRELESS TELECOMMUNICATIONS - 2.57% 3,000 Nextel Communications, Inc., Unsecured Senior Notes 7.375 08/01/15 3,045,000 1,000 Nextel Communications, Inc., Unsecured Senior Serial Redeemable Notes 9.375 11/15/09 1,090,000 1,600 Qwest Services Corp., Notes* 13.500 12/15/10 1,872,000 --------------- 6,007,000 --------------- Total United States (cost - $195,164,783)** 209,307,943 --------------- CANADA - 1.95% CHEMICALS/PLASTICS - 1.07% 2,250 Acetex Corp., Unsecured Senior Notes 10.875 08/01/09 2,503,125 --------------- LEISURE - 0.88% 1,850 Intrawest Corp., Unsecured Senior Notes, Company Guaranteed 10.500 02/01/10 2,051,188 --------------- Total Canada (cost - $4,134,207) 4,554,313 --------------- CAYMAN ISLANDS - 1.07% ELECTRONIC COMPONENTS - 1.07% 2,250 Seagate Technology HDD Holdings, Unsecured Senior Notes, Company Guaranteed (cost - $2,250,000) 8.000 05/15/09 2,491,875 --------------- FRANCE - 1.36% CONGLOMERATES - 1.36% 2,750 Vivendi Universal S.A., Senior Notes* (cost - $2,958,998) 9.250 04/15/10 3,172,813 --------------- LUXEMBOURG - 0.68% CONGLOMERATES - 0.68% 1,500 Tyco International Group S.A., Unsecured Yankee Notes, Company Guaranteed (cost - $1,329,903) 6.750 02/15/11 1,590,000 --------------- Total Long-Term Debt Investments (cost - $205,837,891) 221,116,944 ---------------
The accompanying notes are an integral part of the financial statements. 13
INTEREST MATURITY SHARES RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------- EQUITY INVESTMENT -- 0.00% PREFERRED STOCK - UNITED STATES - 0.00% CLOTHING/TEXTILES - 0.00% 51 Cluett American Corp., Senior Exchangeable Preferred Stock, Series B (1) (cost - $512) 12.500% -- $ 1,033 --------------- SHORT-TERM INVESTMENTS -- 3.94% INVESTMENT COMPANIES - 3.94% 1,748,302 Federated Automated Government Trust*** 0.470 -- 1,748,302 7,444,561 Federated Government Obligations Fund*** 0.910 -- 7,444,561 --------------- Total Short-Term Investments (cost - $9,192,863) 9,192,863 --------------- Total Investments -- 98.69% (cost - $215,031,266) 230,310,840 Securities Lending Collateral (2) -- 6.73% 15,723,388 Liabilities in excess of other assets -- (5.42)% (12,657,339) --------------- Net Assets -- 100.00% $ 233,376,889 ===============
- ---------- * 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 September 30, 2003. (1) Payment-in-kind; of which all or a portion of the coupon is being capitalized at periodic intervals. (2) Cash collateral invested in various money market mutual funds. The accompanying notes are an integral part of the financial statements. 14 STATEMENTS OF ASSETS & LIABILITIES SEPTEMBER 30, 2003 (UNAUDITED)
HIGH YIELD INCOME TOTAL RETURN PORTFOLIO PORTFOLIO -------------- -------------- ASSETS Investments, at value (cost - $77,513,566 and $215,031,266, respectively) $ 78,821,923 $ 230,310,840 Collateral received for securities loaned -- 15,723,388 Interest and dividends receivable 787,949 5,094,649 Receivable for investments sold 357,247 3,891,110 Receivable for Portfolio shares sold 133,575 525,335 Prepaid expenses 22,267 25,598 -------------- -------------- Total assets 80,122,961 255,570,920 -------------- -------------- LIABILITIES Payable upon return for securities loaned -- 15,723,388 Payable for investments purchased 2,103,677 3,424,022 Payable for Portfolio shares repurchased 1,815,848 2,067,771 Dividends payable 60,085 401,893 Distribution and service fees payable (Class A, B, and C shares) 90,173 377,747 Advisory fee payable 7,322 77,413 Administration fee payable 9,551 28,583 Custodian fee payable 2,495 2,623 Accrued expenses 63,361 90,591 -------------- -------------- Total liabilities 4,152,512 22,194,031 -------------- -------------- NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) 6,047 27,207 Paid-in capital 73,515,730 264,579,307 Accumulated net investment loss (221,138) -- Accumulated net realized gain/(loss) from investments 1,361,453 (46,509,199) Net unrealized appreciation on investments 1,308,357 15,279,574 -------------- -------------- Net assets $ 75,970,449 $ 233,376,889 ============== ============== CLASS A Net assets $ 21,998,696 $ 88,203,114 -------------- -------------- Shares of beneficial interest outstanding 1,750,632 10,283,632 -------------- -------------- Net asset value per share $ 12.57 $ 8.58 ============== ============== Maximum offering price per share (net asset value plus sales charge of 4.50%* of the offering price) $ 13.16 $ 8.98 ============== ============== CLASS B Net assets $ 17,049,443 $ 51,112,265 -------------- -------------- Shares of beneficial interest outstanding 1,357,874 5,955,181 -------------- -------------- Net asset value and offering price per share** $ 12.56 $ 8.58 ============== ============== CLASS C Net assets $ 9,062,528 $ 57,641,928 -------------- -------------- Shares of beneficial interest outstanding 721,403 6,725,004 -------------- -------------- Net asset value and offering price per share** $ 12.56 $ 8.57 ============== ============== CLASS Y Net assets $ 27,859,782 $ 36,419,582 -------------- -------------- Shares of beneficial interest outstanding 2,217,549 4,243,274 -------------- -------------- Net asset value, offering and redemption price per share $ 12.56 $ 8.58 ============== ==============
- ---------- * 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. 15 STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED)
HIGH YIELD INCOME TOTAL RETURN PORTFOLIO PORTFOLIO -------------- -------------- INVESTMENT INCOME Interest $ 1,716,102 $ 9,531,912 Dividends 3,281 24,672 Securities lending income -- 17,142 -------------- -------------- 1,719,383 9,573,726 -------------- -------------- EXPENSES Advisory fees 187,260 669,294 Distribution and service fees - Class A 43,209 152,063 Distribution and service fees - Class B 93,166 244,411 Distribution and service fees - Class C 50,930 271,334 Administration fees 62,420 167,325 Transfer agent fees and expenses 89,911 127,771 Legal and auditing fees 35,257 37,263 Accounting fees 14,565 39,043 Federal and state registration fees 26,660 26,803 Reports and notices to shareholders 9,999 16,500 Custodian fees and expenses 7,388 16,375 Trustees' fees and expenses 7,545 7,669 Insurance expenses 3,482 3,428 Other 6,187 4,028 -------------- -------------- Total expenses before waivers and related reimbursements 637,979 1,783,307 Less: waivers and related reimbursements (223,463) (324,028) -------------- -------------- Total expenses after waivers and related reimbursements 414,516 1,459,279 -------------- -------------- Net investment income 1,304,867 8,114,447 -------------- -------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain from investments 745,844 4,833,799 Net change in unrealized appreciation on investments (272,207) 7,624,931 -------------- -------------- Net realized and unrealized gain on investments 473,637 12,458,730 -------------- -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,778,504 $ 20,573,177 ============== ==============
The accompanying notes are an integral part of the financial statements. 16 STATEMENTS OF CHANGES IN NET ASSETS
INCOME HIGH YIELD TOTAL PORTFOLIO RETURN PORTFOLIO --------------------------------------- --------------------------------------- FOR THE FOR THE FOR THE FOR THE SIX MONTHS ENDED FISCAL YEAR SIX MONTHS ENDED FISCAL YEAR SEPTEMBER 30, 2003 ENDED SEPTEMBER 30, 2003 ENDED (UNAUDITED) MARCH 31, 2003 (UNAUDITED) MARCH 31, 2003 ------------------ ------------------ ------------------ ------------------ INCREASE IN NET ASSETS FROM OPERATIONS Net investment income $ 1,304,867 $ 2,096,420 $ 8,114,447 $ 13,203,181 Net realized gain/(loss) from investments 745,844 1,239,185 4,833,799 (9,773,653) Net change in unrealized appreciation/(depreciation) on investments (272,207) 2,049,098 7,624,931 5,790,271 ------------------ ------------------ ------------------ ------------------ Net increase in net assets resulting from operations 1,778,504 5,384,703 20,573,177 9,219,799 ------------------ ------------------ ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares (455,611) (621,839) (3,281,846) (6,054,300) Class B shares (285,535) (447,104) (1,687,039) (2,692,060) Class C shares (155,823) (293,523) (1,871,627) (2,685,695) Class Y shares (602,973) (881,676) (1,308,058) (1,775,411) ------------------ ------------------ ------------------ ------------------ (1,499,942) (2,244,142) (8,148,570) (13,207,466) ------------------ ------------------ ------------------ ------------------ 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 21,133,680 67,589,024 66,450,511 102,263,758 Cost of shares repurchased (29,217,328) (25,383,270) (48,648,759) (59,204,597) Shares issued in reinvestment of dividends 1,248,094 1,871,830 4,851,629 8,107,135 ------------------ ------------------ ------------------ ------------------ Net increase/(decrease) in net assets derived from shares of beneficial interest transactions (6,835,554) 44,077,584 22,653,381 51,166,296 ------------------ ------------------ ------------------ ------------------ Total increase/(decrease) in net assets (6,556,992) 47,047,601 35,077,988 47,178,629 NET ASSETS Beginning of period 82,527,441 35,479,840 198,298,901 151,120,272 ------------------ ------------------ ------------------ ------------------ End of period $ 75,970,449 $ 82,527,441 $ 233,376,889 $ 198,298,901* ================== ================== ================== ==================
- ---------- * Includes undistributed net investment income of $34,123. The accompanying notes are an integral part of the financial statements. 17 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 PERIOD INCOME*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS --------- ---------- --------------- ---------- ------------- INCOME PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) $ 12.50 $ 0.20 $ 0.10 $ (0.23) -- 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 six months ended September 30, 2003 (unaudited) 12.50 0.16 0.09 (0.19) -- 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 six months ended September 30, 2003 (unaudited) 12.50 0.16 0.09 (0.19) -- 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 six months ended September 30, 2003 (unaudited) 12.49 0.22 0.11 (0.26) -- 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)
18
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF END OF INVESTMENT END OF PERIOD EXPENSES TO PERIOD RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) --------- ---------- --------------- --------------------- INCOME PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) $ 12.57 2.43% $ 21,999 0.89%(4) 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 six months ended September 30, 2003 (unaudited) 12.56 2.02 17,049 1.54(4) 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 six months ended September 30, 2003 (unaudited) 12.56 2.02 9,063 1.54(4) 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 six months ended September 30, 2003 (unaudited) 12.56 2.61 27,860 0.54(4) 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 six months ended September 30, 2003 (unaudited) 3.23%(4) 0.54%(4) 58.02% 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 six months ended September 30, 2003 (unaudited) 2.60(4) 0.55(4) 58.02 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 six months ended September 30, 2003 (unaudited) 2.60(4) 0.55(4) 58.02 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 six months ended September 30, 2003 (unaudited) 3.58(4) 0.54(4) 58.02 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
- ---------- * 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. (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. (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) Annualized. The accompanying notes are an integral part of the financial statements. 19
NET NET ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS VALUE, NET UNREALIZED FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED OF PERIOD INCOME*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS --------- ---------- --------------- ---------- ------------- HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) $ 8.10 $ 0.32 $ 0.48 $ (0.32) -- 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 six months ended September 30, 2003 (unaudited) 8.11 0.29 0.47 (0.29) -- 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 six months ended September 30, 2003 (unaudited) 8.10 0.29 0.47 (0.29) -- 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 D For the six months ended September 30, 2003 (unaudited) 8.11 0.33 0.47 (0.33) -- 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) --
20
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF END OF INVESTMENT END OF PERIOD EXPENSES TO PERIOD RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) --------- ---------- --------------- --------------------- HIGH YIELD TOTAL RETURN PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) $ 8.58 9.98% $ 88,203 1.06%(5) 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 six months ended September 30, 2003 (unaudited) 8.58 9.49 51,112 1.71(5) 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 six months ended September 30, 2003 (unaudited) 8.57 9.50 57,642 1.71(5) 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 six months ended September 30, 2003 (unaudited) 8.58 10.03 36,420 0.71(5) 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 six months ended September 30, 2003 (unaudited) 7.52%(5) 0.29%(5) 60.00% 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 six months ended September 30, 2003 (unaudited) 6.87(5) 0.29(5) 60.00 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 six months ended September 30, 2003 (unaudited) 6.86(5) 0.29(5) 60.00 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 six months ended September 30, 2003 (unaudited) 7.87(5) 0.29(5) 60.00 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
- ---------- * 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. (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. The accompanying notes are an integral part of the financial statements. 21 INCOME PORTFOLIO HIGH YIELD TOTAL RETURN PORTFOLIO NOTES TO FINANCIAL STATEMENTS - (UNAUDITED) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business trust on September 29, 1994, and is registered with the Securities and Exchange Commission (the "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, 22 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. 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. 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, 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 September 30, 2003 was as follows:
MARKET VALUE OF PORTFOLIO SECURITIES ON LOAN - --------- ------------------ High Yield Portfolio $ 15,142,681
The Income Portfolio did not have any security lending transactions during the six months ended September 30, 2003. Pursuant to an exemptive order received from the SEC (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 six months ended September 30, 2003, CTC has been compensated approximately $4,274 from the High Yield Portfolio. In addition, the Order permits (subject to limitations) a Portfolio to loan securities to its affiliates. During the six months ended September 30, 2003, Bear Stearns Securities Corp., an affiliate to the Portfolios received rebates in connection with such loans amounting to $18,592 for the High Yield Portfolio. 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. 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
23 For U.S. federal income tax purposes, net realized capital losses from investments incurred after October 31, 2002, within the prior fiscal year are deemed to arise on the first day of the current fiscal year. The High Yield Portfolio incurred and elected to defer such losses of $2,638,381. For U.S. federal income tax purposes, the cost of securities owned, gross appreciation, gross depreciation and net unrealized appreciation of investments at September 30, 2003 for each Portfolio were as follows:
GROSS GROSS NET PORTFOLIO COST APPRECIATION DEPRECIATION APPRECIATION - --------- ------------- ------------ ------------ ------------ Income Portfolio $ 77,513,566 $ 1,519,958 $ (211,601) $ 1,308,357 High Yield Portfolio 215,031,266 15,608,150 (328,576) 15,279,574
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. 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 six months ended September 30, 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 six months ended September 30, 2003, BSFM 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 six months ended September 30, 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* 1.10% 1.75% 1.75% 0.75% High Yield Portfolio** 1.15 1.80 1.80 0.80
- ---------- * Prior to August 1, 2003, the expense limitations were 0.80%, 1.45%, 1.45% and 0.45% for Class A, B, C and Y shares, respectively. ** Prior to August 1, 2003, the expense limitations were 1.00%, 1.65%, 1.65% and 0.65% for Class A, B, C and Y shares, respectively. As necessary, this limitation is effected by waivers by the Adviser of its advisory fees and reimbursements of expenses exceeding the advisory fee. For the six months ended September 30, 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 $ 187,260 $ 36,203 High Yield Portfolio 324,028 --
24 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. 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 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 six months ended September 30, 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 $ 120,419 $ 66,886 High Yield Portfolio 430,256 237,552
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 six months ended September 30, 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 $ 38,831 -- $ 76,422 $ 3,954 High Yield Portfolio 266,046 $ 8,956 96,020 21,203
INVESTMENTS IN SECURITIES For the six months ended September 30, 2003, aggregate purchases and sales of investment securities (excluding short-term investments) for each Portfolio were as follows:
PORTFOLIO PURCHASES SALES - --------- ------------- ------------- Income Portfolio $ 45,913,904 $ 52,204,388 High Yield Portfolio 148,465,280 125,990,187
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. 25 Transactions in shares of beneficial interest for each Portfolio were as follows:
INCOME PORTFOLIO ------------------------------------------------ SALES REPURCHASES REINVESTMENTS -------------- -------------- -------------- CLASS A FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 910,349 1,074,949 27,284 Value $ 11,474,813 $ 13,444,127 $ 342,772 FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 1,918,416 892,665 38,049 Value $ 23,511,749 $ 10,924,899 $ 466,500 CLASS B FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 166,020 360,596 17,131 Value $ 2,085,920 $ 4,507,718 $ 215,116 FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 1,516,519 580,387 27,109 Value $ 18,475,988 $ 7,071,143 $ 332,372 CLASS C FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 166,195 370,528 10,329 Value $ 2,095,220 $ 4,636,585 $ 129,790 FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 706,186 325,220 22,051 Value $ 8,630,729 $ 3,975,476 $ 269,870 CLASS Y FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 435,591 528,643 44,643 Value $ 5,477,727 $ 6,628,898 $ 560,416 FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 1,390,146 278,085 65,567 Value $ 16,970,558 $ 3,411,752 $ 803,088 HIGH YIELD PORTFOLIO ------------------------------------------------ SALES REPURCHASES REINVESTMENTS -------------- -------------- -------------- CLASS A FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 3,569,612 3,957,611 195,780 Value $ 29,741,548 $ 32,960,922 $ 1,638,341 FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 6,370,363 4,975,324 408,346 Value $ 50,751,493 $ 39,763,822 $ 3,257,445 CLASS B FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 922,816 477,062 101,094 Value $ 7,678,990 $ 3,988,950 $ 847,449 FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 2,581,257 1,206,435 177,294 Value $ 20,618,000 $ 9,586,223 $ 1,414,056 CLASS C FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 1,575,387 696,118 135,344 Value $ 13,123,772 $ 5,820,046 $ 1,133,606 FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 2,873,843 910,780 213,931 Value $ 22,966,703 $ 7,229,012 $ 1,702,053 CLASS Y FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 1,917,292 694,250 146,739 Value $ 15,906,201 $ 5,878,841 $ 1,232,233 FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 970,032 331,419 217,625 Value $ 7,927,562 $ 2,625,540 $ 1,733,581
26 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 six months ended September 30, 2003, were as follows:
MAXIMUM LOAN AMOUNT PORTFOLIO AVERAGE LOAN BALANCE OUTSTANDING AVERAGE INTEREST RATE - --------- -------------------- ------------------- --------------------- Income Portfolio $ 422,953 $ 3,452,500 1.67% High Yield Portfolio 4,452 271,600 1.81
The Income Portfolio and High Yield Portfolio had no amounts outstanding under the credit facility at September 30, 2003. 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. SUBSEQUENT EVENT On November 18, 2003, BSAM and The Dreyfus Corporation (with its relevant affiliates, "Dreyfus") announced a strategic arrangement in which Portfolios of the Fund will merge with new or existing Dreyfus funds that have the same or similar investment objectives (the "Transaction"). If shareholders of the Portfolios approve these mergers, those shareholders will receive shares of the corresponding Dreyfus funds having the same value as their Portfolio shares. The Transaction has received the approvals of the Board and the Boards of the relevant Dreyfus funds (other than the Board of the Dreyfus fund corresponding to the Income Portfolio). The Transaction is subject to shareholder approval and is expected to close by the end of the second quarter of 2004. The Board of the Dreyfus fund corresponding to the Income Portfolio is expected to consider the relevant merger in the near future. The Income Portfolio would reorganize into Dreyfus Premier Core Bond Fund, a series of Dreyfus Premier Fixed Income Funds (assuming approval by both the Dreyfus fund Board and the Income Portfolio's shareholders); and The High Yield Portfolio would reorganize into Dreyfus Premier Limited Term High Yield Fund, a series of The Dreyfus/Laurel Funds Trust. Dreyfus currently serves as the investment adviser for Dreyfus Premier Core Bond Fund and Dreyfus Premier Limited Term High Yield Fund, each of which is a currently-operating mutual fund. Upon the closing of these reorganizations, Dreyfus will continue to serve as the sole investment adviser to each of these Dreyfus funds. 27 THE BEAR STEARNS FUNDS 383 MADISON AVENUE, NEW YORK, NY 10179 1.800.766.4111 Michael Minikes Chairman of the Board and Trustee Barry Sommers President John S. Levy Trustee M. B. Oglesby, Jr. Trustee Robert E. Richardson Trustee 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 ADMINISTRATOR Bear Stearns Funds Management Inc. 383 Madison Avenue New York, NY 10179 DISTRIBUTOR Bear, Stearns & Co. Inc. 383 Madison Avenue New York, NY 10179 CUSTODIAN Custodial Trust Company 101 Carnegie Center Princeton, NJ 08540 TRANSFER AND DIVIDEND DISBURSEMENT AGENT PFPC Inc. 760 Moore Road King of Prussia, PA 19406 INDEPENDENT AUDITORS Deloitte & Touche LLP Two World Financial Center New York, NY 10281 COUNSEL Kramer Levin Naftalis & Frankel LLP 919 Third Avenue New York, NY 10022 The financial information included herein is taken from the records of each Portfolio without examination by independent auditors who do not express an opinion thereon. 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 SEMI-ANNUAL REPORT SEPTEMBER 30, 2003 [BEAR STEARNS LOGO] THE BEAR STEARNS FUNDS S&P STARS PORTFOLIO SEPTEMBER 30, 2003 (UNAUDITED) TOP TEN INDUSTRY WEIGHTINGS
PERCENT OF RANK INDUSTRY NET ASSETS - ---- ------------------------------------------------------ ---------- 1. Bank Holding Companies 5.60 2. Computer Peripheral Equipment 4.64 3. Prepackaged Software 4.46 4. Pharmaceutical Preparations 4.16 5. Drugs, Proprietaries & Sundries 3.47 6. Computer Related Services 3.20 7. Surgical & Medical Instruments 2.87 8. Cable & Other Pay TV Services 2.69 9. Hobby, Toy & Game Shops 2.68 10. Security Brokers & Dealers 2.60
TOP TEN HOLDINGS*
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- -------------------------------------- ------------------------------------- ---------- 1. CNET Networks, Inc. Computer Related Services 3.20 2. Cisco Systems, Inc. Computer Peripheral Equipment 2.85 3. Comcast Corp., Special Class A Cable & Other Pay TV Services 2.69 4. Toys "R" Us, Inc. Hobby, Toy & Game Shops 2.68 5. Lehman Brothers Holdings Inc. Security Brokers & Dealers 2.60 6. Citigroup Inc. Commercial Banks 2.57 7. Constellation Brands, Inc., Class A Wines, Brandy & Brandy Spirits 2.51 8. Noble Corp. Drilling Oil & Gas Wells 2.38 9. Intel Corp. Semiconductors & Related Devices 2.37 10. Vishay Intertechnology, Inc. Electronic Resistors 2.32
- ---------- * 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. 1 S&P STARS OPPORTUNITIES PORTFOLIO SEPTEMBER 30, 2003 (UNAUDITED) TOP TEN INDUSTRY WEIGHTINGS
PERCENT OF RANK INDUSTRY NET ASSETS - ---- ------------------------------------------------------ ---------- 1. Drilling Oil & Gas Wells 4.91 2. Pharmaceutical Preparations 4.64 3. Bank Holding Companies 3.79 4. Business Services 3.53 5. Hotels, Motels & Tourist Courts 3.32 6. Data Processing & Preparation 3.27 7. Hospital & Medical Service Plans 3.01 8. Prepackaged Software 2.98 9. Electric Services 2.88 10. Investment Advisory Service 2.87
TOP TEN HOLDINGS*
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ------------------------------------ ------------------------------------- ---------- 1. AutoZone, Inc. Auto & Home Supply Stores 2.30 2. Harrah's Entertainment, Inc. Hotels, Motels & Tourist Courts 2.17 3. Affiliated Computer Services, Inc. Data Processing & Preparation 2.06 4. CVS Corp. Drug Stores & Proprietary Stores 2.05 5. Martek Biosciences Corp. Biological Products 2.03 6. American Standard Cos. Inc. Refrigeration & Heating Equipment 2.01 7. Flextronics International Ltd. Circuit Boards 1.85 8. Fair, Issac & Co., Inc. Business Services 1.84 9. Regis Corp. Beauty Shops 1.83 10. Genzyme Corp. Diagnostic Substances 1.78
- ---------- * 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. 2 THE INSIDERS SELECT FUND SEPTEMBER 30, 2003 (UNAUDITED) TOP TEN INDUSTRY WEIGHTINGS
PERCENT OF RANK INDUSTRY NET ASSETS - ---- ------------------------------------------------------ ---------- 1. Bank Holding Companies 8.75 2. Petroleum Refining 4.98 3. Women's Ready-To-Wear Stores 4.45 4. Crude Petroleum & Natural Gas 3.94 5. Personal Credit Institutions 3.52 6. Motion Picture & Video Production 3.44 7. Aircraft Engines & Engine Parts 3.35 8. National Banks 3.27 9. Flat Glass 3.09 10. Surety Insurance 3.05
TOP TEN HOLDINGS*
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ---------------------------------------- ------------------------------------- ---------- 1. American Express Co. Personal Credit Institutions 3.52 2. Liberty Media Corp. Motion Picture & Video Production 3.44 3. United Technologies Corp. Aircraft Engines & Engine Parts 3.35 4. Washington Mutual, Inc. Bank Holding Companies 3.27 5. FleetBoston Financial Corp. National Banks 3.27 6. PNC Financial Services Group, Inc. (The) Bank Holding Companies 3.24 7. PPG Industries, Inc. Flat Glass 3.09 8. MBIA Inc. Surety Insurance 3.05 9. Dover Corp. Elevators & Moving Stairways 3.03 10. McDonald's Corp. Eating Places 3.01
- ---------- * 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. 3 INTRINSIC VALUE PORTFOLIO SEPTEMBER 30, 2003 (UNAUDITED) TOP TEN INDUSTRY WEIGHTINGS
PERCENT OF RANK INDUSTRY NET ASSETS - ---- ------------------------------------------------------ ---------- 1. Bank Holding Companies 10.48 2. Petroleum Refining 7.57 3. Motion Picture & Video Production 4.93 4. Pharmaceutical Preparations 4.55 5. National Banks 4.50 6. Commercial Banks 3.99 7. Fire, Marine & Casualty Insurance 3.96 8. Telephone Communications 3.92 9. Women's Ready-To-Wear Stores 3.61 10. U.S. Government Agency 3.31
TOP TEN HOLDINGS*
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ------------------------------------ ------------------------------------- ---------- 1. Citigroup Inc. Commercial Banks 3.99 2. Liberty Media Corp. Motion Picture & Video Production 3.50 3. Fannie Mae U.S. Government Agency 3.31 4. Bank of America Corp. Bank Holding Companies 3.02 5. Exxon Mobil Corp. Petroleum Refining 3.01 6. ChevronTexaco Corp. Petroleum Refining 2.53 7. American International Group, Inc. Fire, Marine & Casualty Insurance 2.52 8. International Paper Co. Paper Mills 2.51 9. HCA Inc. General Medical & Surgical Hospitals 2.50 10. U.S. Bancorp National Banks 2.49
- ---------- * 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. 4 SMALL CAP VALUE PORTFOLIO SEPTEMBER 30, 2003 (UNAUDITED) TOP TEN INDUSTRY WEIGHTINGS
PERCENT OF RANK INDUSTRY NET ASSETS - ---- ------------------------------------------------------ ---------- 1. Bank Holding Companies 11.47 2. Prepackaged Software 5.47 3. Real Estate Investment Trusts 5.39 4. Semiconductors & Related Devices 4.07 5. Electronic Computers 3.71 6. Crude Petroleum & Natural Gas 3.09 7. Oil & Gas Field Services 2.37 8. Aircraft Engines & Engine Parts 2.34 9. Radio, TV & Electronic Stores 2.30 10. Copper Foundries 2.29
TOP TEN HOLDINGS*
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ------------------------------------ ------------------------------------- ---------- 1. Electronics For Imaging, Inc. Prepackaged Software 2.92 2. Key Energy Services, Inc. Oil & Gas Field Services 2.37 3. Woodward Governor Co. Aircraft Engines & Engine Parts 2.34 4. Keystone Property Trust Real Estate Investment Trusts 2.33 5. InterTAN, Inc. Radio, TV & Electronic Stores 2.30 6. Mueller Industries, Inc. Copper Foundries 2.29 7. Stage Stores, Inc. Department Stores 2.27 8. 4Kids Entertainment, Inc. Patent Owners & Lessors 2.26 9. Renal Care Group, Inc. Kidney Dialysis Centers 2.25 10. SWS Group, Inc. Security Brokers & Dealers 2.19
- ---------- * 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. 5 ALPHA GROWTH PORTFOLIO SEPTEMBER 30, 2003 (UNAUDITED) TOP TEN INDUSTRY WEIGHTINGS
PERCENT OF RANK INDUSTRY NET ASSETS - ---- ------------------------------------------------------ ---------- 1. Prepackaged Software 6.04 2. Bank Holding Companies 5.85 3. Business Services 4.38 4. Computer Peripheral Equipment 4.19 5. Electric & Other Services Combined 3.65 6. Electric Services 3.39 7. Photographic Equipment & Supplies 3.21 8. Newspapers 3.14 9. Computer Integrated Systems Design 2.86 10. Construction Machinery 2.68
TOP TEN HOLDINGS*
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ------------------------------------ ------------------------------------- ---------- 1. Citrix Systems, Inc. Computer Integrated Systems Design 2.86 2. PACCAR Inc. Construction Machinery 2.68 3. Genzyme Corp. Diagnostic Substances 2.64 4. eBay Inc. Business Services 2.64 5. Boston Scientific Corp. Surgical & Medical Instruments 2.52 6. Symantec Corp. Prepackaged Software 2.51 7. Apollo Group, Inc., Class A Colleges & Universities 2.51 8. International Game Technology Manufacturing Industries 2.46 9. Cisco Systems, Inc. Computer Peripheral Equipment 2.45 10. Nissan Motor Co. Ltd., ADR Motor Vehicles & Car Bodies 2.36
- ---------- * 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 August 1, 2003. Differences in percentage holdings of each security after August 1, 2003 are due to market movement. 6 INTERNATIONAL EQUITY PORTFOLIO SEPTEMBER 30, 2003 (UNAUDITED) TOP TEN INDUSTRY WEIGHTINGS
PERCENT OF RANK INDUSTRY NET ASSETS - ---- ------------------------------------------------------ ---------- 1. Foreign Banks, Branches & Agencies 14.36 2. Telephone Communications 10.70 3. Internet Service Provider 8.44 4. Insurance Carriers 5.59 5. Radio & Telephone Communications 3.59 6. Household Audio & Video Equipment 3.30 7. Pharmaceutical Preparations 3.29 8. Newspapers 3.07 9. Television Broadcasting 2.87 10. Computer-Integrated Systems 2.42
TOP TEN HOLDINGS*
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ---- ------------------------------------ ------------------------------------- ---------- 1. Yahoo Japan Corp. Internet Service Provider 5.20 2. Credit Suisse Group Foreign Banks, Branches & Agencies 3.92 3. Sharp Corp. Household Audio & Video Equipment 3.30 4. SOFTBANK Corp. Internet Service Provider 3.24 5. News Corp. Ltd. (The) Newspapers 3.07 6. Telefonica S.A. Telephone Communications 2.87 7. Zurich Financial Services AG Insurance Carriers 2.50 8. Teva Pharmaceutical Industries Ltd. Pharmaceutical Preparations 2.49 9. AXA Insurance Carriers 2.45 10. Research in Motion Ltd. Computer-Integrated Systems 2.42
- ---------- * 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. 7 THE BEAR STEARNS FUNDS S&P STARS PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2003 (UNAUDITED)
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS -- 102.40% ADVERTISING - 1.96% 2,520,000 DoubleClick Inc.* $ 27,140,400 --------------- AUTO & HOME SUPPLY STORES - 2.07% 320,000 AutoZone, Inc.+* 28,649,600 --------------- BANK HOLDING COMPANIES - 5.60% 330,000 Bank of America Corp. 25,753,200 1,230,000 MBNA Corp. 28,044,000 600,000 Washington Mutual, Inc. 23,622,000 --------------- 77,419,200 --------------- BIOLOGICAL PRODUCTS - 1.87% 400,000 Amgen Inc.* 25,828,000 --------------- BOOK STORES - 1.73% 940,000 Barnes & Noble, Inc.++* 23,885,400 --------------- CABLE & OTHER PAY TV SERVICES - 2.69% 1,260,000 Comcast Corp., Special Class A* 37,220,400 --------------- COMMERCIAL BANKS - 2.57% 780,000 Citigroup Inc. 35,497,800 --------------- COMMERCIAL NONPHYSICAL RESEARCH - 0.20% 50,000 Moody's Corp.+ 2,748,500 --------------- COMPUTER PERIPHERAL EQUIPMENT - 4.64% 2,020,000 Cisco Systems, Inc.* 39,470,800 970,000 Emulex Corp.* 24,705,900 --------------- 64,176,700 --------------- COMPUTER RELATED SERVICES - 3.20% 6,250,000 CNET Networks, Inc.~* 44,250,000 --------------- COMPUTERS, PERIPHERALS & SOFTWARE - 1.72% 270,000 International Business Machines Corp. 23,849,100 --------------- CRUDE PETROLEUM & NATURAL GAS - 2.06% 410,000 Apache Corp.+ 28,429,400 --------------- DIAGNOSTIC SUBSTANCES - 1.77% 530,000 Genzyme Corp.* 24,512,500 --------------- DRILLING OIL & GAS WELLS - 2.38% 970,000 Noble Corp.+* $ 32,970,300 --------------- DRUG STORES & PROPRIETARY STORES - 2.13% 950,000 CVS Corp. 29,507,000 --------------- DRUGS, PROPRIETARIES & SUNDRIES - 3.47% 360,000 Cardinal Health, Inc. 21,020,400 810,000 McKesson Corp.* 26,964,900 --------------- 47,985,300 --------------- EATING PLACES - 2.06% 880,000 Wendy's International, Inc.+ 28,424,000 --------------- ELECTRIC SERVICES - 1.83% 4,950,000 Reliant Resources, Inc.* 25,344,000 --------------- ELECTRONIC RESISTORS - 2.32% 1,830,000 Vishay Intertechnology, Inc.* 32,061,600 --------------- GAS TRANSMISSION & DISTRIBUTION - 1.60% 2,350,000 Williams Cos., Inc. (The)++* 22,137,000 --------------- HOBBY, TOY & GAME SHOPS - 2.68% 3,080,000 Toys "R" Us, Inc.+* 37,052,400 --------------- HOSPITAL & MEDICAL SERVICE PLANS - 2.10% 550,000 Coventry Health Care, Inc.* 29,007,000 --------------- HOTELS, MOTELS & TOURIST COURTS - 2.13% 700,000 Harrah's Entertainment, Inc.* 29,477,000 --------------- INFORMATION RETRIEVAL SERVICES - 0.49% 73,000 CoStar Group, Inc.++++* 1,898,000 3,870,000 SportsLine.com, Inc.~*(a) 4,876,200 --------------- 6,774,200 --------------- INSTRUMENTS TO MEASURE ELECTRICITY - 2.15% 1,600,000 Teradyne, Inc.* 29,760,000 --------------- INVESTMENT ADVISORY SERVICE - 1.99% 820,000 Eaton Vance Corp.+ 27,453,600 --------------- LUMBER & OTHER BUILDING MATERIALS - 1.91% 830,000 Home Depot, Inc. (The)++ 26,435,500 ---------------
The accompanying notes are an integral part of the financial statements. 8
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) MOTOR VEHICLE PARTS & ACCESSORIES - 2.02% 530,000 Lear Corp.+* $ 27,899,200 --------------- PETROLEUM REFINING - 1.99% 750,000 Exxon Mobil Corp. 27,450,000 --------------- PHARMACEUTICAL PREPARATIONS - 4.16% 1,030,000 Laboratory Corp. of America Holdings* 29,561,000 920,000 Pfizer Inc.+ 27,949,600 --------------- 57,510,600 --------------- POWER DRIVEN HAND TOOLS - 1.99% 680,000 Black & Decker Corp. (The)* 27,574,000 --------------- PREPACKAGED SOFTWARE - 4.46% 2,050,000 E.piphany, Inc.~* 10,229,500 1,020,000 Microsoft Corp. 28,345,800 80,000 Open Text Corp.* 2,730,400 1,200,000 Sybase, Inc.* 20,412,000 --------------- 61,717,700 --------------- RADIO, TV & ELECTRONIC STORES - 1.03% 300,000 Best Buy Co., Inc.* 14,256,000 --------------- RADIOTELEPHONE COMMUNICATIONS - 1.40% 980,000 Nextel Communications, Inc., Class A* 19,296,200 --------------- RAILROADS - 1.85% 440,000 Union Pacific Corp.+ 25,594,800 --------------- REAL ESTATE INVESTMENT TRUSTS - 2.25% 650,000 Chelsea Property Group, Inc. 31,135,000 --------------- REFRIGERATION & HEATING EQUIPMENT - 2.13% 350,000 American Standard Cos. Inc.* 29,487,500 --------------- SECURITY BROKERS & DEALERS - 2.60% 520,000 Lehman Brothers Holdings Inc. (b) 35,921,600 --------------- SECURITY SYSTEMS SERVICES - 2.07% 1,400,000 Tyco International Ltd.++ 28,602,000 --------------- SEMICONDUCTORS & RELATED DEVICES - 2.37% 1,190,000 Intel Corp. $ 32,736,900 --------------- SPECIALTY HOSPITALS - 0.21% 169,800 RehabCare Group, Inc.* 2,895,090 --------------- STATIONERY & OFFICE SUPPLIES - 2.10% 1,220,000 Staples, Inc.* 28,975,000 --------------- SURETY INSURANCE - 2.08% 450,000 Ambac Financial Group, Inc.+ 28,800,000 --------------- SURGICAL & MEDICAL INSTRUMENTS - 2.87% 240,000 Boston Scientific Corp.+* 15,312,000 1,460,000 Intuitive Surgical, Inc.++*(a) 24,352,800 --------------- 39,664,800 --------------- TELEPHONE COMMUNICATIONS - 0.99% 2,380,000 Sprint Corp. (PCS Group)++* 13,637,400 --------------- WINES, BRANDY & BRANDY SPIRITS - 2.51% 1,140,000 Constellation Brands, Inc., Class A*(b) 34,758,600 --------------- Total Common Stocks (cost - $1,378,241,407) 1,415,908,290 --------------- SHORT-TERM INVESTMENT -- 0.00% INVESTMENT COMPANY - 0.00% 79 Federated Government Obligations 0.91%~** (cost - $79) 79 --------------- Total Investments -- 102.40% (cost - $1,378,241,486) 1,415,908,369 Securities Lending Collateral (c) -- 2.13% 29,456,647 Liabilities in excess of other assets -- (4.53)% (62,589,967) --------------- Net Assets -- 100.00% $ 1,382,775,049 ===============
The accompanying notes are an integral part of the financial statements. 9
SHARES VALUE - -------------------------------------------------------------------------------------------------- SHORT SALES OF COMMON STOCKS -- (1.97)% EMPLOYMENT AGENCIES - (0.56)% 400,000 Robert Half International, Inc.++++* $ 7,800,000 --------------- PHOTOGRAPHIC EQUIPMENT & SUPPLIES - (0.49)% 320,000 Eastman Kodak Co.++++ 6,700,800 --------------- RADIOTELEPHONE COMMUNICATIONS - (0.12)% 470,000 Metro One Telecommunications, Inc.+++* 1,635,600 --------------- TELEPHONE & TELEGRAPH APPARATUS - (0.49)% 110,000 ADTRAN, Inc.++++ 6,729,800 --------------- TELEGRAPH COMMUNICATIONS - (0.31)% 800,000 Level 3 Communications, Inc.+++ 4,336,000 --------------- Total Short Sales of Common Stocks (proceeds received - $32,412,082) $ 27,202,200 ===============
- ---------- 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 September 30, 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. 10 S&P STARS OPPORTUNITIES PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2003 (UNAUDITED)
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS -- 98.49% ADVERTISING - 1.03% 52,000 DoubleClick Inc.* $ 560,040 --------------- AUTO & HOME SUPPLY STORES - 2.30% 14,000 AutoZone, Inc.+* 1,253,420 --------------- BANK HOLDING COMPANIES - 3.79% 28,000 Banknorth Group, Inc.+ 790,160 12,000 Compass Bancshares, Inc. 414,960 46,000 Sovereign Bancorp, Inc. 853,300 --------------- 2,058,420 --------------- BEAUTY SHOPS - 1.83% 31,000 Regis Corp. 995,100 --------------- BIOLOGICAL PRODUCTS - 2.03% 21,000 Martek Biosciences Corp.* 1,106,070 --------------- BUSINESS SERVICES - 3.53% 49,000 Cendant Corp.+* 915,810 17,000 Fair, Issac & Co., Inc. 1,002,320 --------------- 1,918,130 --------------- CALCULATING & ACCOUNTING EQUIPMENT - 1.58% 17,000 Diebold, Inc.++ 861,050 --------------- CIRCUIT BOARDS - 1.85% 71,000 Flextronics International Ltd.* 1,006,780 --------------- COLLEGES & UNIVERSITIES - 2.55% 13,000 Career Education Corp.* 588,900 14,000 Corinthian Colleges, Inc.* 800,240 --------------- 1,389,140 --------------- COMMUNICATIONS EQUIPMENT - 1.50% 31,000 Rockwell Automation, Inc.++* 813,750 --------------- COMPUTER PERIPHERAL EQUIPMENT - 1.07% 23,000 Emulex Corp.* 585,810 --------------- COMPUTER STORAGE DEVICES - 1.29% 51,000 Dot Hill Systems Corp.~* 701,760 --------------- COMPUTERS, PERIPHERALS & SOFTWARE - 0.45% 8,000 Tech Data Corp.++* 246,800 --------------- CRUDE PETROLEUM & NATURAL GAS - 1.19% 24,000 Evergreen Resources, Inc.* $ 648,000 --------------- DATA PROCESSING & PREPARATION - 3.27% 23,000 Affiliated Computer Services, Inc., Class A* 1,119,870 29,000 Intrado Inc.* 660,620 --------------- 1,780,490 --------------- DEEP SEA PASSENGER TRANSPORTATION - 1.19% 23,000 Royal Caribbean Cruises Ltd.~ 646,530 --------------- DIAGNOSTIC SUBSTANCES - 1.78% 21,000 Genzyme Corp.* 971,250 --------------- DRILLING OIL & GAS WELLS - 4.91% 27,000 ENSCO International Inc.* 724,140 17,000 GlobalSantaFe Corp. 407,150 22,000 Nabors Industries Ltd.* 819,720 21,000 Noble Corp.+* 713,790 --------------- 2,664,800 --------------- DRUG STORES & PROPRIETARY STORES - 2.05% 36,000 CVS Corp. 1,118,160 --------------- DRUGS, PROPRIETARIES & SUNDRIES - 1.28% 21,000 McKesson Corp.* 699,090 --------------- EATING PLACES - 1.04% 17,000 Brinker International, Inc.++* 567,120 --------------- ELECTRIC SERVICES - 2.88% 140,000 Reliant Resources, Inc.* 716,800 46,000 Westar Energy, Inc.++ 848,700 --------------- 1,565,500 --------------- ELECTRONIC COMPONENTS - 0.98% 31,000 American Power Conversion Corp.++ 531,340 --------------- ELECTRONIC RESISTORS - 1.77% 55,000 Vishay Intertechnology, Inc.*(a) 963,600 --------------- FIRE, MARINE & CASUALTY INSURANCE - 1.55% 16,000 Hartford Financial Services Group, Inc. (The) 842,080 --------------- FURNITURE STORES - 1.15% 26,000 Furniture Brands International, Inc.++* 626,600 ---------------
The accompanying notes are an integral part of the financial statements. 11
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) GAS TRANSMISSION & DISTRIBUTION - 1.40% 81,000 Williams Cos., Inc. (The)++* $ 763,020 --------------- HARDWARE - 1.04% 10,000 Fortune Brands, Inc. 567,500 --------------- HOBBY, TOY & GAME SHOPS - 1.15% 52,000 Toys "R" Us, Inc.+* 625,560 --------------- HOSPITAL & MEDICAL SERVICE PLANS - 3.01% 17,000 Coventry Health Care, Inc.* 896,580 18,000 Oxford Health Plans, Inc.* 743,580 --------------- 1,640,160 --------------- HOTELS, MOTELS & TOURIST COURTS - 3.32% 28,000 Harrah's Entertainment, Inc.* 1,179,080 100,000 La Quinta Corp.* 623,000 --------------- 1,802,080 --------------- INSTRUMENTS TO MEASURE ELECTRICITY - 1.30% 38,000 Teradyne, Inc.* 706,800 --------------- INVESTMENT ADVISORY SERVICE - 2.87% 15,000 Affiliated Managers Group, Inc.~* 942,000 18,500 Eaton Vance Corp.+ 619,380 --------------- 1,561,380 --------------- MEDICINALS & BOTANICALS - 1.50% 35,000 NBTY, Inc.* 817,250 --------------- MEN'S & BOYS' CLOTHING - 2.49% 19,000 Abercrombie & Fitch Co., Class A+* 526,490 52,000 Quiksilver, Inc.* 829,400 --------------- 1,355,890 --------------- MOTOR VEHICLE PARTS & ACCESSORIES - 1.45% 15,000 Lear Corp.+* 789,600 --------------- NATIONAL BANKS - 1.10% 24,000 National Commerce Financial Corp. 597,120 --------------- PHARMACEUTICAL PREPARATIONS - 4.64% 8,200 Barr Laboratories, Inc.* 559,322 11,000 Gilead Sciences, Inc.+* 615,230 23,000 Laboratory Corp. of America Holdings* 660,100 12,000 Teva Pharmaceutical Industries Ltd., ADR+ $ 685,800 --------------- 2,520,452 --------------- POWER DRIVEN HAND TOOLS - 0.82% 11,000 Black & Decker Corp. (The)* 446,050 --------------- PREPACKAGED SOFTWARE - 2.98% 14,000 Barra, Inc.~* 525,700 50,000 Sybase, Inc.* 850,500 8,000 Synopsys, Inc.+* 246,160 --------------- 1,622,360 --------------- RADIO BROADCASTING - 1.11% 42,000 Radio One, Inc., Class D++* 603,120 --------------- REAL ESTATE INVESTMENT TRUSTS - 1.50% 17,000 Vornado Realty Trust 816,680 --------------- REFRIGERATION & HEATING EQUIPMENT - 2.01% 13,000 American Standard Cos. Inc.* 1,095,250 --------------- SECURITY BROKERS & DEALERS - 1.52% 12,000 Lehman Brothers Holdings Inc. 828,960 --------------- SEMICONDUCTORS & RELATED DEVICES - 1.95% 14,000 Analog Devices, Inc.* 532,280 32,000 Fairchild Semiconductor International, Inc., Class A+* 530,560 --------------- 1,062,840 --------------- SINGLE-FAMILY HOUSING CONSTRUCTION - 1.00% 7,000 Lennar Corp. 544,530 --------------- SPORTING GOODS & BICYCLE SHOPS - 1.10% 19,000 Sports Authority, Inc. (The)~* 597,740 --------------- STATIONERY & OFFICE SUPPLIES - 1.22% 28,000 Staples, Inc.* 665,000 --------------- SURETY INSURANCE - 1.29% 11,000 Ambac Financial Group, Inc.+ 704,000 --------------- SURGICAL & MEDICAL INSTRUMENTS - 2.74% 10,000 Boston Scientific Corp.+* 638,000 12,000 C.R. Bard, Inc.++* 852,000 --------------- 1,490,000 ---------------
The accompanying notes are an integral part of the financial statements. 12
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) TELEVISION BROADCASTING - 1.09% 18,000 InterActiveCorp* $ 594,900 --------------- TRANSMISSION EQUIPMENT - 1.31% 30,000 Kaydon Corp. 712,200 --------------- WINES, BRANDY & BRANDY SPIRITS - 1.74% 31,000 Constellation Brands, Inc., Class A*(a) 945,190 --------------- Total Common Stocks (cost - $47,883,371) 53,596,462 --------------- SHORT-TERM INVESTMENT -- 3.29% INVESTMENT COMPANY - 3.29% 1,792,919 Federated Government Obligations 0.91%~** (cost - $1,792,919) 1,792,919 --------------- Total Investments -- 101.78% (cost - $49,676,290) 55,389,381 Liabilities in excess of other assets -- (1.78)% (970,114) --------------- Net Assets -- 100.00% $ 54,419,267 =============== SHORT SALES OF COMMON STOCK -- (2.91)% DEPARTMENT STORES - (0.51)% 20,000 Dillard's, Inc. Class A++++ $ 279,600 --------------- HOTELS, MOTELS & TOURIST COURTS - (0.55)% 6,000 Four Seasons Hotels Inc.+++ 298,860 --------------- INTERNAL COMBUSTION ENGINES - (0.57)% 7,000 Cummins, Inc.++++ 311,010 --------------- PAPERBOARD MILLS - (0.66)% 12,000 Potlatch Corp.++++ 356,640 --------------- TELEPHONE COMMUNICATIONS - (0.28)% 30,000 Cincinnati Bell Inc.++++ 152,700 --------------- TELEPHONE & TELEGRAPH APPARATUS - (0.34)% 3,000 ADTRAN, Inc. 183,540 --------------- Total Short Sales of Common Stock (proceeds received - $1,486,476) $ 1,582,350 ===============
- ---------- 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. ~ Currently not rated. * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at September 30, 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. 13 THE INSIDERS SELECT FUND PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2003 (UNAUDITED)
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS -- 93.63% ACCIDENT & HEALTH INSURANCE - 2.76% 27,800 AFLAC Inc. $ 897,940 --------------- ADVERTISING AGENCIES - 2.39% 55,100 Interpublic Group of Cos., Inc. (The) 778,012 --------------- AIRCRAFT ENGINES & ENGINE PARTS - 3.35% 14,100 United Technologies Corp. 1,089,648 --------------- BANK HOLDING COMPANIES - 8.75% 15,600 Comerica Inc. 726,960 22,100 PNC Financial Services Group, Inc. (The) 1,051,518 27,000 Washington Mutual, Inc. 1,062,990 --------------- 2,841,468 --------------- CABLE & OTHER PAY TV SERVICES - 2.78% 8,443 Comcast Corp., Class A* 260,720 21,800 Comcast Corp., Special Class A* 643,972 --------------- 904,692 --------------- COMMUNICATIONS EQUIPMENT - 2.37% 49,300 Nokia Corp., ADR 769,080 --------------- COMPUTER RELATED SERVICES - 1.24% 20,000 Electronic Data Systems Corp. 404,000 --------------- CREDIT REPORTING SERVICES - 2.37% 18,500 Dun & Bradstreet Corp. (The)* 768,490 --------------- CRUDE PETROLEUM & NATURAL GAS - 3.94% 15,200 Anadarko Petroleum Corp. 634,752 9,317 Apache Corp. 646,041 --------------- 1,280,793 --------------- DEPARTMENT STORES - 2.51% 33,100 May Department Stores Co. (The) 815,253 --------------- EATING PLACES - 3.01% 41,600 McDonald's Corp. 979,264 --------------- ELECTRIC SERVICES - 1.63% 8,400 FPL Group, Inc. 530,880 --------------- ELEVATORS & MOVING STAIRWAYS - 3.03% 27,800 Dover Corp. 983,286 --------------- FLAT GLASS - 3.09% 19,200 PPG Industries, Inc. $ 1,002,624 --------------- FOOD & KINDRED PRODUCTS - 1.52% 16,700 Kraft Foods Inc., Class A 492,650 --------------- GROCERY STORES - 2.78% 39,400 Safeway Inc.* 903,836 --------------- HOLDING OFFICES - 2.95% 18,400 MGIC Investment Corp. 958,088 --------------- LIFE INSURANCE - 2.82% 25,900 Lincoln National Corp. 916,342 --------------- LUMBER & OTHER BUILDING MATERIALS - 2.60% 26,500 Home Depot, Inc. (The) 844,025 --------------- MOTION PICTURE & VIDEO PRODUCTION - 3.44% 112,237 Liberty Media Corp., Class A* 1,119,003 --------------- MOTORS & GENERATORS - 1.18% 7,300 Emerson Electric Co. 384,345 --------------- NATIONAL BANKS - 3.27% 35,200 FleetBoston Financial Corp. 1,061,280 --------------- NEWSPAPERS - 1.62% 7,900 Knight-Ridder, Inc. 526,930 --------------- PAPER MILLS - 2.02% 16,800 International Paper Co. 655,536 --------------- PERSONAL CREDIT INSTITUTIONS - 3.52% 25,400 American Express Co. 1,144,524 --------------- PETROLEUM REFINING - 4.98% 12,000 ConocoPhillips 657,000 23,900 Sunoco, Inc. 961,258 --------------- 1,618,258 --------------- SANITARY PAPER PRODUCTS - 2.80% 17,700 Kimberly-Clark Corp. 908,364 --------------- SECURITY SYSTEMS SERVICES - 1.90% 30,200 Tyco International Ltd. 616,986 ---------------
The accompanying notes are an integral part of the financial statements. 14
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) SURETY INSURANCE - 3.05% 18,000 MBIA Inc. $ 989,460 --------------- TELEPHONE COMMUNICATIONS - 1.59% 34,300 Sprint Corp. (FON Group) 517,930 --------------- U.S. GOVERNMENT AGENCY - 2.01% 9,300 Fannie Mae 652,860 --------------- WOMEN'S READY-TO-WEAR STORES - 4.45% 42,700 Limited Brands, Inc. 643,916 41,300 TJX Cos., Inc. (The) 802,046 --------------- 1,445,962 --------------- WOODWORKING MACHINERY - 1.91% 15,600 Pentair, Inc. 621,972 --------------- Total Common Stocks (cost - $28,991,768) 30,423,781 --------------- SHORT-TERM INVESTMENTS -- 6.63% INVESTMENT COMPANY - 1.24% 401,721 Federated Government Obligations 0.91%** $ 401,721 --------------- PRINCIPAL AMOUNT (000'S) - ------------ U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 5.39% $ 1,750 Federal Home Loan Bank, Discount Notes 0.95%, 10/01/03 1,750,000 --------------- Total Short-Term Investments (cost - $2,151,721) 2,151,721 --------------- Total Investments -- 100.26% (cost - $31,143,489) 32,575,502 Liabilities in excess of other assets -- (0.26)% (82,943) --------------- Net Assets -- 100.00% $ 32,492,559 ===============
- ---------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at September 30, 2003. The accompanying notes are an integral part of the financial statements. 15 INTRINSIC VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2003 (UNAUDITED)
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS -- 95.11% ADVERTISING AGENCIES - 2.07% 136,600 Interpublic Group of Cos., Inc. (The) $ 1,928,792 --------------- AIRCRAFT ENGINES & ENGINE PARTS - 1.41% 17,000 United Technologies Corp. 1,313,760 --------------- BANK HOLDING COMPANIES - 10.48% 36,000 Bank of America Corp. 2,809,439 51,900 J.P. Morgan Chase & Co. 1,781,727 60,400 MBNA Corp. 1,377,120 48,427 Washington Mutual, Inc. 1,906,571 36,800 Wells Fargo & Co. 1,895,200 --------------- 9,770,057 --------------- CIGARETTES - 1.46% 31,000 Altria Group, Inc. 1,357,800 --------------- COMMERCIAL BANKS - 3.99% 81,633 Citigroup Inc. 3,715,118 --------------- COMMUNICATIONS EQUIPMENT - 2.00% 119,300 Nokia Corp., ADR 1,861,080 --------------- COMPUTER RELATED SERVICES - 1.53% 70,700 Electronic Data Systems Corp. 1,428,140 --------------- CRUDE PETROLEUM & NATURAL GAS - 1.97% 21,700 Anadarko Petroleum Corp. 906,192 26,300 Occidental Petroleum Corp. 926,549 --------------- 1,832,741 --------------- EATING PLACES - 1.49% 59,000 McDonald's Corp. 1,388,860 --------------- ELECTRIC & ELECTRONIC EQUIPMENT - 1.90% 59,500 General Electric Co. 1,773,695 --------------- ELECTRONIC COMPUTERS - 1.92% 92,400 Hewlett-Packard Co. 1,788,864 --------------- FIRE, MARINE & CASUALTY INSURANCE - 3.96% 36,800 Allstate Corp. (The) 1,344,304 40,700 American International Group, Inc. 2,348,390 --------------- 3,692,694 --------------- FOOD & KINDRED PRODUCTS - 1.44% 45,500 Kraft Foods Inc., Class A $ 1,342,250 --------------- GENERAL MEDICAL & SURGICAL HOSPITALS - 2.50% 63,300 HCA Inc. 2,333,238 --------------- GROCERY STORES - 0.99% 40,100 Safeway Inc.* 919,894 --------------- HOLDING OFFICES - 2.14% 38,200 MGIC Investment Corp. 1,989,074 --------------- LIFE INSURANCE - 2.75% 36,200 Lincoln National Corp. 1,280,756 31,600 Torchmark Corp. 1,284,224 --------------- 2,564,980 --------------- LUMBER & OTHER BUILDING MATERIALS - 1.90% 55,600 Home Depot, Inc. (The) 1,770,860 --------------- MEDICAL PRODUCTS - 2.00% 37,600 Johnson & Johnson 1,861,952 --------------- MOTION PICTURE & VIDEO PRODUCTION - 4.93% 87,900 AOL Time Warner Inc.* 1,328,169 327,306 Liberty Media Corp., Class A* 3,263,241 --------------- 4,591,410 --------------- NATIONAL BANKS - 4.50% 62,300 FleetBoston Financial Corp. 1,878,345 96,600 U.S. Bancorp 2,317,434 --------------- 4,195,779 --------------- OFFICE MACHINES - 0.92% 22,300 Pitney Bowes Inc. 854,536 --------------- PAPER MILLS - 2.51% 59,900 International Paper Co. 2,337,298 --------------- PERSONAL CREDIT INSTITUTIONS - 2.37% 48,900 American Express Co. 2,203,434 --------------- PETROLEUM REFINING - 7.57% 32,975 ChevronTexaco Corp. 2,356,064 34,600 ConocoPhillips 1,894,350 76,600 Exxon Mobil Corp. 2,803,560 --------------- 7,053,974 ---------------
The accompanying notes are an integral part of the financial statements. 16
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) PHARMACEUTICAL PREPARATIONS - 4.55% 31,400 Abbott Laboratories $ 1,336,070 20,500 Merck & Co., Inc. 1,037,710 61,400 Pfizer Inc. 1,865,332 --------------- 4,239,112 --------------- RADIO & TV COMMUNICATIONS EQUIPMENT - 1.71% 69,500 Koninklijke Philips Electronics N.V. 1,592,940 --------------- SANITARY PAPER PRODUCTS - 2.47% 44,800 Kimberly-Clark Corp. 2,299,136 --------------- SECURITY BROKERS & DEALERS - 0.98% 18,000 Morgan Stanley 908,280 --------------- SECURITY SYSTEMS SERVICES - 2.06% 93,900 Tyco International Ltd. 1,918,377 --------------- SHIP BUILDING & REPAIRING - 0.89% 10,600 General Dynamics Corp. 827,436 --------------- TELEPHONE COMMUNICATIONS - 3.92% 59,600 SBC Communications Inc. 1,326,100 60,100 Sprint Corp. (FON Group) 907,510 43,700 Verizon Communications Inc. 1,417,628 --------------- 3,651,238 --------------- TELEVISION BROADCASTING - 0.91% 25,600 InterActiveCorp.* 846,080 --------------- U.S. GOVERNMENT AGENCY - 3.31% 43,900 Fannie Mae 3,081,780 --------------- WOMEN'S READY-TO-WEAR STORES - 3.61% 93,800 Limited Brands, Inc. 1,414,504 100,400 TJX Cos., Inc. (The) 1,949,768 --------------- 3,364,272 --------------- Total Common Stocks (cost - $82,959,824) 88,598,931 --------------- SHORT-TERM INVESTMENTS -- 8.16% INVESTMENT COMPANY - 0.65% 600,915 Federated Government Obligations 0.91%** $ 600,915 --------------- PRINCIPAL AMOUNT (000'S) - ------------ U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 7.51% $ 7,000 Federal Home Loan Bank, Discount Notes, 0.95%, 10/01/03 7,000,000 --------------- Total Short-Term Investments (cost - $7,600,915) 7,600,915 --------------- Total Investments -- 103.27% (cost - $90,560,739) 96,199,846 Liabilities in excess of other assets -- (3.27)% (3,041,862) --------------- Net Assets -- 100.00% $ 93,157,984 ===============
- ---------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at September 30, 2003. The accompanying notes are an integral part of the financial statements. 17 SMALL CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2003 (UNAUDITED)
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS -- 97.72% AIR TRANSPORTATION - 1.11% 70,800 Atlantic Coast Airlines Holdings, Inc.* $ 602,508 --------------- AIRCRAFT ENGINES & ENGINE PARTS - 2.34% 29,000 Woodward Governor Co. 1,267,590 --------------- ALUMINUM EXTRUDED PRODUCTS - 1.50% 53,800 Tredegar Corp. 809,690 --------------- ANALYTICAL INSTRUMENTS - 1.73% 53,700 Molecular Devices Corp.* 935,454 --------------- BANK HOLDING COMPANIES - 11.47% 73,100 BankAtlantic Bancorp, Inc., Class A 1,041,675 37,300 Commercial Federal Corp. 908,255 42,700 Greater Bay Bancorp 888,160 22,700 MAF Bancorp, Inc. 867,140 39,400 Provident Bankshares Corp. 1,113,049 50,500 Republic Bancorp, Inc. 672,660 28,200 Susquehanna Bancshares, Inc. 724,740 --------------- 6,215,679 --------------- BIOLOGICAL PRODUCTS - 1.84% 27,100 Abgenix, Inc.* 392,679 21,000 Serologicals Corp.* 276,150 10,300 Techne Corp.* 327,437 --------------- 996,266 --------------- COMMERCIAL PHYSICAL RESEARCH - 0.86% 51,600 Savient Pharmaceuticals, Inc.* 260,580 7,200 SFBC International, Inc.* 204,710 --------------- 465,290 --------------- COMPUTER INTEGRATED SYSTEMS DESIGN - 2.27% 35,100 JDA Software Group, Inc.* 521,937 62,200 Scientific Games Corp.* 709,702 --------------- 1,231,639 --------------- COMPUTERS, PERIPHERALS & SOFTWARE - 2.10% 31,100 ScanSource, Inc.* 1,136,394 --------------- COPPER FOUNDRIES - 2.29% 48,700 Mueller Industries, Inc.* 1,239,415 --------------- CRUDE PETROLEUM & NATURAL GAS - 3.09% 103,400 Magnum Hunter Resources, Inc.* $ 826,166 60,000 Swift Energy Co.* 846,600 --------------- 1,672,766 --------------- DATA PROCESSING & PREPARATION - 1.47% 64,300 eFunds Corp.* 794,105 --------------- DEPARTMENT STORES - 2.27% 48,200 Stage Stores, Inc.* 1,228,136 --------------- DIRECT MAIL ADVERTISING SERVICES - 0.95% 12,400 ADVO, Inc.* 516,212 --------------- ELECTRIC SERVICES - 2.18% 62,100 UniSource Energy Corp. 1,181,142 --------------- ELECTRONIC COMPONENTS - 1.55% 151,900 Three-Five Systems, Inc.* 836,969 --------------- ELECTRONIC COMPUTERS - 3.71% 148,900 Adaptec, Inc.* 1,125,684 69,900 Fargo Electronics, Inc.* 880,740 --------------- 2,006,424 --------------- EMPLOYMENT AGENCIES - 2.09% 66,800 Heidrick & Struggles International, Inc.* 1,130,924 --------------- FIRE, MARINE & CASUALTY INSURANCE - 1.34% 24,300 Selective Insurance Group, Inc. 723,168 --------------- FREIGHT TRANSPORTATION ARRANGEMENT - 1.16% 26,500 Genesee & Wyoming Inc., Class A* 628,315 --------------- GAMES, TOYS & CHILDREN'S VEHICLES - 1.41% 28,100 Shuffle Master, Inc.* 763,758 --------------- GAS TRANSMISSION & DISTRIBUTION - 2.04% 30,500 Energen Corp. 1,103,490 --------------- HEALTH & ALLIED SERVICES - 0.88% 17,000 Accredo Health, Inc.* 475,830 --------------- INFORMATION RETRIEVAL SERVICES - 1.48% 18,100 FactSet Research Systems Inc. 802,735 --------------- INORGANIC PIGMENTS - 0.95% 31,600 NL Industries, Inc. 514,132 ---------------
The accompanying notes are an integral part of the financial statements. 18
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) JEWELRY STORES - 1.43% 17,400 Zale Corp.* $ 772,734 --------------- KIDNEY DIALYSIS CENTERS - 2.25% 35,600 Renal Care Group, Inc.* 1,215,740 --------------- MANAGEMENT CONSULTING SERVICES - 0.63% 18,900 Right Management Consultants, Inc.* 341,712 --------------- MANAGEMENT SERVICES - 0.78% 18,100 SOURCECORP, Inc.* 420,825 --------------- MEAT PACKING PLANTS - 0.72% 358,173 Hibernia Foods plc, ADR* 390,409 --------------- NONFERROUS WIRE DRAWING & INSULATING - 1.43% 63,200 Andrew Corp.* 776,728 --------------- OIL & GAS FIELD SERVICES - 2.37% 132,900 Key Energy Services, Inc.* 1,282,485 --------------- PATENT OWNERS & LESSORS - 2.26% 57,900 4Kids Entertainment, Inc.* 1,221,690 --------------- PHARMACEUTICAL PREPARATIONS - 0.89% 37,900 Perrigo Co. 482,467 --------------- PREPACKAGED SOFTWARE - 5.47% 23,800 BARRA, Inc.* 893,690 67,900 Electronics For Imaging, Inc.* 1,583,428 41,300 NetIQ Corp.* 493,122 --------------- 2,970,240 --------------- PRESSED & BLOWN GLASS - 1.37% 32,700 DuPont Photomasks, Inc.* 742,617 --------------- PROCESS CONTROL INSTRUMENTS - 1.02% 28,500 Rudolph Technologies, Inc.* 550,335 --------------- PUMPS & PUMPING EQUIPMENT - 2.15% 57,400 Flowserve Corp.* 1,165,220 --------------- RADIO & TV COMMUNICATIONS EQUIPMENT - 0.63% 37,975 Brillian Corp.* 342,155 --------------- RADIO, TV & ELECTRONIC STORES - 2.30% 136,300 InterTAN, Inc.* 1,247,145 --------------- REAL ESTATE INVESTMENT TRUSTS - 5.39% 16,400 Colonial Properties Trust $ 590,892 56,800 Glenborough Realty Trust Inc. 1,071,248 62,300 Keystone Property Trust 1,262,198 --------------- 2,924,338 --------------- REFUSE SYSTEMS - 1.31% 44,100 Headwaters Inc.* 710,010 --------------- SAVINGS & LOAN ASSOCIATIONS - 1.13% 20,200 First Financial Holdings, Inc. 609,232 --------------- SECURITY BROKERS & DEALERS - 2.19% 60,200 SWS Group, Inc. 1,186,542 --------------- SEMICONDUCTORS & RELATED DEVICES - 4.07% 72,900 Lattice Semiconductor Corp.* 518,319 44,200 Microsemi Corp.* 673,608 58,500 OSI Systems, Inc.* 1,012,050 --------------- 2,203,977 --------------- TRANSPORTATION EQUIPMENT - 1.07% 29,900 Arctic Cat Inc. 577,967 --------------- TURBINES & TURBINE GENERATOR SETS - 1.43% 51,600 Stewart & Stevenson Services, Inc. 775,032 --------------- WOMEN'S READY-TO-WEAR STORES - 1.35% 36,200 Cato Corp. (The), Class A 730,154 --------------- Total Common Stocks (cost - $49,562,100) 52,917,785 --------------- SHORT-TERM INVESTMENT -- 3.39% INVESTMENT COMPANY - 3.39% 1,837,992 Federated Government Obligations 0.91%** (cost - $1,837,992) 1,837,992 --------------- Total Investments -- 101.11% (cost - $51,400,092) 54,755,777 Securities Lending Collateral (a) -- 10.56% 5,717,400 Liabilities in excess of other assets -- (11.67)% (6,319,926) --------------- Net Assets -- 100.00% $ 54,153,251 ===============
- ---------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at September 30, 2003. (a) Cash collateral invested in various money market mutual funds. The accompanying notes are an integral part of the financial statements. 19 ALPHA GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2003 (UNAUDITED)
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS -- 99.72% ACCIDENT & HEALTH INSURANCE - 1.77% 61,100 AFLAC Inc. $ 1,973,530 --------------- ALUMINUM FOUNDRIES - 1.21% 62,500 Newell Rubbermaid Inc. 1,354,375 --------------- BANK HOLDING COMPANIES - 5.85% 51,500 BANK ONE CORP. . 1,990,475 26,000 Golden West Financial Corp. 2,327,260 96,300 MBNA Corp. 2,195,640 --------------- 6,513,375 --------------- BUSINESS SERVICES - 4.38% 55,300 eBay Inc.* 2,947,490 30,400 United Parcel Service, Inc., Class B 1,939,520 --------------- 4,887,010 --------------- CHEMICALS & ALLIED PRODUCTS - 1.82% 32,700 Praxair, Inc. 2,025,765 --------------- CHEWING & SMOKING TOBACCO - 1.79% 56,900 UST Inc. 2,001,742 --------------- CHEWING GUM - 1.68% 33,900 Wm. Wrigley Jr. Co. 1,874,670 --------------- CIGARETTES - 1.65% 49,100 Gallaher Group plc, ADR 1,841,741 --------------- COAL, OTHER MINERALS & ORES - 2.11% 165,700 BHP Billiton Ltd., ADR 2,349,626 --------------- COLLEGES & UNIVERSITIES - 2.51% 42,400 Apollo Group, Inc., Class A* 2,799,672 --------------- COMPUTER INTEGRATED SYSTEMS DESIGN - 2.86% 144,400 Citrix Systems, Inc.* 3,188,352 --------------- COMPUTER PERIPHERAL EQUIPMENT - 4.19% 140,100 Cisco Systems, Inc.* 2,737,554 30,800 Lexmark International, Inc.* 1,940,708 --------------- 4,678,262 --------------- CONSTRUCTION MACHINERY - 2.68% 40,100 PACCAR Inc. 2,995,069 --------------- CRUDE PETROLEUM & NATURAL GAS - 1.92% 44,500 Burlington Resources Inc. $ 2,144,900 --------------- DIAGNOSTIC SUBSTANCES - 2.64% 63,800 Genzyme Corp.* 2,950,750 --------------- ELECTRIC & OTHER SERVICES COMBINED - 3.65% 44,500 Consolidated Edison, Inc. 1,813,820 41,800 Entergy Corp. 2,263,470 --------------- 4,077,290 --------------- ELECTRIC SERVICES - 3.39% 41,400 DTE Energy Co. 1,527,246 35,500 Exelon Corp. 2,254,250 --------------- 3,781,496 --------------- FAMILY CLOTHING STORES - 1.60% 33,400 Kohl's Corp.* 1,786,900 --------------- FREIGHT TRANSPORTATION ARRANGEMENT - 1.77% 57,500 Expeditors International of Washington, Inc. 1,978,575 --------------- FROZEN BAKERY PRODUCTS - 1.38% 84,100 Sara Lee Corp. 1,544,076 --------------- GARMENT PRESSING & CLEANERS' AGENTS - 1.37% 41,400 Cintas Corp. 1,525,176 --------------- GOLD ORES - 2.29% 65,400 Newmont Mining Corp. 2,556,486 --------------- GROCERIES - 1.86% 63,500 SYSCO Corp. 2,077,085 --------------- MANUFACTURING INDUSTRIES - 2.46% 97,500 International Game Technology 2,744,625 --------------- MISC. FOOD & KINDRED PRODUCTS - 1.56% 50,400 Unilever plc, ADR 1,745,856 --------------- MISC. FOOD STORES - 2.36% 91,500 Starbucks Corp.* 2,635,200 --------------- MISC. HOME FURNISHINGS STORES - 1.87% 54,600 Bed Bath & Beyond Inc.* 2,084,628 --------------- MOTOR VEHICLE PARTS & ACCESSORIES - 1.91% 24,000 Eaton Corp. 2,126,880 ---------------
The accompanying notes are an integral part of the financial statements. 20
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) MOTOR VEHICLES & CAR BODIES - 2.36% 121,400 Nissan Motor Co. Ltd., ADR $ 2,636,808 --------------- NATIONAL BANKS - 1.64% 51,100 BB&T Corp. 1,835,001 --------------- NEWSPAPERS - 3.14% 24,000 E.W. Scripps Co. (The), Class A 2,042,400 2,200 Washington Post Co. (The), Class B 1,463,000 --------------- 3,505,400 --------------- PERSONAL CREDIT INSTITUTIONS - 2.12% 52,600 American Express Co. 2,370,156 --------------- PHARMACEUTICAL PREPARATIONS - 1.69% 36,600 Forest Laboratories, Inc.* 1,883,070 --------------- PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 3.21% 51,200 Canon Inc., ADR 2,494,464 51,700 Eastman Kodak Co. 1,082,598 --------------- 3,577,062 --------------- POLISHES & SANITATION GOODS - 1.75% 77,400 Ecolab Inc. 1,954,350 --------------- PREPACKAGED SOFTWARE - 6.04% 72,600 Microsoft Corp 2,017,554 169,900 Oracle Corp.* 1,906,278 44,500 Symantec Corp.* 2,804,390 --------------- 6,728,222 --------------- RADIO & TV COMMUNICATIONS EQUIPMENT - 1.99% 53,400 QUALCOMM Inc. 2,223,576 --------------- SAUSAGES & OTHER PREPARED MEATS - 1.43% 75,100 ConAgra Foods, Inc. 1,595,124 --------------- SURGICAL APPLIANCES & SUPPLIES - 1.92% 28,500 Stryker Corp. 2,146,335 --------------- SURGICAL & MEDICAL INSTRUMENTS - 2.52% 44,000 Boston Scientific Corp.* 2,807,200 --------------- THEATRICAL PRODUCERS & SERVICES - 1.34% 49,500 Westwood One, Inc.* 1,494,405 --------------- TOILET PREPARATIONS - 2.04% 35,300 Avon Products, Inc. $ 2,278,968 --------------- Total Common Stocks (cost - $100,695,886) 111,278,789 --------------- SHORT-TERM INVESTMENT -- 1.82% INVESTMENT COMPANY - 1.82% 2,028,760 Federated Government Obligations 0.91%** (cost - $2,028,760) 2,028,760 --------------- Total Investments -- 101.54% (cost - $102,724,646) 113,307,549 Liabilities in excess of other assets -- (1.54)% (1,713,133) --------------- Net Assets -- 100.00% $ 111,594,416 ===============
- ---------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at September 30, 2003. The accompanying notes are an integral part of the financial statements. 21 INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2003 (UNAUDITED)
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS -- 97.14% AUSTRALIA - 4.38% COAL, OTHER MINERALS & ORES - 0.35% 32,082 BHP Billiton Ltd. $ 229,307 --------------- FOREIGN BANKS, BRANCHES & AGENCIES - 0.96% 27,400 Macquarie Bank Ltd. 639,826 --------------- NEWSPAPERS - 3.07% 250,300 News Corp. Ltd. (The) 2,036,376 --------------- Total Australia (cost - $2,425,115) 2,905,509 --------------- AUSTRIA - 0.59% FOREIGN BANKS, BRANCHES & AGENCIES - 0.59% 3,900 Erste Bank der oesterreichischen Sparkassen AG* (cost - $294,820) 394,451 --------------- BERMUDA - 0.21% MOTORS & GENERATORS - 0.21% 89,000 Johnson Electric Holdings Ltd. (cost - $143,674) 136,767 --------------- CANADA - 7.58% AUTOMOTIVE STAMPINGS - 0.98% 9,000 Magna International Inc., Class A 649,350 --------------- COMMERCIAL BANKS - 1.08% 20,800 Bank of Montreal 719,665 --------------- COMPUTER - INTEGRATED SYSTEMS - 2.42% 42,100 Research in Motion Ltd.* 1,608,220 --------------- FOREIGN BANKS, BRANCHES & AGENCIES - 1.47% 16,400 Bank of Nova Scotia 766,861 4,800 Royal Bank of Canada 211,464 --------------- 978,325 --------------- PREPACKAGED SOFTWARE - 0.51% 10,900 Cognos, Inc.* 338,118 --------------- TELECOMMUNICATION EQUIPMENT - 0.79% 127,200 Nortel Networks Corp.* 521,520 --------------- TELEPHONE COMMUNICATIONS - 0.33% 10,100 BCE Inc. 218,174 --------------- Total Canada (cost - $3,685,847) 5,033,372 --------------- CAYMAN ISLANDS - 0.52% INFORMATION RETRIEVAL SERVICES - 0.52% 9,600 SINA Corp.* (cost - $165,577) $ 343,200 --------------- CHINA - 5.65% DRILLING OIL & GAS WELLS - 1.15% 2,750,000 China Petroleum & Chemical Corp., Class H 763,514 --------------- ELECTRIC SERVICES - 2.03% 984,000 Huaneng Power International, Inc. 1,346,936 --------------- OIL & GAS EXPLORATION SERVICES - 0.84% 1,650,000 PetroChina Co. Ltd., Class H 559,318 --------------- RADIO & TELEPHONE COMMUNICATIONS - 1.33% 3,430,000 China Telecom Corp., Ltd., Class H 885,870 --------------- WATER TRANSPORTATION - 0.30% 400,000 China Shipping Development Co., Ltd. 196,286 --------------- Total China (cost - $2,736,011) 3,751,924 --------------- FRANCE - 3.83% INSURANCE CARRIERS - 2.45% 96,600 AXA 1,627,810 --------------- WINES, BRANDY & BRANDY SPIRITS - 1.38% 14,700 LVMH Moet Hennessy Louis Vuitton SA 913,293 --------------- Total France (cost - $2,405,170) 2,541,103 --------------- GERMANY - 4.93% COMPUTERS, PERIPHERALS & SOFTWARE - 1.33% 7,200 SAP AG 880,400 --------------- MISC. RETAIL - 0.56% 10,300 Metro AG 371,841 --------------- MOTORS & GENERATORS - 1.43% 16,000 Siemens AG 950,273 --------------- TELEPHONE COMMUNICATIONS - 1.61% 107,200 T-Online International AG* 1,073,621 --------------- Total Germany (cost - $3,112,388) 3,276,135 ---------------
The accompanying notes are an integral part of the financial statements. 22
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) GREECE - 0.58% BANKING - 0.58% 18,500 Alpha Bank A.E. (cost - $388,695) $ 383,055 --------------- HONG KONG - 3.84% OIL & GAS EXPLORATION SERVICES - 0.46% 181,000 CNOOC Ltd. 308,531 --------------- REAL ESTATE - 1.62% 46,000 Cheung Kong (Holdings) Ltd. 363,839 76,000 Sun Hung Kai Properties Ltd. 615,848 38,000 Wharf (Holdings) Ltd. (The) 99,124 --------------- 1,078,811 --------------- TELEPHONE COMMUNICATIONS - 0.32% 260,000 China Unicom Ltd. 213,203 --------------- WHOLESALE TRADE - DURABLE GOODS - 1.44% 600,000 Li & Fung Ltd. 953,020 --------------- Total Hong Kong (cost - $2,338,916) 2,553,565 --------------- ISRAEL - 2.49% PHARMACEUTICAL PREPARATIONS - 2.49% 28,900 Teva Pharmaceutical Industries Ltd., ADR (cost - $1,174,328) 1,651,635 --------------- ITALY - 3.43% FOREIGN BANKS, BRANCHES & AGENCIES - 2.59% 88,500 Sanpaolo IMI S.p.A. 882,217 176,200 UniCredito Italiano S.p.A. 833,086 --------------- 1,715,303 --------------- TELEVISION BROADCASTING - 0.84% 61,200 Mediaset S.p.A. 560,186 --------------- Total Italy (cost - $2,084,740) 2,275,489 --------------- JAPAN - 24.46% CONSTRUCTION MACHINERY - 0.27% 34,000 Komatsu Ltd. 177,129 --------------- ELECTRIC & ELECTRONIC EQUIPMENT - 0.66% 1,010 Keyence Corp. 214,449 53,000 Mitsubishi Electric Corp. 221,555 --------------- 436,004 --------------- ELECTRONIC COMPONENTS & ACCESSORIES - 1.06% 10,600 Tokyo Electron Ltd. $ 704,042 --------------- FIRE, MARINE & CASUALTY INSURANCE - 0.61% 36 Millea Holdings, Inc. 406,033 --------------- HOUSEHOLD AUDIO & VIDEO EQUIPMENT - 3.30% 150,000 Sharp Corp. 2,195,318 --------------- INTERNET SERVICE PROVIDER - 8.44% 51,000 SOFTBANK Corp. 2,154,769 244 Yahoo Japan Corp.* 3,450,923 --------------- 5,605,692 --------------- MAGNETIC & OPTICAL RECORDING EQUIPMENT - 0.29% 3,200 TDK Corp. 189,912 --------------- MISC. FABRICATED WIRE PRODUCTS - 0.41% 62,000 Fujikura Ltd. 270,832 --------------- MOTOR VEHICLES & CAR BODIES - 1.28% 79,000 Nissan Motor Co., Ltd. 852,124 --------------- MOTOR VEHICLE PARTS & ACCESSORIES - 0.27% 5,000 NOK Corp. 182,160 --------------- PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 2.36% 32,000 Canon Inc. 1,563,980 --------------- SECURITY BROKERS & DEALERS - 1.77% 94,000 Daiwa Securities Group Inc. 635,278 101,000 Nikko Cordial Corp. 537,027 --------------- 1,172,305 --------------- STEEL WIRE & RELATED PRODUCTS - 0.23% 18,000 Sumitomo Electric Industries, Ltd. 149,846 --------------- TELEPHONE COMMUNICATIONS - 3.51% 186 KDDI Corp. 942,362 570 NTT DoCoMo, Inc. 1,392,919 --------------- 2,335,281 --------------- Total Japan (cost - $12,903,163) 16,240,658 ---------------
The accompanying notes are an integral part of the financial statements. 23
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) NETHERLANDS - 3.58% ELECTRONIC COMPONENTS & ACCESSORIES - 0.96% 48,800 ASML Holding N.V.* $ 639,338 --------------- FOREIGN BANKS, BRANCHES & AGENCIES - 0.47% 16,800 ABN AMRO Holding N.V. 310,096 --------------- INSURANCE CARRIERS - 0.63% 23,000 ING Groep N.V. 421,323 --------------- RADIO & TELEVISION COMMUNICATIONS EQUIPMENT - 1.31% 38,400 Koninklijki (Royal) Philips Electronics N.V. 870,226 --------------- SURGICAL & MEDICAL INSTRUMENTS - 0.21% 12,600 QIAGEN N.V.* 137,783 --------------- Total Netherlands (cost - $2,411,102) 2,378,766 --------------- RUSSIA - 1.22% NATURAL GAS DISTRIBUTION - 0.53% 14,300 Gazprom, ADR (a)* 353,210 --------------- TELEPHONE COMMUNICATIONS - 0.69% 6,200 Mobile Telesystems, ADR 456,010 --------------- Total Russia (cost - $671,923) 809,220 --------------- SINGAPORE - 2.14% CIRCUIT BOARDS - 0.49% 23,100 Flextronics International Ltd.* 327,558 --------------- ELECTRONIC COMPONENTS - 1.15% 66,000 Venture Corp. Ltd. 763,646 --------------- FOREIGN BANKS, BRANCHES & AGENCIES - 0.50% 43,000 United Overseas Bank Ltd. 333,343 --------------- Total Singapore (cost - $1,167,305) 1,424,547 --------------- SOUTH KOREA - 1.14% ELECTRONIC COMPONENTS - 1.14% 4,500 Samsung Electronics Co., Ltd., GDR (a) (cost - $770,120) 760,500 --------------- SPAIN - 3.87% PETROLEUM REFINING - 1.00% 40,600 Repsol YPF, S.A. $ 667,131 --------------- TELEPHONE COMMUNICATIONS - 2.87% 161,098 Telefonica S.A. 1,902,332 --------------- Total Spain (cost - $2,118,872) 2,569,463 --------------- SWEDEN - 2.09% AIR & GAS COMPRESSORS - 1.06% 24,100 Atlas Copco AB, Class A 707,229 --------------- FAMILY CLOTHING STORES - 0.53% 15,400 Hennes & Mauritz AB (H&M), B Shares 349,394 --------------- TELEPHONE COMMUNICATIONS - 0.50% 76,700 TeliaSonera AB 333,159 --------------- Total Sweden (cost - $1,381,425) 1,389,782 --------------- SWITZERLAND - 9.39% FOREIGN BANKS, BRANCHES & AGENCIES - 6.09% 81,300 Credit Suisse Group 2,601,033 25,700 UBS AG 1,442,049 --------------- 4,043,082 --------------- INSURANCE CARRIERS - 2.50% 13,300 Zurich Financial Services AG* 1,661,745 --------------- PHARMACEUTICAL PREPARATIONS - 0.80% 6,400 Roche Holding AG 530,668 --------------- Total Switzerland (cost - $5,446,008) 6,235,495 --------------- THAILAND - 1.12% FOREIGN BANKS, BRANCHES & AGENCIES - 0.66% 118,000 Bangkok Bank Public Co. Ltd.* 254,145 151,000 Kasikornbanok Public Co. Ltd.* 185,299 --------------- 439,444 --------------- RADIO & TELEPHONE COMMUNICATIONS - 0.46% 200,000 Advanced Info Service Public Co., Ltd. 305,535 --------------- Total Thailand (cost - $536,929) 744,979 ---------------
The accompanying notes are an integral part of the financial statements. 24
SHARES VALUE - -------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) UNITED KINGDOM - 9.66% BANK HOLDING COMPANIES - 0.52% 25,600 HSBC Holdings plc, Ord .30p $ 343,811 --------------- FIRE, MARINE & CASUALTY INSURANCE - 0.26% 22,100 Aviva plc, Ord 25p 171,468 --------------- FOREIGN BANKS, BRANCHES & AGENCIES - 1.03% 49,100 Standard Chartered plc, Ord .30p 685,636 --------------- LUMBER & OTHER BUILDING PRODUCTS - 1.62% 248,762 Kingfisher plc, Ord 15.71p 1,078,695 --------------- MEDICAL - DRUGS - 0.54% 8,500 AstraZeneca plc, Ord .15p 358,979 --------------- RADIO & TELEPHONE COMMUNICATIONS - 1.80% 599,400 Vodafone Group plc, Ord .06p 1,195,011 --------------- SHOE STORES - 0.98% 34,700 Next plc, Ord 10p 647,993 --------------- TELEPHONE COMMUNICATIONS - 0.87% 377,000 COLT Telecom Group plc, Ord 2.5p* 577,806 --------------- TELEVISION BROADCASTING - 2.04% 132,600 British Sky Broadcasting Group plc, Ord 50p* 1,353,753 --------------- Total United Kingdom (cost - $6,163,206) 6,413,152 --------------- UNITED STATES - 0.44% COMPUTER RELATED SERVICES - 0.44% 9,400 Sohu.com Inc.* (cost - $298,989) 292,340 --------------- Total Common Stocks (cost - $54,824,323) 64,505,107 --------------- RIGHTS -- 0.01% FRANCE - 0.01% INSURANCE CARRIERS - 0.01% 133,200 AXA* (cost - $0) 6,205 --------------- SHORT-TERM INVESTMENT -- 3.68% UNITED STATES - 3.68% INVESTMENT COMPANY - 3.68% 2,444,321 Federated Government Obligations 0.91%** (cost - $2,444,321) $ 2,444,321 --------------- Total Investments -- 100.83% (cost - $57,268,644) 66,955,633 Liabilities in excess of other assets -- (0.83)% (552,467) --------------- Net Assets -- 100.00% $ 66,403,166 ===============
- ---------- ADR American Depositary Receipts. GDR Global Depositary Receipts. * Non-income producing security. ** Money market fund; interest rate reflects SEC seven-day yield at September 30, 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. 25 This page is intentionally left blank. 26 THE BEAR STEARNS FUNDS STATEMENTS OF ASSETS & LIABILITIES SEPTEMBER 30, 2003 (UNAUDITED)
S&P STARS INTRINSIC S&P STARS OPPORTUNITIES THE INSIDERS VALUE PORTFOLIO PORTFOLIO SELECT FUND PORTFOLIO ---------------- --------------- --------------- --------------- ASSETS Investments, at value (cost - $1,378,241,486, $49,676,290 $31,143,489, $90,560,739, $51,400,092, $102,724,646 and $57,268,644, respectively) $ 1,415,908,369 $ 55,389,381 $ 32,575,502 $ 96,199,846 Deposit with broker for securities sold short 35,926,751 1,356,816 -- -- Collateral received for securities loaned 29,456,647 -- -- -- Dividend, interest and reclaims receivable 648,850 22,774 33,754 133,141 Receivable for Portfolio shares sold 1,904,227 72,111 74,869 111,372 Receivable for investments sold 5,774,724 1,612,281 -- 384,247 Receivable from investment advisor -- -- 3,045 -- Prepaid expenses and other assets 4,643 53,843 21,378 18,315 ---------------- --------------- --------------- --------------- Total Assets 1,489,624,211 58,507,206 32,708,548 96,846,921 ---------------- --------------- --------------- --------------- LIABILITIES Securities sold short, at value (proceeds received - $32,412,082, and $1,486,476, respectively) 27,202,200 1,582,350 -- -- Loan payable 36,657,700 -- -- -- Payable upon return for securities loaned 29,456,647 -- -- -- Payable for investments purchased 6,935,258 2,279,867 -- 3,417,459 Payable for Portfolio shares repurchased 2,561,332 47,480 87,710 52,727 Open and closed forward foreign currency exchange contracts -- -- -- -- Advisory fee payable 682,394 4,132 -- -- Administration fee payable 164,241 4,913 4,027 11,427 Distributions and service fees payable (Class A, B, and C shares) 2,665,039 107,582 62,363 124,689 Custodian fee payable 11,607 7,430 2,252 2,022 Accrued expenses 512,744 54,185 59,637 47,390 ---------------- --------------- --------------- --------------- Total Liabilities 106,849,162 4,087,939 215,989 3,688,937 ---------------- --------------- --------------- --------------- NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) 70,053 4,245 2,198 5,094 Paid-in capital 2,461,226,818 59,066,736 31,287,236 92,033,210 Undistributed net investment income/(loss) (6,805,730) (290,321) 55,715 590,155 Accumulated net realized loss from investments, foreign currency related transactions and securities sold short, if any (1,114,592,857) (9,978,610) (284,603) (5,109,582) Net unrealized appreciation on investments, foreign currency related transactions and securities sold short, if any 42,876,765 5,617,217 1,432,013 5,639,107 ---------------- --------------- --------------- --------------- Net assets $ 1,382,775,049 $ 54,419,267 $ 32,492,559 $ 93,157,984 ---------------- --------------- --------------- --------------- SMALL CAP ALPHA INTERNATIONAL VALUE GROWTH EQUITY PORTFOLIO PORTFOLIO PORTFOLIO --------------- --------------- --------------- ASSETS Investments, at value (cost - $1,378,241,486, $49,676,290 $31,143,489, $90,560,739, $51,400,092, $102,724,646 and $57,268,644, respectively) $ 54,755,777 $ 113,307,549 $ 66,955,633 Deposit with broker for securities sold short -- -- -- Collateral received for securities loaned 5,717,400 -- -- Dividend, interest and reclaims receivable 41,834 123,534 179,418 Receivable for Portfolio shares sold 1,637 334,221 100 Receivable for investments sold 1,576,018 -- 3,765,848 Receivable from investment advisor -- -- -- Prepaid expenses and other assets 17,004 26,527 13,684 --------------- --------------- --------------- Total Assets 62,109,670 113,791,831 70,914,683 --------------- --------------- --------------- LIABILITIES Securities sold short, at value (proceeds received - $32,412,082, and $1,486,476, respectively) -- -- -- Loan payable -- -- -- Payable upon return for securities loaned 5,717,400 -- -- Payable for investments purchased 2,001,046 1,766,277 3,723,793 Payable for Portfolio shares repurchased 98,494 139,683 177,915 Open and closed forward foreign currency exchange contracts -- -- 430,856 Advisory fee payable 13,106 24,493 19,262 Administration fee payable 7,037 13,693 8,355 Distributions and service fees payable (Class A, B, and C shares) 61,784 190,006 71,731 Custodian fee payable 3,794 7,965 17,585 Accrued expenses 53,758 55,298 62,020 --------------- --------------- --------------- Total Liabilities 7,956,419 2,197,415 4,511,517 --------------- --------------- --------------- NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) 3,375 6,210 5,334 Paid-in capital 58,407,283 102,569,379 118,410,695 Undistributed net investment income/(loss) 165,417 (105,879) (847,805) Accumulated net realized loss from investments, foreign currency related transactions and securities sold short, if any (7,778,509) (1,458,197) (60,879,346) Net unrealized appreciation on investments, foreign currency related transactions and securities sold short, if any 3,355,685 10,582,903 9,714,288 --------------- --------------- --------------- Net assets $ 54,153,251 $ 111,594,416 $ 66,403,166 --------------- --------------- ---------------
The accompanying notes are an integral part of the financial statements. 27
S&P STARS INTRINSIC S&P STARS OPPORTUNITIES THE INSIDERS VALUE PORTFOLIO PORTFOLIO SELECT FUND PORTFOLIO --------------- --------------- --------------- --------------- CLASS A Net assets $ 564,019,301 $ 23,291,465 $ 15,996,168 $ 34,193,884 --------------- --------------- --------------- --------------- Shares of beneficial interest outstanding 28,192,502 1,806,040 1,057,887 1,863,098 --------------- --------------- --------------- --------------- Net asset value per share $ 20.01 $ 12.90 $ 15.12 $ 18.35 =============== =============== =============== =============== Maximum offering price per share (net asset value plus sales charge of 5.50%* of the offering price) $ 21.17 $ 13.65 $ 16.00 $ 19.42 =============== =============== =============== =============== CLASS B Net assets $ 389,243,622 $ 17,125,910 $ 9,893,651 $ 14,989,195 --------------- --------------- --------------- --------------- Shares of beneficial interest outstanding 20,118,008 1,342,693 684,757 836,025 --------------- --------------- --------------- --------------- Net asset value and offering price per share** $ 19.35 $ 12.75 $ 14.45 $ 17.93 =============== =============== =============== =============== CLASS C Net assets $ 295,981,318 $ 13,141,435 $ 6,239,396 $ 18,604,308 --------------- --------------- --------------- --------------- Shares of beneficial interest outstanding 15,310,177 1,030,463 432,187 1,031,916 --------------- --------------- --------------- --------------- Net asset value and offering price per share** $ 19.33 $ 12.75 $ 14.44 $ 18.03 =============== =============== =============== =============== CLASS Y Net assets $ 133,530,808 $ 860,457 $ 363,344 $ 25,370,597 --------------- --------------- --------------- --------------- Shares of beneficial interest outstanding 6,431,869 66,141 23,224 1,363,163 --------------- --------------- --------------- --------------- Net asset value, offering and redemption price per share $ 20.76 $ 13.01 $ 15.65 $ 18.61 =============== =============== =============== =============== SMALL CAP ALPHA INTERNATIONAL VALUE GROWTH EQUITY PORTFOLIO PORTFOLIO PORTFOLIO --------------- --------------- --------------- CLASS A Net assets $ 14,439,706 $ 63,918,073 $ 14,203,545 --------------- --------------- --------------- Shares of beneficial interest outstanding 897,674 3,515,592 1,141,129 --------------- --------------- --------------- Net asset value per share $ 16.09 $ 18.18 $ 12.45 =============== =============== =============== Maximum offering price per share (net asset value plus sales charge of 5.50%* of the offering price) $ 17.03 $ 19.24 $ 13.17 =============== =============== =============== CLASS B Net assets $ 5,988,433 $ 24,681,273 $ 4,842,906 --------------- --------------- --------------- Shares of beneficial interest outstanding 388,149 1,395,696 399,622 --------------- --------------- --------------- Net asset value and offering price per share** $ 15.43 $ 17.68 $ 12.12 =============== =============== =============== CLASS C Net assets $ 10,889,973 $ 22,995,070 $ 15,620,395 --------------- --------------- --------------- Shares of beneficial interest outstanding 704,645 1,298,954 1,287,274 --------------- --------------- --------------- Net asset value and offering price per share** $ 15.45 $ 17.70 $ 12.13 =============== =============== =============== CLASS Y Net assets $ 22,835,139 -- $ 31,736,320 --------------- --------------- --------------- Shares of beneficial interest outstanding 1,384,880 -- 2,505,596 --------------- --------------- --------------- Net asset value, offering and redemption price per share $ 16.49 -- $ 12.67 =============== =============== ===============
- ---------------- * 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. 28 STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED)
S&P STARS INTRINSIC S&P STARS OPPORTUNITIES THE INSIDERS VALUE PORTFOLIO PORTFOLIO SELECT FUND PORTFOLIO --------------- --------------- --------------- --------------- INVESTMENT INCOME Dividends $ 4,484,295 $ 176,446 $ 296,170 $ 810,460 Interest 54,413 1,911 4,217 14,413 Securities lending income 41,592 -- 37 448 Less: Foreign taxes withheld -- -- -- -- --------------- --------------- --------------- --------------- 4,580,300 178,357 300,424 825,321 --------------- --------------- --------------- --------------- EXPENSES Advisory fees 5,009,040 198,123 89,848 296,090 Administration fees 951,454 39,625 23,581 59,219 Distribution and service fees - Class A 1,372,843 56,454 38,061 65,499 Distribution and service fees - Class B 1,860,446 82,695 47,780 65,429 Distribution and service fees - Class C 1,435,854 64,450 31,107 76,528 Transfer agent fees and expenses 1,642,198 93,660 81,539 86,687 Accounting fees 233,759 9,246 5,502 13,818 Legal and auditing fees 34,037 32,970 36,293 33,849 Custodian fees and expenses 79,161 21,922 4,815 8,509 Federal and state registration fees 35,777 23,925 22,104 22,939 Reports and notices to shareholders 103,367 4,500 3,299 5,711 Trustees' fees and expenses 9,150 7,730 7,690 8,770 Insurance expenses 5,032 549 3,555 3,558 Other 162,245 2,000 1,951 2,500 --------------- --------------- --------------- --------------- Total expenses before waivers and related reimbursements 12,934,363 637,849 397,125 749,106 Less: waivers and related reimbursements (1,548,333) (169,171) (99,068) (145,714) --------------- --------------- --------------- --------------- Total expenses after waivers and related reimbursements 11,386,030 468,678 298,057 603,392 --------------- --------------- --------------- --------------- Net investment income/(loss) (6,805,730) (290,321) 2,367 221,929 --------------- --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain/(loss) from: Investments (67,180,312) 5,117,391 1,353,463 (2,034,906) Foreign currency related transactions -- -- -- -- Securities sold short (3,193,978) (101,296) -- -- Net change in unrealized depreciation on: Investments and foreign currency related transactions, if any 374,105,684 5,884,722 4,732,329 16,369,708 Securities sold short 5,582,679 (41,232) -- -- --------------- --------------- --------------- --------------- Net realized and unrealized gain on investments 309,314,073 10,859,585 6,085,792 14,334,802 --------------- --------------- --------------- --------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 302,508,343 $ 10,569,264 $ 6,088,159 $ 14,556,731 =============== =============== =============== =============== SMALL CAP ALPHA INTERNATIONAL VALUE GROWTH EQUITY PORTFOLIO PORTFOLIO PORTFOLIO --------------- --------------- --------------- INVESTMENT INCOME Dividends $ 384,579 $ 642,277 $ 756,604 Interest 4,138 -- -- Securities lending income 793 60 -- Less: Foreign taxes withheld -- -- (64,507) --------------- --------------- --------------- 389,510 642,337 692,097 --------------- --------------- --------------- EXPENSES Advisory fees 204,319 300,837 316,997 Administration fees 40,864 69,424 47,550 Distribution and service fees - Class A 35,705 132,559 43,765 Distribution and service fees - Class B 28,917 104,812 22,929 Distribution and service fees - Class C 53,043 92,895 72,766 Transfer agent fees and expenses 84,919 85,751 80,528 Accounting fees 9,535 16,199 11,095 Legal and auditing fees 32,630 28,064 38,249 Custodian fees and expenses 7,187 24,693 56,170 Federal and state registration fees 22,193 27,251 20,717 Reports and notices to shareholders 4,027 10,338 5,746 Trustees' fees and expenses 8,751 7,681 7,830 Insurance expenses 3,628 3,548 3,737 Other 2,048 2,278 2,999 --------------- --------------- --------------- Total expenses before waivers and related reimbursements 537,766 906,330 731,078 Less: waivers and related reimbursements (128,191) (158,114) (194,321) --------------- --------------- --------------- Total expenses after waivers and related reimbursements 409,575 748,216 536,757 --------------- --------------- --------------- Net investment income/(loss) (20,065) (105,879) 155,340 --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain/(loss) from: Investments 2,509,914 -- (520,817) Foreign currency related transactions -- -- (91,845) Securities sold short -- -- -- Net change in unrealized depreciation on: Investments and foreign currency related transactions, if any 9,006,294 12,788,542 12,486,463 Securities sold short -- -- -- --------------- --------------- --------------- Net realized and unrealized gain on investments 11,516,208 12,788,542 11,873,801 --------------- --------------- --------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 11,496,143 $ 12,682,663 $ 12,029,141 =============== =============== ===============
The accompanying notes are an integral part of the financial statements. 29 STATEMENTS OF CHANGES IN NET ASSETS
S&P STARS OPPORTUNITIES S&P STARS PORTFOLIO PORTFOLIO ----------------------------------- ----------------------------------- FOR THE FOR THE FOR THE FOR THE SIX MONTHS ENDED FISCAL YEAR SIX MONTHS ENDED FISCAL YEAR SEPTEMBER 30, 2003 ENDED SEPTEMBER 30, 2003 ENDED (UNAUDITED) MARCH 31, 2003 (UNAUDITED) MARCH 31, 2003 ------------------ --------------- ------------------ --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) $ (6,805,730) $ (18,437,027) (290,321) $ (690,819) Net realized gain/(loss) from investments, foreign currency related transactions and securities sold short, if any (70,374,290) (534,691,972) 5,016,095 (14,094,234) Net change in unrealized appreciation/(depreciation) on investments, foreign currency related transactions and securities sold short, if any 379,688,363 (349,377,257) 5,843,490 (4,665,677) --------------- --------------- --------------- --------------- Net increase/(decrease) in net assets, resulting from operations 302,508,343 (902,506,256) 10,569,264 (19,450,730) --------------- --------------- --------------- --------------- 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 58,661,251 163,983,729 2,605,637 24,602,311 Cost of shares repurchased (149,295,562) (687,251,200) (6,456,368) (27,421,582) Shares issued in reinvestment of dividends and distributions -- -- -- 775,281 --------------- --------------- --------------- --------------- Net increase/(decrease) in net assets derived from shares of beneficial interest transactions (90,634,311) (523,267,471) (3,850,731) (2,043,990) --------------- --------------- --------------- --------------- Total increase/(decrease) in net assets 211,874,032 (1,425,773,727) 6,718,533 (22,331,353) NET ASSETS Beginning of period 1,170,901,017 2,596,674,744 47,700,734 70,032,087 --------------- --------------- --------------- --------------- End of period* $ 1,382,775,049 $ 1,170,901,017 $ 54,419,267 $ 47,700,734 =============== =============== =============== =============== THE INSIDERS SELECT FUND ----------------------------------- FOR THE FOR THE SIX MONTHS ENDED FISCAL YEAR SEPTEMBER 30, 2003 ENDED (UNAUDITED) MARCH 31, 2003 ------------------ --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) $ 2,367 $ 53,550 Net realized gain/(loss) from investments, foreign currency related transactions and securities sold short, if any 1,353,463 (1,496,027) Net change in unrealized appreciation/(depreciation) on investments, foreign currency related transactions and securities sold short, if any 4,732,329 (9,619,724) --------------- --------------- Net increase/(decrease) in net assets, resulting from operations 6,088,159 (11,062,201) --------------- --------------- 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) Class B shares -- (15,796) Class C shares -- (11,229) Class Y shares -- (640) --------------- --------------- -- (52,791) --------------- --------------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares 2,497,914 13,299,638 Cost of shares repurchased (3,464,268) (13,545,245) Shares issued in reinvestment of dividends and distributions -- 48,418 --------------- --------------- Net increase/(decrease) in net assets derived from shares of beneficial interest transactions (966,354) (197,189) --------------- --------------- Total increase/(decrease) in net assets 5,121,805 (11,312,181) NET ASSETS Beginning of period 27,370,754 38,682,935 --------------- --------------- End of period* $ 32,492,559 $ 27,370,754 =============== ===============
- ---------- * Includes undistributed net investment income as follows:
FOR THE FOR THE SIX MONTHS ENDED FISCAL YEAR SEPTEMBER 30, 2003 ENDED (UNAUDITED) MARCH 31, 2003 ------------------ ------------------ The Insiders Select Fund $ 55,715 $ 53,348 Intrinsic Value Portfolio 590,155 368,226 Small Cap Value Portfolio 165,417 185,345
The accompanying notes are an integral part of the financial statements. 30
INTRINSIC VALUE PORTFOLIO SMALL CAP VALUE PORTFOLIO ----------------------------------- ----------------------------------- FOR THE FOR THE FOR THE FOR THE SIX MONTHS ENDED FISCAL YEAR SIX MONTHS ENDED FISCAL YEAR SEPTEMBER 30, 2003 ENDED SEPTEMBER 30, 2003 ENDED (UNAUDITED) MARCH 31, 2003 (UNAUDITED) MARCH 31, 2003 ------------------ -------------- ------------------ -------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) $ 221,929 $ 591,558 $ (20,065) $ 185,699 Net realized gain/(loss) from investments, foreign currency related transactions and securities sold short, if any (2,034,906) (2,993,556) 2,509,914 (10,169,674) Net change in unrealized appreciation/(depreciation) on investments, foreign currency related transactions and securities sold short, if any 16,369,708 (17,383,948) 9,006,294 (16,055,862) ------------------ ------------ ------------------ ------------ Net increase/(decrease) in net assets, resulting from operations 14,556,731 (19,785,946) 11,496,143 (26,039,837) ------------------ ------------ ------------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares -- (124,710) -- -- Class B shares -- (26,585) -- -- Class C shares -- (30,467) -- -- Class Y shares -- (252,926) -- -- ------------------ ------------ ------------------ ------------ -- (434,688) -- -- ------------------ ------------ ------------------ ------------ Net realized capital gains Class A shares -- -- -- (1,262,957) Class B shares -- -- -- (427,272) Class C shares -- -- -- (826,472) Class Y shares -- -- -- (1,639,686) ------------------ ------------ ------------------ ------------ -- -- -- (4,156,387) ------------------ ------------ ------------------ ------------ SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares 25,657,242 31,578,358 4,088,292 17,139,387 Cost of shares repurchased (7,333,183) (18,042,549) (9,107,372) (24,768,254) Shares issued in reinvestment of dividends and distributions -- 406,998 -- 3,708,819 ------------------ ------------ ------------------ ------------ Net increase/(decrease) in net assets derived from shares of beneficial interest transactions 18,324,059 13,942,807 (5,019,080) (3,920,048) ------------------ ------------ ------------------ ------------ Total increase/(decrease) in net assets 32,880,790 (6,277,827) 6,477,063 (34,116,272) NET ASSETS Beginning of period 60,277,194 66,555,021 47,676,188 81,792,460 ------------------ ------------ ------------------ ------------ End of period* $ 93,157,984 $ 60,277,194 $ 54,153,251 $ 47,676,188 ================== ============ ================== ============ ALPHA GROWTH PORTFOLIO INTERNATIONAL EQUITY PORTFOLIO ----------------------------------- ----------------------------------- FOR THE FOR THE FOR THE FOR THE SIX MONTHS ENDED FISCAL YEAR SIX MONTHS ENDED FISCAL YEAR SEPTEMBER 30, 2003 ENDED SEPTEMBER 30, 2003 ENDED (UNAUDITED) MARCH 31, 2003 (UNAUDITED) MARCH 31, 2003 ------------------ -------------- ------------------ -------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) $ (105,879) $ (177,537) $ 155,340 $ 347,940 Net realized gain/(loss) from investments, foreign currency related transactions and securities sold short, if any -- 2,029,943 (612,662) (17,232,117) Net change in unrealized appreciation/(depreciation) on investments, foreign currency related transactions and securities sold short, if any 12,788,542 (11,016,230) 12,486,463 (6,833,766) ------------------ ------------ ------------------ ------------ Net increase/(decrease) in net assets, resulting from operations 12,682,663 (9,163,824) 12,029,141 (23,717,943) ------------------ ------------ ------------------ ------------ 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 38,982,985 60,680,183 19,502,601 18,424,391 Cost of shares repurchased (9,183,607) (21,187,371) (19,589,643) (22,089,897) Shares issued in reinvestment of dividends and distributions -- -- -- -- ------------------ ------------ ------------------ ------------ Net increase/(decrease) in net assets derived from shares of beneficial interest transactions 29,799,378 39,492,812 (87,042) (3,665,506) ------------------ ------------ ------------------ ------------ Total increase/(decrease) in net assets 42,482,041 30,328,988 11,942,099 (27,383,449) NET ASSETS Beginning of period 69,112,375 38,783,387 54,461,067 81,844,516 ------------------ ------------ ------------------ ------------ End of period* $ 111,594,416 $ 69,112,375 $ 66,403,166 $ 54,461,067 ================== ============ ================== ============
31 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 PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) $ 15.81 $ (0.08) $ 4.28 -- $ 20.01 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 six months ended September 30, 2003 (unaudited) 15.32 (0.12) 4.15 -- 19.35 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 six months ended September 30, 2003 (unaudited) 15.31 (0.12) 4.14 -- 19.33 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 six months ended September 30, 2003 (unaudited) 16.37 (0.03) 4.42 -- 20.76 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 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, if any. The accompanying notes are an integral part of the financial statements. 32
TOTAL NET ASSETS, RATIO OF INVESTMENT END OF PERIOD EXPENSES TO RETURN(3) (000's omitted) AVERAGE NET ASSETS(1) ---------- --------------- --------------------- S&P STARS PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) 26.57% $ 564,019 1.50%(4) For the fiscal year ended March 31, 2003 (37.06) 484,873 1.50 For the fiscal year ended March 31, 2002 (9.80) 1,151,482 1.50 For the fiscal year ended March 31, 2001 (22.36) 1,173,464 1.50 For the fiscal year ended March 31, 2000 50.82 673,550 1.50 For the fiscal year ended March 31, 1999 27.46 206,130 1.50 CLASS B For the six months ended September 30, 2003 (unaudited) 26.31 389,244 2.00(4) For the fiscal year ended March 31, 2003 (37.37) 323,425 2.00 For the fiscal year ended March 31, 2002 (10.27) 672,833 2.00 For the fiscal year ended March 31, 2001 (22.73) 620,784 2.00 For the fiscal year ended March 31, 2000 50.13 300,693 2.00 For the fiscal year ended March 31, 1999 26.75 49,319 2.00 CLASS C For the six months ended September 30, 2003 (unaudited) 26.26 295,981 2.00(4) For the fiscal year ended March 31, 2003 (37.38) 253,391 2.00 For the fiscal year ended March 31, 2002 (10.28) 568,726 2.00 For the fiscal year ended March 31, 2001 (22.74) 540,150 2.00 For the fiscal year ended March 31, 2000 50.15 314,794 2.00 For the fiscal year ended March 31, 1999 26.75 97,654 2.00 CLASS Y For the six months ended September 30, 2003 (unaudited) 26.82 133,531 1.00(4) For the fiscal year ended March 31, 2003 (36.60) 109,212 1.00 For the fiscal year ended March 31, 2002 (9.37) 203,633 1.00 For the fiscal year ended March 31, 2001 (21.95) 176,235 1.00 For the fiscal year ended March 31, 2000 51.61 154,015 1.00 For the fiscal year ended March 31, 1999 28.02 52,483 1.00 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 PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) (0.82)%(4) 0.24%(4) 63.47% For the fiscal year ended March 31, 2003 (0.95) 0.16 122.29 For the fiscal year ended March 31, 2002 (1.12) 0.08 110.80 For the fiscal year ended March 31, 2001 (1.04) 0.10 42.93 For the fiscal year ended March 31, 2000 (1.12) 0.18 54.67 For the fiscal year ended March 31, 1999 (0.73) 0.27 76.17 CLASS B For the six months ended September 30, 2003 (unaudited) (1.32)(4) 0.24(4) 63.47 For the fiscal year ended March 31, 2003 (1.44) 0.16 122.29 For the fiscal year ended March 31, 2002 (1.65) 0.08 110.80 For the fiscal year ended March 31, 2001 (1.58) 0.10 42.93 For the fiscal year ended March 31, 2000 (1.63) 0.18 54.67 For the fiscal year ended March 31, 1999 (1.23) 0.27 76.17 CLASS C For the six months ended September 30, 2003 (unaudited) (1.32)(4) 0.24(4) 63.47 For the fiscal year ended March 31, 2003 (1.44) 0.16 122.29 For the fiscal year ended March 31, 2002 (1.65) 0.08 110.80 For the fiscal year ended March 31, 2001 (1.58) 0.10 42.93 For the fiscal year ended March 31, 2000 (1.63) 0.18 54.67 For the fiscal year ended March 31, 1999 (1.23) 0.27 76.17 CLASS Y For the six months ended September 30, 2003 (unaudited) (0.32)(4) 0.24(4) 63.47 For the fiscal year ended March 31, 2003 (0.43) 0.16 122.29 For the fiscal year ended March 31, 2002 (0.65) 0.08 110.80 For the fiscal year ended March 31, 2001 (0.47) 0.10 42.93 For the fiscal year ended March 31, 2000 (0.56) 0.18 54.67 For the fiscal year ended March 31, 1999 (0.23) 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 period reported and includes reinvestment of dividends and distributions, if any. Total investment return is not annualized. (4) Annualized. 33
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 six months ended September 30, 2003 (unaudited) $ 10.49 $ (0.05) $ 2.46 -- $ 12.90 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 six months ended September 30, 2003 (unaudited) 10.40 (0.08) 2.43 -- 12.75 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 six months ended September 30, 2003 (unaudited) 10.40 (0.08) 2.43 -- 12.75 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 six months ended September 30, 2003 (unaudited) 10.56 (0.02) 2.47 -- 13.01 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, if any. The accompanying notes are an integral part of the financial statements. 34
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 six months ended September 30, 2003 (unaudited) 22.97% $ 23,291 1.50%(4) 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 six months ended September 30, 2003 (unaudited) 22.60 17,126 2.00(4) 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 six months ended September 30, 2003 (unaudited) 22.60 13,141 2.00(4) 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 six months ended September 30, 2003 (unaudited) 23.20 861 1.00(4) 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 six months ended September 30, 2003 (unaudited) (0.83)%(4) 0.63%(4) 98.10% 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 six months ended September 30, 2003 (unaudited) (1.33)(4) 0.63(4) 98.10 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 six months ended September 30, 2003 (unaudited) (1.33)(4) 0.63(4) 98.10 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 six months ended September 30, 2003 (unaudited) (0.33)(4) 0.63(4) 98.10 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. 35
NET NET ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS VALUE, NET UNREALIZED FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED OF PERIOD INCOME/(LOSS)*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS --------- ----------------- --------------- --------- ------------- THE INSIDERS SELECT FUND CLASS A For the six months ended September 30, 2003 (unaudited) $ 12.33 $ 0.02 $ 2.77 -- -- 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 six months ended September 30, 2003 (unaudited) 11.82 (0.01) 2.64 -- -- 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 six months ended September 30, 2003 (unaudited) 11.80 (0.01) 2.65 -- -- 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 six months ended September 30, 2003 (unaudited) 12.73 0.09 2.83 -- -- 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 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. The accompanying notes are an integral part of the financial statements. 36
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF END OF INVESTMENT END OF PERIOD EXPENSES TO PERIOD RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) -------- ---------- --------------- --------------------- THE INSIDERS SELECT FUND CLASS A For the six months ended September 30, 2003 (unaudited) $ 15.12 22.63% $ 15,996 1.65%(4) 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 six months ended September 30, 2003 (unaudited) 14.45 22.25 9,894 2.15(4) 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 six months ended September 30, 2003 (unaudited) 14.44 22.37 6,239 2.15(4) 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 six months ended September 30, 2003 (unaudited) 15.65 22.94 363 1.15(4) 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 six months ended September 30, 2003 (unaudited) 0.26%(4) 0.63%(4) 14.06% 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 six months ended September 30, 2003 (unaudited) (0.24)(4) 0.63(4) 14.06 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 six months ended September 30, 2003 (unaudited) (0.24)(4) 0.63(4) 14.06 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 six months ended September 30, 2003 (unaudited) 0.79(4) 0.63(4) 14.06 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 period reported and includes reinvestment of dividends and distributions, if any. Total investment return is not annualized. (4) Annualized. 37
NET NET ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS VALUE, NET UNREALIZED FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED OF PERIOD INCOME/LOSS*(1) INVESTMENTS*(2) INCOME CAPITAL GAINS --------- --------------- --------------- ---------- -------------- INTRINSIC VALUE PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) $ 14.81 $ 0.01 $ 3.53 -- -- 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 six months ended September 30, 2003 (unaudited) 14.50 -- 3.43 -- -- 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 six months ended September 30, 2003 (unaudited) 14.58 (0.02) 3.47 -- -- 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 six months ended September 30, 2003 (unaudited) 14.97 0.10 3.54 -- -- 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 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. The accompanying notes are an integral part of the financial statements. 38
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF END OF INVESTMENT END OF PERIOD EXPENSES TO PERIOD RETURN(3) (000's omitted) AVERAGE NET ASSETS(1) -------- --------------- --------------- --------------------- INTRINSIC VALUE PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) $ 18.35 23.90% $ 34,194 1.50%(4) 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 six months ended September 30, 2003 (unaudited) 17.93 23.66 14,989 2.00(4) 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 six months ended September 30, 2003 (unaudited) 18.03 23.66 18,604 2.00(4) 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 six months ended September 30, 2003 (unaudited) 18.61 24.32 25,371 1.00(4) 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 six months ended September 30, 2003 (unaudited) 0.57%(4) 0.36%(4) 23.51% 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 six months ended September 30, 2003 (unaudited) 0.09(4) 0.36(4) 23.51 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 six months ended September 30, 2003 (unaudited) 0.09(4) 0.36(4) 23.51 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 six months ended September 30, 2003 (unaudited) 1.10(4) 0.36(4) 23.51 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 period reported and includes reinvestment of dividends and distributions, if any. Total investment return is not annualized. (4) Annualized. 39
NET NET NET ASSET REALIZED AND DISTRIBUTIONS ASSET VALUE, NET UNREALIZED FROM NET VALUE, BEGINNING INVESTMENT GAIN/(LOSS) ON REALIZED END OF OF PERIOD INCOME/(LOSS)*(1) INVESTMENTS*(2) CAPITAL GAINS PERIOD ---------- ----------------- --------------- ------------- -------- SMALL CAP VALUE PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) $ 12.90 $ (0.01) $ 3.20 -- $ 16.09 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 six months ended September 30, 2003 (unaudited) 12.40 (0.05) 3.08 -- 15.43 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 six months ended September 30, 2003 (unaudited) 12.42 (0.05) 3.08 -- 15.45 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 six months ended September 30, 2003 (unaudited) 13.20 0.04 3.25 -- 16.49 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 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. The accompanying notes are an integral part of the financial statements. 40
TOTAL NET ASSETS, RATIO OF INVESTMENT END OF PERIOD EXPENSES TO RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) ---------- --------------- --------------------- SMALL CAP VALUE PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) 24.73% $ 14,440 1.57%(4) For the fiscal year ended March 31, 2003 (31.94) 12,771 1.50 For the fiscal year ended March 31, 2002 18.51 23,902 1.50 For the fiscal year ended March 31, 2001 (11.64) 17,194 1.50 For the fiscal year ended March 31, 2000 38.21 24,086 1.50 For the fiscal year ended March 31, 1999 (20.26) 18,520 1.50 CLASS B For the six months ended September 30, 2003 (unaudited) 24.44 5,988 2.07(4) For the fiscal year ended March 31, 2003 (32.52) 4,975 2.00 For the fiscal year ended March 31, 2002 17.76 6,944 2.00 For the fiscal year ended March 31, 2001 (12.12) 4,301 2.00 For the fiscal year ended March 31, 2000 37.53 4,030 2.00 For the fiscal year ended March 31, 1999 (20.63) 2,716 2.00 CLASS C For the six months ended September 30, 2003 (unaudited) 24.40 10,890 2.07(4) For the fiscal year ended March 31, 2003 (32.45) 9,204 2.00 For the fiscal year ended March 31, 2002 17.75 16,112 2.00 For the fiscal year ended March 31, 2001 (12.07) 11,460 2.00 For the fiscal year ended March 31, 2000 37.54 13,399 2.00 For the fiscal year ended March 31, 1999 (20.67) 11,112 2.00 CLASS Y For the six months ended September 30, 2003 (unaudited) 24.92 22,835 1.07(4) For the fiscal year ended March 31, 2003 (31.59) 20,726 1.00 For the fiscal year ended March 31, 2002 19.02 34,834 1.00 For the fiscal year ended March 31, 2001 (11.22) 33,449 1.00 For the fiscal year ended March 31, 2000 38.86 31,091 1.00 For the fiscal year ended March 31, 1999 (19.84) 24,087 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 --------------------- ---------------------------- ---------- SMALL CAP VALUE PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) (0.15)%(4) 0.47%(4) 42.34% For the fiscal year ended March 31, 2003 0.23 0.48 92.42 For the fiscal year ended March 31, 2002 (0.24) 0.53 75.76 For the fiscal year ended March 31, 2001 (0.63) 1.02 65.32 For the fiscal year ended March 31, 2000 (0.75) 0.65 65.85 For the fiscal year ended March 31, 1999 (0.60) 0.65 84.12 CLASS B For the six months ended September 30, 2003 (unaudited) (0.65)(4) 0.47(4) 42.34 For the fiscal year ended March 31, 2003 (0.26) 0.48 92.42 For the fiscal year ended March 31, 2002 (0.74) 0.53 75.76 For the fiscal year ended March 31, 2001 (1.14) 1.02 65.32 For the fiscal year ended March 31, 2000 (1.24) 0.65 65.85 For the fiscal year ended March 31, 1999 (1.10) 0.65 84.12 CLASS C For the six months ended September 30, 2003 (unaudited) (0.65)(4) 0.47(4) 42.34 For the fiscal year ended March 31, 2003 (0.27) 0.48 92.42 For the fiscal year ended March 31, 2002 (0.74) 0.53 75.76 For the fiscal year ended March 31, 2001 (1.14) 1.02 65.32 For the fiscal year ended March 31, 2000 (1.24) 0.65 65.85 For the fiscal year ended March 31, 1999 (1.10) 0.65 84.12 CLASS Y For the six months ended September 30, 2003 (unaudited) 0.37(4) 0.47(4) 42.34 For the fiscal year ended March 31, 2003 0.74 0.48 92.42 For the fiscal year ended March 31, 2002 0.26 0.53 75.76 For the fiscal year ended March 31, 2001 (0.13) 1.02 65.32 For the fiscal year ended March 31, 2000 (0.24) 0.65 65.85 For the fiscal year ended March 31, 1999 (0.10) 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 period reported and includes reinvestment of dividends and distributions, if any. Total investment return is not annualized. (4) Annualized. 41
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 ---------- ----------- --------------- ------------- ---------- ALPHA GROWTH PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) $ 15.57 -- $ 2.61 -- $ 18.18 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 six months ended September 30, 2003 (unaudited) 15.17 (0.04) 2.55 -- 17.68 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 six months ended September 30, 2003 (unaudited) 15.19 (0.04) 2.55 -- 17.70 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 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. The accompanying notes are an integral part of the financial statements. 42
TOTAL NET ASSETS, RATIO OF INVESTMENT END OF PERIOD EXPENSES TO RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) ----------- --------------- --------------------- ALPHA GROWTH PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) 16.76% $ 63,918 1.40%(4) For the fiscal year ended March 31, 2003 (17.36) 39,817 1.40 For the fiscal year ended March 31, 2002 12.48 23,176 1.40 For the fiscal year ended March 31, 2001 (21.03) 17,316 1.40 For the fiscal year ended March 31, 2000 22.46 22,580 1.40 For the fiscal year ended March 31, 1999 29.47 6,542 1.40 CLASS B For the six months ended September 30, 2003 (unaudited) 16.55 24,681 1.90(4) For the fiscal year ended March 31, 2003 (17.60) 16,059 1.90 For the fiscal year ended March 31, 2002 11.85 9,061 1.90 For the fiscal year ended March 31, 2001 (21.36) 7,441 1.90 For the fiscal year ended March 31, 2000 21.83 9,124 1.90 For the fiscal year ended March 31, 1999 28.61 4,460 1.90 CLASS C For the six months ended September 30, 2003 (unaudited) 16.52 22,995 1.90(4) For the fiscal year ended March 31, 2003 (17.54) 13,236 1.90 For the fiscal year ended March 31, 2002 11.91 6,546 1.90 For the fiscal year ended March 31, 2001 (21.40) 4,973 1.90 For the fiscal year ended March 31, 2000 21.81 6,398 1.90 For the fiscal year ended March 31, 1999 28.69 3,304 1.90 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 --------------------- ------------------------- ----------- ALPHA GROWTH PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited) (0.01)%(4) 0.34%(4) 0.00% For the fiscal year ended March 31, 2003 (0.15) 0.56 185.33 For the fiscal year ended March 31, 2002 (0.42) 1.06 82.40 For the fiscal year ended March 31, 2001 (0.46) 0.97 81.37 For the fiscal year ended March 31, 2000 (0.63) 1.33 56.26 For the fiscal year ended March 31, 1999 (0.57) 2.89 84.49 CLASS B For the six months ended September 30, 2003 (unaudited) (0.51)(4) 0.34(4) 0.00 For the fiscal year ended March 31, 2003 (0.65) 0.56 185.33 For the fiscal year ended March 31, 2002 (0.92) 1.06 82.40 For the fiscal year ended March 31, 2001 (0.96) 0.97 81.37 For the fiscal year ended March 31, 2000 (1.11) 1.33 56.26 For the fiscal year ended March 31, 1999 (1.07) 2.89 84.49 CLASS C For the six months ended September 30, 2003 (unaudited) (0.51)(4) 0.34(4) 0.00 For the fiscal year ended March 31, 2003 (0.63) 0.56 185.33 For the fiscal year ended March 31, 2002 (0.92) 1.06 82.40 For the fiscal year ended March 31, 2001 (0.96) 0.97 81.37 For the fiscal year ended March 31, 2000 (1.09) 1.33 56.26 For the fiscal year ended March 31, 1999 (1.07) 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 period reported and includes reinvestment of dividends and distributions, if any. Total investment return is not annualized. (4) Annualized. 43
NET NET ASSET REALIZED AND VALUE, NET UNREALIZED BEGINNING INVESTMENT GAIN/(LOSS) ON OF PERIOD INCOME/(LOSS)**(1) INVESTMENTS**(2) ----------- ------------------ ----------------- INTERNATIONAL EQUITY PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited)*** $ 10.31 $ 0.04 $ 2.10 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) For the fiscal year ended March 31, 2000 15.14 (0.05) 12.98 For the fiscal year ended March 31, 1999 13.77 (0.03) 1.40 CLASS B For the six months ended September 30, 2003 (unaudited)*** 10.02 -- 2.10 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) For the fiscal year ended March 31, 2000 15.05 (0.10) 12.80 For the fiscal year ended March 31, 1999 13.75 (0.02) 1.32 CLASS C For the six months ended September 30, 2003 (unaudited)*** 10.03 -- 2.10 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) For the fiscal year ended March 31, 2000 15.05 (0.09) 12.79 For the fiscal year ended March 31, 1999 13.75 (0.02) 1.32 CLASS Y For the six months ended September 30, 2003 (unaudited)*** 10.42 0.04 2.21 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) DIVIDENDS DISTRIBUTIONS FROM NET FROM NET INVESTMENT REALIZED INCOME CAPITAL GAINS ----------- ------------- CLASS A For the six months ended September 30, 2003 (unaudited)*** -- -- For the fiscal year ended March 31, 2003 -- -- For the fiscal year ended March 31, 2002 -- -- For the fiscal year ended March 31, 2001 -- $ (0.31) For the fiscal year ended March 31, 2000 -- (0.23) For the fiscal year ended March 31, 1999 --+ -- CLASS B For the six months ended September 30, 2003 (unaudited)*** -- -- For the fiscal year ended March 31, 2003 -- -- For the fiscal year ended March 31, 2002 -- -- For the fiscal year ended March 31, 2001 -- (0.31) For the fiscal year ended March 31, 2000 -- (0.23) For the fiscal year ended March 31, 1999 --+ -- CLASS C For the six months ended September 30, 2003 (unaudited)*** -- -- For the fiscal year ended March 31, 2003 -- -- For the fiscal year ended March 31, 2002 -- -- For the fiscal year ended March 31, 2001 -- (0.31) For the fiscal year ended March 31, 2000 -- (0.23) For the fiscal year ended March 31, 1999 --+ -- CLASS Y For the six months ended September 30, 2003 (unaudited)*** -- -- For the fiscal year ended March 31, 2003 -- -- For the period July 5, 2001* through March 31, 2002 -- --
- ---------- * 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, except where noted. *** Calculated based on average shares outstanding. + Amount is less than $0.01 per share. (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. The accompanying notes are an integral part of the financial statements. 44
NET ASSET VALUE, TOTAL NET ASSETS, RATIO OF END OF INVESTMENT END OF PERIOD EXPENSES TO PERIOD RETURN(3) (000'S OMITTED) AVERAGE NET ASSETS(1) --------- ----------- -------------- ---------------------- INTERNATIONAL EQUITY PORTFOLIO CLASS A For the six months ended September 30, 2003 (unaudited)*** $ 12.45 20.76% $ 14,204 1.75%(5) 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 six months ended September 30, 2003 (unaudited)*** 12.12 20.96 4,843 2.25(5) 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 six months ended September 30, 2003 (unaudited)*** 12.13 20.94 15,620 2.25(5) 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 six months ended September 30, 2003 (unaudited)*** 12.67 21.59 31,736 1.25(5) 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 INCOME/(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 six months ended September 30, 2003 (unaudited)*** 0.76%(5) 0.61%(5) 101.16% 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 six months ended September 30, 2003 (unaudited)*** (0.06)(5) 0.61(5) 101.16 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 six months ended September 30, 2003 (unaudited)*** (0.07)(5) 0.61(5) 101.16 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 six months ended September 30, 2003 (unaudited)*** 0.71(5) 0.61(5) 101.16 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. 45 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--(UNAUDITED) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business trust on September 29, 1994 and is registered with the Securities and Exchange Commission (the "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. 46 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 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 create an obligation to purchase the security at market prices prevailing at the later delivery date (or to deliver the security if already owned by the Portfolio). Upon 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 six months ended September 30, 2003. S&P STARS has segregated sufficient liquid assets in a separate account as collateral for open short sales. Securities sold short at September 30, 2003 for S&P STARS were as follows:
MARKET UNREALIZED SECURITY PROCEEDS VALUE GAIN - -------- ------------- ------------- ------------- ADTRAN, Inc. $ 7,323,020 $ 6,729,800 $ 593,220 Eastman Kodak Co. 9,149,318 6,700,800 2,448,518 Level 3 Communications, Inc. 5,492,739 4,336,000 1,156,739 Metro One Telecommunications, Inc. 2,171,147 1,635,600 535,547 Robert Half International, Inc. 8,275,858 7,800,000 475,858 ------------- ------------- ------------- Total $ 32,412,082 $ 27,202,200 $ 5,209,882 ============= ============= =============
S&P STARS Opportunities has segregated sufficient liquid assets in a separate account as collateral for open short sales. Securities sold short at September 30, 2003 for S&P STARS Opportunities were as follows:
MARKET UNREALIZED SECURITY PROCEEDS VALUE GAIN/(LOSS) - -------- ------------- ------------- ------------- ADTRAN, Inc. $ 206,856 $ 183,540 $ 23,316 Cincinnati Bell Inc. 183,743 152,700 31,043 Cummins, Inc. 316,503 311,010 5,493 Dillard's, Inc., Class A 287,462 279,600 7,862 Four Seasons Hotel Inc. 182,224 298,860 (116,636) Potlatch Corp. 309,688 356,640 (46,952) ------------- ------------- ------------- Total $ 1,486,476 $ 1,582,350 $ (95,874) ============= ============= =============
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 47 proceedings. In the event that the borrower fails to return securities, and cash collateral being maintained by the borrower is insufficient to cover the value of loaned securities and provided such collateral insufficiency is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Portfolios. The market value of securities on loan to brokers at September 30, 2003, were as follows:
MARKET VALUE OF PORTFOLIO SECURITIES ON LOAN - --------- ------------------ S&P STARS $ 28,254,619 Small Cap 5,446,810
In addition, Insiders Select, Intrinsic Value and Alpha Growth engaged in security lending transactions during the six months ended September 30, 2003, although no securities were outstanding as of September 30, 2003. All such income is included in the Statements of Operations. No other Portfolios had security lending transactions during the six months ended September 30, 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. and 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 period, CTC has been compensated approximately $9,588, $7, $109, $219 and $15 from S&P STARS, Insiders Select, Intrinsic Value, Small Cap and Alpha Growth, respectively. In addition, the Order permits (subject to limitations) a Portfolio to loan securities to its affiliates. During the period, Bear Stearns Securities Corp., an affiliate to the Portfolios received rebates in connection with such loans amounting to $28,374, $79, $19 and $2,338 for S&P STARS, Insiders Select, Intrinsic Value 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 six months ended September 30, 2003, only International Equity entered into such forward currency contracts. International Equity did not have any open forward currency contracts at September 30, 2003. 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 48 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. 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 CARRYFORWARDS 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 prior fiscal year are deemed to arise on the first day of the current 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 appreciation of investments at September 30, 2003 for each Portfolio were as follows:
GROSS GROSS NET PORTFOLIO COST APPRECIATION DEPRECIATION APPRECIATION - --------- ---------------- ------------- -------------- ------------- S&P STARS $ 1,378,241,486 $ 162,179,391 $ (119,302,626) $ 42,876,765 S&P STARS Opportunities 49,676,290 6,606,089 (988,872) 5,617,217 Insiders Select 31,143,489 4,157,811 (2,725,798) 1,432,013 Intrinsic Value 90,560,739 9,183,004 (3,543,897) 5,639,107 Small Cap 51,400,092 6,260,466 (2,904,781) 3,355,685 Alpha Growth 102,724,646 14,286,822 (3,703,919) 10,582,903 International Equity 57,268,644 10,022,688 (335,699) 9,686,989
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. 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. 49 TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES For the six months ended September 30, 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, 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 six months ended, September 30, 2003, the performance adjustment fee decreased the total advisory fee by $69,258 or 0.44% 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 six months ended September 30, 2003. As a result the annual rate was adjusted to 0.56% 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 Portfolio's net assets in excess of $65 million at the relevant month end. For the six months ended September 30, 2003, Marvin & Palmer earned a fee of $55,496. For the six months ended September 30, 2003, BSFM 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 the average daily net assets above $5 billion. For the six months ended September 30, 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* 1.70 2.20 2.20 1.20 Alpha Growth 1.40 1.90 1.90 -- International Equity 1.75 2.25 2.25 1.25
- ---------- * Prior to August 1, 2003 the expense limitations were 1.50%, 2.00%, 2.00% and 1.00% for Class A, B, C and Y shares, respectively. 50 As necessary, this limitation is effected by waivers by the Adviser of its advisory fees and reimbursements of expenses exceeding the advisory fee. For the six months ended September 30, 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 - --------- -------------------- ---------------------- S&P STARS $ 1,548,333 -- S&P STARS Opportunities 169,171 -- Insiders Select 89,848 $ 9,220 Intrinsic Value 145,714 -- Small Cap 128,191 -- Alpha Growth 158,114 -- International Equity 194,321 --
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 six months ended September 30, 2003, Bear Stearns, an affiliate of the Adviser and the Administrator, earned $536,627, $30,271, $6,459, $8,376, $2,409 and $24,304 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 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 six months ended September 30, 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 $ 3,158,646 $ 1,510,497 S&P STARS Opportunities 138,588 65,011 Insiders Select 78,196 38,752 Intrinsic Value 139,220 68,236 Small Cap 79,324 38,341 Alpha Growth 214,560 115,706 International Equity 93,656 45,804
51 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 six months ended September 30, 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 $ 410,597 $ 28,165 $ 860,693 $ 19,943 S&P STARS Opportunities 34,697 312 55,944 419 Insiders Select 26,578 -- 22,872 690 Intrinsic Value 39,246 1,947 18,847 1,069 Small Cap 5,950 -- 11,858 743 Alpha Growth 172,432 14 37,514 1,957 International Equity 1,392 -- 6,784 631
INVESTMENTS IN SECURITIES For the six months ended September 30, 2003, aggregate purchases and sales of investment securities (excluding short-term investments) for each Portfolio were as follows:
PORTFOLIO PURCHASES SALES - --------- -------------- -------------- S&P STARS $ 854,480,063 $ 944,645,019 S&P STARS Opportunities 50,752,331 54,714,084 Insiders Select 4,170,936 6,020,010 Intrinsic Value 34,067,266 17,423,200 Small Cap 21,899,506 24,022,272 Alpha Growth 29,808,057 -- International Equity 60,635,012 60,992,613
INVESTMENTS IN AFFILIATES A summary of transactions for each issuer, which is or was an affiliate at or during the six months ended September 30, 2003, were as follows:
NUMBER OF CAPITAL UNREALIZED PORTFOLIO AFFILIATE SHARES LOSS LOSS VALUE - --------- --------- --------- ---------- -------------- -------------- S&P STARS Intuitive Surgical, Inc. 1,460,000 $ 749,122 $ 9,039,876 $ 24,352,800 SportsLine.com, Inc. 3,870,000 -- 32,520,111 4,876,200
52 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 S&P STARS OPPORTUNITIES ------------------------------------------- ------------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ------------- ------------- ------------- ------------- ------------- ------------- CLASS A FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 1,378,170 3,858,041 -- 104,683 255,399 -- Value $ 25,602,131 $ 71,886,612 -- $ 1,270,478 $ 3,063,645 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 3,895,224 19,073,752 -- 878,968 1,055,372 30,110 Value $ 76,281,246 $ 347,895,463 -- $ 10,928,634 $ 12,146,430 $ 339,034 CLASS B FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 650,079 1,638,515 -- 54,774 133,777 -- Value $ 11,754,761 $ 29,383,389 -- $ 660,119 $ 1,607,335 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 1,674,642 8,079,666 -- 546,134 627,113 20,418 Value $ 31,438,483 $ 143,765,252 -- $ 6,865,066 $ 7,170,373 $ 228,272 CLASS C FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 551,151 1,790,882 -- 50,792 139,053 -- Value $ 9,942,775 $ 32,113,696 -- $ 618,950 $ 1,664,742 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 1,707,019 8,417,201 -- 532,785 584,820 17,250 Value $ 32,256,708 $ 149,851,445 -- $ 6,672,259 $ 6,669,475 $ 193,031 CLASS Y FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 583,254 824,803 -- 4,972 10,635 -- Value $ 11,361,584 $ 15,911,865 -- $ 56,090 $ 120,646 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 1,265,616 2,478,336 -- 11,479 117,341 1,320 Value $ 24,007,292 $ 45,739,040 -- $ 136,352 $ 1,435,304 $ 14,944
53
INSIDERS SELECT INTRINSIC VALUE ------------------------------------------- ------------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ------------- ------------- ------------- ------------- ------------- ------------- CLASS A FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 103,814 103,925 -- 816,163 150,292 -- Value $ 1,508,763 $ 1,503,378 -- $ 14,721,833 $ 2,705,384 -- 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 CLASS B FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 54,602 80,022 -- 174,709 62,272 -- Value $ 743,881 $ 1,085,878 -- $ 3,085,273 $ 1,074,071 -- 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 CLASS C FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 17,866 55,221 -- 326,897 57,668 -- Value $ 245,270 $ 758,973 -- $ 5,828,199 $ 1,012,384 -- 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 CLASS Y FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares -- 7,146 -- 112,123 147,586 -- Value -- $ 116,039 -- $ 2,021,937 $ 2,541,344 -- 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 SMALL CAP ALPHA GROWTH ------------------------------------------- ------------------------------------------- SALES REPURCHASES REINVESTMENTS SALES REPURCHASES REINVESTMENTS ------------- ------------- ------------- ------------- ------------- -------------- CLASS A FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 32,915 125,574 -- 1,288,872 330,733 -- Value $ 513,000 $ 1,879,106 -- $ 22,529,261 $ 5,780,065 -- 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 -- CLASS B FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 34,715 47,718 -- 471,625 134,766 -- Value $ 528,539 $ 709,302 -- $ 7,987,119 $ 2,252,336 -- 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 -- CLASS C FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 38,641 75,005 -- 495,679 68,337 -- Value $ 582,966 $ 1,097,236 -- $ 8,466,605 $ 1,151,206 -- 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 -- CLASS Y FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 152,324 337,586 -- Value $ 2,463,787 $ 5,421,728 -- 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
54
INTERNATIONAL EQUITY ------------------------------------------------- SALES REPURCHASES REINVESTMENTS -------------- -------------- ------------- CLASS A FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 681,005 1,530,771 -- Value $ 7,523,076 $ 17,105,974 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 950,740 1,108,654 -- Value $ 11,728,521 $ 13,680,368 -- CLASS B FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 35,954 57,105 -- Value $ 387,924 $ 621,002 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 38,380 158,816 -- Value $ 492,186 $ 1,947,580 -- CLASS C FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 45,471 79,853 -- Value $ 506,905 $ 883,300 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 101,211 247,980 -- Value $ 1,369,054 $ 2,869,518 -- CLASS Y FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 Shares 1,007,783 82,239 -- Value $ 11,084,696 $ 979,367 -- FOR THE FISCAL YEAR ENDED MARCH 31, 2003 Shares 396,376 287,464 -- Value $ 4,834,630 $ 3,592,431 --
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 33 1/3% 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 six months ended September 30, 2003, were as follows:
MAXIMUM LOAN AMOUNT PORTFOLIO AVERAGE LOAN BALANCE OUTSTANDING AVERAGE INTEREST RATE - --------- -------------------- ------------------- --------------------- S&P STARS $ 17,564,364 $ 38,685,900 1.63% Small Cap 39,336 2,449,900 1.50 Alpha Growth 498 50,000 1.64
S&P STARS had a loan balance of $36,657,700 outstanding under the line of credit facility at September 30, 2003. None of the other Portfolios had any amounts outstanding under the line of credit facility at September 30, 2003. 55 SUBSEQUENT EVENT On November 18, 2003, BSAM and The Dreyfus Corporation (with its relevant affiliates, "Dreyfus") announced a strategic arrangement in which Portfolios of The Bear Stearns Funds ("BSF") will merge with new or existing Dreyfus funds that have the same or similar investment objectives (the "Transaction"). If shareholders of the Portfolios approve these mergers, those shareholders will receive shares of the corresponding Dreyfus funds having the same value as their Portfolio shares. The Transaction (which is described below) has received the approvals of the Board of Trustees of BSF and the Boards of the relevant Dreyfus funds (other than the Board of the Dreyfus fund corresponding to the Income Portfolio). The Transaction is subject to shareholder approval and is expected to close by the end of the second quarter of 2004. The Board of the Dreyfus fund corresponding to the Income Portfolio is expected to consider the relevant merger in the near future. The S&P STARS Portfolio would reorganize into Dreyfus Premier S&P STARS Fund, a new series of Dreyfus Premier Manager Funds I, a newly established investment company. Upon the closing of the Portfolio's reorganization, Dreyfus will serve as the primary investment adviser to Dreyfus Premier S&P STARS Fund and BSAM will serve as the Fund's sub-adviser. The S&P STARS Opportunities Portfolio would reorganize into Dreyfus Premier S&P STARS Opportunities Fund, a new series of Dreyfus Premier Manager Funds I. Upon the closing of the Portfolio's reorganization, Dreyfus will serve as the sole investment adviser to Dreyfus Premier S&P STARS Opportunities Fund. The Insiders Select Fund and the Intrinsic Value Portfolio would reorganize into Dreyfus Premier Intrinsic Value Fund, a newly established series of Dreyfus Premier Manager Funds I. Upon the closing of the proposed reorganization, Dreyfus will serve as the primary investment adviser to Dreyfus Premier Intrinsic Value Fund and BSAM will serve as the Fund's sub-adviser. The Small Cap Value Portfolio would reorganize into Dreyfus Premier Future Leaders Fund, a series of Dreyfus Growth and Value Funds, Inc. Dreyfus currently serves as the investment adviser of Dreyfus Premier Future Leaders Fund, a currently-operating mutual fund. Upon the closing of the Portfolio's reorganization, Dreyfus will serve as the sole investment adviser to Dreyfus Premier Future Leaders Fund. The Alpha Growth Portfolio would reorganize into Dreyfus Premier Alpha Growth Fund, a new series of Dreyfus Premier Manager Funds I. Upon the closing of the Portfolio's reorganization, Dreyfus will serve as the primary investment adviser to Dreyfus Premier Alpha Growth Fund and BSAM will serve as the Fund's sub-adviser. The International Equity Portfolio would reorganize into Dreyfus Premier International Value Fund, a series of Dreyfus Growth and Value Funds, Inc. Dreyfus currently serves as the investment adviser of Dreyfus Premier International Value Fund, a currently-operating mutual fund. Upon the closing of the Portfolio's reorganization, Dreyfus will serve as the sole investment adviser to Dreyfus Premier International Value Fund. 56 The Bear Stearns Funds 383 MADISON AVENUE, NEW YORK, NY 10179 1.800.766.4111 Michael Minikes Chairman of the Board and Trustee Barry Sommers President John S. Levy Trustee M. B. Oglesby, Jr. Trustee Robert E. Richardson Trustee 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. 760 Moore Road King of Prussia, PA 19406 INDEPENDENT AUDITORS Deloitte & Touche LLP Two World Financial Center New York, NY 10281 The financial information included herein is taken from the records of each Portfolio without examination by independent auditors who do not express an opinion thereon. 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 Semi-Annual Report September 30, 2003 [Bear Stearns Logo] THE BEAR STEARNS FUNDS Prime Money Market Portfolio Portfolio of Investments SEPTEMBER 30, 2003 (unaudited)
PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE(S) DATE(S) VALUE CERTIFICATES OF DEPOSIT - 29.09% Banks - Domestic - 3.84% $ 30,000 Citibank N.A. [A-1+, P-1] 1.060 - 1.065% 10/31/03 - 12/19/03 $ 29,999,831 35,000 State Street Bank & Trust Co. [A-1+, P-1] 1.100 - 1.250 07/13/04 - 08/30/04 35,000,000 20,000 Wells Fargo Bank N.A. [A-1+, P-1] 1.060 - 1.070 10/06/03 - 10/14/03 20,000,000 84,999,831 Banks - Euro - Australia - 1.13% 25,000 National Australia Bank [A-1+, P-1] 1.550 12/10/03 25,011,401 Banks - Euro - France - 1.85% 41,000 Societe Generale [A-1+, P-1] 0.930 - 1.180 10/17/03 - 07/07/04 40,999,374 Banks - Euro - Germany - 1.49% 11,000 Deutsche Bank [A-1+, P-1] 1.050 10/07/03 10,999,961 22,000 Landesbank Hessen-Thuringen Girozentrale [A-1+, P-1] 1.320 - 1.400 10/24/03 - 01/29/04 22,010,391 33,010,352 Banks - Euro - Netherlands - 1.31% 29,000 ING Bank N.V. [A-1+, P-1] 1.050 - 1.070 10/02/03 - 12/16/03 29,000,000 Banks - Euro - Switzerland - 0.81% 18,000 Credit Suisse First Boston [A-1, P-1] 1.045 10/16/03 17,999,726 Banks - Euro - United Kingdom - 3.97% 53,000 Barclays Bank plc [A-1+, P-1] 1.040 - 1.610 10/20/03 - 12/10/03 53,004,731 23,000 HBOS Treasury Services plc [A-1+, P-1] 1.120 - 1.370 01/29/04 - 02/10/04 23,006,659 12,000 Lloyds TSB Bank plc [A-1+, P-1] 1.400 08/05/04 12,000,508 88,011,898 Banks - Yankee - Australia - 0.47% 10,500 Australia & New Zealand Banking Group [A-1+, P-1] 1.060 10/31/03 10,500,085 Banks - Yankee - Canada - 3.30% 26,000 Canadian Imperial Bank of Commerce [A-1, P-1] 1.240 05/17/04 26,007,957 22,000 Canadian Imperial Bank of Commerce* [A-1, P-1] 1.045 10/01/03 22,000,000 25,000 Toronto Dominion Bank NY [A-1, P-1] 1.050 - 1.380 01/22/04 - 08/27/04 24,993,202 73,001,159 Banks - Yankee - France - 0.69% 15,250 Societe Generale [A-1+, P-1] 1.300 04/15/04 15,259,533
The accompanying notes are an integral part of the financial statements. 1
PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE(S) DATE(S) VALUE CERTIFICATES OF DEPOSIT (continued) Banks - Yankee - Germany - 5.13% $ 11,000 Bayerische Landesbank Girozentrale [A-1+, P-1] 1.495% 11/18/03 $ 11,000,000 29,000 Bayerische Landesbank Girozentrale* [A-1+, P-1] 1.080 10/27/03 28,999,942 25,000 Norddeutsche Landesbank Girozentrale [A-1+, P-1] 1.170 - 1.270 11/14/03 - 08/20/04 24,991,380 28,000 Westdeutsche Landesbank Girozentrale [A-1+, P-1] 1.070 - 1.320 12/17/03 - 04/15/04 28,015,108 20,500 Westdeutsche Landesbank Girozentrale* [A-1+, P-1] 1.055 10/01/03 20,500,000 113,506,430 Banks - Yankee - Netherlands - 0.45% 10,000 Rabobank Nederland N.V. [A-1+, P-1] 1.370 08/27/04 9,999,972 Banks - Yankee - Sweden - 2.23% 49,385 Svenska Handelsbanken [A-1, P-1] 1.060 - 1.250 10/15/03 - 04/07/04 49,393,982 Banks - Yankee - Switzerland - 0.75% 16,500 UBS A.G. [A-1+, P-1] 1.315 08/03/04 16,500,000 Banks - Yankee - United Kingdom - 1.67% 16,000 Abbey National Treasury Service* [A-1+, P-1] 1.050 10/01/03 15,999,988 5,000 Barclays Bank plc [A-1+, P-1] 1.090 12/15/03 5,000,042 16,000 Royal Bank of Scotland plc [A-1+, P-1] 1.070 12/17/03 16,000,000 37,000,030 Total Certificates of Deposit (cost - $644,193,773) 644,193,773 COMMERCIAL PAPER - 20.33% Banks - Yankee - United Kingdom - 1.20% 26,486 HBOS Treasury Services plc [A-1+, P-1] 1.051 - 1.061 10/06/03 - 11/10/03 26,476,837 Commercial Finance - 2.75% 13,000 General Electric Capital Corp. [A-1+, P-1] 1.104 12/02/03 12,975,372 18,000 Toyota Motor Credit Corp. [A-1+, P-1] 1.041 10/15/03 17,992,720 30,000 UBS Finance LLC [A-1+, P-1] 1.110 10/01/03 30,000,000 60,968,092 Corporate Loan Conduit - 1.44% 32,000 Greyhawk Funding LLC [A-1+, P-1] 1.071 - 1.082 10/07/03 - 10/30/03 31,980,874
The accompanying notes are an integral part of the financial statements. 2
PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE(S) DATE(S) VALUE COMMERCIAL PAPER (continued) Diversified Receivables Conduit - 11.09% $ 10,000 Alpine Securitization Corp. [A-1, P-1] 1.071% 10/24/03 $ 9,993,164 11,000 Blue Ridge Asset Corp. [A-1, P-1] 1.061 10/24/03 10,992,551 36,500 Eureka Securitization [A-1+, P-1] 1.082 - 1.091 10/14/03 - 11/10/03 36,465,237 5,000 Govco, Inc. [A-1+, P-1] 1.082 11/07/03 4,994,450 44,000 Liberty Street Funding [A-1, P-1] 1.033 - 1.092 10/09/03 - 11/25/03 43,960,328 24,000 Mont Blanc Capital Corp. [A-1+, P-1] 1.081 11/07/03 23,973,442 14,404 Old Line Funding Corp. [A-1+, P-1] 1.081 10/01/03 - 11/07/03 14,390,680 30,000 Park Avenue Receivables Corp. [A-1, P-1] 1.061 - 1.081 10/28/03 - 10/29/03 29,975,205 24,200 Preferred Receivables Funding [A-1, P-1] 1.081 10/20/03 - 10/29/03 24,182,966 39,710 Sheffield Receivables Corp. [A-1+, P-1] 1.061 - 1.100 10/03/03 - 10/29/03 39,689,117 7,000 Windmill Funding Corp. [A-1+, P-1] 1.071 10/02/03 6,999,792 245,616,932 Drugs - 0.99% 22,000 Pfizer Inc. [A-1+, P-1] 0.914 - 1.030 10/16/03 - 12/09/03 21,974,778 Investment Structure - 0.86% 19,000 Sigma Finance, Inc. [A-1+, P-1] 1.073 - 1.083 10/24/03 - 10/29/03 18,985,760 Office Automation Equipment - 1.01% 22,246 Pitney Bowes, Inc. [A-1+, P-1] 1.080 10/01/03 22,246,000 Security Brokers & Dealers - 0.99% 10,000 Credit Suisse First Boston [A-1, P-1] 1.051 10/06/03 9,998,542 12,000 Morgan Stanley* [A-1, P-1] 1.140 10/01/03 12,000,000 21,998,542 Total Commercial Paper (cost - $450,247,815) 450,247,815 CORPORATE OBLIGATIONS - 10.54% Banks - Domestic 4.15% 16,500 Bank One N.A.* [A-1, P-1] 1.366 12/08/03 16,517,987 12,000 First Union National Bank* [A-1, P-1] 1.380 12/16/03 12,016,651 8,500 First USA Bank* [A-1, P-1] 1.360 11/06/03 8,519,464 8,250 Southtrust Bank N.A.* [A-1, P-1] 1.210 11/24/03 8,257,462 24,500 US Bank N.A.* [A-1, P-1] 1.170 - 1.260 10/14/03 - 10/21/03 24,517,123 22,000 Wells Fargo Bank N.A.* [A-1+, P-1] 1.040 10/01/03 22,000,000 91,828,687
The accompanying notes are an integral part of the financial statements. 3
PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE(S) DATE(S) VALUE CORPORATE OBLIGATIONS (continued) Commercial Finance - 0.63% $ 14,000 General Electric Capital Corp.* [A-1+, P-1] 1.150% 10/17/03 $ 14,000,000 Insurance - 2.71% 20,000 General Electric Capital Assurance Co.* (1) [A-1+, P-1] 1.200 10/06/03 20,000,000 40,000 Travelers Insurance Co.* (1) [A-1+, P-1] 1.180 - 1.190 10/28/03 40,000,000 60,000,000 Investment Structure - 1.13% 8,000 Sigma Finance, Inc., MTN (1) [A-1+, P-1] 1.260 03/18/04 8,002,717 17,000 Sigma Finance, Inc.* (1) [A-1+, P-1] 1.074 10/01/03 16,998,091 25,000,808 Security Brokers & Dealers - 1.92% 20,000 Goldman Sachs Group, Inc. (The)* (1) [A-1, P-1] 1.190 10/01/03 20,000,000 22,500 Merrill Lynch & Co., Inc.* [A-1, P-1] 1.299 - 1.380 10/02/03 - 10/28/03 22,524,730 42,524,730 Total Corporate Obligations (cost - $233,354,225) 233,354,225 SHARES INVESTMENT COMPANIES - 0.06% 511,705 American AAdvantage Money Market Select Fund** [AAAm/Aaa] 0.990 - 511,705 211,478 Federated Prime Cash Obligations Fund - Institutional Class** [AAAm/Aaa] 0.980 - 211,478 582 Federated Trust Prime Obligations Fund** [AAAm/Aaa] 0.970 - 582 213,188 One Group Prime Money Market - Institutional Class** [AAAm/Aaa] 0.990 - 213,188 508,552 Reserve Primary Fund** [AAAm/Aaa] 1.010 - 508,552 Total Investment Companies (cost - $1,445,505) 1,445,505 PRINCIPAL AMOUNT (000'S) REPURCHASE AGREEMENTS*** - 32.25% $ 236,260 Bank of America LLC [A-1+, P-1] 1.120 10/01/03 236,260,000 235,000 UBS Warburg [A-1+, F-1+] 1.050 - 1.110 10/01/03 235,000,000 243,000 Wachovia Securities Inc. [A-1, P-1] 1.100 10/01/03 243,000,000 Total Repurchase Agreements (cost - $714,260,000) 714,260,000
The accompanying notes are an integral part of the financial statements. 4
PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE(S) DATE(S) VALUE TIME DEPOSITS - 3.84% $ 50,000 Bank One N.A. [A-1, P-1] 1.060 10/01/03 $ 50,000,000 35,000 Societe Generale [A-1+, P-1] 1.094 10/01/03 35,000,000 Total Time Deposits (cost - $85,000,000) 85,000,000 U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.84% Fannie Mae - 2.91% 64,500 Unsecured Notes 1.080 - 4.750 11/14/03 - 08/30/04 64,547,956 Federal Home Loan Bank - 0.59% 13,000 Unsecured Bonds 1.200 08/20/04 13,000,000 Freddie Mac - 0.34% 7,575 Unsecured Notes, MTN 1.500 09/24/04 7,569,799 Total U.S. Government Agency Obligations (cost - $85,117,755) 85,117,755 Total Investments - 99.95% (cost - $2,213,619,073)**** 2,213,619,073 Other assets in excess of liabilities - 0.05% 1,016,345 Net Assets - 100.00% $ 2,214,635,418
MTN Medium Term Note. (1) SEC Rule 144A security. Such securities are traded only among qualified institutional buyers. * Variable Rate Obligations - The rate shown is the rate as of September 30, 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 September 30, 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. 5 THE BEAR STEARNS FUNDS Prime Money Market Portfolio Statement of Assets & Liabilities SEPTEMBER 30, 2003 (unaudited) Assets Investments, at amortized cost which approximates market value (identified and tax cost - $2,213,619,073) $ 2,213,619,073 Interest receivable 2,912,021 Prepaid expenses 60,598 Total assets 2,216,591,692 Liabilities Dividends payable 1,569,402 Advisory fee payable 193,215 Administration fee payable 87,489 Custodian fee payable 22,121 Accrued expenses 84,047 Total liabilities 1,956,274 Net Assets Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized) 2,214,666 Paid-in capital 2,212,451,667 Accumulated net realized loss from investments (30,915) Net assets $ 2,214,635,418 ClassY Net Assets $ 2,214,635,418 Shares of beneficial interest outstanding 2,214,666,333 Net asset value, offering and redemption price per share $ 1.00
The accompanying notes are an integral part of the financial statements. 6 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 (unaudited) Investment Income Interest $ 13,982,387 Expenses Advisory fees 2,296,172 Administration fees 574,032 Accounting fees 180,074 Custodian fees and expenses 123,475 Legal and auditing fees 42,135 Federal and state registration fees 23,619 Transfer agent fees and expenses 20,814 Reports and notices to shareholders 9,000 Trustees' fees and expenses 8,827 Insurance expenses 4,489 Other 26,409 Total expenses before waivers 3,309,046 Less: waivers (1,007,700) Total expenses after waivers 2,301,346 Net investment income 11,681,041 Net realized gain on investments 367 Net increase in net assets resulting from operations $ 11,681,408
The accompanying notes are an integral part of the financial statements. 7 Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED FOR THE SEPTEMBER 30, 2003 FISCAL YEAR ENDED (UNAUDITED) MARCH 31, 2003 Increase in net assets from Operations Net investment income $ 11,681,041 $ 38,051,689 Net realized gain on investments 367 4,464 Net increase in net assets resulting from operations 11,681,408 38,056,153 Dividends to shareholders from Net investment income (11,681,041) (38,051,689) Shares of beneficial interest* Net proceeds from the sale of shares 3,693,021,135 8,240,980,188 Cost of shares repurchased (3,909,875,243) (8,491,253,839) Shares issued in reinvestment of dividends 9,920,914 34,116,859 Net decrease in net assets derived from shares of beneficial interest transactions (206,933,194) (216,156,792) Total decrease in net assets (206,932,827) (216,152,328) Net Assets Beginning of period 2,421,568,245 2,637,720,573 End of period $ 2,214,635,418 $ 2,421,568,245
* Share transactions at net asset value of $1.00 per share. The accompanying notes are an integral part of the financial statements. 8 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 period indicated. This information has been derived from information provided in the financial statements.
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 FOR THE FISCAL YEARS ENDED MARCH 31, (UNAUDITED) 2003 2002 2001 2000 1999 Per Share Operating Performance Net asset value, beginning of period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 Net investment income(1) 0.0051 0.0158 0.0308 0.0622 0.0526 0.0524 Net increase in net assets resulting from operations 0.0051 0.0158 0.0308 0.0622 0.0526 0.0524 Dividends to shareholders from net investment income (0.0051) (0.0158) (0.0308) (0.0622) (0.0526) (0.0524) Net asset value, end of period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 Total investment return(2) 0.51% 1.59% 3.13% 6.40% 5.39% 5.37% Ratios/Supplemental Data Net assets, end of period (000's omitted) $ 2,214,635 $ 2,421,568 $ 2,637,721 $ 1,963,646 $ 913,907 $ 386,201 Ratio of expenses to average net assets(1) 0.20%(3) 0.20% 0.20% 0.20% 0.20% 0.20% Ratio of net investment income to average net assets(1) 1.02%(3) 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%(3) 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 last day of each period reported and includes reinvestment of dividends. Total investment return is not annualized. (3) Annualized. The accompanying notes are an integral part of the financial statements. 9 THE BEAR STEARNS FUNDS Prime Money Market Portfolio Notes to Financial Statements - (unaudited) Organization and Significant Accounting Policies The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business trust on September 29, 1994, and is registered with the Securities and Exchange Commission (the "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 portfo-lios, 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, 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. PortfolioValuation - 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. 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:
GROSS CAPITAL LOSS AMOUNTS EXPIRING IN CARRYFORWARD 2007 2008 2009 $ 31,282 $ 29,962 $ 1,279 $ 41
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 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. 10 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 six months ended September 30, 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 Investment 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 six months ended September 30, 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 six months ended September 30, 2003, the Adviser has undertaken to limit the Portfolio's total 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 six months ended September 30, 2003, the Adviser waived advisory fees of $1,007,700 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 September 30, 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 487,980,741 of Class Y shares or approximately 22% of the shares outstanding. Collateral for Repurchase Agreements Listed below is the collateral associated with the repurchase agreements outstanding at September 30, 2003:
PRINCIPAL MATURITY INTEREST MARKET ACCRUED TOTAL ISSUER AMOUNT DATES RATES VALUE INTEREST VALUE Bank of America LLC Fannie Mae, Pass-through Pools $ 121,059,024 07/01/18 - 10/01/33 5.500 - 6.500% $ 124,713,249 $ 584,774 $ 125,298,023 Freddie Mac, Pass-through Pools 199,618,344 06/01/32 - 09/01/33 5.000 - 7.000 115,116,150 571,027 115,687,177 $ 239,829,399 $ 1,155,801 $ 240,985,200 UBS Warburg Fannie Mae, Pass-through Pools $ 283,138,930 11/01/07 - 06/01/33 5.000 - 7.500% $ 191,637,018 $ 881,264 $ 192,518,282 Freddie Mac, Pass-through Pools 91,577,118 04/01/17 - 09/01/33 5.000 - 8.250 46,965,146 219,160 47,184,306 $ 238,602,164 $ 1,100,424 $ 239,702,588 Wachovia Securities Inc. Fannie Mae, Pass-through Pools $ 256,837,552 04/01/14 - 09/01/33 4.000 - 7.000% $ 199,580,586 $ 822,081 $ 200,402,667 Freddie Mac, Pass-through Pools 178,657,354 10/01/08 - 07/01/18 4.000 - 6.500 47,254,470 202,864 47,457,334 $ 246,835,056 $ 1,024,945 $ 247,860,001
11 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 six months ended September 30, 2003. Subsequent Event On November 18, 2003, BSAM and The Dreyfus Corporation (with its relevant affiliates, "Dreyfus") announced a strategic arrangement in which Portfolios of the Fund will merge with new or existing Dreyfus funds that have the same or similar investment objectives (the "Transaction"). If shareholders of the Portfolios approve these mergers, those shareholders will receive shares of the corresponding Dreyfus funds having the same value as their Portfolio shares. The Transaction has received the approvals of the Board of Trustees of the Fund and the Boards of the relevant Dreyfus funds (other than the Board of the Dreyfus fund corresponding to the Income Portfolio). The Transaction is subject to shareholder approval and is expected to close by the end of the second quarter of 2004.The Board of the Dreyfus fund corresponding to the Income Portfolio is expected to consider the relevant merger in the near future. The Portfolio would reorganize into Bear Stearns Prime Money Market Fund, a newly formed series of Dreyfus Premier Manager Funds I, a newly formed investment company. Upon the closing of the reorganization, Dreyfus will serve as the sole investment adviser to the Dreyfus fund. 12 The Bear Stearns Funds 383 Madison Avenue, New York, NY 10179 1.800.766.4111 Michael Minikes Chairman of the Board and Trustee Barry Sommers President John S. Levy Trustee M.B. Oglesby, Jr. Trustee Robert E. Richardson Trustee 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 Administrator Bear Stearns Funds Management Inc. 383 Madison Avenue New York, NY 10179 Custodian Custodial Trust Company 101 Carnegie Center Princeton, NJ 08540 Counsel Kramer Levin Naftalis & Frankel LLP 919 Third Avenue New York, NY 10022 Distributor Bear, Stearns & Co. Inc. 383 Madison Avenue New York, NY 10179 Transfer and Dividend Disbursement Agent PFPC Inc. 760 Moore Road King of Prussia, PA 19406 Independent Auditors Deloitte & Touche LLP Two World Financial Center New York, NY 10281 The financial information included herein is taken from the records of the Portfolio without examination by independent auditors who do not express an opinion thereof. 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. 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. Form N-CSR disclosure requirement is not applicable for semi-annual reports. 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. Form N-CSR disclosure requirement is not applicable to semi-annual reports. 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. Form N-CSR disclosure requirement is not yet effective with respect to the registrant. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Form N-CSR disclosure requirement is not yet effective with respect to the registrant. ITEM 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. Form N-CSR disclosure requirement is not applicable to semi-annual reports. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Disclose the conclusions of the registrant's principal executive and principal financial officers, or persons performing similar functions, regarding the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). IN THE OPINION OF THE PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER, BASED ON THEIR EVALUATION, THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES ARE ADEQUATELY DESIGNED AND ARE OPERATING EFFECTIVELY TO ENSURE (i) THAT MATERIAL INFORMATION RELATING TO THE REGISTRANT, INCLUDING ITS CONSOLIDATED SUBSIDIARIES, IS MADE KNOWN TO THEM BY OTHERS WITHIN THOSE ENTITIES, PARTICULARLY DURING THE PERIOD IN WHICH THIS REPORT IS BEING PREPARED; AND (ii) THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT ON FORM N-CSR IS RECORDED, PROCESSED, SUMMARIZED AND REPORTED WITHIN THE TIME PERIODS SPECIFIED IN THE SECURITIES AND EXCHANGE COMMISSION'S RULES AND FORMS. (b) Disclose any change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. THERE WERE NO CHANGES IN THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING THAT OCCURRED DURING THE REGISTRANT'S MOST RECENT FISCAL HALF-YEAR (THE REGISTRANT'S SECOND FISCAL HALF-YEAR IN THE CASE OF AN ANNUAL REPORT) THAT HAVE MATERIALLY AFFECTED OR ARE REASONABLY LIKELY TO MATERIALLY AFFECT, THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING. ITEM 10. EXHIBITS. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) 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 - (a)(2) 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). CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 ARE ATTACHED HERETO. (b) A separate or combined certification for each principal executive officer and principal officer of the registrant as required by Rule 30a-2(b) under the Act of 1940. CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 ARE ATTACHED HERETO. SIGNATURES 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 ----------------------------------------------------- Name: Frank J. Maresca Title: Vice President and Treasurer Date: December 8, 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 ----------------------------------------------------- Name: Frank J. Maresca Title: Vice President and Treasurer Date: December 8, 2003 By (Signature and Title)* /s/ Barry Sommers ------------------------------------------------------- Name: Barry Sommers Title: President Date: December 8, 2003 * Print the name and title of each signing officer under his or her signature. EX-99.302CERT 3 a2123877zex-99_302cert.txt EXHIBIT 99.302CERT Exhibit 99.302Cert CERTIFICATIONS I, Barry Sommers, President of The Bear Stearns Funds, certify that: 1. I have reviewed this report on Form N-CSR of The Bear Stearns Funds (the "registrant"); 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; 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; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. December 8, 2003 /s/ Barry Sommers - ---------------------- ----------------------------------- Date Barry Sommers President CERTIFICATIONS 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 (the "registrant"); 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; 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; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. December 8, 2003 /s/ Frank J. Maresca - ---------------------- ------------------------------- Date Frank J. Maresca Vice President and Treasurer EX-99.906CERT 4 a2123877zex-99_906cert.txt EXHIBIT 99.906CERT Exhibit 99.906Cert This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, and accompanies the report on Form N-CSR for the period ended September 30, 2003 of The Bear Stearns Funds (the "Registrant"). Each of the undersigned, being the Principal Executive Officer and Principal Financial Officer of the Registrant, hereby certifies that, to such officer's knowledge,: 1. the Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) or 78o(d)); and 2. the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. December 8, 2003 - -------------------------------- Date /s/ Frank J. Maresca ------------------------------------------- Frank J. Maresca Vice President and Treasurer /s/ Barry Sommers ------------------------------------------- Barry Sommers President A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----