-----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, GAiZmL6XsfqJeWdUh6XvUwEegxypgP2Im/6RjU5RG/Mlz9gXnwaHOT6Mm1YaKAbT Cxns8qavN00KYnhfErBltw== 0001047469-99-022687.txt : 19990625 0001047469-99-022687.hdr.sgml : 19990625 ACCESSION NUMBER: 0001047469-99-022687 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990601 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEAR STEARNS FUNDS CENTRAL INDEX KEY: 0000931145 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08798 FILM NUMBER: 99638292 BUSINESS ADDRESS: STREET 1: 245 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10167 MAIL ADDRESS: STREET 2: 245 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10167 N-30D 1 N-30D [LOGO] The Bear Stearns Funds 575 LEXINGTON AVENUE NEW YORK, NY 10022 1.800.766.4111 Michael Minikes Chairman of the Board Doni L. Fordyce President Barry Sommers Executive Vice President Peter M. Bren Trustee Alan J. Dixon Trustee John R. McKernan, Jr. Trustee M.B. Oglesby, Jr. Trustee Stephen A. Bornstein Vice President and Secretary Frank J. Maresca Vice President and Treasurer Vincent L. Pereira Assistant Treasurer INVESTMENT ADVISER DISTRIBUTOR Bear Stearns Asset Bear, Stearns & Co. Inc. Management Inc. 245 Park Avenue 575 Lexington Avenue New York, NY 10167 New York, NY 10022 ADMINISTRATOR TRANSFER AND DIVIDEND Bear Stearns Funds Management Inc. DISBURSEMENT AGENT 575 Lexington Avenue PFPC Inc. New York, NY 10022 Bellevue Corporate Center CUSTODIAN 400 Bellevue Parkway Custodial Trust Company Wilmington, DE 19808 101 Carnegie Center INDEPENDENT AUDITORS Princeton, NJ 08540 Deloitte & Touche LLP COUNSEL Two World Financial Center Kramer, Levin, New York, NY 10281 Naftalis & Frankel LLP 919 Third Avenue New York, NY 10022
This report is submitted for the general information of the shareholders of the Portfolio. It is not authorized for distribution to prospective investors in the Portfolio unless it is preceded or accompanied by a current prospectus which includes details regarding the Portfolio's objectives, policies and other information. Total investment return is based on historical results and is not intended to indicate future performance. Prime Money Market Portfolio is neither insured nor guaranteed by the U.S. Government, and there can be no assurance that the Prime Money Market Portfolio will be able to maintain a stable net asset value of $1.00 per share. BSFR-017-04 PRIME MONEY MARKET PORTFOLIO ANNUAL REPORT MARCH 31, 1999 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO LETTER TO SHAREHOLDERS April 30, 1999 Dear Shareholders: We are pleased to present you with the annual report of the Prime Money Market Portfolio (the "Portfolio") for the period ended March 31, 1999. As of March 31, 1999, the Portfolio's current yield was 4.84% and the 7-day effective yield was 4.92%. For the 12 months ended March 31, 1999, the Portfolio's total return was 5.37%, and exceeded the average total return for tier-one taxable institutional money market funds by 20 basis points as measured by IBC Financial Data, Inc.(1) As we reported in our semi-annual report dated September 30, 1998, the Portfolio received an AAAm rating (its highest) from Standard & Poors. On November 24, 1998, Moody's Investors Service assigned a money market fund rating of Aaa (its highest) to the portfolio. In its press-release, Moody's referenced the high credit quality of the Portfolio's assets and the adviser's experience, knowledge, and conservative investment policies. We are very pleased to have the highest rating from both of these premier rating services. The fourth quarter of 1998 began with financial markets in turmoil. However, after two 25 basis point reductions in the targeted Federal Funds rate (at the September 29th regularly scheduled meeting and on October 15th between regularly scheduled meetings) to a level of 5.0%, markets started to calm. If there was any doubt the Fed stood ready to provide liquidity to the system, it was removed by an additional 25 basis point reduction in the targeted Fed Funds rate (to 4.75%) at the November 17th meeting of the Federal Open Market Committee (FOMC). Credit conditions and liquidity concerns started to ease as the fourth quarter wound down. Despite international financial concerns, the U.S. economy continued its stellar performance in the 4th quarter. Spurred by robust consumer spending, 4th quarter GDP rose 6.0%. With inflation at exceptionally low levels, the economy's performance was truly spectacular. Absent the pressures of inflation, the FOMC left the targeted Fed Funds rate unchanged at both its February 3rd and March 30th-31st meetings. Also a neutral posture regarding future rate actions remained in effect. The preliminary release for 1st quarter 1999 GDP was 4.5%, and inflation pressures were absent. Several opinions have been offered to explain the continuation of the ideal economic environment that exists in the U.S., which is characterized by solid growth, low unemployment and low inflation. One school of thought, supported by Federal Reserve Board Chairman Greenspan, attributes these conditions to increases in worker productivity. This view is starting to be embraced by other members of the FOMC, who are shifting from an inclination to make preemptive strikes against inflation to a more restrained approach that looks for solid evidence of inflation before implementing increases in rates. 1 Looking forward, it appears the FOMC will continue to maintain a neutral posture for the immediate future. Our strategy in this environment continues to revolve around flexibility. We will continue to take modest positions when opportunities arise, but believe that safety of principal and liquidity are the highest priorities. We do appreciate your support and welcome your ideas and concerns. Sincerely, [SIGNATURE] Doni L. Fordyce President The Bear Stearns Funds - ------- (1) The Net Yield represents past performance which is not a guarantee of future results. Yields are net of management fees and expenses. As of March 31, 1999, there were 178 funds in the taxable First Tier - Institutional Only category, and throughout all periods, some or all of the funds, including the Prime Money Market Portfolio, reported fee waivers from time to time. Without such waivers, the reported yields would have been lower. 2 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- -------------------------------------------------------------------------------------------------- PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE DATE VALUE - -------------------------------------------------------------------------------------------------- BANKERS ACCEPTANCES -- 1.3% BANKS - DOMESTIC - 1.3% $ 5,000 Wachovia Bank N.A. [P-1, A-1+].................... 4.670% 04/19/99 $ 4,988,325 ------------- CORPORATE OBLIGATIONS -- 8.8% BANKS - FOREIGN - 0.9% 3,500 Abbey National Treasury Services plc* [P-1, A-1+]........................................... 4.785 04/01/99 3,499,060 ------------- BANKS - DOMESTIC - 5.5% 5,000 First Union National Bank* [P-1, A-1]............. 4.950 04/01/99 4,998,634 1,000 First Union National Bank [P-1, A-1].............. 5.310 09/14/99 1,000,813 2,000 J.P. Morgan & Co., Inc.* [P-1, A-1+].............. 4.855 04/07/99 1,999,741 2,000 Key Bank N.A.* [P-1, A-1]......................... 4.780 04/01/99 1,999,691 5,000 NationsBank N.A. [P-1, A-1+]...................... 5.020 04/01/99 5,000,000 4,000 Northern Trust Co.* [P-1, A-1+]................... 4.727 04/08/99 3,998,948 2,500 PNC Bank N.A.* [P-1, A-1]......................... 4.813 04/16/99 2,499,308 ------------- 21,497,135 ------------- BANKS - YANKEE - CANADA - 0.3% 1,000 Royal Bank of Canada* [P-1, A-1+]................. 4.805 04/01/99 999,433 ------------- INVESTMENT STRUCTURE - 0.8% 3,000 Sigma Finance Inc.* [P-1, A-1+]................... 4.980 04/01/99 3,000,000 ------------- SECURITIES DEALER - 1.3% 5,000 Goldman Sachs Group L.P.+ [P-1, A-1+]............. 4.951 04/07/99 5,000,000 ------------- Total Corporate Obligations (cost $28,995,628) 33,995,628 ------------- COMMERCIAL PAPER -- 41.1% ASSET-BACKED CREDIT CARDS - 2.3% 3,000 Citibank Credit Card Master Trust, Dakota Certificates [P-1, A-1+]........................ 4.890 04/07/99 2,997,555 3,000 Citibank Credit Card Master Trust, Dakota Certificates [P-1, A-1+]........................ 4.820 05/03/99 2,987,146 3,000 Citibank Credit Card Master Trust, Dakota Certificates [P-1, A-1+]........................ 4.850 06/01/99 2,975,346 ------------- 8,960,047 ------------- BANK - YANKEE - U.K. - 0.4% 1,530 Lloyds Bank plc [P-1, A-1+]....................... 5.000 04/07/99 1,528,725 -------------
The accompanying notes are an integral part of the financial statements. 3 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- -------------------------------------------------------------------------------------------------- PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE DATE VALUE - -------------------------------------------------------------------------------------------------- COMMERCIAL PAPER (CONTINUED) COMMERCIAL FINANCE - 12.8% $ 3,000 American Express Credit Corp. [P-1, A-1].......... 4.850% 04/01/99 $ 3,000,000 12,000 Caisse Des Depot [P-1, A-1+]...................... 5.080 04/01/99 12,000,000 2,900 Ford Motor Credit Corp. [P-1, A-1]................ 4.850 04/08/99 2,897,265 3,000 Ford Motor Credit Corp. [P-1, A-1]................ 4.870 04/05/99 2,998,377 3,500 Ford Motor Credit Corp. [P-1, A-1]................ 4.820 04/07/99 3,497,188 1,800 Ford Motor Credit Corp. [P-1, A-1]................ 4.860 04/09/99 1,798,056 3,000 General Electric Capital Corp. [P-1, A-1+]........ 4.850 05/13/99 2,983,025 3,000 General Electric Capital Corp. [P-1, A-1+]........ 4.830 07/21/99 2,955,323 2,000 General Electric Capital Corp. [P-1, A-1+]........ 4.830 05/25/99 1,985,510 5,000 General Motors Acceptance Corp. [P-1, A-1]........ 4.950 04/06/99 4,996,563 3,500 General Motors Acceptance Corp. [P-1, A-1]........ 5.000 04/06/99 3,497,569 5,000 IBM Credit Corp. [P-1, A-1]....................... 4.950 04/01/99 5,000,000 2,000 UBS AG [P-1, A-1+]................................ 5.010 04/19/99 1,994,990 ------------- 49,603,866 ------------- CORPORATE LOAN CONDUIT - 3.8% 2,333 Centric Capital Corp. [P-1, A-1+]................. 5.080 05/04/99 2,322,136 2,857 Centric Capital Corp. [P-1, A-1+]................. 4.880 05/06/99 2,843,445 4,000 Centric Capital Corp. [P-1, A-1+]................. 4.870 06/07/99 3,963,746 2,755 Greenwich Funding Corp. [P-1, A-1+]............... 4.880 04/26/99 2,745,664 3,000 Greenwich Funding Corp. [P-1, A-1+]............... 4.900 05/04/99 2,986,525 ------------- 14,861,516 ------------- DIVERSIFIED RECEIVABLES CONDUIT - 10.9% 5,000 Alpine Securitization Corp. [P-1, A-1+]........... 4.850 04/06/99 4,996,632 2,000 Alpine Securitization Corp. [P-1, A-1+]........... 4.950 04/20/99 1,994,775 2,500 Barton Capitol Corp. [P-1, A-1+].................. 4.860 04/05/99 2,498,650 2,000 Barton Capitol Corp. [P-1, A-1+].................. 4.910 04/13/99 1,996,727 3,000 Barton Capitol Corp. [P-1, A-1+].................. 4.900 04/20/99 2,992,242 2,577 Barton Capitol Corp. [P-1, A-1+].................. 4.900 04/26/99 2,568,231 5,001 Enterprise Funding [P-1, A-1+].................... 5.100 04/01/99 5,001,000 3,018 Enterprise Funding [P-1, A-1+].................... 4.880 04/08/99 3,015,136 3,000 Park Avenue Receivables Corp. [P-1, A-1].......... 4.880 04/20/99 2,992,273 4,000 Sheffield Receivables Corp. [P-1, A-1+]........... 4.980 04/06/99 3,997,233 4,000 Windmill Funding Corp. [P-1, A-1+]................ 4.880 04/13/99 3,993,493 4,000 Windmill Funding Corp. [P-1, A-1+]................ 4.950 04/14/99 3,992,850 2,000 Windmill Funding Corp. [P-1, A-1+]................ 4.910 04/30/99 1,992,089 ------------- 42,031,331 ------------- DIVERSIFIED OPERATIONS - 3.1% 12,000 Koch Industries Inc. [P-1, A-1+].................. 5.020 04/01/99 12,000,000 -------------
The accompanying notes are an integral part of the financial statements. 4 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- -------------------------------------------------------------------------------------------------- PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE DATE VALUE - -------------------------------------------------------------------------------------------------- COMMERCIAL PAPER (CONTINUED) INVESTMENT STRUCTURE - 1.8% $ 2,500 Sigma Finance Corp. [P-1, A-1+]................... 5.300% 04/20/99 $ 2,493,007 2,000 Sigma Finance Corp. [P-1, A-1+]................... 5.170 05/25/99 1,984,490 2,500 Sigma Finance Corp. [P-1, A-1+]................... 4.830 08/11/99 2,455,725 ------------- 6,933,222 ------------- MEDICAL-DRUGS - 1.6% 6,000 American Home Products [P-1, A-1]................. 5.030 04/01/99 6,000,000 ------------- SECURITIES DEALER - 4.4% 4,000 Credit Suisse First Boston Inc. [P-1, A-1+]....... 4.840 05/18/99 3,974,724 3,000 Credit Suisse First Boston Inc. [P-1, A-1+]....... 4.850 06/09/99 2,972,113 4,000 Goldman Sachs Group, L.P. [P-1, A-1+]............. 4.860 04/14/99 3,992,980 3,000 Morgan Stanley Dean Witter Discover & Co., (LOC) [P-1, A-1]...................................... 4.900 04/05/99 2,998,367 3,000 Morgan Stanley Dean Witter Discover & Co., (LOC) [P-1, A-1]...................................... 4.840 06/15/99 2,969,750 ------------- 16,907,934 ------------- Total Commercial Paper (cost $158,826,641)........ 158,826,641 ------------- CERTIFICATES OF DEPOSIT -- 20.8% BANKS - DOMESTIC - 1.2% 3,750 Bank of America N.A. [P-1, A-1+].................. 4.950 11/18/99 3,749,988 1,000 Chase Manhattan Bank N.A. [P-1, A-1+]............. 5.745 05/10/99 1,000,609 ------------- 4,750,597 ------------- BANKS EURO-DUTCH - 1.3% 3,000 ING Bank NV [P-1, A-1+]........................... 4.930 08/12/99 2,999,480 2,000 ING Bank NV [P-1, A-1+]........................... 5.000 09/09/99 2,000,168 ------------- 4,999,648 ------------- BANKS - YANKEE - CANADA - 3.9% 3,000 Canadian Imperial Bank [P-1, A-1+]................ 5.710 06/23/99 3,005,113 3,000 Canadian Imperial Bank [P-1, A-1+]................ 5.010 01/27/00 2,999,761 1,000 Royal Bank of Canada [P-1, A-1+].................. 5.685 06/30/99 999,885 3,000 Royal Bank of Canada [P-1, A-1+].................. 4.910 08/09/99 3,000,000 2,500 Toronto Dominion Bank Ltd.* [P-1, A-1+]........... 4.790 04/01/99 2,499,438 2,500 Toronto Dominion Bank Ltd. [P1, A1+].............. 5.640 07/14/99 2,499,572 ------------- 15,003,769 ------------- BANKS - YANKEE - FRANCE - 0.6% 2,500 Societe Generale [P-1, A-1+]...................... 5.750 04/06/99 2,500,155 -------------
The accompanying notes are an integral part of the financial statements. 5 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- -------------------------------------------------------------------------------------------------- PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE DATE VALUE - -------------------------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT (CONTINUED) BANKS - YANKEE - GERMANY - 7.0% $ 4,000 Bayerische Landesbank Girozentrale [P-1, A-1+].... 5.720% 05/06/99 $ 4,002,454 2,000 Bayerische Landesbank Girozentrale [P-1, A-1+].... 5.650 07/23/99 2,003,432 6,000 Bayerische Hypotheken-und Wechsel Bank AG [P-1, A-1+]........................................... 5.755 04/02/99 6,000,082 3,000 Deutsche Bank AG [P-1, A-1+]...................... 4.880 04/19/99 3,000,000 3,000 Dresdner Bank AG [P-1, A-1+]...................... 4.950 11/09/99 2,998,523 3,000 Norddeutsche Landesbank Girozentrale [P-1, A-1+]........................................... 5.250 03/01/00 2,998,940 3,000 Westdeutsche Landesbank Girozentrale [P-1, A-1+]........................................... 4.920 08/16/99 2,998,881 3,000 Westdeutsche Landesbank Girozentrale [P-1, A-1+]........................................... 5.160 09/17/99 3,000,775 ------------- 27,003,087 ------------- BANKS - YANKEE - NETHERLANDS - 2.1% 2,000 Rabobank Nederland NV [P-1, A-1+]................. 5.590 04/06/99 2,000,072 2,000 Rabobank Nederland NV [P-1, A-1+]................. 5.710 04/16/99 1,999,905 2,000 Rabobank Nederland NV [P-1, A-1+]................. 5.770 05/05/99 2,000,649 2,000 Rabobank Nederland NV [P-1, A-1+]................. 5.650 07/08/99 2,002,613 ------------- 8,003,239 ------------- BANKS - YANKEE - U.K. - 3.1% 3,000 Barclay's Bank plc [P-1, A-1+].................... 4.875 04/27/99 3,000,011 2,000 Barclay's Bank plc [P-1, A-1+].................... 5.030 09/07/99 2,000,491 2,000 National Westminster plc [P-1, A-1+].............. 5.740 04/28/99 1,999,858 2,000 National Westminster plc [P-1, A-1+].............. 5.738 05/07/99 2,000,028 3,000 National Westminster plc [P-1, A-1+].............. 4.980 01/10/00 2,999,099 ------------- 11,999,487 ------------- BANKS - YANKEE - SWISS - 1.6% 1,000 UBS AG [P-1, A-1+]................................ 5.705 07/02/99 1,001,440 5,000 UBS AG [P-1, A-1+]................................ 5.075 01/13/00 5,003,006 ------------- 6,004,446 ------------- Total Certificates of Deposit (cost $80,264,428).................................... 80,264,428 ------------- TIME DEPOSIT -- 2.6% 10,000 South Trust Bank N.A. (cost $10,000,000).......... 5.250 04/01/99 10,000,000 -------------
The accompanying notes are an integral part of the financial statements. 6 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- -------------------------------------------------------------------------------------------------- PRINCIPAL INTEREST/ AMOUNT DISCOUNT MATURITY (000'S) RATE DATE VALUE - -------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS** -- 25.1% $40,000 Goldman Sachs & Co., L.P.......................... 4.900% 04/01/99 $ 40,000,000 56,775 Morgan Stanley & Co. Inc.......................... 4.970 04/01/99 56,775,000 ------------- Total Repurchase Agreements (cost $96,775,000).... 96,775,000 ------------- Total Investments - 99.7% (cost $384,850,022)***.......................... 384,850,022 Other Assets in Excess of Liabilities - 0.3%...... 1,350,734 ------------- Net Assets - 100.0%............................... $ 386,200,756 ------------- -------------
- --------- * Variable Rate Obligations - The rate shown is the rate as of March 31, 1999 and the maturity date shown is the date the interest rate resets. ** See notes to the financial statements for description of underlying collateral. *** The cost of investments for federal income tax purposes is substantially the same as for financial reporting purposes. + Variable Rate Obligation. The rate is based on the three month LIBOR (London Interbank Offered Rate)-2%, with a seven day guarantee feature and a final maturity date of 11/05/99. The accompanying notes are an integral part of the financial statements. 7 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1999 ASSETS Investments, at amortized cost which approximates market value (identified and tax cost - $384,850,022)...... $384,850,022 Cash............................................ 577 Receivable from investment adviser.............. 68,162 Interest receivable............................. 2,613,744 Deferred organization expenses and other assets........................................ 69,202 ------------ Total assets.............................. 387,601,707 ------------ LIABILITIES Dividends payable............................... 1,233,456 Administration fee payable...................... 13,521 Custodian fee payable........................... 13,111 Accrued expenses................................ 140,863 ------------ Total liabilities......................... 1,400,951 ------------ NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized)..... 386,236 Paid-in capital................................. 385,850,128 Accumulated net realized loss from investments................................... (35,608) ------------ Net assets................................ $386,200,756 ------------ ------------ CLASS Y Net assets...................................... $386,200,756 ------------ Shares of beneficial interest outstanding....... 386,236,364 ------------ Net asset value, offering and redemption price per share..................................... $1.00 ------------ ------------
The accompanying notes are an integral part of the financial statements. 8 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 1999 INVESTMENT INCOME Interest........................................ $11,580,645 ----------- EXPENSES Advisory fees................................... 434,624 Accounting fees................................. 139,740 Federal and state registration fees............. 114,625 Administration fees............................. 108,656 Custodian fees and expenses..................... 48,684 Legal and auditing fees......................... 40,767 Transfer agent fees and expenses................ 25,200 Reports and notices to shareholders............. 16,711 Amortization of organization expenses........... 11,336 Insurance expenses.............................. 7,580 Rating fees and expenses........................ 6,464 Trustees' fees and expenses..................... 5,614 Other........................................... 9,605 ----------- Total expenses before waivers and related reimbursements............................. 969,606 Less: waivers and related reimbursements.... (543,660) ----------- Total expenses after waivers and related reimbursements............................. 425,946 ----------- Net investment income........................... 11,154,699 ----------- NET REALIZED LOSS ON INVESTMENTS.................. (35,565) ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................................... $11,119,134 ----------- -----------
The accompanying notes are an integral part of the financial statements. 9 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE PERIOD FISCAL YEAR JULY 14, 1997* ENDED THROUGH MARCH MARCH 31, 1999 31, 1998 --------------- -------------- INCREASE IN NET ASSETS FROM OPERATIONS Net investment income........................... $ 11,154,699 $ 3,363,564 Net realized loss on investments................ (35,565) (43) --------------- -------------- Net increase in net assets resulting from operations.................................... 11,119,134 3,363,521 --------------- -------------- DIVIDENDS TO SHAREHOLDERS FROM Net investment income........................... (11,154,699) (3,363,564) --------------- -------------- SHARES OF BENEFICIAL INTEREST** Net proceeds from the sale of shares............ 915,765,236 203,898,180 Cost of shares repurchased...................... (657,566,582) (85,207,807) Shares issued in reinvestment of dividends...... 6,577,202 2,770,134 --------------- -------------- Net increase in net assets derived from shares of beneficial interest transactions........... 264,775,856 121,460,507 --------------- -------------- Total increase in net assets.................... 264,740,291 121,460,464 NET ASSETS Beginning of period............................. 121,460,465 1 --------------- -------------- End of period................................... $386,200,756 $ 121,460,465 --------------- -------------- --------------- --------------
- -------- * Commencement of investment operations. ** Share transactions at net asset value of $1.00 per share. The accompanying notes are an integral part of the financial statements. 10 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------- Contained below is per share operating performance data for each share outstanding, total investment return, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
FOR THE PERIOD FOR THE JULY 14, 1997* FISCAL YEAR ENDED THROUGH MARCH 31, 1999 MARCH 31, 1998 --------------------- ---------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period......................... $ 1.00 $ 1.00 Net investment income(1)......... 0.0524 0.0399 -------- -------- Net increase in net assets resulting from operations...... 0.0524 0.0399 -------- -------- Dividends and distributions to shareholders from net investment income.............. (0.0524) (0.0399) -------- -------- Net asset value, end of period... $ 1.00 $ 1.00 -------- -------- -------- -------- Total investment return(2)....... 5.37% 5.72% -------- -------- -------- -------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted)....................... $ 386,201 $ 121,460 Ratio of expenses to average net assets(1)(4)................... 0.20% 0.13%(3) Ratio of net investment income to average net assets(1).......... 5.24% 5.58%(3) Increase/(decrease) reflected in above expense ratio and net investment income due to waivers and reimbursements..... 0.25% 0.52%(3)
- -------- * Commencement of investment operations. (1) Reflects waivers and 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 and distributions. (3) Annualized. (4) Without the waiver of advisory fee and without the reimbursement of certain operating expenses, the ratio of expenses to average net assets would have been 0.45% for the year ended March 31, 1999 and 0.65% annualized for the period July 14, 1997 through March 31, 1998. The accompanying notes are an integral part of the financial statements. 11 THE BEAR STEARNS FUNDS PRIME MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business trust on September 29, 1994 and is registered with the Securities and Exchange Commission (the "Commission") under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as an open-end management investment company. The Fund consists of ten separate portfolios: seven diversified portfolios, Large Cap Value Portfolio, Small Cap Value Portfolio, Income Portfolio, International Equity Portfolio, Balanced Portfolio, High Yield Total Return Portfolio and Prime Money Market Portfolio (the "Portfolio"), and three non-diversified portfolios, The Insiders Select Fund, S&P STARS Portfolio, and Focus List Portfolio. Each portfolio is treated as a separate entity for certain matters under the Investment Company Act, and for other purposes, and a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. As of the date hereof, each portfolio (except the Prime Money Market Portfolio which only offers shares designated as class Y and Focus List and International Equity which have yet to commence initial public offerings of their class Y shares) offers four classes of shares, which have been designated as class A, B, C, and Y shares. ORGANIZATIONAL MATTERS--Prior to commencing investment operations on July 14, 1997, the Portfolio did not have any transactions other than those relating to organizational matters and the sale of one class Y share to Bear, Stearns & Co. Inc. ("Bear Stearns" or the "Distributor"). Costs of $56,500 which were incurred by the Portfolio in connection with the organization, registration with the Commission and initial public offering of its shares, have been deferred and are being amortized using the straight-line method over the period of benefit not exceeding sixty months, beginning with the commencement of investment operations of the Portfolio. In the event that the Portfolio is liquidated prior to the end of the sixty month period, the Distributor or the transferee of the Distributor shall bear the unamortized deferred organization expenses. PORTFOLIO VALUATION--Portfolio securities are valued under the amortized cost method, which approximates current market value. Securities are valued at cost when purchased and thereafter a constant proportionate amortization of any discount or premium is recorded until maturity of the security. Regular review and monitoring of the valuations are performed in an attempt to avoid dilution or other unfair results to shareholders. The Portfolio seeks to maintain a net asset value of $1.00 per share, although there is no assurance that it will be able to do so on a continuing basis. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are recorded on the trade date (the date on which the order to buy or sell is executed). Realized gains and losses 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 net investment income and capital gains, if any, the Portfolio intends not to be subject to a U.S. federal excise tax. At March 31 1999, the Portfolio had a capital loss carryforward of $34,543 available as a reduction, to the extent provided in regulations of any future net capital gains realized before the end of fiscal year 2007. To the extent that the loss is used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders. For U.S. federal income tax purposes, realized capital losses incurred after October 31, 1998, within the fiscal year, are deemed to arise on the first day of the following fiscal year. The Portfolio incurred and elected to defer such losses of $1,065. 12 DIVIDENDS AND DISTRIBUTIONS--Dividends from net investment income are declared daily and paid monthly. Any net realized capital gains are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principals. 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 a 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. MANAGEMENT ESTIMATES--The preparation of financial statements in accordance with generally accepted accounting principals 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. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES For the fiscal year ended March 31, 1999, Bear Stearns Asset Management Inc. ("BSAM" or the "Adviser"), a wholly-owned subsidiary of The Bear Stearns Companies Inc., served as Adviser pursuant to an advisory agreement with the Portfolio. Under the terms of the Investment Advisory Agreement the Adviser is entitled to receive from the Portfolio a monthly fee equal to an annual rate of 0.20% of the Portfolio's average daily net assets. For the fiscal year ended March 31, 1999, 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 0.05% of the Portfolio's average daily net assets. Under the terms of an Administrative Services Agreement with the Portfolio, PFPC Inc. provides certain fund accounting and administrative services to the Portfolio. For providing these services, PFPC Inc. is entitled to receive from the Portfolio a monthly fee equal to an annual rate of 0.075% of the Portfolio's average daily net assets up to $150 million, 0.04% of the next $150 million, 0.02% of the next $300 million and 0.0125% of net assets above $600 million, subject to a minimum monthly fee of $6,250 for the Portfolio. For the fiscal year ended March 31, 1999, PFPC Inc. has voluntarily waived a portion of its fee. For the fiscal year ended March 31, 1999, the Adviser has voluntarily undertaken to limit the Portfolio's operating expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary items) to a maximum annual level of no more than 0.20% of its average daily net assets. As necessary, this limitation is effected by waivers by the Adviser of its advisory fees and reimbursements of expenses exceeding the advisory fee. For the fiscal year ended March 31, 1999, the Adviser waived advisory fees of $400,797. In addition, the Adviser reimbursed $142,863, in order to maintain the voluntary expense limitation. Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies Inc., and an affiliate of the Adviser and the Administrator, serves as custodian to the Portfolio. SHARES OF BENEFICIAL INTEREST The Portfolio currently offers class Y shares. There is no sales charge or CDSC on class Y shares, which are offered primarily to institutional investors. At March 31, 1999 there was an unlimited amount of $0.001 par value shares of beneficial interest authorized for the Portfolio, of which Bear Stearns owned 83,990,879 of class Y shares (including 1,324,653 shares acquired through dividends reinvested). 13 COLLATERAL FOR REPURCHASE AGREEMENTS Listed below is the collateral associated with the repurchase agreement with Goldman Sachs & Co., L.P. outstanding at March 31, 1999:
PRINCIPAL INTEREST MARKET ACCRUED ISSUER AMOUNT (000) MATURITY DATES RATES VALUE INTEREST TOTAL VALUE - ----------------------------------- ------------ ----------------- ----------- ----------- -------- ----------- FHLMC**............................ $224,852 04/15/99-03/01/29 5.00%-14.75% $17,280,167 $107,345 $17,387,512 FNMA*.............................. $184,729 04/25/99-05/01/29 5.00%-12.50% 23,278,222 134,266 23,412,488 ----------- -------- ----------- $40,558,389 $241,611 $40,800,000 ----------- -------- ----------- ----------- -------- -----------
Listed below is the collateral associated with the repurchase agreement with Morgan Stanley & Co. Inc. outstanding at March 31, 1999.
PRINCIPAL INTEREST MARKET ACCRUED ISSUER AMOUNT (000) MATURITY DATES RATES VALUE INTEREST TOTAL VALUE - ----------------------------------- ------------ ----------------- ----------- ----------- -------- ----------- FNMA*.............................. $169,024 04/01/19-10/01/36 6.13%-7.37% $57,859,292 326,114 $58,185,406
- --------- * Federal National Mortgage Association **Federal Home Loan Mortgage Corp. CREDIT AGREEMENT The Fund (on behalf of Prime Money Market Portfolio) has entered into a credit agreement with BankBoston, N.A. Small Cap Value Portfolio, Large Cap Value Portfolio, The Insiders Select Fund, S&P STARS Portfolio, Income Portfolio, Focus List Portfolio, Balanced Portfolio, International Equity Portfolio, High Yield Total Return Portfolio and Bear Stearns Investment Trust, which consists of the Emerging Markets Debt Portfolio, are also parties to the credit agreement. The agreement provides that each party to the credit agreement is permitted to borrow in an amount equal to the lesser of $25 million or 25% of the net assets of a Portfolio. At no time shall the aggregate outstanding principal amount of all loans to any of the Portfolios exceed $25 million. Each Portfolio as a fundamental policy is permitted to borrow in an amount up to 33 1/3% of the value of such Portfolio's assets. However, each Portfolio currently intends to borrow money only for temporary or emergency (not leveraging) purposes in an amount up to 15% (10% for the Emerging Markets Debt Portfolio) of its net assets. The line of credit will bear interest at the greater of: (i) the annual rate of interest announced from time to time from the bank at its head office as its Base Rate, or (ii) the Federal Funds Rate plus 0.50%, or at the borrower's option, the rate quoted by BankBoston, N.A. Each loan is payable on demand or upon termination of this credit agreement or, for money market loans, on the last day of the interest period and, in any event, not later than 14 days from the date the loan was advanced. The Portfolio had no amounts outstanding under the line of credit agreement during the fiscal year ended March 31, 1999. 14 REPORT OF INDEPENDENT AUDITORS The Board of Trustees and Shareholders, Prime Money Market Portfolio (A Series of The Bear Stearns Funds): We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Prime Money Market Portfolio (the "Portfolio") as of March 31, 1999, and the related statements of operations, changes in net assets and the financial highlights for the periods presented. These financial statements and the financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Prime Money Market Portfolio as of March 31, 1999, the results of its operations, the changes in its net assets, and the financial highlights for each of the periods presented in conformity with generally accepted accounting principles. Deloitte & Touche LLP New York, New York May 14, 1999 15 -----END PRIVACY-ENHANCED MESSAGE-----