-----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, VnUe5i2PPWLySfyS6kkyMtHaO2MtmORnJhCFPbmp5Cv3VFuNz4+9SK33Rwcdd8aw fg1/ofBRHjiy6Ux6v+Y/aQ== 0001047469-99-022691.txt : 19990625 0001047469-99-022691.hdr.sgml : 19990625 ACCESSION NUMBER: 0001047469-99-022691 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: 99638294 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 COUNSEL Bear Stearns Asset Kramer Levin Management Inc. Naftalis & Frankel LLP 575 Lexington Avenue 919 Third Avenue New York, NY 10022 New York, NY 10022 SUB-ADVISER DISTRIBUTOR INTERNATIONAL EQUITY Bear, Stearns & Co. Inc. PORTFOLIO 245 Park Avenue Marvin & Palmer New York, NY 10167 Associates, Inc. TRANSFER AND DIVIDEND 1201 N. Market Street DISBURSEMENT AGENT Suite 2300 PFPC Inc. Wilmington, DE 19801 Bellevue Corporate Center ADMINISTRATOR 400 Bellevue Parkway Bear Stearns Funds Wilmington, DE 19809 Management Inc. INDEPENDENT AUDITORS 575 Lexington Avenue Deloitte & Touche LLP New York, NY 10022 Two World Financial Center CUSTODIAN New York, NY 10281 Custodial Trust Company 101 Carnegie Center Princeton, NJ 08540
This report is submitted for the general information of the shareholders of each Portfolio. It is not authorized for distribution to prospective investors in each Portfolio unless it is preceded or accompanied by a current prospectus which includes details regarding each Portfolio's objectives, policies, sales commissions and other information. Total investment return is based on historical results and is not intended to indicate future performance. The investment return and principal value of an investment in each Portfolio will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. "Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-", and "STARS-Registered Trademark-" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Bear, Stearns & Co. Inc. S&P STARS Portfolio is not sponsored, managed, advised, sold or promoted by Standard & Poor's. BSF-R-015-04 S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio Annual Report March 31, 1999 THE BEAR STEARNS FUNDS S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio LETTER TO SHAREHOLDERS April 30, 1999 Dear Shareholders: We are pleased to present the annual report to shareholders for the S&P STARS Portfolio ("S&P STARS"), The Insiders Select Fund ("Insiders Select"), Large Cap Value Portfolio ("Large Cap"), Small Cap Value Portfolio ("Small Cap"), Focus List Portfolio ("Focus List"), Balanced Portfolio ("Balanced") and International Equity Portfolio ("International Equity") (each a "Portfolio" and collectively the "Portfolios") for the fiscal year ended March 31, 1999. Detailed performance data for each class of shares of each Portfolio can be found in the "Financial Highlights" and in the line graph sections of this report. The twelve months ended March 31, 1999, were an extremely volatile period for the world's financial markets. The specter of ailing economies in Asia had haunted the markets since the summer of 1997, so that when Russia devalued its currency and defaulted on its debt in August 1998, nervous markets fell precipitously worldwide. In a classic "flight to quality" investors sought the safest investment they could find, namely U.S. Treasury bonds. The situation was made worse by fears of a major hedge fund collapse a month later. Stock markets worldwide plummeted in September and October, but then began a rapid recovery as central banks lowered interest rates and these problems were viewed as contained. The U.S. market rally that started in the fall was fueled by investor appetite for growth stocks, particularly technology, communications and Internet-related stocks. On March 29, 1999 the Dow Jones Industrial Average closed above 10,000 for the first time and the broader averages flirted with their all-time highs. However, market activity was narrow. Roughly one-third of the performance of the Standard & Poor's 500 Composite Index, ("S&P 500 Index"), came from just two stocks, Microsoft Corp. and America Online Inc. The divergence between large- and small-cap stocks widened dramatically -- as indicated by the Russell 2000 Index's decline of more than 16% for the twelve month period and value stocks continued to languish. Despite concerns about the market's lofty valuations, these new levels are supported by good economic news that is getting better. The U.S. economy is growing at a healthy 3-3 1/2% annual rate, and unemployment remains at near-historical lows with only a trace of inflation. Consumer spending, which accounts for two-thirds of Gross Domestic Product growth, is high, and so far in 1999 corporate profits have been much stronger than had been expected. In addition to the supportive domestic backdrop, the international environment has improved. Brazil, which appeared on the verge of financial collapse early this year when it devalued its currency, has kept its head above water. Best of all, Asia appears to be on the mend. Japan is beginning to implement structural reforms that lead us to believe it may be able to pull itself out of recession, which provides support for other countries in Asia -- which, in turn, is good news for U.S. companies that do business overseas. S&P STARS PORTFOLIO For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of 27.46% (without giving effect to the sales charge), and Class B and C shares had a total return of 26.75% (without giving effect to the contingent deferred sales charge, or "CDSC")(1). The Portfolio's benchmark, the S&P 500 Index, returned 18.46% for the same period. 1 With a firm belief in the vital role technology will play in shaping business and economic growth, we were well represented in computer software and systems, communications and Internet stocks throughout the period. As of March 31, 1999, our largest holdings included Cisco Systems, Inc. (6.28% of net assets), EMC Corp. (4.41%), MCI Worldcom, Inc. (3.49%) and Sprint Corp. (PCS Group) (3.71%). While they did not have the "sizzle" of technology and Internet-related issues, health care and pharmaceutical stocks were also strong performers over the twelve months. However, given the uncertainty about exposure to currency problems in world markets, the financial sector underperformed. Throughout the period, we reduced or reallocated exposures here toward companies with a more domestic orientation such as Staples, Inc. (2.96%) and Eaton Vance Corp. (0.74%). MAINTAINING A FOCUS ON "GROWTH AT A REASONABLE PRICE" Small and mid-cap stocks, regardless of their fundamental strengths or growth prospects, were left behind in the market rally. At the period's end, the small-cap sector was the cheapest it has been relative to large caps in decades. Our small-cap holdings included Consolidated Products, Inc. (1.08%), RehabCare Group, Inc. (0.82%) and the Gartner Group, Inc. (0.95%) -- all of which represent our strategy of investing in companies that have projected long-term growth rates well above that of the S&P 500 Index, but which are inexpensive by standard valuation measures. Without a dramatic shift in sentiment, mid-cap and smaller issues are likely to perform better than large growth stocks in the immediate future. We believe that domestic economic growth and corporate earnings will be higher than anticipated, which should favor value stocks. On the other hand, well positioned large-cap growth issues will continue to offer investors relative predictability and consistent cash flow. Although we will continue to emphasize large-cap growth stocks, we will build additional positions in the small-cap sector, where we expect to to find more compelling opportunities that represent growth at a reasonable price. THE INSIDERS SELECT FUND For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of 0.29% (without giving effect to the sales charge), and Class B and C shares had a total return of (0.16)% (without giving effect to the CDSC)(2). The Portfolio's benchmark, the S&P MidCap 400 Index, returned 0.43% for the same period. Throughout the first half of the Portfolio's fiscal year, volatility and weakness in mid- and small-cap stocks made it somewhat difficult to find companies with attractive insider situations. The financial sector was particularly hard hit as investors worried about the impact of a slowing economy and exposure to emerging markets. But as the stock market firmed in the fall, confidence returned and we bought Citigroup Inc. (3.78% of net assets). Our positions in technology and manufacturing companies such as United Technologies Corp. (4.45%) recovered and gained ground. FINDING VALUE IN MARKET LAGGARDS The tone of insider buying was generally mixed over the course of the Portfolio's fiscal year. While the August-September market correction created dramatically lower valuations, buying enthusiasm was dampened by market volatility. Moreover, sentiment throughout the period favored large-cap growth stocks -- and mid-cap value stocks lagged. As a result, many attractive situations in neglected sectors grew even more attractive as the period progressed. As large-cap growth stocks led the market to new highs by the end of March, investors began to question valuations in some of these issues. While a powerful buying trend in value stocks and mid-cap stocks has not materialized, interest in these holdings has become far greater than it had been in some time. Consequently, having focused on companies with strong fundamentals and solid growth prospects, the Fund benefited from the strong relative performance of many of its larger holdings including WPP Group plc (5.69% of net assets), The Dun & Bradstreet Corp. (5.07%), United Technologies Corp., American Express Co. (4.38%) and Johnson & Johnson (4.11%) -- all of which posted strong gains in the first quarter of 1999. We will continue to maintain our discipline of purchasing mid-to-large-cap value stocks with positive fundamentals and compelling insider buying and/or share repurchases. These stocks generally have much lower valuations than their respective index and tend to provide a defensive position in volatile markets. We believe this strategy will be particularly effective considering that the U.S. economy is expected to slow over the next few years. 2 LARGE CAP VALUE PORTFOLIO For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of 3.68% (without giving effect to the sales charge) and Class B and Class C shares had a total return of 3.21% and 3.22%, respectively, (without giving effect to the CDSC)(3). The Portfolio's benchmark, the S&P 500 Index, returned 18.46% for the same period. When Large Cap's fiscal year ended, leading stock market indices were very near their all-time highs. However, these levels primarily reflected a continuation of the pattern set in early 1998: Bigger is better, and big technology stocks are best of all. Investors favored these growth stocks despite their historically high valuations and ignored stocks with more favorable fundamentals. As a result, with technology representing roughly 20% of the S&P 500 Index at period's end, our underweighted position in this sector held back performance. We have adhered to our strategy of seeking out stocks of companies exhibiting above-average growth that trade at discounts to the market of 25% or more, since we believe the market will ultimately reward these stocks with prices that reflect their inherent worth. While we have confidence in our approach, our performance has lagged the market by forces affecting all value managers. In general, Large Cap has benefited from the relatively strong performance of its holdings in the financial services sector, which began to rally last fall when the Federal Reserve lowered interest rates. Given the high levels of employment and consumer confidence, our consumer-oriented stocks also had strong returns. For example, McDonald's Corp. (3.57% of net assets) performed well in the first quarter of 1999, reflecting the effects of a change in management eighteen months ago that has resulted in tighter cost controls, increased cash flow, an aggressive share repurchase program as well as an improved product -- all of which have enhanced shareholder value. Although shares of The Bank of New York Co., Inc. (3.33%), one of our largest holdings, declined during the latest quarter due to acquisition costs, one of its purchases -- the Royal Bank of Scotland's custody unit -- makes The Bank of New York Co., Inc. the world's largest custodian. It is because of the bank's dominant position in its business and the kind of strong numbers we like to see, such as a lower expense ratio than its peers and bottom-line growth above the market's, that we are optimistic about its prospects. A FOCUS ON EARNINGS GROWTH THAT EXCEEDS THE MARKET'S As we begin the next fiscal year, we remain overweighted in financial stocks, a sector that we expect to generate earnings growth in excess of the market's over the next 12 to 24 months while selling at relative valuations well below its historic averages. In addition to The Bank of New York Co., Inc., examples include Citigroup Inc. (2.96%), which is beginning to see the benefits of the merger of Citicorp and Travelers, and PNC Bank Corp. (2.91%), a well-run regional bank selling at a discount to the market. We also remain biased toward consumer stocks, particularly those companies undergoing positive changes in their businesses, such as the auto makers, or those experiencing accelerating earnings growth, such as restaurants. Although the Portfolio remains underweighted in technology, we expect that given the high valuations and volatility in this sector we will have opportunities to increase our exposure at more attractive valuations before year-end. SMALL CAP VALUE PORTFOLIO* For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of (20.26)% (without giving effect to the sales charge), and Class B and C shares had a total return of (20.63)% and (20.67)%, respectively, (without giving effect to the CDSC)(4). The Portfolio's benchmark, the Russell 2000 Index returned (16.20)% for the same period, and the Russell 2000 Value Index returned (22.03)%. Although small-capitalization stocks rallied late last year, they still lag far behind large-capitalization issues. In fact, while the S&P 500 Index, which is dominated by large-cap growth stocks, rose by nearly 5% in the three months ending March 31, 1999, the Russell 2000 Index fell by more than 5%. These numbers highlight both the narrowness of the overall stock market and the growing disparity between large- and small-cap issues. When components of the indices are broken out, the disparities between the growth and value sectors are apparent as well. For example, during the last quarter, the Russell 2000 Growth Index was down nearly 2% while the Russell 2000 Value Index dropped almost 10%. So although we have confidence in our holdings, the Portfolio has been pulled down by factors affecting all value managers, particularly those investing in small-cap stocks. 3 The same big question remains, just as it did last year: How long will these disparities continue, fueled as they are by investors' willingness to pay for earnings multiples in the high 20's for large/mega-cap stocks, while ignoring small caps -- particularly small-cap value stocks with roughly half these earnings multiples? FUNDAMENTALS FAVOR SMALL-CAP STOCKS We believe that the gap will close this year. However, a specific catalyst other than valuation remains elusive. As the Dow Jones Industrial Average broke through the 10,000-level, the concentration of strong performers seemed to beg for a broadening of gains by other types of companies. As we said in our last report, standard valuation measures show small-cap stocks at 20-year lows compared to large caps. These yardsticks include price-to-cash flow, price-to-earnings (both trailing and forward), price-to-book, and price-to-sales ratios. Ironically, this has occurred while two measures of internal operations and fundamentals and not market valuations -- return on equity and operating margins -- show a favorable trend for small-caps relative to large caps. Our strategy continues to focus on investing in a limited number of high-quality small-cap companies with value characteristics combined with a catalyst that we believe should lead to higher stock prices. The Portfolio consists of 35 to 45 companies, with a concentration in the largest positions. These, our favorite holdings, include U.S. Franchise System, Inc. (6.92% of net assets), Steiner Leisure Ltd. (6.06%), Butler International, Inc. (5.36%) and Cox Radio, Inc. (3.89%). We have brought up our weighting in the technology sector by taking advantage of companies with positive fundamentals and outlook, but whose stocks are trading at multiples we believe do not value the companies at an appropriate price. FOCUS LIST PORTFOLIO For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of 29.47% (without giving effect to the sales charge), and Class B and C shares had a total return of 28.61% and 28.69%, respectively (without giving effect to the CDSC)(5). The Portfolio's benchmark, the S&P 500 Index returned 18.46% for the same period. During the past twelve months, market sentiment favored the biggest and best-known growth stocks, particularly technology and Internet issues, which led the market to record levels at the end of March. The Portfolio's performance benefited from its holdings in these sectors, including America Online, Inc. (17.96% of net assets), EMC Corp. (8.22%) and Intel Corp. (3.33%). The Portfolio also participated in the rally in media and telecommunications stocks with positions in several of the largest players including Time Warner Inc. in the U.S. (4.87%) and Vodafone Group plc (5.12%), a leading global wireless network operator based in the U.K. Lacking the size and glamour of these issues, virtually all other sectors lagged. Investors continued to favor growth and were willing to pay for it. By period's end, valuations in the market's favorites were stretched, and we expect to see interest in sectors beyond the favored few revive as the corporate profit recovery we have seen this year gathers steam. MARKETS ON FIRMER FOOTING IN 1999 We are more optimistic about the prospects for the world's markets in 1999 than we were in 1998. Asian markets are on the rebound, and Brazil's financial problems have been contained. Although commodity prices are rising, we view this as a sign that economies are reviving, rather than as a harbinger of inflation. As a result, toward the end of the period, we added positions in energy and basic materials, two sectors with the potential to surprise on the upside as the climate improves. BALANCED PORTFOLIO For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of 4.07% (without giving effect to the sales charge), and Class B and C shares had a total return of 3.56% (without giving effect to the CDSC)(6). The Portfolio's benchmarks, the Lipper Balanced Fund Index and S&P 500 Index, returned 8.36% and 18.46%, respectively, for the same period. Following its balanced approach to investing, the Portfolio typically allocates between 40% and 60% of its assets to both equity and fixed income investments, with the exact percentage determined by an analysis of current economic and market conditions. As a result of price appreciation in many holdings as the stock market rallied, the Portfolio maintained its bias toward stocks during the six months ending March 31, 1999. Large growth companies, particularly those in technology, remained the market leaders. As a result, our underweighted position in this sector held back performance. While earnings growth in this group will undoubtedly continue to outpace the market's, this positive outlook appears to be built into current valuations without taking into consideration the inherent volatility of earnings and prices. 4 Also affecting performance were declines in holdings such as Philip Morris Cos. Inc. (0.95% of net assets), which lost two unexpectedly large lawsuits in early 1999, and The Bank of New York Co., Inc. (1.47%), whose share price weakened on the announcement of several acquisitions. The largest, Royal Bank of Scotland's custody unit, makes The Bank of New York Co., Inc. the world's largest custodian. We are optimistic about the stock's prospects because of the bank's dominant position in its business and its strong numbers -- a higher efficiency ratio than its peers and bottom-line growth above the market's coupled with a lower P/E multiple. Partially offsetting these disappointments was our overweighting in other sectors including consumer stocks, which generally performed well. McDonald's Corp. (1.83%), for example, had a strong quarter, reflecting the effects of a management change 18 months ago that has resulted in tighter cost controls, increased cash flow, an aggressive share repurchase program and an improved product, which have enhanced shareholder value. FINDING VALUE IN FINANCIAL STOCKS We have overweighted the stock portion of the Portfolio with financials, a sector we expect to generate earnings growth in excess of the market's over the next 12 to 24 months while selling at relative valuations well below their historical averages. We also remain biased toward consumer stocks, with an emphasis on companies undergoing positive changes in their businesses or experiencing accelerating earnings growth. While the Portfolio remains underweighted in technology, we expect that the sector's high valuations and its inherent volatility will create opportunities that meet our value criteria before year-end. Toward the end of the period, the fixed income portion of the Portfolio benefited from its overweighting in agency and corporate issues, resulting from purchases we made last fall when spreads had widened substantially. These sectors have recovered as relative calm returned to the financial markets. We expect to continue to find opportunities as spreads narrow, although there probably will not be the same exaggerated upside potential as before. In general, we will continue to seek opportunities that build yield, while maintaining high credit quality and minimizing volatility. INTERNATIONAL EQUITY PORTFOLIO** For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of 9.97%(7) (without giving effect to the sales charge), and Class B and C shares had a total return of 9.48% (without giving effect to the CDSC)(7). The Portfolio's benchmark, the Morgan Stanley Capital International Europe, Australasia, Far East (EAFE) Index returned 6.06% for the same period. The twelve month period ended March 31, 1999, was especially volatile for investors in international markets, which were clouded by lingering currency troubles in Asia and then battered by the summer meltdown of the Russian economy. This was followed later in the year by fears that the "Asian flu" would spread to Latin America. By year-end 1998, equity prices had declined significantly -- and no market was spared. However, stability began to return in the fall and winter due to interest rate cuts by central banks worldwide. This helped ease pressures on Asian economies and also indicated the central banks' willingness to act to spur economic growth. In addition, an aid package from the International Monetary Fund provided Brazil with relief, and the Japanese government began to implement structural reforms. During the twelve month period, we remained heavily invested in Europe, which as a region, was the most stable and had the most solid growth prospects. However, our industry emphasis shifted -- for example, away from large banks with heavy international exposure -- as conditions changed. In addition, as stability returned to the Asian markets, we gradually built exposure there. CONFIDENCE BUILDS IN JAPAN Over the period, we increased our holdings in Japan from approximately 3% to more than 20% by the end of March. We added to holdings in Fujitsu Ltd. (1.56% of net assets), a global supplier of information technology products, and Sony Corp. (1.99%) and added Softbank Corp. (0.47%), which markets computer software, networking products and services. As in other markets worldwide, technology and technology-related issues like these led the Japanese market higher. Markets in Singapore and Hong Kong also revived in early 1999. Given the healthier environment, we will consider building positions in Asia on a market-by-market basis. By contrast, economic growth forecasts were lowered in Europe over the past twelve months. Early in the period, a strong consolidation trend and attractive valuations had created a positive environment, particularly for the financial sector, until the 5 Russian crisis hit last summer. This caused us to turn our attention to more domestically oriented sectors such as telecommunications, and we built positions in such companies as Vodafone Group plc (3.60%) and COLT Telecom Group plc (2.30%) in the U.K., France Telecom SA (1.03%) and Swisscom AG (0.54%). As markets elsewhere strengthened, European markets did not recover as quickly. This was primarily due to concerns about the socialist posture of many European governments and to slowing economic growth resulting from the downturn in Asia. With the climate less positive as 1999 began, we reduced holdings in a number of the pharmaceutical and telecommunications issues that had performed so strongly in the recent past. With the ouster of the German Minister of Finance in March, the German market and others across the continent stabilized. Looking ahead, we are optimistic that the environment in Europe will continue to improve as the consolidation trend in such industries as financial services and telecommunications continues. We also believe that the prospects for Asia are positive. Historically, however, the markets have not ignored conflicts or external events. Any expansion or escalation of the military action in Yugoslavia could have negative repercussions, not only in the European markets but worldwide. In conclusion, we value the confidence you have placed in us and would be pleased to address any questions or concerns you may have. Please feel free to call us at 1-800-766-4111. Sincerely, /s/ Doni L. Fordyce Doni L. Fordyce President The Bear Stearns Funds - ------- * Small-cap funds typically carry additional risks, since smaller companies generally have a higher risk of failure than well-established larger companies. Historically, stocks of smaller companies have experienced a greater degree of market volatility than stocks on average. **International investing involves risks such as currency exchange-rate volatility, possible political, social, or economic instability and differences in taxation and other financial standards. (1) For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of 20.46%, including the initial 5.50% maximum sales charge and Class B shares returned 21.75% including the 5.00% CDSC and Class C shares returned 25.75%, including the 1.00% CDSC. (2) For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of (5.22)%, including the initial 5.50% maximum sales charge and Class B shares returned (4.90)%, including the 5.00% CDSC and Class C shares returned (1.11)%, including the 1.00% CDSC. (3) For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of (2.02)%, including the initial 5.50% maximum sales charge and Class B shares returned (1.51)%, including the 5.00% CDSC and Class C shares returned 2.27% including the 1.00% CDSC. (4) For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of (24.66)%, including the initial 5.50% maximum sales charge and Class B shares returned (24.40)%, including the 5.00% CDSC and Class C shares returned (21.43)%, including the 1.00% CDSC. (5) For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of 22.35%, including the initial 5.50% maximum sales charge and Class B shares returned 23.61%, including the 5.00% CDSC and Class C shares returned 27.69%, including the 1.00% CDSC. (6) For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of (1.63)%, including the initial 5.50% maximum sales charge and Class B shares returned (1.44)%, including the 5.00% CDSC and Class C shares returned 2.56%, including the 1.00% CDSC. (7) For the fiscal year ended March 31, 1999, the Portfolio's Class A shares had a total return of 3.93%, including the initial 5.50% maximum sales charge and Class B shares returned 4.48%, including the 5.00% CDSC and Class C shares returned 8.48%, including the 1.00% CDSC. Bear Stearns Asset Management Inc. waived all or a portion of its advisory fee and agreed voluntarily to reimburse a portion of each Portfolio's operating expenses, as necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. 6 THE BEAR STEARNS FUNDS S&P STARS Portfolio COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(3)(6) VS. ITS BROAD-BASED INDEX EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CLASS A SHARES CLASS C SHARES S&P 500 COMPOSITE INDEX Apr. 5 1995 $9,525.00 $10,000.00 $10,000.00 $10,571.43 $11,083.33 $10,848.00 Sept. 30, 1995 $11,444.45 $11,975.00 $11,709.00 $11,644.82 $12,170.34 $12,411.00 Mar. 31, 1996 $12,158.20 $12,691.32 $13,074.00 $12,304.88 $12,836.51 $13,659.00 Sept. 30, 1996 $13,282.76 $13,835.76 $14,076.00 $14,878.37 $15,471.38 $15,247.00 Mar. 31, 1997 $14,208.88 $14,763.54 $15,653.00 $16,411.13 $17,034.15 $18,384.00 Sept. 30, 1997 $19,353.33 $20,058.56 $19,757.00 $17,555.43 $18,171.88 $20,323.94 Mar. 31, 1998 $20,394.52 $21,081.93 $23,158.89 $21,569.24 $22,260.41 $23,923.00 Sept. 30, 1998 $19,056.42 $19,647.04 $21,544.00 $24,523.71 $25,254.31 $26,131.00 Mar. 31, 1999 $25,999.13 $26,722.00 $27,433.00 Past performance is not predictive of future performance. S&P STARS PORTFOLIO Class A shares $25,999 Class C shares 26,722 S&P 500 Composite Index 27,433
TOTAL RETURNS
ONE YEAR ENDED AVERAGE MARCH 31, 1999 ANNUAL(4) ------------------- ------------------- S&P STARS Portfolio(2) Class A shares(5).............. 20.46% 27.04% Class B shares(6).............. 21.75 31.99 Class C shares(7).............. 25.75 27.92 Class Y shares(3).............. 28.02 26.60 S&P 500 Composite Index(1)......... 18.46 28.76
- --------- (1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio and reflects all Portfolio expenses. Investors should note that the Portfolio is a professionally managed mutual fund while the index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to voluntarily reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The return of Class Y shares (for which August 7, 1995 was the initial public offering date) would have been higher than Class A and C shares if operations were commenced on the same day. The higher return is due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) For the period of April 5, 1995 (commencement of investment operations) through March 31, 1999 for Class A and C shares. (5) Reflects the initial maximum sales charge in effect, 5.50% and 4.75%, respectively, for each period shown. Without the applicable sales charge, the total returns would have been 27.46% and 28.61%, respectively, for each period shown. (6) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total returns would have been 26.75% and 35.01%, respectively, for each period shown. Assuming no redemption of shares at the end of the period, the return of Class B shares (for which January 5, 1998 was the initial public offering date) would have been higher than Class A shares and would have been substantially the same as Class C shares if operations were commenced on the same day. The higher return is due to the fact that there is no initial sales charge on Class B shares. (7) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total return for the one year ended March 31, 1999 would have been 26.75%. CDSC -- Contingent Deferred Sales Charge. 7 THE BEAR STEARNS FUNDS The Insiders Select Fund COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(3)(6) VS. ITS BROAD-BASED INDEX EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CLASS A SHARES CLASS C SHARES S&P MIDCAP 400 INDEX (1) June 16, 1995 $9,525.00 $10,000.00 $10,000.00 $9,579.40 $10,066.67 $10,134.00 Sept 30, 1995 $10,468.20 $10,975.00 $11,123.00 $10,801.00 $11,316.67 $11,280.00 Mar 31, 1996 $11,118.70 $11,633.30 $11,974.00 $11,682.50 $12,200.00 $12,319.00 Sept 30, 1996 $12,206.70 $12,733.33 $12,681.00 $13,109.80 $13,662.60 $13,448.00 Mar 31, 1997 $13,155.00 $13,691.00 $13,249.00 $15,194.10 $15,799.50 $15,197.00 Sept 30, 1997 $16,755.00 $17,387.90 $17,639.00 $16,995.90 $17,614.80 $17,785.00 Mar 31, 1998 $19,209.00 $19,874.30 $19,743.00 $19,122.56 $19,772.94 $19,319.00 Sept 30, 1998 $15,963.51 $16,478.77 $16,525.00 $18,573.54 $19,151.63 $21,181.00 Mar 31, 1999 $19,264.48 $19,839.17 $19,828.00 Past performance is not predictive of future performance. THE INSIDERS SELECT FUND Class A shares $19,264 Class C shares 19,839 S&P Midcap 400 Index 19,828
TOTAL RETURNS
ONE YEAR ENDED AVERAGE MARCH 31, 1999 ANNUAL(4) ------------------- ------------------- The Insiders Select Fund(2) Class A shares(5).............. (5.22)% 18.86% Class B shares(6).............. (4.90) 6.72 Class C shares(7).............. (1.11) 19.79 Class Y shares(3).............. 0.85 20.71 S&P MidCap 400 Index(1)............ 0.43 19.77
- --------- (1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio and reflects all Portfolio expenses. Investors should note that the Portfolio is a professionally managed mutual fund while the index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to voluntarily reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The return of Class Y shares (for which June 20, 1995 was the initial public offering date) would have been higher than Class A and C shares if operations were commenced on the same day. The higher return is due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) For the period of June 16, 1995 (commencement of investment operations) through March 31, 1999 for Class A and C shares. (5) Reflects the initial maximum sales charge in effect, 5.50% and 4.75%, respectively, for each period shown. Without the applicable sales charge, the total returns would have been 0.29% and 20.40%, respectively, for each period shown. (6) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total returns would have been (0.16)% and 9.90%, respectively, for each period shown. Assuming no redemption of shares at the end of the period, the return of Class B shares (for which January 6, 1998 was the initial public offering date) would have been higher than Class A shares and substantially the same as Class C shares if operations were commenced on the same day. The higher return is due to the fact that there is no initial sales charge on Class B shares. (7) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total return for the one year ended March 31, 1999 would have been (0.16)%. CDSC -- Contingent Deferred Sales Charge. 8 THE BEAR STEARNS FUNDS Large Cap Value Portfolio COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(3)(6) VS. ITS BROAD-BASED INDEX EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CLASS A SHARES CLASS C SHARES S&P 500 COMPOSITE INDEX Apr. 4 1995 $9,525.00 $10,000.00 $10,000.00 $10,191.75 $10,683.33 $10,800.00 Sept. 30, 1995 $11,295.06 $11,825.00 $11,700.00 $11,915.10 $12,462.52 $12,375.00 Mar. 31, 1996 $12,034.41 $12,570.89 $13,075.00 $12,042.36 $12,562.55 $13,150.00 Sept. 30, 1996 $12,257.12 $12,770.96 $14,095.00 $13,626.63 $14,178.46 $15,400.00 Mar. 31, 1997 $13,892.10 $14,440.30 $15,763.00 $16,335.50 $16,955.40 $18,600.00 Sept. 30, 1997 $17,524.90 $18,162.20 $19,895.00 $17,858.50 $18,481.30 $20,467.00 Mar. 31, 1998 $20,008.60 $20,785.20 $23,321.00 $20,220.69 $20,976.42 $24,091.21 Sept. 30, 1998 $17,646.60 $18,280.95 $21,694.71 $20,584.76 $21,289.99 $26,314.47 Mar. 31, 1999 $20,763.85 $21,453.93 $27,626.52 Past performance is not predictive of future performance. LARGE CAP VALUE PORTFOLIO Class A shares $20,764 Class C shares 21,454 S&P 500 Composite Index 27,627
TOTAL RETURNS
ONE YEAR ENDED AVERAGE MARCH 31, 1999 ANNUAL(4) ------------------- ------------------- Large Cap Value Portfolio(2) Class A shares(5).............. (2.02)% 20.14% Class B shares(6).............. (1.51) 11.31 Class C shares(7).............. 2.27 21.04 Class Y shares(3).............. 4.29 19.98 S&P 500 Composite Index(1)......... 18.46 28.94
- --------- (1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio and reflects all Portfolio expenses. Investors should note that the Portfolio is a professionally managed mutual fund while the index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to voluntarily reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The return of Class Y shares (for which September 11, 1995 was the initial public offering date) would have been higher than Class A and C shares if operations were commenced on the same day. The higher return is due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) For the period of April 4, 1995 (commencement of investment operations) through March 31, 1999 for Class A and C shares. (5) Reflects the initial maximum sales charge in effect, 5.50% and 4.75%, respectively, for each period shown. Without the applicable sales charge, the total returns would have been 3.68% and 21.62%, respectively, for each period shown. (6) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total returns would have been 3.21% and 14.62%, respectively, for each period shown. Assuming no redemption of shares at the end of the period, the return of Class B shares (for which January 28, 1998 was the initial public offering date) would have been higher than Class A shares and substantially the same as Class C shares if operations were commenced on the same day. The higher return is due to the fact that there is no initial sales charge on Class B shares. (7) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total return for the one year ended March 31, 1999 would have been 3.22%. CDSC -- Contingent Deferred Sales Charge. 9 THE BEAR STEARNS FUNDS Small Cap Value Portfolio COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A AND C SHARES(1)(2)(3)(6) VS. ITS BROAD-BASED INDEX EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CLASS A SHARES CLASS C SHARES RUSSELL 2000 INDEX Apr. 3 1995 $9,525.00 $10,000.00 $10,000.00 $10,342.56 $10,841.67 $10,901.00 Sept. 30, 1995 $12,057.06 $12,625.00 $11,969.00 $12,127.79 $12,673.20 $12,231.00 Mar. 31, 1996 $12,797.08 $13,358.47 $12,852.00 $14,240.48 $14,847.44 $13,511.00 Sept. 30, 1996 $14,248.54 $14,822.06 $13,556.00 $14,001.67 $14,552.87 $14,248.00 Mar. 31, 1997 $14,294.60 $14,844.60 $13,512.00 $16,600.07 $16,433.30 $15,697.00 Sept. 30, 1997 $18,669.70 $19,337.30 $18,028.00 $18,570.10 $19,212.30 $17,416.11 Mar. 31, 1998 $20,993.50 $21,687.80 $19,213.00 $20,300.71 $20,948.25 $18,334.00 Sept. 30, 1998 $15,000.19 $15,461.90 $14,260.00 $18,306.23 $18,834.14 $17,025.00 Mar. 31, 1999 $16,739.39 $17,204.10 $16,100.00 Past performance is not predictive of future performance. SMALL CAP VALUE PORTFOLIO Class A shares $16,739 Class C shares 17,204 Russell 2000 Index 16,100
TOTAL RETURNS
ONE YEAR ENDED AVERAGE MARCH 31, 1999 ANNUAL(4) ------------------- ------------------- Small Cap Value Portfolio(2) Class A shares(5)......... (24.66)% 13.76% Class B shares(6)......... (24.40) (8.58) Class C shares(7)......... (21.43) 14.54 Class Y shares(3)......... (19.84) 13.97 Russell 2000 Index(1)......... (16.20) 12.65
- --------- (1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio and reflects all Portfolio expenses. Investors should note that the Portfolio is a professionally managed mutual fund while the index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to voluntarily reimburse a portion of the Portfolio's operating expenses, if necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) The return of Class Y shares (for which June 22, 1995 was the initial public offering date) would have been higher than Class A and C shares if operations were commenced on the same day. The higher return is due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. (4) For the period of April 3, 1995 (commencement of investment operations) through March 31, 1999 for Class A and C shares. (5) Reflects the initial maximum sales charge in effect, 5.50% and 4.75%, respectively, for each period shown. Without the applicable sales charge, the total returns would have been (20.26)% and 15.15%, respectively, for each period shown. (6) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total returns would have been (20.63)% and (5.56)% respectively, for each period shown. Assuming no redemption of shares at the end of the period, the return of Class B shares (for which January 21, 1998 was the initial public offering date) would have been higher than Class A shares and substantially the same as Class C shares if operations were commenced on the same day. The higher return is due to the fact that there is no initial sales charge on Class B shares. (7) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total return for the one year ended March 31, 1999 would have been (20.67)% CDSC -- Contingent Deferred Sales Charge. 10 THE BEAR STEARNS FUNDS Focus List Portfolio COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A, B AND C SHARES(1)(2)(3) VS. ITS BROAD-BASED INDEX EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CLASS A CLASS B CLASS C S&P 500 shares shares shares Composite Index 12/31/97 $9,450.00 $10,000.00 $10,000.00 $10,000.00 03/31/98 $10,551.20 $11,150.00 $11,150.00 $11,394.88 09/30/98 $9,512.34 $10,024.89 $10,024.89 $10,600.00 03/31/99 $13,660.57 $13,940.00 $14,348.15 $13,497.90 Past performance is not predictive of future performance. Focus List Portfolio Class A shares $13,661 Class B shares 13,940 Class C shares $14,348 S&P 500 Composite Index 13,498
TOTAL RETURNS
ONE YEAR ENDED AVERAGE MARCH 31, 1999 ANNUAL(3) ------------------- ------------------- Focus List Portfolio(2) Class A shares(4)................ 22.35% 28.22% Class B shares(5)................ 23.61 30.31 Class C shares(6)................ 27.69 33.34 S&P 500 Composite Index(1)......... 18.46 27.00
- --------- (1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio and reflects all Portfolio expenses. Investors should note that the Focus List Portfolio is a professionally managed mutual fund while the index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to voluntarily reimburse a portion of the Portfolio's operating expenses to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) For the period of December 29, 1997 (commencement of investment operations) through March 31, 1999. (4) Reflects the initial maximum sales charge in effect at the beginning of the period (5.50%). Without the applicable sales charge, the total returns would have been 29.47% and 34.14%, respectively, for each period shown. (5) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge total returns would have been 28.61% and 33.28%, respectively, for each period shown. (6) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total return for the one year ended March 31, 1999 would have been 28.69%. 11 THE BEAR STEARNS FUNDS Balanced Portfolio COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A, B AND C SHARES(1)(2)(3) VS. VARIOUS INDICES EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Class A shares Class B shares Class C shares 12/31/97 $9,450.00 $10,000.00 $10,000.00 03/31/98 $10,209.78 $10,791.86 $10,791.86 09/30/98 $9,792.26 $10,325.17 $10,325.17 03/31/99 $10,625.00 $10,776.00 $11,176.00 Past performance is not predictive of future performance. Balanced Portfolio Class A shares $10,625 Class B shares 10,776 Class C shares 11,176 S&P 500 Composite Index 13,498 Lipper Balanced Fund Index 11,693 S&P 500 LIPPER BALANCED Composite Index Fund Index 12/31/97 $10,000.00 $10,000.00 03/31/98 $11,384.88 $10,791.06 09/30/98 $10,600.09 $10,321.13 03/31/99 $13,497.90 $11,693.30 Past performance is not predictive of future performance. Balanced Portfolio S&P 500 Composite Index Lipper Balanced Fund Index
TOTAL RETURNS
ONE YEAR ENDED AVERAGE MARCH 31, 1999 ANNUAL(3) ------------------- ------------------- Balanced Portfolio(2) Class A shares(4)................ (1.63)% 4.95% Class B shares(5)................ (1.44) 6.14 Class C shares(6)................ 2.56 9.27 Class Y shares(7)................ 4.59 10.22 Lipper Balanced Fund Index(1)...... 8.36 13.27 S&P 500 Composite Index (1)........ 18.46 27.00
- --------- (1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio and reflects all Portfolio expenses. Investors should note that the Balanced Portfolio is a professionally managed mutual fund while the indices are unmanaged, do not incur sales charges or expenses and are not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to voluntarily reimburse a portion of the Portfolio's operating expenses to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) For the period of December 29, 1997 (commencement of investment operations) through March 31, 1999 for Class A, B and C shares. (4) Reflects the initial maximum sales charge in effect at the beginning of the period (5.50%). Without the applicable sales charge, the total returns would have been 4.07% and 9.80%, respectively, for each period shown. (5) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, total returns would have been 3.56% and 9.27%, respectively, for each period shown. (6) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total return for the one year ended March 31, 1999 would have been 3.56%. (7) The return of Class Y shares (for which January 6, 1998 was the initial public offering date) would have been higher than Class A and C shares if operations were commenced on the same day. The higher return is due to the fact that there is no sales load, CDSC or 12b-1 fee charged to Class Y shares. CDSC - Contingent Deferred Sales Charge. 12 THE BEAR STEARNS FUNDS International Equity Portfolio COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CLASS A, B AND C SHARES(1)(2)(3) VS. ITS BROAD-BASED INDEX EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CLASS A SHARES CLASS B SHARES CLASS C SHARES Dec. 29, 1997 $9,450.00 $10,000.00 $10,000.00 Dec. 31, 1997 $9,450.00 $10,000.00 $10,000.00 Mar. 31, 1998 $10,842.53 $11,458.33 $11,458.33 Sept. 30, 1998 $10,197.42 $10,750.60 $10,749.00 Mar. 31, 1999 $11,924.34 $12,144.00 $12,542.09 Past performance is not predictive of future performance MSCI EAFE INDEX Dec. 29, 1997 $10,000.00 Dec. 31, 1997 $10,000.00 Mar. 31, 1998 $11,430.00 Sept. 30, 1998 $9,835.00 Mar. 31, 1999 $11,945.00 Past performance is not predictive of future performance
TOTAL RETURNS
ONE YEAR ENDED MARCH 31, 1999 AVERAGE ANNUAL(3) ------------------- ------------------- International Equity Portfolio(2) Class A shares(4)................ 3.93% 15.05% Class B shares(5)................ 4.48 16.74 Class C shares(6)................ 8.48 19.80 MSCI EAFE Index(1)................. 6.06 16.92
- --------- (1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio and reflects all Portfolio expenses. Investors should note that the International Equity Portfolio is a professionally managed mutual fund while the index is unmanaged, does not incur sales charges or expenses and is not available for investment. (2) Bear Stearns Asset Management Inc. waived its advisory fee and agreed to voluntarily reimburse a portion of the Portfolio's operating expenses to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. (3) For the period of December 29, 1997 (commencement of investment operations) through March 31, 1999. (4) Reflects the initial maximum sales charge in effect at the beginning of the period (5.50%). Without the applicable sales charge, the total returns would have been 9.97% and 20.37%, respectively, for each period shown. (5) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total returns would have been 9.48% and 19.80%, respectively, for each period shown. (6) Reflects the applicable contingent deferred sales charge. Without the applicable sales charge, the total return for the one year ended March 31, 1999 would have been 9.48%. 13 THE BEAR STEARNS FUNDS S&P STARS Portfolio MARCH 31, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Telecommunications................................ 14.50 2. Drugs & Hospital Supplies......................... 8.35 3. Networking Products............................... 6.28 4. Banks............................................. 5.79 5. Multimedia........................................ 4.87 6. Cable TV.......................................... 4.55 7. Computer Software................................. 4.55 8. Computers - Memory Devices........................ 4.41 9. Retail - Grocery Stores........................... 4.01 10. Diversified Operations............................ 3.97
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Cisco Systems, Inc........................... Networking Products 6.28 2. EMC Corp..................................... Computers - Memory Devices 4.41 3. Pfizer Inc................................... Drugs & Hospital Supplies 4.11 4. Sprint Corp. (PCS Group)..................... Telecommunications 3.71 5. MCI Worldcom, Inc............................ Telecommunications 3.49 6. Sterling Software, Inc....................... Computer Software 3.22 7. Lilly, (Eli) & Co............................ Drugs & Hospital Supplies 3.14 8. BankAmerica Corp............................. Banks 3.13 9. Time Warner Inc.............................. Multimedia 2.98 10. Staples, Inc................................. Retail - Office Supplies 2.96
- ------- * The Portfolio's holdings will change over time. 14 THE BEAR STEARNS FUNDS The Insiders Select Fund MARCH 31, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Credit & Finance.................................. 7.12 2. Banks............................................. 6.92 3. Financial Services................................ 6.60 4. Diversified Operations............................ 6.56 5. Advertising Agencies.............................. 5.69 6. Telecommunications................................ 5.29 7. Commercial Services............................... 5.07 8. Aerospace & Defense............................... 4.45 9. Drugs & Hospital Supplies......................... 4.11 10. Multi-line Insurance.............................. 3.96
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. WPP Group plc - ADR.......................... Advertising Agencies 5.69 2. Dun & Bradstreet Corp. (The)................. Commercial Services 5.07 3. United Technologies Corp..................... Aerospace & Defense 4.45 4. American Express Co.......................... Credit & Finance 4.38 5. Johnson & Johnson............................ Drugs & Hospital Supplies 4.11 6. American International Group, Inc............ Multi-line Insurance 3.96 7. Viad Corp.................................... Diversified Operations 3.84 8. Citigroup Inc................................ Financial Services 3.78 9. Wendy's International, Inc................... Retail - Restaurants 3.43 10. Winsloew Furniture, Inc...................... Office Furnishings 2.94
- ------- * The Portfolio's holdings will change over time. 15 THE BEAR STEARNS FUNDS Large Cap Value Portfolio MARCH 31, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Banks............................................. 8.50 2. Retail - Restaurants.............................. 7.19 3. Oil Companies - Integrated........................ 7.18 4. Life/Health Insurance............................. 7.05 5. Diversified Operations............................ 6.36 6. Financial Services................................ 5.79 7. Credit & Finance.................................. 5.46 8. Advertising Agencies.............................. 4.81 9. Drugs & Hospital Supplies......................... 4.53 10. Commercial Services............................... 4.46
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. WPP Group plc - ADR.......................... Advertising Agencies 4.81 2. Dun & Bradstreet Corp. (The)................. Commercial Services 4.46 3. Wendy's International, Inc................... Retail - Restaurants 3.62 4. McDonald's Corp.............................. Retail - Restaurants 3.57 5. United Technologies Corp..................... Aerospace & Defense 3.45 6. Bank of New York Co., Inc. (The)............. Banks 3.33 7. Atlantic Richfield Co........................ Oil Companies - Integrated 3.25 8. Citigroup Inc................................ Financial Services 2.96 9. Equitable Companies Inc. (The)............... Life/Health Insurance 2.92 10. PNC Bank Corp................................ Banks 2.91
- ------- * The Portfolio's holdings will change over time. 16 THE BEAR STEARNS FUNDS Small Cap Value Portfolio MARCH 31, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Commercial Services............................... 11.52 2. Hotels & Motels................................... 6.92 3. Radio............................................. 6.38 4. Building & Housing................................ 5.98 5. Drugs & Hospital Supplies......................... 5.69 6. Human Resources................................... 5.36 7. Communications.................................... 4.62 8. Diversified Operations............................ 4.32 9. Real Estate Investment Trust...................... 3.80 10. Transport......................................... 3.72
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- -------------------------------------------------- ------------- 1. U.S. Franchise System, Inc................... Hotels & Motels 6.92 2. Steiner Leisure Ltd.......................... Commercial Services 6.06 3. Butler International, Inc.................... Human Resources 5.36 4. Global Pharmaceutical Corp................... Drugs & Hospital Supplies 4.94 5. Data Transmission Network Corp............... Communications 4.62 6. Cox Radio, Inc., Class A..................... Radio 3.89 7. Bally Total Fitness Holding Corp............. Recreational Centers 3.41 8. Elcor Corp................................... Building & Housing 3.37 9. Furniture Brands International, Inc.......... Home Furnishings 3.27 10. Duff & Phelps Credit Rating Co............... Commercial Services 3.22
- ------- * The Portfolio's holdings will change over time. 17 THE BEAR STEARNS FUNDS Focus List Portfolio MARCH 31, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Technology: Internet/News Media................... 17.96 2. Technology: Computer Services..................... 9.53 3. Media/Telecommunications: European Telecommunication Services........................ 9.50 4. Technology: Computers & Office Equipment.......... 8.22 5. Media Communications: Broadcasting................ 4.87 6. Health Care: Medical Products..................... 4.69 7. Media Communications: Broadcasting Television..... 4.58 8. Consumer: Wholesale Distribution.................. 4.17 9. Technology: Electronic Components................. 4.07 10. Technology: Computer Sciences..................... 3.90
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. America Online, Inc.......................... Technology: Internet/News Media 17.96 2. EMC Corp..................................... Technology: Computers & Office Equipment 8.22 3. National Data Corp........................... Technology: Computer Services 5.28 4. Vodafone Group plc -- ADR.................... Media Telecommunications: European 5.12 Telecommunication Services 5. Time Warner Inc.............................. Media Communications: Broadcasting 4.87 6. Biomet, Inc.................................. Health Care: Medical Products 4.69 7. CBS Corp..................................... Media Communications: Broadcasting 4.58 Television 8. Telecom Italia SpA -- ADR.................... Media Telecommunications: European 4.38 Telecommunication Services 9. BISYS Group Inc. (The)....................... Technology: Computer Services 4.25 10. McKesson HBOC, Inc........................... Consumer: Wholesale Distribution 4.17
- ------- * The Portfolio's holdings will change over time. 18 THE BEAR STEARNS FUNDS Balanced Portfolio MARCH 31, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- TOP INDUSTRY WEIGHTINGS EQUITY - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Diversified Operations............................ 3.98 2. Oil Companies - Integrated........................ 3.74 3. Life/Health Insurance............................. 3.69 4. Retail - Restaurants.............................. 3.69 5. Financial Services................................ 3.26 LONG-TERM DEBT - --------------------------------------------------------------------- 1. U.S. Government Agency Obligations................ 20.85 2. Corporate Obligations............................. 18.16 3. U.S. Government Obligations....................... 5.57
- -------------------------------------------------------------------------------- TOP FIVE HOLDINGS* EQUITY - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ---------- 1. WPP Group plc - ADR.......................... Advertising Agencies 1.99 2. United Technologies Corp..................... Aerospace & Defense 1.98 3. Wendy's International, Inc................... Retail - Restaurants 1.86 4. McDonald's Corp.............................. Retail - Restaurants 1.83 5. Dun & Bradstreet Corp. (The)................. Commercial Services 1.74 LONG-TERM DEBT - ------------------------------------------------------------------------------------------------------- 1. Fannie Mae................................... U.S. Government Agency Obligations 8.46 2. Government National Mortgage Association..... U.S. Government Agency Obligations 6.94 3. U.S. Treasury Notes.......................... U.S. Government Obligations 5.57 4. Freddie Mac.................................. U.S. Government Agency Obligations 5.45 5. Dow Chemical Co.............................. Corporate Obligations 1.55
- ------- * The Portfolio's holdings will change over time. 19 THE BEAR STEARNS FUNDS International Equity Portfolio MARCH 31, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN INDUSTRY WEIGHTINGS - --------------------------------------------------------------------------------
PERCENT OF RANK INDUSTRY NET ASSETS - ------------------------------------------------------ ------------- 1. Medical - Drugs................................... 12.20 2. Cellular Telecommunications....................... 8.50 3. Telecommunication Equipment....................... 7.80 4. Telecommunication Services........................ 5.41 5. Multi-line Insurance.............................. 5.12 6. Computer Services................................. 4.77 7. Computer - Integrated Systems..................... 4.53 8. Telephone - Integrated............................ 4.28 9. Cosmetics & Toiletries............................ 3.71 10. Electronic Components - Semiconductors............ 3.47
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - --------------------------------------------------------------------------------
PERCENT OF RANK HOLDINGS INDUSTRY NET ASSETS - ------------------------------------------------- ---------------------------------------- ------------- 1. Nokia Oyj.................................... Telecommunication Equipment 5.49 2. Vodafone Group plc........................... Cellular Telecommunications 3.60 3. Glaxo Wellcome plc........................... Medical - Drugs 3.15 4. Roche Holding AG............................. Medical - Drugs 3.06 5. Mannesmann AG................................ Machinery - General Industry 2.76 6. Cap Gemini SA................................ Computer Services 2.72 7. Takeda Chemical Industries................... Medical - Drugs 2.70 8. Kao Corp..................................... Cosmetics & Toiletries 2.61 9. COLT Telecom Group plc....................... Telecommunication Services 2.31 10. Cable & Wireless plc......................... Telecommunication Services 2.24
- ------- * The Portfolio's holdings will change over time. 20 THE BEAR STEARNS FUNDS S&P STARS Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 99.89% BANKS - 5.79% 180,000 BankAmerica Corp. .............................. $ 12,712,500 300,000 Bank of New York Co., Inc. (The) ............... 10,781,250 --------------- 23,493,750 --------------- CABLE TV - 4.55% 130,000 Cablevision Systems Corp.* ..................... 9,636,250 140,000 Comcast Corp., Special Class A ................. 8,811,250 --------------- 18,447,500 --------------- CHEMICALS - SPECIALTY - 0.97% 250,000 Crompton & Knowles Corp.+ ...................... 3,937,500 --------------- COMMERCIAL SERVICES - 1.06% 250,000 Convergys Corp.* ............................... 4,281,250 --------------- COMPUTER SERVICES - 1.08% 120,000 Ceridian Corp.* ................................ 4,387,500 --------------- COMPUTER SOFTWARE - 4.55% 60,000 Microsoft Corp.* ............................... 5,377,500 550,000 Sterling Software, Inc. ........................ 13,062,500 --------------- 18,440,000 --------------- COMPUTERS - INTEGRATED SYSTEMS - 1.78% 280,000 Cadence Design Systems, Inc.* .................. 7,210,000 --------------- COMPUTERS - MEMORY DEVICES - 4.41% 140,000 EMC Corp. ...................................... 17,885,000 --------------- CONSULTING SERVICES - 0.95% 170,000 Gartner Group, Inc., Class A*++ ................ 3,835,625 --------------- CREDIT & FINANCE - 2.61% 90,000 American Express Co. ........................... 10,575,000 --------------- DATA PROCESSING/MANAGEMENT - 1.08% 230,000 Reynolds & Reynolds Co. (The)++ ................ 4,370,000 --------------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ DIVERSIFIED OPERATIONS - 3.97% 100,000 General Electric Co.++ ......................... $ 11,062,500 70,000 Tyco International Ltd. ........................ 5,022,500 --------------- 16,085,000 --------------- DRUGS & HOSPITAL SUPPLIES - 8.35% 70,000 Bristol-Myers Squibb Co. ....................... 4,501,875 150,000 Lilly, (Eli) & Co.+ ............................ 12,731,250 120,000 Pfizer Inc. .................................... 16,650,000 --------------- 33,883,125 --------------- ELECTRIC UTILITIES - 0.59% 60,000 CMS Energy Corp. ............................... 2,403,750 --------------- ELECTRONIC COMPONENTS - 1.60% 105,000 Applied Materials, Inc.* ....................... 6,477,188 --------------- ELECTRONICS - 1.32% 45,000 Intel Corp. .................................... 5,360,625 --------------- INVESTMENT MANAGEMENT/ADVISOR SERVICE - 0.74% 149,600 Eaton Vance Corp.+ ............................. 3,010,700 --------------- MULTIMEDIA - 4.87% 260,000 News Corp. Ltd. (The) .......................... 7,670,000 170,000 Time Warner Inc.+ .............................. 12,080,625 --------------- 19,750,625 --------------- NETWORK SOFTWARE - 0.83% 110,000 Network Associates, Inc.* ...................... 3,375,625 --------------- NETWORKING PRODUCTS - 6.28% 232,500 Cisco Systems, Inc.* ........................... 25,473,281 --------------- OIL & GAS DRILLING - 0.72% 250,000 Global Marine Inc.++ ........................... 2,937,500 --------------- ONLINE SERVICES - 2.66% 74,000 America Online, Inc. ........................... 10,804,000 ---------------
The accompanying notes are an integral part of the financial statements. 21 THE BEAR STEARNS FUNDS S&P STARS Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) PHYSICAL THERAPY/REHABILITATION CENTERS - 1.97% 450,000 HEALTHSOUTH Corp.*+ ............................ $ 4,668,750 220,000 RehabCare Group, Inc.*+ ........................ 3,313,750 --------------- 7,982,500 --------------- PUBLISHING - BOOKS - 1.81% 150,000 Scholastic Corp.* .............................. 7,331,250 --------------- RETAIL - DEPARTMENT STORES - 1.64% 100,000 Dayton Hudson Corp. ............................ 6,662,500 --------------- RETAIL - DRUG STORES - 2.11% 180,000 CVS Corp. ...................................... 8,550,000 --------------- RETAIL - GROCERY STORES - 4.01% 100,000 Kroger Co. ..................................... 5,987,500 200,000 Safeway Inc.*+ ................................. 10,262,500 --------------- 16,250,000 --------------- RETAIL - OFFICE SUPPLIES - 3.92% 450,000 OfficeMax, Inc.*+ .............................. 3,881,250 365,000 Staples, Inc.* ................................. 11,999,375 --------------- 15,880,625 --------------- RETAIL - RESTAURANTS - 3.26% 250,000 Consolidated Products, Inc.*++ ................. 4,390,625 270,000 Outback Steakhouse, Inc.* ...................... 8,842,500 --------------- 13,233,125 --------------- TELECOMMUNICATIONS - 14.50% 70,000 AirTouch Communications, Inc.*+ ................ 6,763,750 190,000 ECI Telecommunications Ltd. .................... 6,650,000 160,000 MCI Worldcom, Inc.* ............................ 14,170,000 140,000 Northern Telecom Ltd. .......................... 8,697,500 60,000 QUALCOMM, Inc.* ................................ 7,462,500 340,000 Sprint Corp. (PCS Group)* ...................... 15,066,250 --------------- 58,810,000 --------------- TELEPHONE - LONG DISTANCE - 1.57% 80,000 AT&T Corp. ..................................... 6,385,000 --------------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ TELEVISION - 1.23% 100,000 Univision Communications, Inc. - Class A*+ ..... $ 5,000,000 --------------- TRANSPORT - AIR FREIGHT - 1.53% 200,000 Airborne Freight Corp.+ ........................ 6,225,000 --------------- TRANSPORT - TRUCK - 1.22% 150,000 USFreightways Corp.+ ........................... 4,931,250 --------------- WIRELESS EQUIPMENT - 0.36% 92,100 DSP Communications, Inc.*+++ ................... 1,462,088 --------------- Total Common Stocks (cost - $296,111,015) ........................ 405,127,882 --------------- SHORT-TERM INVESTMENT -- 1.06% INVESTMENT COMPANY - 1.06% 4,326,483 Federated Investors, Trust for Short-Term U.S. Government Securities**+++ (cost - $4,326,483) .......................... 4,326,483 --------------- Total Investments -- 100.95% (cost - $300,437,498) ........................ 409,454,365 Liabilities in excess of other assets - (0.95)% ............................. (3,868,616) --------------- Net Assets -- 100.00% .......................... $ 405,585,749 --------------- ---------------
- --------- Unless otherwise indicated, all common stocks are ranked as five stars. + Currently ranked as four stars. ++ Currently ranked as three stars. +++ Not ranked by stars. * Non-income producing security. ** Money market fund. 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 - Expected to be a below average performer. One star - Sell - Expect to be well below average performer and to fall in price. The accompanying notes are an integral part of the financial statements. 22 THE BEAR STEARNS FUNDS The Insiders Select Fund PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 93.29% ADVERTISING AGENCIES - 5.69% 30,000 WPP Group plc - ADR .............................. $ 2,595,000 ----------- AEROSPACE & DEFENSE - 4.45% 15,000 United Technologies Corp. ........................ 2,031,562 ----------- AUTOMOTIVE PARTS & EQUIPMENT - 2.50% 30,000 Dana Corp. ....................................... 1,140,015 ----------- BANKS - 6.92% 14,000 BankAmerica Corp. ................................ 988,750 18,000 PNC Bank Corp. ................................... 1,000,124 30,000 Summit Bancorp. .................................. 1,170,000 ----------- 3,158,874 ----------- CHEMICALS - DIVERSIFIED - 1.71% 45,000 Solutia Inc. ..................................... 781,875 ----------- COMMERCIAL SERVICES - 5.07% 65,000 Dun & Bradstreet Corp. (The) ..................... 2,315,625 ----------- COMPUTERS & OFFICE EQUIPMENT - 2.10% 15,000 Pitney Bowes, Inc. ............................... 956,250 ----------- COMPUTERS - MEMORY DEVICES - 2.32% 58,800 Quantum Corp.* ................................... 1,058,400 ----------- CONSULTING SERVICES - 2.47% 50,000 Gartner Group, Inc. * ............................ 1,128,125 ----------- CREDIT & FINANCE - 7.12% 17,000 American Express Co. ............................. 1,997,500 30,000 SLM Holding Corp. ................................ 1,252,500 ----------- 3,250,000 ----------- DIVERSIFIED OPERATIONS - 6.56% 55,000 Raychem Corp. .................................... 1,240,937 63,000 Viad Corp. ....................................... 1,752,187 ----------- 2,993,124 ----------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------- DRUGS & HOSPITAL SUPPLIES - 4.11% 20,000 Johnson & Johnson ................................ $ 1,873,750 ----------- FINANCIAL SERVICES - 6.60% 27,000 Citigroup Inc. ................................... 1,724,625 27,200 H & R Block, Inc. ................................ 1,288,600 ----------- 3,013,225 ----------- HEALTH CARE SERVICES - 2.89% 20,000 Mckesson HBOC, Inc. .............................. 1,320,000 ----------- HOUSEHOLD PRODUCTS - 2.26% 30,000 Dial Corp. (The) ................................. 1,031,250 ----------- LIFE/HEALTH INSURANCE - 1.73% 25,000 Torchmark Corp. .................................. 790,625 ----------- MACHINERY - ELECTRICAL - 2.36% 25,000 Grainger (W.W.), Inc. ............................ 1,076,562 ----------- MEDICAL SERVICES - 2.08% 50,000 Columbia/HCA Healthcare Corp. .................... 946,875 ----------- MULTI-LINE INSURANCE - 3.96% 15,000 American International Group, Inc. ............... 1,809,375 ----------- OFFICE FURNISHINGS - 2.94% 45,000 Winsloew Furniture, Inc.* ........................ 1,341,563 ----------- OIL COMPANIES - INTEGRATED - 2.24% 18,000 Texaco Inc. ...................................... 1,021,500 ----------- PROPERTY/CASUALTY INSURANCE - 1.42% 18,600 Mercury General Corp. ............................ 648,675 ----------- RETAIL - DEPARTMENT STORES - 2.22% 25,000 J.C. Penney Co., Inc. ............................ 1,012,500 ----------- RETAIL - RESTAURANTS - 3.43% 55,000 Wendy's International, Inc. ...................... 1,564,063 -----------
The accompanying notes are an integral part of the financial statements. 23 THE BEAR STEARNS FUNDS The Insiders Select Fund PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) TELECOMMUNICATIONS - 5.29% 55,000 Cincinnati Bell, Inc. ............................ $ 1,234,062 25,000 SBC Communications, Inc. ......................... 1,178,124 ----------- 2,412,186 ----------- TOYS - 2.85% 45,000 Hasbro, Inc. ..................................... 1,302,187 ----------- Total Common Stocks (cost - $35,765,192)............................ 42,573,186 ----------- SHORT-TERM INVESTMENTS -- 6.34% INVESTMENT COMPANIES -- 0.10% 2,228 Federated Automated Government Money Trust**................................... 2,228 42,711 Federated Investors, Trust for Short-Term U.S. Government Securities**......................... 42,711 ----------- Total Investment Companies (cost - $44,939)................................ 44,939 -----------
- ------------------------------------------------------------------------------ PRINCIPAL AMOUNT (000'S) VALUE - ------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCY OBLIGATION - 6.24% $2,850 Freddie Mac, Discount Notes, 4.800%, 04/01/99 (cost - $2,850,000) ............................ $ 2,850,000 ----------- Total Short-Term Investments (cost - $2,894,939) ............................ 2,894,939 ----------- Total Investments 99.63% (cost - $38,660,131) ........................... 45,468,125 Other assets in excess of liabilities -- 0.37% ... 168,967 ----------- Net Assets -- 100.00%............................. $45,637,092 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. The accompanying notes are an integral part of the financial statements. 24 THE BEAR STEARNS FUNDS Large Cap Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 99.25% ADVERTISING AGENCIES - 4.81% 12,000 WPP Group plc - ADR .............................. $ 1,038,000 ----------- AEROSPACE & DEFENSE - 3.45% 5,500 United Technologies Corp. ........................ 744,906 ----------- AUTOMOBILES - 3.73% 7,000 Ford Motor Co. ................................... 397,250 4,700 General Motors Corp. ............................. 408,312 ----------- 805,562 ----------- AUTOMOTIVE PARTS & EQUIPMENT - 2.43% 18,200 Genuine Parts Co. ................................ 524,387 ----------- BANKS - 8.50% 20,000 Bank of New York Co., Inc. (The) ................. 718,750 6,900 BankAmerica Corp. ................................ 487,313 11,300 PNC Bank Corp. ................................... 627,856 ----------- 1,833,919 ----------- CHEMICALS - DIVERSIFIED - 1.69% 21,000 Solutia Inc. ..................................... 364,875 ----------- COMMERCIAL SERVICES - 4.46% 27,000 Dun & Bradstreet Corp. (The) ..................... 961,875 ----------- COMPUTERS - 2.38% 2,900 International Business Machines Corp. ............ 514,025 ----------- COMPUTERS & OFFICE EQUIPMENT - 2.23% 9,000 Xerox Corp. ...................................... 480,375 ----------- CONTAINERS - METAL/GLASS - 1.44% 10,900 Crown Cork & Seal Co., Inc. ...................... 311,331 ----------- CREDIT & FINANCE - 5.46% 8,400 Fannie Mae ....................................... 581,700 14,300 SLM Holding Corp. ................................ 597,025 ----------- 1,178,725 ----------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ DIVERSIFIED OPERATIONS - 6.36% 3,500 General Electric Co. ............................. $ 387,187 17,000 Raychem Corp. .................................... 383,562 21,600 Viad Corp. ....................................... 600,750 ----------- 1,371,499 ----------- DRUGS & HOSPITAL SUPPLIES - 4.53% 7,400 Baxter International Inc. ........................ 488,400 7,600 Bristol-Myers Squibb Co. ......................... 488,775 ----------- 977,175 ----------- ELECTRIC - INTEGRATED - 1.48% 6,000 FPL Group, Inc. .................................. 319,500 ----------- ELECTRICAL EQUIPMENT - 1.80% 9,000 Grainger (W.W.), Inc. ............................ 387,563 ----------- FINANCIAL SERVICES - 5.79% 10,000 Citigroup Inc. ................................... 638,750 12,900 H & R Block, Inc. ................................ 611,138 ----------- 1,249,888 ----------- HOUSEHOLD PRODUCTS - 2.02% 12,700 Dial Corp. (The) ................................. 436,563 ----------- LIFE/HEALTH INSURANCE - 7.05% 6,850 Aon Corp. ........................................ 433,263 9,000 Equitable Companies Inc. (The) ................... 630,000 14,500 Torchmark Corp. .................................. 458,563 ----------- 1,521,826 ----------- OIL COMPANIES - INTEGRATED - 7.18% 9,600 Atlantic Richfield Co. ........................... 700,800 4,300 Exxon Corp. ...................................... 303,419 9,600 Texaco Inc. ...................................... 544,800 ----------- 1,549,019 ----------- PAPER & PAPER RELATED PRODUCTS - 2.67% 12,000 Kimberly-Clark Corp. ............................. 575,250 -----------
The accompanying notes are an integral part of the financial statements. 25 THE BEAR STEARNS FUNDS Large Cap Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) RETAIL - DEPARTMENT STORES - 2.16% 11,500 J.C. Penney Co., Inc. ............................ 465,750 ----------- RETAIL - RESTAURANTS - 7.19% 17,000 McDonald's Corp. ................................. $ 770,313 27,500 Wendy's International, Inc. ...................... 782,031 ----------- 1,552,344 ----------- SAVINGS & LOAN - 2.42% 12,785 Washington Mutual, Inc. .......................... 522,587 ----------- TELECOMMUNICATIONS - 1.31% 6,000 SBC Communications Inc. .......................... 282,750 ----------- TELEPHONE - LOCAL - 2.40% 10,000 Bell Atlantic Corp. .............................. 516,875 ----------- TOBACCO - 2.16% 13,250 Philip Morris Cos. Inc. .......................... 466,234 ----------- TOYS - 2.15% 16,000 Hasbro, Inc. ..................................... 463,000 ----------- Total Common Stocks (cost - $16,069,853) ........................... 21,415,803 ----------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS -- 1.97% INVESTMENTS COMPANIES - 1.97% 3,883 Federated Automated Government Money Trust * ..... $ 3,883 421,103 Federated Investors, Trust for Short-Term U.S. Government Securities* ......................... 421,103 ----------- Total Short-Term Investments (cost - $424,986) .............................. 424,986 ----------- Total Investments -- 101.22% (cost - $16,494,839) ........................... 21,840,789 Liabilities in excess of other assets -- (1.22)% ........................................ (262,274) ----------- Net Assets -- 100.00% ............................ $21,578,515 ----------- -----------
- --------- ADR American Depositary Receipts. * Money market fund. The accompanying notes are an integral part of the financial statements. 26 THE BEAR STEARNS FUNDS Small Cap Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
------------------------------------------------------------------------------ SHARES VALUE ------------------------------------------------------------------------------ EQUITY SECURITIES -- 99.37% COMMON STOCKS -- 95.15% BOOKS, PUBLISHING & PRINTING - 0.86% 40,000 Big Entertainment Inc ............................ $ 485,000 ----------- BROADCASTING - 1.93% 181,200 Four Media Co.* .................................. 1,087,200 ----------- BUILDING & HOUSING - 5.98% 54,100 Elcor Corp. ...................................... 1,903,644 85,500 Giant Cement Holding, Inc.* ...................... 1,469,531 ----------- 3,373,175 ----------- CHEMICALS & FERTILIZERS - 1.42% 178,200 U.S. Home & Garden Inc.* ......................... 801,900 ----------- COMMERCIAL PRINTING - 2.07% 100,000 Bowne & Co., Inc. ................................ 1,168,750 ----------- COMMERCIAL SERVICES - 11.52% 56,250 COMARCO, Inc.* ................................... 1,265,625 34,700 Duff & Phelps Credit Rating Co. .................. 1,817,412 111,200 Steiner Leisure Ltd.* ............................ 3,419,400 ----------- 6,502,437 ----------- COMMUNICATIONS - 4.62% 109,300 Data Transmission Network Corp.* ................. 2,609,537 ----------- COMPUTER SERVICES - 2.55% 67,300 Computer Task Group, Inc.* ....................... 1,438,537 ----------- COMPUTER SOFTWARE - 1.13% 19,300 Actuate Software Corp. ........................... 636,900 ----------- DIVERSIFIED OPERATIONS - 4.32% 143,800 Alyn Corp.* ...................................... 413,425 29,000 Crane Co. ........................................ 701,437 33,700 SPS Technologies, Inc.* .......................... 1,322,725 ----------- 2,437,587 ----------- ------------------------------------------------------------------------------ SHARES VALUE - --------------------------------------------------------------------------------- DRUGS & HOSPITAL SUPPLIES - 3.20% 30,000 Dura Pharmaceuticals, Inc.* ...................... $ 423,750 441,575 Global Pharmaceutical Corp.* ..................... 1,380,478 ----------- 1,804,228 ----------- ELECTRONICS - 0.76% 26,100 Cubic Corp. ...................................... 427,387 ----------- FINANCIAL SERVICES - 2.60% 35,900 Bank United Corp., Class A ....................... 1,467,413 ----------- FOOD - MEAT PRODUCTS - 0.93% 105,000 Hibernia Foods plc - ADR* ........................ 525,000 ----------- HOME FURNISHINGS - 3.27% 83,400 Furniture Brands International, Inc.* ............ 1,845,225 ----------- HOTELS & MOTELS - 6.92% 267,000 U.S. Franchise System, Inc.* ..................... 3,904,875 ----------- HUMAN RESOURCES - 5.36% 164,750 Butler International, Inc.* ...................... 3,027,281 ----------- LIFE INSURANCE - 0.60% 13,700 Penn Treaty American Corp.* ...................... 339,931 ----------- MACHINERY - CONSTRUCTION & MINING - 1.00% 23,500 Terex Corp. ...................................... 566,938 ----------- MISCELLANEOUS INDUSTRIALS - 2.55% 125,100 Kemet Corp. ...................................... 1,438,650 3,802 Meicom Computers & Communications, Ltd. (Fully Paid).*++ ...................................... 380 5,704 Meicom Computers & Communications, Ltd. (Partial Paid).*++ ...................................... 285 ----------- 1,439,315 ----------- NETWORKING PRODUCTS - 1.68% 50,000 FORE Systems, Inc.* .............................. 945,313 ----------- NON-FERROUS METALS - 1.71% 45,950 Chase Industries, Inc.* .......................... 350,369 27,500 Mueller Industries, Inc.* ........................ 615,313 ----------- 965,682 -----------
The accompanying notes are an integral part of the financial statements. 27 THE BEAR STEARNS FUNDS Small Cap Value Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
------------------------------------------------------------------------------ SHARES VALUE - ---------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) OIL & GAS DRILLING - 1.10% 52,600 Global Marine Inc.* .............................. $ 618,050 ----------- RADIO - 6.38% 42,800 Cox Radio, Inc., Class A* ........................ 2,193,500 18,500 Jacor Communications, Inc. * ..................... 1,406,000 ----------- 3,599,500 ----------- REAL ESTATE INVESTMENT TRUST - 3.80% 32,300 Glenborough Realty Trust, Inc. ................... 549,100 82,500 U.S. Restaurant Properties, Inc. ................. 1,593,281 ----------- 2,142,381 ----------- RECREATIONAL CENTERS - 3.41% 80,700 Bally Total Fitness Holding Corp.* ............... 1,926,713 ----------- RENTAL/AUTO EQUIPMENT - 3.19% 63,100 United Rentals, Inc.* ............................ 1,798,350 ----------- RETAIL - RESTAURANTS - 3.03% 67,000 Foodmaker, Inc.* ................................. 1,708,500 ----------- STEEL - 2.49% 237,000 Universal Stainless & Alloy Products, Inc.* ...... 1,407,188 ----------- TRANSPORT - 3.72% 36,000 Celadon Group, Inc.* ............................. 292,500 82,250 Varlen Corp. ..................................... 1,809,500 ----------- 2,102,000 ----------- WIRELESS EQUIPMENT - 1.05% 37,500 DSP Communications, Inc.* ........................ 595,313 ----------- Total Common Stocks (cost - $50,229,212) ........................... 53,697,606 ----------- PREFERRED STOCKS - 4.22% DRUGS & HOSPITAL SUPPLIES - 2.49% 9,000 Global Pharmaceutical Corp. Convertible Series C* (a) ............................................ 1,406,250 -----------
------------------------------------------------------------------------------ SHARES VALUE - --------------------------------------------------------------------------------- FOOD - MEAT PRODUCTS - 1.73% 7,000 Hibernia Foods plc - ADR Convertible Series A* (b) ............................................ $ 972,222 ----------- Total Preferred Stocks (cost - $1,600,000) ............................ 2,378,472 ----------- PRINCIPAL AMOUNT (000'S) - --------------- CORPORATE NOTE -- 0.83% $ 466 Meicom Computers & Communications, Ltd. 6.00%, 07/07/03+,++ (cost - $466,000) .............................. 466,000 ----------- SHARES - --------------- SHORT-TERM INVESTMENT -- 0.41% 234,211 Federated Investors, Trust for Short-Term U.S. Government Securities** (cost - $234,211) .............................. 234,211 ----------- Total Investments -- 100.61% (cost - $52,529,423) ........................... 56,776,289 Liabilities in excess of other assets -- (0.61)% ........................................ (341,575 ) ----------- Net Assets -- 100.00% ............................ $56,434,714 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. (a) Includes 225,000 shares of Series C warrants, with no market value. (b) Includes 70,000 shares of Class E and Class F warrants, with no market value. + As of March 31, 1999 the Porfolio committed to investing an additional $699,000 of capital in Meicom Computers & Communications, Ltd. Such investment will be made in equal payments of $233,000 on the ninth, fifteenth and twenty-first month from the closing date (July 28,1998). ++ Restricted and illiquid. See notes to financial statements. The accompanying notes are an integral part of the financial statements. 28 THE BEAR STEARNS FUNDS Focus List Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 95.05% CONSUMER: WHOLESALE DISTRIBUTION - 4.17% 9,032 McKesson HBOC, Inc. .............................. $ 596,112 ----------- ENERGY: MAJOR OIL COMPANIES - 3.41% 12,000 Shell Transport & Trading Co. - ADR .............. 487,500 ----------- FINANCIAL SERVICES: GOVERNMENT-SPONSORED ENTERPRISES - 3.10% 6,400 Fannie Mae ....................................... 443,200 ----------- FINANCIAL SERVICES: LIFE INSURANCE - 2.85% 24,000 Clark/Bardes Holdings, Inc. * .................... 408,000 ----------- FINANCIAL SERVICES: MID-CAP BANKS - 2.45% 9,000 Summit Bancorp.+ ................................. 351,000 ----------- FOOD-MISCELLANEOUS/DIVERSIFIED - 0.05% 600 Vlasic Foods International Inc.*+ ................ 7,762 ----------- HEALTH CARE: MEDICAL PRODUCTS - 4.69% 16,000 Biomet, Inc. ..................................... 671,000 ----------- MEDIA COMMUNICATIONS: BROADCASTING - 4.87% 9,800 Time Warner Inc. ................................. 696,412 ----------- MEDIA COMMUNICATIONS: BROADCASTING TELEVISION - 4.58% 16,000 CBS Corp.* ....................................... 655,000 ----------- MEDIA TELECOMMUNICATIONS: EUROPEAN TELECOMMUNICATION SERVICES - 9.50% 6,000 Telecom Italia SpA - ADR ......................... 626,250 3,900 Vodafone Group plc - ADR ......................... 732,225 ----------- 1,358,475 ----------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------- PHARMACEUTICALS - 3.19% 6,900 Warner-Lambert Co.+ .............................. $ 456,694 ----------- RETAIL - SPECIALTY DISCOUNT - 1.75% 10,000 Rite Aid Corp.+ .................................. 250,000 ----------- TECHNOLOGY: COMPUTER SCIENCES - 3.90% 12,200 Affiliated Computer Services, Inc. Class A* ...... 558,150 ----------- TECHNOLOGY: COMPUTER SERVICES - 9.53% 10,800 BISYS Group Inc. (The)* .......................... 607,500 18,000 National Data Corp. .............................. 756,000 ----------- 1,363,500 ----------- TECHNOLOGY: COMPUTERS & OFFICE EQUIPMENT - 8.22% 9,200 EMC Corp.* ....................................... 1,175,300 ----------- TECHNOLOGY: ELECTRONIC COMPONENTS - 4.07% 12,000 Solectron Corp. * ................................ 582,750 ----------- TECHNOLOGY: ENTERPRISE SOFTWARE - 3.43% 20,000 Project Software & Development, Inc.*+ ........... 490,000 ----------- TECHNOLOGY: INTERNET/NEWS MEDIA - 17.96% 17,600 America Online, Inc. * ........................... 2,569,600 ----------- TECHNOLOGY: SEMI CONDUCTORS - 3.33% 4,000 Intel Corp. ...................................... 476,500 ----------- Total Common Stocks (cost - $9,435,138) 13,596,955 -----------
The accompanying notes are an integral part of the financial statements. 29 THE BEAR STEARNS FUNDS Focus List Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 7.50% INVESTMENT COMPANIES - 0.16% 3,264 Federated Automated Government Money Trust **+ ... $ 3,264 20,067 Federated Investors, Trust for Short-Term U.S. Government Securities**+ ....................... 20,067 ----------- Total Investment Companies (cost - $23,331)................................ 23,331 ----------- PRINCIPAL AMOUNT (000'S) - --------------- U.S. GOVERNMENT AGENCY OBLIGATION - 7.34% $1,050 Freddie Mac, Discount Notes, 4.800%, 04/01/99+ (cost - $1,050,000) ............................ 1,050,000 ----------- Total Short-Term Investments (cost - $1,073,331)..................................... 1,073,331 ----------- Total Investments -- 102.55% (cost - $10,508,469).................................... 14,670,286 Liabilities in excess of other assets -- (2.55)%.. (364,334) ----------- Net Assets -- 100.00%............................. $14,305,952 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. + Not a Focus List Selection at March 31, 1999. The accompanying notes are an integral part of the financial statements. 30 THE BEAR STEARNS FUNDS Balanced Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ EQUITY SECURITIES -- 54.54% ADVERTISING AGENCIES - 1.99% 4,100 WPP Group plc - ADR .............................. $ 354,650 ----------- AEROSPACE & DEFENSE - 1.98% 2,600 United Technologies Corp. ........................ 352,137 ----------- AUTOMOBILES - 2.20% 3,700 Ford Motor Co. ................................... 209,975 2,100 General Motors Corp. ............................. 182,437 ----------- 392,412 ----------- AUTOMOTIVE PARTS & EQUIPMENT - 1.23% 7,600 Genuine Parts Co. ................................ 218,975 ----------- BANKS - 2.74% 7,300 Bank of New York Co., Inc. (The) ................. 262,344 3,200 BankAmerica Corp. ................................ 226,000 ----------- 488,344 ----------- BROADCASTING - 0.17% 5,000 Four Media Co. ** ................................ 30,000 ----------- BUILDING & HOUSING - 0.10% 1,000 Giant Cement Holding, Inc.** ..................... 17,187 ----------- CHEMICALS - DIVERSIFIED - 1.10% 11,300 Solutia Inc. ..................................... 196,337 ----------- COMMERCIAL SERVICES - 2.38% 8,700 Dun & Bradstreet Corp. (The) ..................... 309,937 3,700 Steiner Leisure Ltd.* ............................ 113,775 ----------- 423,712 ----------- COMMUNICATIONS - 0.58% 4,300 Data Transmission Network Corp.* ................. 102,662 ----------- COMPUTERS & OFFICE EQUIPMENT - 1.44% 4,800 Xerox Corp. ...................................... 256,200 ----------- CONSULTING SERVICES - 0.55% 4,300 Gartner Group, Inc.* ............................. 97,019 ----------- - ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------- CONTAINERS - METAL/GLASS - 1.04% 6,500 Crown Cork & Seal Co., Inc. ...................... $ 185,656 ----------- CREDIT & FINANCE - 2.54% 3,100 Fannie Mae ....................................... 214,675 5,700 SLM Holding Corp. ................................ 237,975 ----------- 452,650 ----------- DIVERSIFIED OPERATIONS - 3.98% 2,300 General Electric Co. ............................. 254,437 7,000 Raychem Corp. .................................... 157,937 1,500 SPS Technologies, Inc.* .......................... 58,875 8,500 Viad Corp. ....................................... 236,406 ----------- 707,655 ----------- DRUGS & HOSPITAL SUPPLIES - 2.78% 4,000 Baxter International, Inc. ....................... 264,000 3,600 Bristol-Myers Squibb Co. ......................... 231,525 ----------- 495,525 ----------- ELECTRIC HOUSEWARES & FANS - 0.51% 13,000 Windmere-Durable Holdings Inc.* .................. 91,000 ----------- ELECTRICAL EQUIPMENT - 1.33% 5,500 Grainger (W.W.), Inc. ............................ 236,844 ----------- ELECTRICITY - 0.66% 2,200 FPL Group, Inc. .................................. 117,150 ----------- FINANCIAL SERVICES - 3.26% 4,700 Citigroup Inc. ................................... 300,212 5,900 H&R Block, Inc. .................................. 279,512 ----------- 579,724 ----------- HOTELS & MOTELS - 0.81% 9,800 U. S. Franchise System, Inc.* .................... 143,325 ----------- HOUSEHOLD PRODUCTS - 1.39% 7,200 Dial Corp. (The) ................................. 247,500 ----------- HUMAN RESOURCES - 0.45% 4,400 Butler International, Inc.* ...................... 80,850 -----------
The accompanying notes are an integral part of the financial statements. 31 THE BEAR STEARNS FUNDS Balanced Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - -------------------------------------------------------------------------------
EQUITY SECURITIES (CONTINUED) LIFE/HEALTH INSURANCE - 3.69% 2,700 Aon Corp. ........................................ $ 170,775 4,100 Equitable Companies Inc. (The) ................... 287,000 6,300 Torchmark Corp. .................................. 199,238 ----------- 657,013 ----------- NON-FERROUS METALS - 0.43% 3,400 Mueller Industries, Inc.* ........................ 76,075 ----------- OIL COMPANIES - INTEGRATED - 3.74% 3,000 Atlantic Richfield Co. ........................... 219,000 2,800 Exxon Corp. ...................................... 197,575 4,400 Texaco, Inc. ..................................... 249,700 ----------- 666,275 ----------- PAPER & PAPER RELATED PRODUCTS - 1.51% 5,600 Kimberly-Clark Corp. ............................. 268,450 ----------- RADIO - 1.14% 1,000 Cox Radio, Inc., Class A* ........................ 51,250 2,000 Jacor Communications, Inc.* ...................... 152,000 ----------- 203,250 -----------
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------- RETAIL - RESTAURANTS - 3.69% 7,200 McDonald's Corp. ................................. $ 326,250 11,600 Wendy's International, Inc. ...................... 329,875 ----------- 656,125 ----------- SAVINGS & LOAN - 1.48% 6,450 Washington Mutual, Inc. .......................... 263,644 ----------- TELECOMMUNICATIONS - 1.35% 5,100 SBC Communications, Inc. ......................... 240,338 ----------- TELEPHONE - LONG DISTANCE - 1.35% 3,000 AT&T Corp. ....................................... 239,438 ----------- TOBACCO - 0.95% 4,800 Philip Morris Cos. Inc. .......................... 168,900 ----------- Total Equity Securities (cost - $8,626,451) ............................ 9,707,022 -----------
PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE DATE - --------------- ------------- ------------------ LONG-TERM DEBT INVESTMENTS -- 44.58% CORPORATE OBLIGATIONS - 18.16% BANKS - 2.04% $ 100 Firstar Bank Milwaukee, Senior Notes ............. 6.250% 12/01/02 102,000 250 NationsBank Corp., Senior Notes .................. 7.000 05/15/03 260,938 ----------- 362,938 ----------- FINANCIAL - 1.44% 100 Associates Corp. N.A., Senior Notes .............. 6.625 06/15/05 103,000 75 International Lease Finance Corp. ................ 6.125 11/01/99 75,352 75 Morgan Stanley Dean Witter ....................... 6.750 03/04/03 77,250 ----------- 255,602 -----------
The accompanying notes are an integral part of the financial statements. 32 THE BEAR STEARNS FUNDS Balanced Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - -------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED) FOOD & BEVERAGES - 3.57% $ 75 Anheuser Busch Cos. Inc. ......................... 6.750% 06/01/05 $ 76,313 200 Heinz (H. J.) Co. ................................ 6.000 03/15/08 200,750 150 Hershey Foods Co. ................................ 6.700 10/01/05 157,313 200 Sara Lee Corp. ................................... 6.150 06/19/08 201,500 ----------- 635,876 ----------- INDUSTRIAL - 10.25% 200 American Home Products ........................... 7.900 02/15/05 218,000 250 Dow Chemical Co. ................................. 8.625 04/01/06 275,938 250 Du Pont (E. I.) de Nemours Co. ................... 6.750 09/01/07 263,125 200 Enron Oil & Gas .................................. 6.700 11/15/06 204,750 100 Gap, Inc. ........................................ 6.900 09/15/07 105,875 75 Hoechst-Celanese Corp. ........................... 6.125 02/01/04 76,219 75 Pepsico Inc. ..................................... 5.750 01/02/03 75,094 200 Tribune Co. ...................................... 5.500 10/06/08 184,500 150 Union Camp Corp. ................................. 6.500 11/15/07 151,875 250 Wheeling Pittsburgh Corp. ........................ 9.375 11/15/03 268,438 ----------- 1,823,814 ----------- UTILITY - ELECTRIC - 0.86% 75 Central Power & Light Co., Series 93-G ........... 6.875 02/01/03 77,531 75 Pacific Gas & Electric Co., Series FF ............ 6.250 03/01/04 76,219 ----------- 153,750 ----------- Total Corporate Obligations (cost - $3,265,549) ...................................... 3,231,980 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 20.85% FANNIE MAE - 8.46% 1,493 Fannie Mae ....................................... 6.000-8.000 12/01/08-06/01/28 1,506,944 ----------- FREDDIE MAC - 5.45% 974 Freddie Mac ...................................... 5.125-7.000 08/22/05-05/01/26 969,200 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 6.94% 1,203 Government National Mortgage Association ......... 6.000-8.500 07/15/17-06/15/28 1,235,022 ----------- Total U.S. Government Agency Obligations (cost - $3,736,109) ...................................... 3,711,166 -----------
The accompanying notes are an integral part of the financial statements. 33 THE BEAR STEARNS FUNDS Balanced Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT INTEREST MATURITY (000'S) RATE(S) DATE(S) VALUE - -------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INVESTMENTS (CONTINUED) U.S. GOVERNMENT OBLIGATIONS - 5.57% U.S. TREASURY NOTES - 5.57% $ 950 U.S. Treasury Notes (cost - $979,563) ............ 5.625-6.500% 02/15/06-08/15/23 $ 990,266 ----------- Total Long-Term Debt Investments (cost - $7,981,221) ...................................... 7,933,412 -----------
SHARES - --------------- SHORT-TERM INVESTMENT -- 2.41% INVESTMENT COMPANY - 2.41% 428,831 Federated Investors, Trust for Short-Term U.S. Government Securities** (cost - $428,831) .......................................................................... 428,831 ----------- Total Investments -- 101.53% (cost - $17,036,503) .................................... 18,069,265 Liabilities in excess of other assets -- (1.53)% ..................................... (271,595) ----------- Net Assets -- 100.00% ................................................................ $17,797,670 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. ** Money market fund. The accompanying notes are an integral part of the financial statements. 34 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS -- 101.83% AUSTRALIA - 4.47% BREWERY - 0.97% 47,500 Foster's Brewing Group Ltd. ...................... $ 139,213 ----------- COMMERCIAL BANKS-PACIFIC RIM - 1.57% 12,500 National Australia Bank Ltd. ..................... 226,156 ----------- FINANCE-OTHER SERVICES - 1.24% 14,000 Lend Lease Corp. Ltd.+ ........................... 177,625 ----------- RETAIL-MISCELLANEOUS/DIVERSIFIED - 0.69% 18,400 Coles Myer Ltd. .................................. 99,429 ----------- Total Australia (cost - $619,858) ................ 642,423 ----------- FINLAND - 6.46% TELECOMMUNICATION EQUIPMENT - 5.49% 4,900 Nokia Oyj, Class A ............................... 788,736 ----------- TELEPHONE-INTEGRATED - 0.97% 8,400 Sonera Group Oyj* ................................ 139,655 ----------- Total Finland (cost - $558,302) 928,391 ----------- FRANCE - 16.54% COMPUTER-INTEGRATED SYSTEMS - 1.22% 2,300 Equant NV* ....................................... 174,807 ----------- COMPUTER SERVICES - 2.72% 2,333 Cap Gemini SA .................................... 390,647 ----------- COSMETICS & TOILETRIES - 1.10% 250 L'OREAL .......................................... 158,159 ----------- DIVERSIFIED OPERATIONS - 1.88% 1,100 Vivendi .......................................... 270,642 ----------- ELECTRONIC COMPONENTS-SEMICONDUCTORS - 1.31% 1,900 STMicroelectronics NV* ........................... 188,609 ----------- FOOD-RETAIL - 0.64% 150 Promodes ......................................... 91,657 ----------- MEDICAL-DRUGS - 1.74% 1,100 Sanofi SA ........................................ 185,257 300 Synthelabo SA .................................... 65,261 ----------- 250,518 ----------- MONEY CENTER BANKS - 0.37% 600 Banque Nationale de Paris ........................ 52,209 ----------- - ------------------------------------------------------------------------------ SHARES VALUE - -------------------------------------------------------------------------------
FRANCE (CONTINUED) MULTI-LINE INSURANCE - 1.75% 1,900 Axa .............................................. $ 251,889 ----------- OIL COMPANIES-INTEGRATED - 0.38% 400 Elf Aquitaine SA ................................. 54,325 ----------- TELEPHONE-INTEGRATED - 1.03% 1,835 France Telecom SA ................................ 148,380 ----------- TELEVISION - 1.63% 800 Canal Plus ....................................... 234,486 ----------- WATER - 0.77% 600 Suez Lyonnaise des Eaux SA ....................... 111,025 ----------- Total France (cost - $2,219,488) ................. 2,377,353 ----------- GERMANY - 3.75% DIVERSIFIED OPERATIONS - 0.36% 100 Preussag AG ...................................... 52,144 ----------- MACHINERY - GENERAL INDUSTRY - 2.76% 3,200 Mannesmann AG .................................... 396,943 ----------- REINSURANCE - 0.01% 8 Muenchener Rueckversicherungs-Gesellschaft AG-New Registered Shares* ............................. 1,576 8 Muenchener Rueckversicherungs-Gesellschaft AG Registered Shares .............................. 1,596 8 Muenchener Rueckversicherungs-Gesellschaft AG, Warrants* ...................................... 292 ----------- 3,464 ----------- TELEPHONE-INTEGRATED - 0.62% 2,200 Deutsche Telekom AG .............................. 88,472 ----------- Total Germany (cost - $413,847) .................. 541,023 ----------- HONG KONG - 3.48% DIVERSIFIED OPERATIONS - 0.44% 8,000 Hutchison Whampoa Ltd. ........................... 62,971 ----------- MONEY CENTER BANKS - 1.57% 7,200 HSBC Holdings plc ................................ 225,768 -----------
The accompanying notes are an integral part of the financial statements. 35 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) HONG KONG (CONTINUED) REAL ESTATE DEVELOPMENT - 1.47% 14,000 Cheung Kong (Holdings) Ltd. ...................... $ 106,587 14,000 Sun Hung Kai Properties Ltd. ..................... 104,780 ----------- 211,367 ----------- Total Hong Kong (cost - $463,562) ................ 500,106 ----------- IRELAND - 1.77% COMMERCIAL BANKS-EUROPE - 1.33% 9,200 Bank of Ireland .................................. 191,958 ----------- DRUG DELIVERY SYSTEMS - 0.44% 900 Elan Corp. plc, ADR .............................. 62,775 ----------- Total Ireland (cost - $239,116) .................. 254,733 ----------- ITALY - 4.49% CELLULAR TELECOMMUNICATIONS - 1.16% 24,800 Telecom Italia Mobile SpA ........................ 166,801 ----------- GAS-DISTRIBUTION - 0.73% 21,600 Italgas SpA ...................................... 104,936 ----------- MONEY CENTER BANKS - 0.27% 2,404 Instituto Bancario San Paolo di Torino ........... 39,060 ----------- MULTI-LINE INSURANCE - 1.14% 4,100 Assicurazioni Generali SpA ....................... 164,216 ----------- TELEVISION - 1.19% 18,100 Mediaset SpA* .................................... 170,198 ----------- Total Italy (cost - $608,440) 645,211 ----------- JAPAN - 22.81% AUDIO/VIDEO PRODUCTS - 1.99% 3,100 Sony Corp. ....................................... 286,625 ----------- AUTO-CARS/LIGHT TRUCKS - 0.31% 1,000 Honda Motor Co., Ltd. ............................ 45,174 ----------- BREWERY - 0.57% 7,000 Kirin Brewery Co., Ltd. .......................... 82,040 ----------- CELLULAR TELECOMMUNICATIONS - 2.06% 600 NTT Mobile Communications Network, Inc. .......... 296,378 ----------- COMPUTER-INTEGRATED SYSTEMS - 1.56% 14,000 Fujitsu Ltd. ..................................... 224,842 -----------
- ------------------------------------------------------------------------------ SHARES VALUE - -------------------------------------------------------------------------------
JAPAN (CONTINUED) COSMETICS & TOILETRIES - 2.61% 17,000 Kao Corp. ........................................ $ 375,369 ----------- DISTRIBUTION/WHOLESALE - 0.47% 600 Softbank Corp. ................................... 67,280 ----------- ELECTRONIC COMPONENTS-MISCELLANEOUS - 2.74% 6,000 Murata Manufacturing Co., Ltd. ................... 319,176 11,000 Toshiba Corp. .................................... 75,141 ----------- 394,317 ----------- ELECTRONIC COMPONENTS-SEMICONDUCTORS - 2.16% 6,000 Tokyo Electron, Ltd. ............................. 310,563 ----------- ELECTRONIC MEASUREMENT INSTRUMENTS - 0.31% 300 Keyence Corp. .................................... 44,837 ----------- FINANCE-INVESTMENT BANKING/BROKERAGE - 0.39% 12,000 The Nikko Securities Co., Ltd. ................... 55,729 ----------- MEDICAL-DRUGS - 2.70% 10,000 Takeda Chemical Industries ....................... 387,571 ----------- MONEY CENTER BANKS - 0.58% 6,000 Bank of Tokyo-Mitsubishi, Ltd. ................... 82,682 ----------- OPTICAL SUPPLIES - 0.79% 2,000 Hoya Corp. ....................................... 113,485 ----------- PHOTO EQUIPMENT & SUPPLIES - 0.42% 5,000 Nikon Corp. ...................................... 60,795 ----------- REAL ESTATE DEVELOPMENT - 0.38% 6,000 Mitsui Fudosan Co., Ltd. ......................... 54,057 ----------- RETAIL-MISCELLANEOUS/DIVERSIFIED - 0.89% 2,000 Ito Yokado Co., Ltd. ............................. 128,684 ----------- TELECOMMUNICATION EQUIPMENT - 1.88% 4,000 Matsushita Electric Industrial Co., Ltd. ......... 270,539 ----------- Total Japan (cost - $2,926,124) .................. 3,280,967 ----------- NETHERLANDS - 6.72% BREWERY - 0.95% 2,700 Heineken NV ...................................... 136,125 ----------- COMPUTER-INTEGRATED SYSTEMS - 1.75% 5,500 ASM Lithography Holding NV* ...................... 251,463 ----------- FOOD-RETAIL - 0.50% 1,900 Koninkllijke Ahold NV ............................ 72,818 -----------
The accompanying notes are an integral part of the financial statements. 36 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) NETHERLANDS (CONTINUED) MULTI-LINE INSURANCE - 1.88% 2,000 Aegon NV ......................................... $ 182,558 2,300 Fortis (NL) NV ................................... 88,272 ----------- 270,830 ----------- PUBLISHING-PERIODICALS - 1.64% 1,300 Wolters Kluwer NV ................................ 235,782 ----------- Total Netherlands (cost - $945,100) .............. 967,018 ----------- SINGAPORE - 1.13% PUBLISHING-NEWSPAPERS - 0.77% 10,000 Singapore Press Holdings Ltd. .................... 110,501 ----------- REAL ESTATE DEVELOPMENT - 0.36% 10,000 City Developments Ltd. ........................... 52,069 ----------- Total Singapore (cost - $155,421) ................ 162,570 ----------- SPAIN - 0.33% ELECTRIC-INTEGRATED - 0.33% 1,900 Endesa SA (cost - $52,332) ....................... 47,957 ----------- SWEDEN - 0.95% RETAIL-APPAREL/SHOE - 0.52% 1,000 Hennes & Mauritz AB .............................. 75,398 ----------- TELECOMMUNICATION EQUIPMENT - 0.43% 2,600 Telefonaktiebolaget LM Ericsson, ADR ............. 61,912 ----------- Total Sweden (cost - $148,992) ................... 137,310 ----------- SWITZERLAND - 3.60% MEDICAL-DRUGS - 3.06% 36 Roche Holding AG ................................. 439,010 ----------- TELEPHONE-INTEGRATED - 0.54% 200 Swisscom AG* ..................................... 78,100 ----------- Total Switzerland (cost - $475,529) .............. 517,110 ----------- UNITED KINGDOM - 24.47% CABLE TV - 1.49% 49,300 TeleWest Communications plc Ord 10p* ............. 213,886 -----------
- ------------------------------------------------------------------------------ SHARES VALUE - -------------------------------------------------------------------------------
UNITED KINGDOM (CONTINUED) CELLULAR TELECOMMUNICATIONS - 5.28% 17,200 Orange plc Ord 20p* .............................. $ 240,594 27,900 Vodafone Group plc Ord 5p ........................ 518,402 ----------- 758,996 ----------- COMPUTER SERVICES - 2.05% 28,500 Logica plc Ord 10p ............................... 294,220 ----------- DIVERSIFIED OPERATIONS - 0.51% 3,600 Granada Group plc Ord 25p ........................ 72,935 ----------- FOOD-MISCELLANEOUS/DIVERSIFIED - 0.57% 5,700 Cadbury Schweppes plc Ord 25p .................... 82,722 ----------- MUTI-LINE INSURANCE - 0.35% 3,800 Allied Zurich plc Ord 25p ........................ 51,222 ----------- MEDICAL-DRUGS - 4.70% 13,500 Glaxo Wellcome plc Ord 25p ....................... 452,426 15,500 SmithKline Beecham plc Ord 6.25p ................. 223,570 ----------- 675,996 ----------- MULTIMEDIA - 1.01% 9,900 Reuters Group plc Ord 25p ........................ 145,433 ----------- RETAIL-CONSUMER ELECTRONICS - 1.27% 8,600 Dixons Group plc Ord 10p ......................... 182,285 ----------- RETAIL-MAJOR DEPARTMENT STORES - 0.97% 11,100 Kingfisher plc Ord 25p ........................... 139,946 ----------- TELECOMMUNICATION SERVICES - 4.55% 6,400 Cable & Wireless Communications plc Ord 25p* ..... 72,579 20,000 Cable & Wireless plc Ord 25p ..................... 249,895 18,400 COLT Telecom Group plc Ord 25p* .................. 331,489 ----------- 653,963 ----------- TELEPHONE-INTEGRATED - 1.12% 9,900 British Telecommunications plc Ord 25p ........... 161,575 ----------- TELEVISION - 0.60% 8,700 Carlton Communications plc Ord 5p ................ 85,882 ----------- Total United Kingdom (cost - $2,869,317) ......... 3,519,061 -----------
The accompanying notes are an integral part of the financial statements. 37 THE BEAR STEARNS FUNDS International Equity Portfolio PORTFOLIO OF INVESTMENTS MARCH 31, 1999
- ------------------------------------------------------------------------------ SHARES VALUE - -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) UNITED STATES - 0.86% TELECOMMUNICATION SERVICES - 0.86% 2,200 Global TeleSystems Group, Inc.* (cost - $140,945) ...................................... $ 123,062 ----------- Total Investments -- 101.83% (cost - $12,836,373) ........................... 14,644,295 Liabilities in excess of other assets -- (1.83)% ........................................ (262,701) ----------- Net Assets -- 100.00% ............................ $14,381,594 ----------- -----------
- --------- ADR American Depositary Receipts. * Non-income producing security. + Not readily marketable security. The accompanying notes are an integral part of the financial statements. 38 THE BEAR STEARNS FUNDS STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 1999
LARGE CAP SMALL CAP INTERNATIONAL S&P STARS THE INSIDERS VALUE VALUE FOCUS LIST BALANCED EQUITY PORTFOLIO SELECT FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------ ------------ ----------- ----------- ----------- ----------- ------------- ASSETS Investments, at value (cost - $300,437,498, $38,660,131, $16,494,839, $52,529,423, $10,508,469, $17,036,503 and $12,836,373, respectively)... $409,454,365 $45,468,125 $21,840,789 $56,776,289 $14,670,286 $18,069,265 $14,644,295 Receivable for Portfolio shares sold......................... 4,145,215 65,757 7,686 120,349 65,481 399,216 12,049 Receivable for investments sold......................... -- 349,034 209,420 361,535 -- 494,394 65,152 Dividends, interest and reclaims receivable, if any.......................... 138,348 24,149 29,254 33,776 570 129,924 66,328 Receivable from investment adviser...................... -- 9,266 19,883 2,087 42,591 12,845 18,127 Deferred organization expenses and other assets............. 78,081 85,921 63,271 44,992 59,534 70,910 86,620 ------------ ------------ ----------- ----------- ----------- ----------- ------------- Total assets............. 413,816,009 46,002,252 22,170,303 57,339,028 14,838,462 19,176,554 14,892,571 ------------ ------------ ----------- ----------- ----------- ----------- ------------- LIABILITIES Payable for investments purchased.................... 6,594,616 -- -- 223,110 -- 245,766 90,169 Payable for Portfolio shares repurchased.................. 804,320 199,547 495,156 509,658 438,592 1,040,013 263,818 Distribution and service fees payable (Class A, B and C shares)...................... 523,031 82,171 30,203 64,200 5,795 13,654 25,034 Administration fee payable..... 48,776 5,783 2,385 7,269 13,277 21,994 1,853 Advisory fee payable........... 89,454 -- -- -- -- -- -- Custodian fee payable.......... 3,012 1,990 1,860 2,048 1,984 2,715 2,715 Accrued expenses............... 167,051 75,669 62,184 98,029 72,862 54,742 127,388 ------------ ------------ ----------- ----------- ----------- ----------- ------------- Total liabilities........ 8,230,260 365,160 591,788 904,314 532,510 1,378,884 510,977 ------------ ------------ ----------- ----------- ----------- ----------- ------------- NET ASSETS Capital stock, $0.001 par value (unlimited shares of beneficial interest authorized).................. 16,677 2,700 1,096 3,150 830 1,356 952 Paid-in capital................ 297,448,381 38,381,782 15,587,297 51,922,283 10,796,725 16,896,112 12,550,363 Undistributed net investment income....................... -- 9,925 17,215 -- -- 36,656 -- Accumulated net realized gain/(loss) from investments, securities sold short, options and foreign currency related transactions, if any.......................... (896,176) 434,691 626,957 262,415 (653,420) (169,216) 23,183 Net unrealized appreciation on investments and foreign currency related transactions, if any......... 109,016,867 6,807,994 5,345,950 4,246,866 4,161,817 1,032,762 1,807,096 ------------ ------------ ----------- ----------- ----------- ----------- ------------- Net assets............... $405,585,749 $45,637,092 $21,578,515 $56,434,714 $14,305,952 $17,797,670 $14,381,594 ------------ ------------ ----------- ----------- ----------- ----------- ------------- ------------ ------------ ----------- ----------- ----------- ----------- ------------- CLASS A Net assets..................... $206,129,846 $24,395,124 $ 9,676,843 $18,520,271 $ 6,541,656 $ 4,494,523 $ 8,299,250 ------------ ------------ ----------- ----------- ----------- ----------- ------------- Shares of beneficial interest outstanding.................. 8,452,791 1,433,442 490,131 1,032,811 377,779 342,738 548,148 ------------ ------------ ----------- ----------- ----------- ----------- ------------- Net asset value per share...... $24.39 $17.02 $19.74 $17.93 $17.32 $13.11 $15.14 ------------ ------------ ----------- ----------- ----------- ----------- ------------- ------------ ------------ ----------- ----------- ----------- ----------- ------------- Maximum offering price per share (net asset value plus sales charge. of 5.50%* of the offering price) $25.81 $18.01 $20.89 $18.97 $18.33 $13.87 $16.02 ------------ ------------ ----------- ----------- ----------- ----------- ------------- ------------ ------------ ----------- ----------- ----------- ----------- ------------- CLASS B Net assets..................... $ 49,319,024 $ 8,426,271 $ 1,910,667 $ 2,715,882 $ 4,460,389 $ 1,810,940 $ 3,156,097 ------------ ------------ ----------- ----------- ----------- ----------- ------------- Shares of beneficial interest outstanding.................. 2,045,745 503,013 97,921 153,345 259,683 138,506 209,734 ------------ ------------ ----------- ----------- ----------- ----------- ------------- Net asset value and offering price per share**............ $24.11 $16.75 $19.51 $17.71 $17.18 $13.07 $15.05 ------------ ------------ ----------- ----------- ----------- ----------- ------------- ------------ ------------ ----------- ----------- ----------- ----------- ------------- CLASS C Net assets..................... $ 97,653,820 $11,902,023 $ 5,250,027 $11,111,814 $ 3,303,907 $ 1,089,141 $ 2,926,247 ------------ ------------ ----------- ----------- ----------- ----------- ------------- Shares of beneficial interest outstanding.................. 4,052,356 710,975 268,231 627,714 192,252 83,326 194,435 ------------ ------------ ----------- ----------- ----------- ----------- ------------- Net asset value and offering price per share**............ $24.10 $16.74 $19.57 $17.70 $17.19 $13.07 $15.05 ------------ ------------ ----------- ----------- ----------- ----------- ------------- ------------ ------------ ----------- ----------- ----------- ----------- ------------- CLASS Y Net assets..................... $ 52,483,059 $ 913,674 $ 4,740,978 $24,086,747 -- $10,403,066 -- ------------ ------------ ----------- ----------- ----------- ----------- ------------- Shares of beneficial interest outstanding.................. 2,126,974 52,708 239,739 1,336,066 -- 790,505 -- ------------ ------------ ----------- ----------- ----------- ----------- ------------- Net asset value, offering and redemption price per share... $24.68 $17.33 $19.78 $18.03 -- $13.16 -- ------------ ------------ ----------- ----------- ----------- ----------- ------------- ------------ ------------ ----------- ----------- ----------- ----------- -------------
- ------------ *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. 39 THE BEAR STEARNS FUNDS STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 1999
LARGE CAP SMALL CAP INTERNATIONAL S&P STARS THE INSIDERS VALUE VALUE FOCUS LIST BALANCED EQUITY PORTFOLIO SELECT FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------- ------------ ---------- ------------ ---------- ---------- -------------- INVESTMENT INCOME Dividends...................... $ 1,860,735 $ 635,657 $ 404,467 $ 386,833 $ 56,372 $ 132,157 $ 169,273 Interest....................... 188,648 225,148 52,123 212,916 25,252 469,275 64,793 Less: Foreign taxes withheld................. (13,168) (1,432) (389) -- -- (106) (28,803) ----------- ------------ ---------- ------------ ---------- ---------- -------------- 2,036,215 859,373 456,201 599,749 81,624 601,326 205,263 ----------- ------------ ---------- ------------ ---------- ---------- -------------- EXPENSES Advisory fees.................. 2,007,915 365,355 165,850 497,109 63,550 101,976 114,148 Distribution and service fees - Class A...................... 682,524 124,069 46,716 111,413 21,863 23,454 30,684 Distribution and service fees - Class B...................... 193,055 68,310 12,841 21,972 31,426 14,094 26,946 Distribution and service fees - Class C...................... 714,370 130,390 55,531 151,596 22,616 9,368 25,834 Transfer agent fees and expenses..................... 312,232 153,830 105,546 147,323 88,287 88,841 76,008 Accounting fees................ 256,593 127,397 100,173 147,784 50,847 64,618 55,768 Administration fees............ 401,582 68,666 33,079 99,413 14,665 23,533 17,122 Federal and state registration fees......................... 89,021 40,052 45,244 67,262 83,256 83,156 80,168 Legal and auditing fees........ 132,727 48,966 44,610 49,874 37,178 32,852 20,133 Custodian fees and expenses.... 46,170 24,999 11,001 28,711 13,555 15,817 27,725 Amortization of organization expenses..................... 40,719 36,120 15,695 21,604 8,080 11,757 12,202 Reports and notices to shareholders................. 81,501 11,819 10,132 19,999 -- 1,038 289 Insurance expenses............. 7,531 6,911 6,080 6,326 6,261 6,263 6,261 Trustees' fees and expenses.... 4,991 3,941 4,055 3,001 4,103 3,311 3,450 Other.......................... 75,673 3,219 3,094 6,488 393 323 666 ----------- ------------ ---------- ------------ ---------- ---------- -------------- Total expenses before waivers and related reimbursements........... 5,046,604 1,214,044 659,647 1,379,875 446,080 480,401 497,404 Less: waivers and related reimbursements........... (716,763) (364,596) (322,961) (429,559) (281,791) (326,219) (271,159) ----------- ------------ ---------- ------------ ---------- ---------- -------------- Total expenses after waivers and related reimbursements........... 4,329,841 849,448 336,686 950,316 164,289 154,182 226,245 ----------- ------------ ---------- ------------ ---------- ---------- -------------- Net investment income/(loss)... (2,293,626) 9,925 119,515 (350,567) (82,665) 447,144 (20,982) ----------- ------------ ---------- ------------ ---------- ---------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from: Investments.................. 4,870,089 446,891 1,012,884 279,839 (653,420) (169,216) 42,889 Option transactions.......... 1,430,342 -- -- -- -- -- -- Securities sold short........ (1,205,082) (12,202) -- (17,427) -- -- -- Foreign currency related transactions............... -- -- -- -- -- -- (26,898) Net change in unrealized appreciation on: Investments.................. 69,260,476 (424,713) (291,673) (15,312,529) 3,662,162 426,454 896,709 Foreign currency related transactions............... -- -- -- -- -- -- (48,161) ----------- ------------ ---------- ------------ ---------- ---------- -------------- Net realized and unrealized gain/(loss) on investments... 74,355,825 9,976 721,211 (15,050,117) 3,008,742 257,238 864,539 ----------- ------------ ---------- ------------ ---------- ---------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $72,062,199 $ 19,901 $ 840,726 $(15,400,684) $2,926,077 $ 704,382 $ 843,557 ----------- ------------ ---------- ------------ ---------- ---------- -------------- ----------- ------------ ---------- ------------ ---------- ---------- --------------
The accompanying notes are an integral part of the financial statements. 40 (This page has been left blank intentionally.) 41 THE BEAR STEARNS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
S&P STARS PORTFOLIO THE INSIDERS SELECT FUND LARGE CAP VALUE PORTFOLIO ------------------------------- ------------------------------- ------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR ENDED ENDED ENDED ENDED ENDED ENDED MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1999 MARCH 31, 1998 -------------- -------------- -------------- -------------- -------------- -------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss)... $ (2,293,626) $ (1,516,182) $ 9,925 $ (31,926) $ 119,515 $ 81,316 Net realized gain/(loss) on investments..... 5,095,349 20,429,272 434,689 6,125,491 1,012,884 2,468,368 Net change in unrealized appreciation.... 69,260,476 37,801,568 (424,713) 4,989,395 (291,673) 4,011,497 -------------- -------------- -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations...... 72,062,199 56,714,658 19,901 11,082,960 840,726 6,561,181 -------------- -------------- -------------- -------------- -------------- -------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares........ -- -- -- -- (52,112) (6,738) Class B shares........ -- -- -- -- (4,736) -- Class C shares........ -- -- -- -- (3,697) -- Class Y shares........ -- -- -- -- (58,015) (66,694) -------------- -------------- -------------- -------------- -------------- -------------- -- -- -- -- (118,560) (73,432) -------------- -------------- -------------- -------------- -------------- -------------- Net realized capital gains Class A shares........ (6,112,211) (12,011,452) (1,358,815) (2,877,613) (807,345) (1,061,580) Class B shares........ (944,991) -- (434,161) -- (114,321) -- Class C shares........ (3,004,046) (7,215,795) (675,728) (1,511,446) (474,805) (688,493) Class Y shares........ (1,819,866) (3,784,124) (54,124) (272,772) (487,820) (1,872,935) -------------- -------------- -------------- -------------- -------------- -------------- (11,881,114) (23,011,371) (2,522,828) (4,661,831) (1,884,291) (3,623,008) -------------- -------------- -------------- -------------- -------------- -------------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares.......... 370,960,712 85,871,383 26,721,919 13,066,709 9,602,484 8,081,705 Cost of shares repurchased..... (250,991,253) (46,357,215) (18,667,292) (11,007,952) (9,537,890) (7,019,459) Shares issued in reinvestment of dividends....... 11,062,277 21,279,449 2,358,103 4,312,328 1,621,941 3,045,286 -------------- -------------- -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets derived from shares of beneficial interest transactions.... 131,031,736 60,793,617 10,412,730 6,371,085 1,686,535 4,107,532 -------------- -------------- -------------- -------------- -------------- -------------- Total increase/(decrease) in net assets... 191,212,821 94,496,904 7,909,803 12,792,214 524,410 6,972,273 NET ASSETS Beginning of period.......... 214,372,928 119,876,024 37,727,289 24,935,075 21,054,105 14,081,832 -------------- -------------- -------------- -------------- -------------- -------------- End of period**... $ 405,585,749 $214,372,928 $ 45,637,092 $37,727,289 $21,578,515 $ 21,054,105 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ---------- * Commencement of operations. ** Includes undistributed net investment income as follows:
FOR THE FISCAL YEAR/PERIOD ENDED MARCH 31, 1999 MARCH 31, 1998 ---------------- ---------------- The Insiders Select Fund............ $ 9,925 -- Large Cap Value Portfolio........... 17,215 $ 16,260 Balanced Portfolio.................. 36,656 16,766 International Equity Portfolio...... -- 2,461
The accompanying notes are an integral part of the financial statements. 42
FOCUS LIST PORTFOLIO BALANCED PORTFOLIO SMALL CAP VALUE PORTFOLIO ------------------------------- ------------------------------- ------------------------------- FOR THE PERIOD FOR THE PERIOD FOR THE FOR THE FOR THE DECEMBER 29, FOR THE DECEMBER 29, FISCAL YEAR FISCAL YEAR FISCAL YEAR 1997* FISCAL YEAR 1997* ENDED ENDED ENDED THROUGH ENDED THROUGH MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1999 MARCH 31, 1998 -------------- -------------- -------------- -------------- -------------- -------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss)... $ (350,567) $ (363,627) $ (82,665) $ (5,316) $ 447,144 $ 47,628 Net realized gain/(loss) on investments..... 262,412 8,869,769 (653,420) 22,342 (169,216) 12,323 Net change in unrealized appreciation.... (15,312,529) 13,475,276 3,662,162 499,655 426,454 606,308 -------------- -------------- -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations...... (15,400,684) 21,981,418 2,926,077 516,681 704,382 666,259 -------------- -------------- -------------- -------------- -------------- -------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares........ -- -- -- -- (121,594) (10,210) Class B shares........ -- -- -- -- (32,964) (2,353) Class C shares........ -- -- -- -- (21,505) (1,857) Class Y shares........ -- -- -- -- (251,191) (16,442) -------------- -------------- -------------- -------------- -------------- -------------- -- -- -- -- (427,254) (30,862) -------------- -------------- -------------- -------------- -------------- -------------- Net realized capital gains Class A shares........ (1,150,703) (1,714,612) (7,560) -- (3,931) -- Class B shares........ (141,517) -- (5,323) -- (1,206) -- Class C shares........ (714,120) (1,249,650) (4,143) -- (703) -- Class Y shares........ (1,268,782) (1,869,317) -- -- (6,483) -- -------------- -------------- -------------- -------------- -------------- -------------- (3,275,122) (4,833,579) (17,026) -- (12,323) -- -------------- -------------- -------------- -------------- -------------- -------------- SHARES OF BENEFICIAL INTEREST Net proceeds from the sale of shares.......... 45,379,051 26,127,616 7,301,185 7,046,653 8,698,719 10,954,435 Cost of shares repurchased..... (48,453,172) (13,322,599) (3,208,556) (275,794) (2,836,127) (166,905) Shares issued in reinvestment of dividends....... 2,949,510 4,344,751 16,732 -- 230,561 16,785 -------------- -------------- -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets derived from shares of beneficial interest transactions.... (124,611) 17,149,768 4,109,361 6,770,859 6,093,153 10,804,315 -------------- -------------- -------------- -------------- -------------- -------------- Total increase/(decrease) in net assets... (18,800,417) 34,297,607 7,018,412 7,287,540 6,357,958 11,439,712 NET ASSETS Beginning of period.......... 75,235,131 40,937,524 7,287,540 -- 11,439,712 -- -------------- -------------- -------------- -------------- -------------- -------------- End of period**... $ 56,434,714 $ 75,235,131 $ 14,305,952 $ 7,287,540 $ 17,797,670 $ 11,439,712 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- INTERNATIONAL EQUITY PORTFOLIO ------------------------------- FOR THE PERIOD FOR THE DECEMBER 29, FISCAL YEAR 1997* ENDED THROUGH MARCH 31, 1999 MARCH 31, 1998 -------------- -------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss)... $ (20,982) $ 2,461 Net realized gain/(loss) on investments..... 15,991 (117,110) Net change in unrealized appreciation.... 848,548 958,548 -------------- -------------- Net increase/(decrease) in net assets resulting from operations...... 843,557 843,899 -------------- -------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A shares........ (1,421) -- Class B shares........ (530) -- Class C shares........ (510) -- Class Y shares........ -- -- -------------- -------------- (2,461) -- -------------- -------------- 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.......... 8,180,925 7,265,097 Cost of shares repurchased..... (2,716,280) (34,440) Shares issued in reinvestment of dividends....... 1,297 -- -------------- -------------- Net increase/(decrease) in net assets derived from shares of beneficial interest transactions.... 5,465,942 7,230,657 -------------- -------------- Total increase/(decrease) in net assets... 6,307,038 8,074,556 NET ASSETS Beginning of period.......... 8,074,556 -- -------------- -------------- End of period**... $ 14,381,594 $ 8,074,556 -------------- -------------- -------------- --------------
43 THE BEAR STEARNS FUNDS FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total investment returns, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
NET NET DISTRIBUTIONS NET ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE, BEGINNING INCOME/ GAIN/(LOSS) ON INVESTMENT CAPITAL END OF OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD --------- ---------- ---------------- ---------- ------------- ------ S&P STARS PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ $19.97 $(0.12) $ 5.46 $ -- $(0.92) $24.39 For the fiscal year ended March 31, 1998................ 16.13 (0.13) 6.69 -- (2.72) 19.97 For the fiscal year ended March 31, 1997................ 14.92 (0.09) 2.63 -- (1.33) 16.13 For the period April 3, 1995* through March 31, 1996...... 12.00 -- 3.31 -- (0.39) 14.92 CLASS B For the fiscal year ended March 31, 1999................ 19.86 (0.12) 5.29 -- (0.92) 24.11 For the period January 5, 1998* through March 31, 1998...... 17.37 (0.04) 2.53 -- -- 19.86 CLASS C For the fiscal year ended March 31, 1999................ 19.85 (0.22) 5.39 -- (0.92) 24.10 For the fiscal year ended March 31, 1998................ 16.06 (0.22) 6.65 -- (2.64) 19.85 For the fiscal year ended March 31, 1997................ 14.86 (0.17) 2.62 -- (1.25) 16.06 For the period April 3, 1995* through March 31, 1996...... 12.00 (0.06) 3.28 -- (0.36) 14.86 CLASS Y For the fiscal year ended March 31, 1999................ 20.11 (0.05) 5.54 -- (0.92) 24.68 For the fiscal year ended March 31, 1998................ 16.23 (0.05) 6.74 -- (2.81) 20.11 For the fiscal year ended March 31, 1997................ 14.97 (0.02) 2.66 -- (1.38) 16.23 For the period August 7, 1995* through March 31, 1996...... 14.13 0.07 1.20 (0.03) (0.40) 14.97 THE INSIDERS SELECT FUND CLASS A For the fiscal year ended March 31, 1999................ 17.88 -- (0.01) -- (0.85) 17.02 For the fiscal year ended March 31, 1998................ 14.58 -- 6.30 -- (3.00) 17.88 For the fiscal year ended March 31, 1997................ 14.00 0.02 2.48 (0.01) (1.91) 14.58 For the period June 16, 1995* through March 31, 1996...... 12.00 0.03 1.98 (0.01) -- 14.00 CLASS B For the fiscal year ended March 31, 1999................ 17.69 -- (0.09) -- (0.85) 16.75 For the period January 6, 1998* through March 31, 1998...... 15.72 0.01 1.96 -- -- 17.69 CLASS C For the fiscal year ended March 31, 1999................ 17.68 -- (0.09) -- (0.85) 16.74 For the fiscal year ended March 31, 1998................ 14.48 (0.07) 6.21 -- (2.94) 17.68 For the fiscal year ended March 31, 1997................ 13.96 (0.06) 2.47 -- (1.89) 14.48 For the period June 16, 1995* through March 31, 1996...... 12.00 (0.01) 1.97 -- -- 13.96 CLASS Y For the fiscal year ended March 31, 1999................ 18.09 -- 0.09 -- (0.85) 17.33 For the fiscal year ended March 31, 1998................ 14.66 0.07 6.36 -- (3.00) 18.09 For the fiscal year ended March 31, 1997................ 14.02 0.08 2.49 (0.02) (1.91) 14.66 For the period June 20, 1995* through March 31, 1996...... 12.12 0.07 1.87 (0.04) -- 14.02
- ------------ * Commencement of operations. ** Calculated based on the shares outstanding on the first and last day of the respective periods, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. (1) Reflects waivers and reimbursements. (2) The amounts shown for a share outstanding throughout the respective periods are not in accord with the changes in the aggregate gains and losses on investments during the respective periods because of the timing of sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective periods. The accompanying notes are an integral part of the financial statements. 44
INCREASE/(DECREASE) REFLECTED IN EXPENSE RATIOS AND NET RATIO OF NET NET ASSETS, RATIO OF INVESTMENT INVESTMENT TOTAL END OF EXPENSES TO INCOME/(LOSS) INCOME/(LOSS) PORTFOLIO INVESTMENT PERIOD AVERAGE NET TO AVERAGE DUE TO WAIVERS AND TURNOVER RETURN(3) (000'S OMITTED) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS RATE ----------- --------------- ----------- ------------- ------------------- --------- S&P STARS PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ 27.46% $206,130 1.50% (0.73)% 0.27% 76.17% For the fiscal year ended March 31, 1998................ 43.53 109,591 1.50(7) (0.83)(6) 0.38 172.78(7) For the fiscal year ended March 31, 1997................ 16.87 67,491 1.50(7) (0.59)(6) 0.70 220.00(7) For the period April 3, 1995* through March 31, 1996...... 27.68 45,049 1.50(5)(7) (0.01)(5)(6) 0.89(5) 295.97(7) CLASS B For the fiscal year ended March 31, 1999................ 26.75 49,319 2.00 (1.23) 0.27 76.17 For the period January 5, 1998* through March 31, 1998...... 14.34(4) 5,800 2.00(5) (1.47)(4)(5) 0.53(4)(5) 172.78(7) CLASS C For the fiscal year ended March 31, 1999................ 26.75 97,654 2.00 (1.23) 0.27 76.17 For the fiscal year ended March 31, 1998................ 42.80 63,330 2.00(7) (1.32)(6) 0.38 172.78(7) For the fiscal year ended March 31, 1997................ 16.33 37,622 2.00(7) (1.09) 0.70 220.00(7) For the period April 3, 1995* through March 31, 1996...... 26.91 28,081 2.00(5)(7) (0.45)(4)(5)(6) 0.92(5) 295.97(7) CLASS Y For the fiscal year ended March 31, 1999................ 28.02 52,483 1.00 (0.23) 0.27 76.17 For the fiscal year ended March 31, 1998................ 44.22 35,652 1.00(7) (0.32)(6) 0.38 172.78(7) For the fiscal year ended March 31, 1997................ 17.48 14,763 1.00(7) (0.10)(6) 0.70 220.00(7) For the period August 7, 1995* through March 31, 1996...... 9.09(4) 8,779 1.00(5)(7) 0.82(4)(5)(6) 0.99(4)(5) 295.97(7) THE INSIDERS SELECT FUND CLASS A For the fiscal year ended March 31, 1999................ 0.29 24,395 1.65 0.02 0.81 99.71 For the fiscal year ended March 31, 1998................ 46.02 21,912 1.65 0.03 1.09 115.64 For the fiscal year ended March 31, 1997................ 18.31 13,860 1.65 0.11 1.82 128.42 For the period June 16, 1995* through March 31, 1996...... 16.75 12,132 1.65(5) 0.38(5) 1.87(5) 93.45 CLASS B For the fiscal year ended March 31, 1999................ (0.16) 8,426 2.15 0.03 0.81 99.71 For the period January 6, 1998* through March 31, 1998...... 12.53(4) 2,253 2.15(5) (0.95)(4)(5) 1.82(4)(5) 115.64 CLASS C For the fiscal year ended March 31, 1999................ (0.16) 11,902 2.15 0.02 0.81 99.71 For the fiscal year ended March 31, 1998................ 45.17 12,297 2.15 (0.46) 1.10 115.64 For the fiscal year ended March 31, 1997................ 17.69 9,519 2.15 (0.38) 1.81 128.42 For the period June 16, 1995* through March 31, 1996...... 16.33 9,928 2.15(5) (0.12)(5) 1.92(5) 93.45 CLASS Y For the fiscal year ended March 31, 1999................ 0.85 914 1.15 0.02 0.81 99.71 For the fiscal year ended March 31, 1998................ 46.68 1,265 1.15 0.55 1.07 115.64 For the fiscal year ended March 31, 1997................ 18.81 1,557 1.15 0.60 1.81 128.42 For the period June 20, 1995* through March 31, 1996...... 15.98(4) 1,293 1.15(5) 0.97(4)(5) 2.04(4)(5) 93.45
- ------------ (3) Total investment return does not consider the effects of sales charges or contingent deferred sales charges. Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total investment return is not annualized. (4) The total investment return and ratios for a class of shares are not necessarily comparable to those of any other outstanding class of shares, due to timing differences in the commencement of the intial public offerings. (5) Annualized. (6) Includes S&P STARS' share of S&P STARS Master Series' expenses for the period prior to June 25, 1997. (7) Portfolio turnover rate is related to S&P STARS Master Series for the period prior to June 25, 1997. 45 THE BEAR STEARNS FUNDS FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total invesment returns, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
NET NET DISTRIBUTIONS NET ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE, BEGINNING INCOME/ GAIN/(LOSS) ON INVESTMENT CAPITAL END OF OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD --------- ---------- ---------------- ---------- ------------- ------ LARGE CAP VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ $20.83 $ 0.11 $ 0.59 $(0.11) $(1.68) $19.74 For the fiscal year ended March 31, 1998................ 17.17 0.05 7.15 (0.02) (3.52) 20.83 For the fiscal year ended March 31, 1997................ 15.13 0.04 2.28 (0.10) (0.18) 17.17 For the period April 3, 1995* through March 31, 1996...... 12.00 0.06 3.10 (0.02) (0.01) 15.13 CLASS B For the fiscal year ended March 31, 1999................ 20.66 0.08 0.52 (0.07) (1.68) 19.51 For the period January 28, 1998* through March 31, 1998...... 18.17 (0.01) 2.50 -- -- 20.66 CLASS C For the fiscal year ended March 31, 1999................ 20.66 0.07 0.53 (0.01) (1.68) 19.57 For the fiscal year ended March 31, 1998................ 17.11 (0.03) 7.10 -- (3.52) 20.66 For the fiscal year ended March 31, 1997................ 15.08 (0.02) 2.25 (0.02) (0.18) 17.11 For the period April 3, 1995* through March 31, 1996...... 12.00 (0.01) 3.10 -- (0.01) 15.08 CLASS Y For the fiscal year ended March 31, 1999................ 20.84 0.17 0.65 (0.20) (1.68) 19.78 For the fiscal year ended March 31, 1998................ 17.18 0.26 7.05 (0.13) (3.52) 20.84 For the fiscal year ended March 31, 1997................ 15.12 0.23 2.17 (0.16) (0.18) 17.18 For the period September 11, 1995* through March 31, 1996................ 13.98 0.07 1.16 (0.08) (0.01) 15.12 SMALL CAP VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ 23.65 (0.13) (4.65) -- (0.94) 17.93 For the fiscal year ended March 31, 1998................ 17.48 (0.14) 8.06 -- (1.75) 23.65 For the fiscal year ended March 31, 1997................ 15.87 (0.10) 1.95 -- (0.24) 17.48 For the period April 3, 1995* through March 31, 1996...... 12.00 (0.07) 4.17 -- (0.23) 15.87 CLASS B For the fiscal year ended March 31, 1999................ 23.48 (0.16) (4.67) -- (0.94) 17.71 For the period January 21, 1998* through March 31, 1998...... 19.95 -- 3.53 -- -- 23.48 CLASS C For the fiscal year ended March 31, 1999................ 23.48 (0.26) (4.58) -- (0.94) 17.70 For the fiscal year ended March 31, 1998................ 17.38 (0.24) 8.00 -- (1.66) 23.48 For the fiscal year ended March 31, 1997................ 15.79 (0.18) 1.93 -- (0.16) 17.38 For the period April 3, 1995* through March 31, 1996...... 12.00 (0.10) 4.11 -- (0.22) 15.79 CLASS Y For the fiscal year ended March 31, 1999................ 23.65 (0.02) (4.66) -- (0.94) 18.03 For the fiscal year ended March 31, 1998................ 17.47 (0.04) 8.06 -- (1.84) 23.65 For the fiscal year ended March 31, 1997................ 15.85 (0.05) 1.97 -- (0.30) 17.47 For the period June 22, 1995* through March 31, 1996...... 13.09 -- 3.05 -- (0.29) 15.85 FOCUS LIST PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ 13.40 (0.07) 4.01 -- (0.02) 17.32 For the period December 29, 1997* through March 31, 1998................ 12.00 (0.01) 1.41 -- -- 13.40 CLASS B For the fiscal year ended March 31, 1999................ 13.38 (0.13) 3.95 -- (0.02) 17.18 For the period December 29, 1997* through March 31, 1998................ 12.00 (0.01) 1.39 -- -- 13.38 CLASS C For the fiscal year ended March 31, 1999................ 13.38 (0.13) 3.96 -- (0.02) 17.19 For the period December 29, 1997* through March 31, 1998................ 12.00 (0.01) 1.39 -- -- 13.38
- ---------- * Commencement of operations. ** Calculated based on the shares outstanding on the first and last day of the respective periods, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. (1) Reflects waivers and reimbursements. (2) The amounts shown for a share outstanding throughout the respective periods are not in accord with the changes in the aggregate gains and losses on investments during the respective periods because of the timing of sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective periods. The accompanying notes are an integral part of the financial statements. 46
INCREASE/(DECREASE) REFLECTED IN EXPENSE RATIOS AND NET RATIO OF NET NET ASSETS, RATIO OF INVESTMENT INVESTMENT TOTAL END OF EXPENSES TO INCOME/(LOSS) INCOME/(LOSS) PORTFOLIO INVESTMENT PERIOD AVERAGE NET TO AVERAGE DUE TO WAIVERS AND TURNOVER RETURN(3) (000'S OMITTED) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS RATE ----------- --------------- ----------- ------------- ------------------- --------- LARGE CAP VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ 3.68% $ 9,677 1.50% 0.54% 1.46% 38.27% For the fiscal year ended March 31, 1998................ 44.59 8,358 1.50 0.32 1.73 61.75 For the fiscal year ended March 31, 1997................ 15.44 4,987 1.50 0.43 1.58 136.67 For the period April 3, 1995* through March 31, 1996...... 26.35 3,616 1.50(5) 0.46(5) 4.34(5) 45.28 CLASS B For the fiscal year ended March 31, 1999................ 3.21 1.911 2.00 0.08 1.46 38.27 For the period January 28, 1998* through March 31, 1998...... 13.70(4) 446 2.00(5) (0.73)(4)(5) 1.05(4)(5) 61.75 CLASS C For the fiscal year ended March 31, 1999................ 3.22 5,250 2.00 0.08 1.46 38.27 For the fiscal year ended March 31, 1998................ 43.94 4,987 2.00 (0.19) 1.73 61.75 For the fiscal year ended March 31, 1997................ 14.87 2,986 2.00 (0.08) 1.61 136.67 For the period April 3, 1995* through March 31, 1996...... 25.71 3,520 2.00(5) (0.06)(5) 4.39(5) 45.28 CLASS Y For the fiscal year ended March 31, 1999................ 4.29 4,741 1.00 1.08 1.46 38.27 For the fiscal year ended March 31, 1998................ 45.27 7,263 1.00 0.83 1.76 61.75 For the fiscal year ended March 31, 1997................ 16.04 6,109 1.00 1.00 1.50 136.67 For the period September 11, 1995* through March 31, 1996................ 8.75(4) 3,413 1.00(5) 0.76(4)(5) 4.41(4)(5) 45.28 SMALL CAP VALUE PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ (20.26) 18,520 1.50 (0.60) 0.65 84.12 For the fiscal year ended March 31, 1998................ 46.86 25,111 1.50 (0.71) 0.76 90.39 For the fiscal year ended March 31, 1997................ 11.71 13,143 1.50 (0.81) 1.00 56.88 For the period April 3, 1995* through March 31, 1996...... 34.36 6,474 1.50(5) (0.66)(5) 2.32(5) 40.79 CLASS B For the fiscal year ended March 31, 1999................ (20.63) 2,716 2.00 (1.10) 0.65 84.12 For the period January 21, 1998* through March 31, 1998...... 17.69(4) 901 2.00(5) (1.49)(4)(5) 1.31(4)(5) 90.39 CLASS C For the fiscal year ended March 31, 1999................ (20.67) 11,112 2.00 (1.10) 0.65 84.12 For the fiscal year ended March 31, 1998................ 46.10 18,082 2.00 (1.21) 0.76 90.39 For the fiscal year ended March 31, 1997................ 11.12 11,071 2.00 (1.31) 0.99 56.88 For the period April 3, 1995* through March 31, 1996...... 33.59 6,753 2.00(5) (1.09)(5) 2.39(5) 40.79 CLASS Y For the fiscal year ended March 31, 1999................ (19.84) 24,087 1.00 (0.10) 0.65 84.12 For the fiscal year ended March 31, 1998................ 47.54 31,141 1.00 (0.21) 0.77 90.39 For the fiscal year ended March 31, 1997................ 12.19 16,724 1.00 (0.31)(4)(5) 1.00 56.88 For the period June 22, 1995* through March 31, 1996...... 23.52(4) 8,989 1.00(5) -- 2.45(4)(5) 40.79 FOCUS LIST PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ 29.47 6,542 1.40 (0.57) 2.89 84.49 For the period December 29, 1997* through March 31, 1998................ 11.67 3,201 1.40(5) (0.30)(5) 5.01(5) 28.91 CLASS B For the fiscal year ended March 31, 1999................ 28.61 4,460 1.90 (1.07) 2.89 84.49 For the period December 29, 1997* through March 31, 1998................ 11.50 2,399 1.90(5) (0.78)(5) 5.27(5) 28.91 CLASS C For the fiscal year ended March 31, 1999................ 28.69 3,304 1.90 (1.07) 2.89 84.49 For the period December 29, 1997* through March 31, 1998................ 11.50 1,687 1.90(5) (0.62)(5) 5.52(5) 28.91
- ---------- (3) Total investment return does not consider the effects of sales charges or contingent deferred sales charges. Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total investment return is not annualized. (4) The total investment return and ratios for a class of shares are not necessarily comparable to those of any other outstanding class of shares, due to timing differences in the commencement of the intial public offerings. (5) Annualized. 47 THE BEAR STEARNS FUNDS FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total invesment returns, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
NET NET DISTRIBUTIONS NET ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE, BEGINNING INCOME/ GAIN ON INVESTMENT CAPITAL END OF OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD --------- ---------- ---------------- ---------- ------------- ------ BALANCED PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ $12.93 $ 0.34 $ 0.18 $(0.33) $(0.01) $13.11 For the period December 29, 1997* through March 31, 1998................ 12.00 0.06 0.91 (0.04) -- 12.93 CLASS B For the fiscal year ended March 31, 1999................ 12.92 0.29 0.16 (0.29) (0.01) 13.07 For the period December 29, 1997* through March 31, 1998................ 12.00 0.05 0.90 (0.03) -- 12.92 CLASS C For the fiscal year ended March 31, 1999................ 12.92 0.29 0.16 (0.29) (0.01) 13.07 For the period December 29, 1997* through March 31, 1998................ 12.00 0.05 0.90 (0.03) -- 12.92 CLASS Y For the fiscal year ended March 31, 1999................ 12.95 0.37 0.21 (0.36) (0.01) 13.16 For the period January 6, 1998* through March 31, 1998...... 12.05 0.06 0.88 (0.04) -- 12.95 INTERNATIONAL EQUITY PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ 13.77 (0.03) 1.40 --+ -- 15.14 For the period December 29, 1997* through March 31, 1998................ 12.00 0.01 1.76 -- -- 13.77 CLASS B For the fiscal year ended March 31, 1999................ 13.75 (0.02) 1.32 --+ -- 15.05 For the period December 29, 1997* through March 31, 1998................ 12.00 -- 1.75 -- -- 13.75 CLASS C For the fiscal year ended March 31, 1999................ 13.75 (0.02) 1.32 --+ -- 15.05 For the period December 29, 1997* through March 31, 1998................ 12.00 -- 1.75 -- -- 13.75
- ---------- * Commencement of operations. ** Calculated based on the shares outstanding on the first and last day of the respective periods, except for dividends and distributions, if any, which are based on the actual shares outstanding on the dates of distributions. + Amount is less than $0.01 per share. (1) Reflects waivers and reimbursements. (2) The amounts shown for a share outstanding throughout the respective periods are not in accord with the changes in the aggregate gains and losses on investments during the respective periods because of the timing of sales and repurchases of Portfolio shares in relation to fluctuating net asset values during the respective periods. The accompanying notes are an integral part of the financial statements. 48
INCREASE/(DECREASE) REFLECTED IN EXPENSE NET RATIO OF NET RATIOS AND NET ASSETS, RATIO OF INVESTMENT INVESTMENT TOTAL END OF EXPENSES TO INCOME/(LOSS) INCOME/(LOSS) PORTFOLIO INVESTMENT PERIOD AVERAGE NET TO AVERAGE DUE TO WAIVERS AND TURNOVER RETURN(3) (000'S OMITTED) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS RATE ----------- --------------- ----------- ------------- ------------------- --------- BALANCED PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ 4.07% $ 4,495 1.20% 2.65% 2.08% 45.98% For the period December 29, 1997* through March 31, 1998................ 8.04 3,852 1.20(5) 2.47(5) 3.25(5) 12.72 CLASS B For the fiscal year ended March 31, 1999................ 3.56 1,811 1.70 2.15 2.08 45.98 For the period December 29, 1997* through March 31, 1998................ 7.92 1,044 1.70(5) 1.96(5) 3.30(5) 12.72 CLASS C For the fiscal year ended March 31, 1999................ 3.56 1,089 1.70 2.15 2.08 45.98 For the period December 29, 1997* through March 31, 1998................ 7.92 858 1.70(5) 1.95(5) 3.33(5) 12.72 CLASS Y For the fiscal year ended March 31, 1999................ 4.59 10,403 0.70 3.15 2.08 45.98 For the period January 6, 1998* through March 31, 1998...... 7.80(4) 5,685 0.70(5) 2.98(4)(5) 3.12(4)(5) 12.72 INTERNATIONAL EQUITY PORTFOLIO CLASS A For the fiscal year ended March 31, 1999................ 9.97 8,299 1.75 0.05 2.38 114.68 For the period December 29, 1997* through March 31, 1998................ 14.75 3,765 1.75(5) 0.53(5) 4.06(5) 3.26 CLASS B For the fiscal year ended March 31, 1999................ 9.48 3,156 2.25 (0.45) 2.38 114.68 For the period December 29, 1997* through March 31, 1998................ 14.58 2,137 2.25(5) (0.06)(5) 4.04(5) 3.26 CLASS C For the fiscal year ended March 31, 1999................ 9.48 2,926 2.25 (0.45) 2.38 114.68 For the period December 29, 1997* through March 31, 1998................ 14.58 2,173 2.25(5) (0.06)(5) 4.04(5) 3.26
- ---------- (3) Total investment return does not consider the effects of sales charges or contingent deferred sales charges. Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total investment return is not annualized. (4) The total investment return and ratios for Class Y shares are not necessarily comparable to those of Class A and C shares due to timing differences in the commencement of the intial public offering of Class Y shares. (5) Annualized. 49 THE BEAR STEARNS FUNDS S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio NOTES TO FINANCIAL STATEMENTS ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business trust on September 29, 1994 and is registered with the Securities and Exchange Commission (the "Commission") under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as an open-end management investment company. The Fund currently has ten separate portfolios in operation: seven diversified portfolios, Large Cap Value Portfolio ("Large Cap"), Small Cap Value Portfolio ("Small Cap"), Balanced Portfolio ("Balanced"), International Equity Portfolio ("International Equity"), High Yield Total Return Portfolio, Income Portfolio and Prime Money Market Portfolio and three non-diversified portfolios, S&P STARS Portfolio ("S&P STARS"), The Insiders Select Fund ("Insiders Select") and Focus List Portfolio ("Focus List") (each a "Portfolio" and collectively, the "Portfolios"). Each Portfolio is treated as a separate entity for certain matters under the Investment Company Act, and for other purposes, and a shareholder of one Portfolio is not deemed to be a shareholder of any other Portfolio. As of the date hereof, each Portfolio offers four classes of shares, which have been designated as Class A, B, C and Y shares (except the Prime Money Market Portfolio, which only offers shares designated as Class Y). Class Y shares of Focus List and International Equity have yet to commence their initial public offerings. ORGANIZATIONAL MATTERS -- Prior to commencing investment operations, each Portfolio as indicated below did not have any transactions other than those relating to organizational matters and the issuance of shares of beneficial interest of the Portfolios to Bear, Stearns & Co. Inc. ("Bear Stearns" or the "Distributor") as follows:
SHARES OF BENEFICIAL INTEREST ------------------------------------------------------------ COMMENCEMENT OF PORTFOLIO OPERATIONS CLASS A CLASS B CLASS C CLASS Y - ------------------------------ --------------------- ------- ------- ------- ------- S&P STARS..................... April 3, 1995 5,209 -- 5,209 -- Insiders Select............... June 16, 1995 1 -- 1 -- Large Cap..................... April 3, 1995 1,042 -- 1,042 -- Small Cap..................... April 3, 1995 1,042 -- 1,042 -- Focus List.................... December 29, 1997 1 1 1 1 Balanced...................... December 29, 1997 1 1 1 1 International Equity.......... December 29, 1997 1 1 1 1
Costs of $203,596, $181,965, $99,875, $107,203, $39,619, $54,795 and $61,015 which were incurred by S&P STARS, Insiders Select, Large Cap, Small Cap, Focus List, Balanced and International Equity, respectively, in connection with the organization, registration with the Commission and initial public offering of its shares, have been deferred and are being amortized using the straight-line method over the period of benefit not exceeding sixty months, beginning with the commencement of investment operations of each Portfolio. 50 In the event that the Distributor or any transferee of the Distributor redeems any of its original shares in a particular Portfolio prior to the end of the sixty month period, the proceeds of the redemption payable in respect of such shares shall be reduced by the pro rata share (based on the proportionate share of the original shares redeemed to the total number of original shares outstanding at the time of the redemption) of the unamortized deferred organization expenses as of the date of such redemption. In the event that a particular Portfolio is liquidated prior to the end of the sixty month period, the Distributor or the transferee of the Distributor shall bear the unamortized deferred organization expenses. MANAGEMENT ESTIMATES -- The preparation of financial statements in accordance with generally accepted accounting principles requires management to make certain estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. PORTFOLIO VALUATION -- Each Portfolio calculates the net asset value of and completes orders to purchase or repurchase its shares of beneficial interest on each business day, with the exception of those days on which the New York Stock Exchange is closed. Net asset value per share is determined as of the close of regular trading on the floor of the New York Stock Exchange on each business day. Portfolio securities, including covered call options written by the Portfolios, are valued at the last sale price on the securities exchange or national securities market on which such securities primarily are traded. Securities not listed on an exchange or national securities market, or securities in which there were no transactions, are valued at the average of the most recent bid and asked prices, except in the case of open short positions where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities which mature in 60 days or less are valued at amortized cost, which approximates market value, unless this method does not represent fair value. Any securities or other assets for which recent market quotations are not readily available are valued at fair value as determined in good faith by the Fund's Valuation Committee. In making this determination the Valuation Committee will follow procedures adopted by the Board of Trustees, such procedures are among other things, publicly available information regarding the issuer, market conditions and values ascribed to comparable companies. Expenses and fees, including the investment advisory, administration and distribution fees, are accrued daily and taken into account for the purpose of determining the net asset value of a Portfolio's shares. Because of the differences in operating expenses incurred by each class, the per share net asset value of each class will differ. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME -- Investment transactions are recorded on the trade date (the date on which the order to buy or sell is executed). Realized gains and losses from securities and foreign currency related transactions, if any, are calculated on the identified cost basis. Discounts are treated as adjustments to interest income and identified costs of investments over the lives of the respective investments. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Amortization is recorded on a straight-line basis. Each Portfolios' net investment income (other than distribution fees) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of net assets of each class at the beginning of the day (after adjusting for current capital share activity of the respective classes). OPTIONS WRITTEN -- When a Portfolio writes an option, an amount equal to the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from writing options which expire unexercised are recorded by the Portfolio on the expiration date as realized gains from option transactions. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying securities in determining whether the Portfolio has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The use of written options involves, to varying degrees, elements of market risk in excess of the amount recognized in the statement of assets and liabilities. The contractual or notional amounts reflect the extent of the Portfolio's involvement in these financial instruments. In writing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio selling or buying a security at a price different from the current market value. Each Portfolio's activities in written options are conducted through regulated exchanges which do not result in counterparty credit risks. The Portfolios had no other transactions except for those listed below. 51 Option activity for the fiscal year ended March 31, 1999 was as follows:
S&P STARS ---------------------------------------------- CALL OPTIONS PUT OPTIONS ----------------------- --------------------- CONTRACTS PREMIUMS CONTRACTS PREMIUMS --------- ----------- --------- --------- Outstanding at beginning of year......................... -- -- -- -- Options written............... 5,600 $ 2,371,262 -- -- Options purchased............. -- -- 3,500 $1,217,695 Options closed or expired..... (5,600) (2,371,262) (3,500) (1,217,695) --------- ----------- --------- --------- Outstanding at end of year.... -- -- -- -- --------- ----------- --------- --------- --------- ----------- --------- ---------
SHORT SELLING -- S&P STARS, Insiders Select, Large Cap and Small Cap may engage in short selling of securities. Of the Portfolios that may engage in short selling only S&P STARS, Insiders Select and Small Cap engaged in short sales during the fiscal year ended March 31, 1999. Short sales are transactions in which a Portfolio sells a security it does not own in anticipation of a decline in the market value of that security. When a Portfolio makes a short sale, an amount equal to the proceeds received by a Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the short sale. Short sales represent obligations of a Portfolio to make future delivery of specific securities and, correspondingly, create an obligation to purchase the security at market prices prevailing at the later delivery date (or to deliver the security if already owned by a Portfolio). Upon termination of a short sale, a Portfolio will recognize a gain, limited to the price at which the Portfolio sold the security short, if the market price is less than the proceeds originally received. The Portfolio will recognize a loss, unlimited in magnitude, if the market price at termination is greater than the proceeds originally received. As a result, short sales create the risk that the Portfolio's ultimate obligation to satisfy the delivery requirements may exceed the amount of the proceeds initially received or the liability recorded in the financial statements. Focus List, Balanced and International Equity may only engage in short sales "against the box", a transaction in which a Portfolio enters into a short sale of a security which a Portfolio owns. Focus List, Balanced and International Equity did not engage in any short sales "against the box" during the fiscal year ended March 31, 1999. The Portfolios had no open short sales at March 31, 1999. SECURITIES LENDING -- Loans of securities are required at all times to be secured by collateral at least equal to 102% of the market value of the securities on loan. However, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. In the event that the borrower fails to return securities, and cash collateral being maintained by the borrower is insufficient to cover the value of loaned securities and provided such collateral insufficiency is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Portfolios. At March 31, 1999, none of the Portfolios had securities out on loan. During the fiscal year ended March 31, 1999, income from securities lending of $34,462 was earned by S&P STARS. Such income from securities lending is included under the caption INTEREST in the Statements of Operations. FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in foreign currencies, if any, are recorded in a Portfolio's records at the current prevailing exchange rates. Asset and liability accounts that are denominated in a foreign currency are adjusted daily to reflect current exchange rates. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in the Statements of Operations for the current period. It is not practical to isolate that portion of both realized and unrealized gains and losses on investments in the Statements of Operations that result from fluctuations in foreign currency exchange rates. Each Portfolio reports certain foreign currency related transactions, if any, as components of realized gains/(losses) for financial reporting purposes, whereas such components are treated as ordinary income/(loss) for U.S. federal income tax purposes. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- A Portfolio may enter into forward foreign currency exchange contracts ("forward currency contracts") to hedge against adverse changes in the relationship of the U.S. dollar to foreign currencies. The Portfolios may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Portfolios may also use these contracts to hedge the U.S. dollar value of securities it already owns denominated in foreign 52 currencies. Forward currency contracts are valued at the forward rate, and are marked-to-market daily. The change in market value is recorded by the Portfolio as an unrealized gain or loss. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the current contract at the time it was opened and the value at the time it was closed. The use of forward currency contracts does not eliminate fluctuations in the underlying prices of the Portfolio's securities, but it does establish a rate of exchange that can be achieved in the future. Although forward currency contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of currency increase. In addition, the Portfolio could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. For the fiscal year ended March 31, 1999, none of the Portfolios had open forward currency contracts. 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 is categorized as foreign exchange gain or loss for both financial reporting and income tax reporting purposes. U.S. FEDERAL TAX STATUS -- Each Portfolio intends to distribute substantially all of its taxable income and to comply or continue to comply with the other requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required. In addition, by distributing during each calendar year substantially all of its ordinary income and capital gains, if any, each Portfolio intends not to be subject to a U.S. federal excise tax. 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. Balanced incurred and elected to defer such losses of $163,370. At March 31, 1999, Focus List and Balanced have a capital loss carryforward of $653,420 and $5,846, respectively, which expires in 2007. DIVIDENDS AND DISTRIBUTIONS -- Each Portfolio, except Balanced, intends to distribute at least annually to shareholders substantially all of its net investment income. Balanced declares and pays quarterly, as dividends to shareholders, substantially all of its net investment income. Distribution of net realized gains, if any, will be declared and paid at least annually. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within capital accounts based on their U.S. federal tax-basis treatment. Temporary differences do not require reclassification. At March 31, 1999, S&P STARS, Small Cap, Focus List and International Equity reclassified within the composition of net assets, net investment losses of $2,293,626, $350,567, $82,665 and $20,982, respectively to paid-in capital. In addition, at March 31, 1999, International Equity reclassified within the composition of net assets, net realized losses from foreign currency transactions of $124,302, to paid-in capital. 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. 53 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 the investment adviser pursuant to an Investment Advisory Agreement with respect to each Portfolio. Under the terms of the Investment Advisory Agreement, each Portfolio, except Insiders Select, has agreed to pay BSAM a monthly fee at the annual rate of 0.75% of average daily net assets for S&P STARS, Large Cap and Small Cap, 0.65% of average daily net assets for Focus List and Balanced, and 1.00% of average daily net assets for International Equity. For Insiders Select, BSAM is entitled to receive from the Portfolio a monthly fee equal to an annual rate of 1.00% of the Portfolio's average daily net assets. In addition, starting in the thirteenth month of operation, BSAM is entitled to a monthly performance adjustment fee which may increase or decrease the total advisory fee by up to 0.50% per year of the value of Insider Select's average daily net assets. The performance adjustment fee reduced the total advisory fee by $108,270 or 0.24% of the value of Insider's average daily net assets due to underperformance in comparison to the S&P MidCap 400 Index, the Portfolio's benchmark index, effective February 1, 1998, for the fiscal year ended March 31, 1999. BSAM has engaged Marvin & Palmer Associates, Inc. ("Marvin & Palmer") as the International Equity's sub-investment adviser to manage the Portfolio's day-to-day investment activities. Marvin & Palmer is entitled to receive a monthly fee from BSAM calculated on an annual basis equal to 0.20% of the Portfolio's total average daily net assets to the extent the International Equity's average daily net assets are in excess of $25 million and below $50 million at the relevant month end, 0.45% of the International Equity's total average daily net assets to the extent the International Equity'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 International Equity's total average daily net assets to the extent the International Equity's net assets in excess of $65 million at the relevant month end. During the fiscal year ended March 31, 1999, Marvin & Palmer did not earn a fee since the International Equity's net assets were below $25 million. For the fiscal year ended March 31, 1999, Bear Stearns Funds Management Inc. ("BSFM" or the "Administrator") served as administrator to each Portfolio pursuant to an Administration Agreement. The Administrator is entitled to receive from each Portfolio a monthly fee equal to an annual rate of 0.15% of each Portfolio's average daily net assets. Under the terms of an Administrative Services Agreement with each Portfolio, PFPC Inc. provides certain accounting and administrative services to each Portfolio. For providing these services, PFPC Inc. is entitled to receive from each Portfolio a monthly fee equal to an annual rate of 0.10% of the Portfolio's average daily net assets up to $200 million, 0.075% of the next $200 million, 0.05% of the next $200 million and 0.03% of net assets above $600 million, subject to a minimum annual fee of $138,000 for each Portfolio. During the fiscal year ended March 31, 1999, PFPC has voluntarily waived a portion of its fee in all Portfolios except S&P STARS. For the fiscal year ended March 31, 1999, BSAM voluntarily undertook to limit each Portfolio's total operating expenses (exclusive of brokerage commissions, taxes, interest and extraordinary items) to a maximum annual level as a percent of each Portfolio's average daily net assets as follows:
PORTFOLIO CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Y SHARES - ------------------------------ -------------- -------------- -------------- -------------- S&P STARS..................... 1.50% 2.00% 2.00% 1.00% Insiders Select............... 1.65 2.15 2.15 1.15 Large Cap..................... 1.50 2.00 2.00 1.00 Small Cap..................... 1.50 2.00 2.00 1.00 Focus List.................... 1.40 1.90 1.90 0.90 Balanced...................... 1.20 1.70 1.70 0.70 International Equity.......... 1.75 2.25 2.25 1.25
54 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 investment advisory fee waivers and reimbursements of expenses (in order to maintain the voluntary expense limitation) were as follows:
PORTFOLIO ADVISORY FEE WAIVERS EXPENSE REIMBURSEMENTS - ------------------------------ -------------------- ---------------------- S&P STARS..................... $716,763 -- Insiders Select............... 321,688 $ 42,908 Large Cap..................... 165,850 157,111 Small Cap..................... 400,694 28,865 Focus List.................... 63,550 218,241 Balanced...................... 101,976 224,243 International Equity.......... 114,148 157,011
The Portfolios will not pay BSAM at a later time for any amounts BSAM may waive, nor will the Portfolios reimburse BSAM for any amounts BSAM may assume. For the fiscal year ended March 31, 1999, Bear Stearns, an affiliate of the Adviser and the Administrator, earned approximately $500,570, $15,902, $1,602, $3,540, $23,472, and $5,688 in brokerage commissions from portfolio transactions executed on behalf of S&P STARS, Insiders Select, Large Cap, Small Cap, Focus List and Balanced, respectively. Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies Inc. and an affiliate of the Adviser and the Administrator, serves as custodian to each of the Portfolios. DISTRIBUTION PLAN 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%(a) 0.25%(a) 0.75% 0.25% 0.75%(a) 0.25%(a) Insiders Select......................... 0.25(a) 0.25(a) 0.75 0.25 0.75(a) 0.25(a) Large Cap............................... 0.25(a) 0.25(a) 0.75 0.25 0.75(a) 0.25(a) Small Cap............................... 0.25(a) 0.25(a) 0.75 0.25 0.75(a) 0.25(a) Focus List.............................. 0.25 0.25 0.75 0.25 0.75 0.25 Balanced................................ 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
- ------- (a) Prior to February 10, 1999, fees for shareholder servicing were paid through the Distribution Plan. 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 of Trustees 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 whose clients hold each Portfolio's shares and other distribution-related activities. Bear Stearns uses shareholder servicing fees to pay broker-dealers and other financial institutions whose clients hold portfolio shares primarily for shareholder liaison and other account maintenance services. 55 For the fiscal year ended March 31, 1999, 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..................... $1,021,830 $568,119 Insiders Select............... 211,061 111,708 Large Cap..................... 74,636 40,452 Small Cap..................... 185,883 99,098 Focus List.................... 51,462 24,443 Balanced...................... 29,321 17,595 International Equity.......... 54,926 28,538
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. Effective December 24, 1997, the Distributor has increased the reallowance to all authorized dealers on net asset value transfers from 1.00% to 1.25%. In addition, Bear Stearns advanced 4.25% and 1.00% in sales commissions on the sale of Class B and C shares, respectively, to dealers at the time of such sales. For the fiscal year ended March 31, 1999, Bear Stearns has advised each Portfolio that it received the approximate amounts noted below in front-end sales charges resulting from sales of Class A shares (from which Bear Stearns paid such sales charges to dealers who in turn paid commissions to sales persons) and contingent deferred sales charges ("CDSC") upon certain redemptions by Class B and C shareholders, respectively. The amounts were as follows:
FRONT-END SALES CHARGES CDSC CDSC PORTFOLIO CLASS A SHARES CLASS B SHARES CLASS C SHARES - ------------------------------ ----------------------- -------------- -------------- S&P STARS..................... $2,061,054 $68,256 $24,498 Insiders Select............... 389,116 69,780 14,431 Large Cap..................... 86,248 9,006 4,492 Small Cap..................... 165,298 14,163 7,586 Focus List.................... 111,817 30,273 656 Balanced...................... 43,060 1,463 6 International Equity.......... 92,733 6,730 706
INVESTMENTS IN SECURITIES For U.S. federal income tax purposes, the cost of securities owned, gross appreciation, gross depreciation and net unrealized appreciation of investments at March 31, 1999 for each Portfolio were as follows:
GROSS GROSS NET PORTFOLIO COST APPRECIATION DEPRECIATION APPRECIATION - ------------------------- ------------- ------------- ------------- ------------- S&P STARS................ $ 301,419,926 $ 120,704,551 $ (12,670,112) $108,034,439 Insiders Select.......... 38,664,138 8,093,128 (1,289,141) 6,803,987 Large Cap................ 16,494,839 6,157,467 (811,517) 5,345,950 Small Cap................ 53,001,292 9,901,033 (6,126,036) 3,774,997 Focus List............... 10,508,469 4,617,326 (455,509) 4,161,817 Balanced................. 17,036,503 1,671,551 (638,789) 1,032,762 International Equity..... 12,836,373 1,996,524 (188,602) 1,807,922
56 For the fiscal year ended March 31, 1999, aggregate purchases and sales of investment securities (excluding short-term securities) for each Portfolio were as follows:
PORTFOLIO PURCHASES SALES - ------------------------------ ------------ ------------ S&P STARS..................... $322,357,313 $204,943,223 Insiders Select............... 50,254,609 40,811,454 Large Cap..................... 9,129,370 8,083,398 Small Cap..................... 52,248,962 52,009,599 Focus List.................... 11,497,703 7,927,577 Balanced...................... 13,207,979 6,494,385 International Equity.......... 18,638,669 11,920,753
SHARES OF BENEFICIAL INTEREST Each Portfolio offers Class A, B, C and Y shares. Class A shares are sold with a front-end sales charge of up to 5.50% for each Portfolio. Class B shares are sold with a CDSC of up to 5.00% within six years of purchase. Class C shares are sold with a CDSC of 1.00% during the first year. There is no sales charge or CDSC on Class Y shares, which are offered primarily to institutional investors. At March 31, 1999, there was an unlimited amount of $0.001 par value shares of beneficial interest authorized for each Portfolio, of which Bear Stearns owned the following shares including reinvestment of dividends and distributions, if any:
SHARES OF BENEFICIAL INTEREST -------------------------- PORTFOLIO CLASS A CLASS B - ---------------------------------------------------------------------------------------------------- ------------ ------------ S&P STARS........................................................................................... 5,436 -- Insiders Select..................................................................................... 1 -- Large Cap........................................................................................... 1,359 -- Small Cap........................................................................................... 1,190 -- Focus List.......................................................................................... 41,736 41,737 Balanced............................................................................................ 55,557 55,557 International Equity................................................................................ 138,890 138,917 PORTFOLIO CLASS C CLASS Y - ---------------------------------------------------------------------------------------------------- ------------ ------------ S&P STARS........................................................................................... 5,438 -- Insiders Select..................................................................................... -- -- Large Cap........................................................................................... 1,353 -- Small Cap........................................................................................... 1,186 -- Focus List.......................................................................................... 41,737 -- Balanced............................................................................................ 57,016 1 International Equity................................................................................ 138,890 --
57 Transactions in each Portfolio's share of beneficial interest were as follows:
INSIDERS S&P STARS SELECT --------------------------------------------------- -------------- SALES REPURCHASES REINVESTMENTS SALES --------------- --------------- ----------------- -------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares............................................... 13,356,673 10,653,471 260,562 822,035 Value................................................ $ 285,940,228 $ 225,975,249 $ 5,518,701 $ 14,004,050 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares............................................... 2,206,598 1,533,370 632,794 420,704 Value................................................ $ 42,537,872 $ 29,585,256 $ 10,791,624 $ 7,036,800 CLASS B* FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares............................................... 1,816,976 105,953 42,628 489,490 Value................................................ $ 39,716,007 $ 2,329,507 $ 894,326 $ 8,243,946 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares............................................... 292,094 -- -- 127,400 Value................................................ $ 5,301,891 -- -- $ 2,149,181 CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares............................................... 1,500,923 775,235 136,180 258,790 Value................................................ $ 32,744,043 $ 15,847,614 $ 2,855,694 $ 4,440,849 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares............................................... 1,125,588 680,009 402,739 201,834 Value................................................ $ 22,151,823 $ 12,920,388 $ 6,834,482 $ 3,338,014 CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares............................................... 593,967 324,017 83,772 1,825 Value................................................ $ 12,560,434 $ 6,838,883 $ 1,793,556 $ 33,074 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares............................................... 849,614 199,060 213,147 32,037 Value................................................ $ 15,879,797 $ 3,851,571 $ 3,653,343 $ 542,714 REPURCHASES REINVESTMENTS --------------- ----------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares............................................... 693,757 79,376 Value................................................ $ 11,455,485 $ 1,261,278 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares............................................... 312,605 167,184 Value................................................ $ 5,267,810 $ 2,629,805 CLASS B* FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares............................................... 140,589 26,712 Value................................................ $ 2,267,701 $ 418,312 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares............................................... -- -- Value................................................ -- -- CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares............................................... 283,301 40,088 Value................................................ $ 4,567,478 $ 627,381 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares............................................... 254,946 91,147 Value................................................ $ 4,287,656 $ 1,420,978 CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares............................................... 22,222 3,166 Value................................................ $ 376,628 $ 51,132 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares............................................... 84,697 16,449 Value................................................ $ 1,452,486 $ 261,545
- --------- * Class B shares commenced its initial public offering for the S&P STARS and Insiders Select on January 5, 1998 and January 6, 1998, respectively. 58
LARGE CAP SMALL CAP ------------------------------------------------- -------------- SALES REPURCHASES REINVESTMENTS SALES ------------- --------------- ----------------- -------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................. 236,435 182,475 34,912 1,836,377 Value................................................... $ 4,771,728 $ 3,596,602 $ 665,076 $ 33,847,374 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................. 115,448 50,777 46,162 492,900 Value................................................... $ 2,229,250 $ 998,486 $ 853,530 $ 9,966,068 CLASS B* FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................. 88,188 17,993 6,120 142,362 Value................................................... $ 1,751,063 $ 331,830 $ 115,353 $ 2,826,045 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................. 21,870 264 -- 38,387 Value................................................... $ 441,820 $ 5,391 -- $ 830,356 CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................. 72,424 69,436 23,811 174,437 Value................................................... $ 1,462,648 $ 1,367,701 $ 450,271 $ 3,524,703 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................. 64,169 33,086 35,761 270,017 Value................................................... $ 1,249,264 $ 611,649 $ 656,208 $ 5,553,946 CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................. 83,237 212,477 20,538 284,559 Value................................................... $ 1,617,045 $ 4,241,757 $ 391,241 $ 5,180,929 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................. 202,742 292,994 83,137 469,788 Value................................................... $ 4,161,371 $ 5,403,933 $ 1,535,548 $ 9,777,246 REPURCHASES REINVESTMENTS --------------- ----------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................. 1,923,838 58,402 Value................................................... $ 35,242,367 $ 1,063,921 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................. 253,678 70,857 Value................................................... $ 5,138,087 $ 1,453,284 CLASS B* FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................. 34,784 7,380 Value................................................... $ 613,558 $ 133,000 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................. -- -- Value................................................... -- -- CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................. 351,849 34,901 Value................................................... $ 6,472,733 $ 629,311 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................. 191,822 54,988 Value................................................... $ 3,883,351 $ 1,121,735 CLASS Y FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................. 326,429 61,415 Value................................................... $ 6,124,514 $ 1,123,278 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................. 196,994 86,372 Value................................................... $ 4,301,161 $ 1,769,732
- --------- * Class B shares commenced its initial public offering for the Large Cap and Small Cap on January 28, 1998 and January 21, 1998, respectively. 59
FOCUS LIST* BALANCED* ------------------------------------------------- ------------- SALES REPURCHASES REINVESTMENTS SALES ------------- --------------- ----------------- ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................... 273,095 134,732 508 203,116 Value..................................................... $ 3,857,601 $ 1,822,606 $ 7,297 $ 2,584,096 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................... 261,602 22,694 -- 297,413 Value..................................................... $ 3,226,172 $ 275,794 -- $ 3,630,397 CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................... 166,081 86,025 371 58,838 Value..................................................... $ 2,369,877 $ 1,237,419 $ 5,300 $ 751,354 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................... 179,256 -- -- 80,740 Value..................................................... $ 2,256,277 -- -- $ 977,533 CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................... 76,706 10,820 289 15,231 Value..................................................... $ 1,073,707 $ 148,531 $ 4,135 $ 196,638 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................... 126,077 -- -- 66,284 Value..................................................... $ 1,564,204 -- -- $ 800,467 CLASS Y** FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................... -- -- -- 394,174 Value..................................................... -- -- -- $ 5,166,631 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................... -- -- -- 451,987 Value..................................................... -- -- -- $ 5,546,038 REPURCHASES REINVESTMENTS --------------- ----------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................... 162,878 4,677 Value..................................................... $ 2,121,980 $ 59,462 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................... 167 577 Value..................................................... $ 1,965 $ 7,404 CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................... 2,483 1,358 Value..................................................... $ 31,916 $ 17,255 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................... -- 53 Value..................................................... -- $ 682 CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................... 49 1,718 Value..................................................... $ 640 $ 21,785 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................... -- 142 Value..................................................... -- $ 1,819 CLASS Y** FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares.................................................... 53,105 10,358 Value..................................................... $ 681,591 $ 132,059 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares.................................................... 13,445 536 Value..................................................... $ 164,940 $ 6,880
INTERNATIONAL EQUITY* ------------- SALES ------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares................................................................................................... 436,615 Value.................................................................................................... $ 6,455,599 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................................................................................... 273,821 Value.................................................................................................... $ 3,433,979 CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares................................................................................................... 69,803 Value.................................................................................................... $ 1,039,099 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................................................................................... 155,378 Value.................................................................................................... $ 1,882,062 CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares................................................................................................... 46,356 Value.................................................................................................... $ 686,227 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................................................................................... 160,283 Value.................................................................................................... $ 1,949,056 REPURCHASES --------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares................................................................................................... 162,043 Value.................................................................................................... $ 2,355,819 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................................................................................... 291 Value.................................................................................................... $ 3,918 CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares................................................................................................... 15,483 Value.................................................................................................... $ 212,361 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................................................................................... -- Value.................................................................................................... -- CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares................................................................................................... 9,943 Value.................................................................................................... $ 148,100 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................................................................................... 2,269 Value.................................................................................................... $ 30,522 REINVESTMENTS ------------------- CLASS A FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares................................................................................................... 46 Value.................................................................................................... $ 660 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................................................................................... -- Value.................................................................................................... -- CLASS B FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares................................................................................................... 36 Value.................................................................................................... $ 527 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................................................................................... -- Value.................................................................................................... -- CLASS C FOR THE FISCAL YEAR ENDED MARCH 31, 1999 Shares................................................................................................... 8 Value.................................................................................................... $ 110 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 Shares................................................................................................... -- Value.................................................................................................... --
- --------- * Commenced operations on December 29, 1997. ** Commenced its initial public offering on January 6, 1998. 60 RESTRICTED SECURITIES Certain of the Small Cap Portfolio's investments are restricted as to resale and are valued at the direction of the Portfolio's Board of Trustees in good faith, at fair value, after taking into consideration appropriate indications of value. The table below shows the number of shares or notes held, the acquisition dates, aggregate costs, fair value as of March 31, 1999, per share value of the securities and percentage of net assets which the security comprises.
NUMBER ACQUISITION FAIR VALUE AT COMMON STOCK OF SHARES DATE COST MARCH 31, 1999 - -------------------------------------------------------------------- ----------- -------------- ------------- ---------------- Meicom Computers & Communications, Ltd.............................. 9,506 07/07/98 $ 665 $ 665 PRINCIPAL AMOUNT ACQUISITION FAIR VALUE AT CORPORATE NOTES (000'S) DATES COST MARCH 31, 1999 - -------------------------------------------------------------------- ----------- -------------- ------------- ---------------- Meicom Computers & Communications, Ltd.............................. $233 07/07/98 $ 233,000 $ 233,000 Meicom Computers & Communications, Ltd.............................. 233 10/26/98 233,000 233,000 VALUE PERCENTAGE OF COMMON STOCK PER SHARE NET ASSETS - -------------------------------------------------------------------- ------------ ----------------- Meicom Computers & Communications, Ltd.............................. $ 0.07 0.00% VALUE PERCENTAGE OF CORPORATE NOTES PER NOTE NET ASSETS - -------------------------------------------------------------------- ------------ ----------------- Meicom Computers & Communications, Ltd.............................. $ 1.00 0.415 % Meicom Computers & Communications, Ltd.............................. 1.00 0.415
CREDIT AGREEMENT The Fund, on behalf of the Portfolios, has entered into a credit agreement with BankBoston, N.A. Bear Stearns Investment Trust, which consists of the Emerging Markets Debt Portfolio, is also a party to the credit agreement. The agreement provides that each party to the credit agreement is permitted to borrow in an amount equal to the lesser of $25 million or 25% of the net assets of each Portfolio. At no time shall the aggregate outstanding principal amount of all loans to any of the Portfolios exceed $25 million. Each Portfolio as a fundamental policy is permitted to borrow in an amount up to 331/3% 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% of its net assets. The line of credit will bear interest at the greater of: (i) the annual rate of interest announced from time to time from the bank at its head office as its Base Rate, or (ii) the Federal Funds Effective Rate plus 0.50%, or at the borrower's option, the rate quoted by BankBoston, N.A. Each loan is payable on demand or upon termination of this credit agreement or, for money market loans, on the last day of the interest period and, in any event, not later than 14 days from the date the loan was advanced. Amounts outstanding under the line of credit agreement during the fiscal year ended March 31, 1999, were as follows:
MAXIMUM LOAN AMOUNTS PORTFOLIO AVERAGE LOAN BALANCE OUTSTANDING - --------------------------------------------------------------------- -------------------------- ---------------------------- S&P STARS............................................................ $ 957,676 $ 11,000,000 Insiders Select...................................................... 2,555 259,300 Large Cap............................................................ 15,368 623,400 Small Cap............................................................ 34,164 1,377,300 Focus List........................................................... 5,685 641,700 Balanced............................................................. 137 50,000 International Equity................................................. 1,314 203,000 PORTFOLIO AVERAGE INTEREST RATE - --------------------------------------------------------------------- --------------------------- S&P STARS............................................................ 6.55% Insiders Select...................................................... 8.58 Large Cap............................................................ 6.47 Small Cap............................................................ 6.65 Focus List........................................................... 6.90 Balanced............................................................. 8.62 International Equity................................................. 6.92
The Portfolios had no amounts outstanding under the line of credit agreement at March 31, 1999 (except for International Equity Portfolio which had $76,700 outstanding under the line of credit agreement). 61 THE BEAR STEARNS FUNDS S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio REPORT OF INDEPENDENT AUDITORS The Board of Trustees and Shareholders, S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio: We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of S&P STARS Portfolio, The Insiders Select Fund, Large Cap Value Portfolio, Small Cap Value Portfolio, Focus List Portfolio, Balanced Portfolio and International Equity Portfolio (collectively, the "Portfolios") as of March 31, 1999, and the related statements of operations, changes in net assets and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Portfolios' management. Our responsibility is to express an opinion on these financial statements and 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 and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of S&P STARS Portfolio, The Insiders Select Fund, Large Cap Value Portfolio, Small Cap Value Portfolio, Focus List Portfolio, Balanced Portfolio and International Equity Portfolio as of March 31, 1999, the results of their operations, the changes in their net assets and the financial highlights for each of the periods presented in conformity with generally accepted accounting principles. Deloitte & Touche LLP New York, New York May 14, 1999 62 S&P STARS Portfolio The Insiders Select Fund Large Cap Value Portfolio Small Cap Value Portfolio Focus List Portfolio Balanced Portfolio International Equity Portfolio SHAREHOLDER TAX INFORMATION - (UNAUDITED) Each Portfolio is required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise its shareholders within 60 days of each Portfolio's fiscal year end (March 31, 1999) as to the U.S. federal tax status of distributions received by the Portfolio's shareholders in respect of such fiscal year. During the fiscal year ended March 31, 1999, the following dividends and distributions per share were paid by each of the Portfolios:
INTERNATIONAL S&P STARS THE INSIDERS LARGE CAP SMALL CAP FOCUS LIST EQUITY PORTFOLIO SELECT FUND VALUE PORTFOLIO VALUE PORTFOLIO PORTFOLIO PORTFOLIO ------------- ------------- --------------- --------------- ----------- --------------- Payment Date: 12/23/98 12/23/98 12/23/98 12/23/98 12/23/98 12/23/98 Net Investment Income: Class A -- -- $ 0.1086 -- -- $ 0.0028 Class B -- -- 0.0697 -- -- 0.0028 Class C -- -- 0.0131 -- -- 0.0028 Class Y -- -- 0.2001 -- -- -- Short-Term Capital Gains: Class A -- $ 0.1274 $ 0.2629 $ 0.5200 $ 0.0237 -- Class B -- 0.1274 0.2629 0.5200 0.0237 -- Class C -- 0.1274 0.2629 0.5200 0.0237 -- Class Y -- 0.1274 0.2629 0.5200 -- -- Long-Term Capital Gains: Class A $ 0.9231 $ 0.7247 $ 1.4196 $ 0.4226 -- -- Calss B 0.9231 0.7247 1.4196 0.4226 -- -- Class C 0.9231 0.7247 1.4196 0.4226 -- -- Class Y 0.9231 0.7247 1.4196 0.4226 -- -- BALANCED PORTFOLIO -------------------------------------------------------------- Payment Date: 06/23/98 09/22/98 12/22/98 3/22/99 Net Investment Income: Class A $ 0.0700 $ 0.0850 $ 0.1100 $ 0.0600 Class B 0.0650 0.0800 0.0900 0.0550 Class C 0.0650 0.0800 0.0900 0.0550 Class Y 0.0800 0.0900 0.1200 0.0700 Short-Term Capital Gains: Class A -- -- $ 0.0100 -- Class B -- -- 0.0100 -- Class C -- -- 0.0100 -- Class Y -- -- 0.0100 --
Ordinary income dividends, which include short-term capital gain distributions, should be reported as dividend income on Form 1040. Dividends from net investment income are taxable as ordinary income, as are short-term capital gain distributions. 63 INCOME PERCENTAGES BY SECURITY TYPE FOR FISCAL YEAR ENDED MARCH 31, 1999: Per share distributions from net investment income for the Balanced Portfolio (referenced above) were derived from the following security types: Corporate Obligations 32.83% Fannie Mae 13.98 Freddie Mac 10.40 Government National Mortgage Association 18.71 U.S. Treasury Obligations 24.08 ------ Total 100.00% ------ ------
Because each Portfolio's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 1999. The second notification, which will reflect the amount to be used by calendar year taxpayers on their U.S. federal income tax returns, will be made in conjunction with Form 1099-DIV and will be mailed in January 2000. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their dividend. They will generally not be entitled to a foreign tax credit or deduction for the withholding taxes paid by the Portfolios, if any. In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Portfolios. 64 -----END PRIVACY-ENHANCED MESSAGE-----