BEAR STEARNS FUNDS, N-30D, 1995-11-29

BEAR STEARNS FUNDS
N-30D, 1995-11-29

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<PAGE>
The
Bear Stearns
Funds
245 Park Avenue
New York, NY 10167
1.800.766.4111

<TABLE>
<S> <C>
Robert S. Reitzes....................... Chairman of the Board and Trustee
Neil T. Eigen........................... President
Peter B. Fox............................ Executive Vice President
William J. Montgoris.................... Executive Vice President
Peter M. Bren........................... Trustee
Alan J. Dixon........................... Trustee
John R. McKernan, Jr. .................. Trustee
M.B. Oglesby, Jr. ...................... Trustee
Stephen A. Bornstein.................... Vice President and Secretary
Frank J. Maresca........................ Vice President and Treasurer
Raymond D. DeAngelo..................... Vice President
Vincent L. Pereira...................... Assistant Treasurer
Eileen M. Coyle......................... Assistant Secretary

Investment Adviser Sub-Investment Adviser
Bear Stearns Funds Symphony Asset Management
Management Inc. 555 California Street,
245 Park Avenue Suite 2975
New York, NY 10167 San Francisco, CA 94104

Distributor Custodian
Bear, Stearns & Co. Inc. Custodial Trust Company
245 Park Avenue 101 Carnegie Center
New York, NY 10167 Princeton, NJ 08540

Transfer & Dividend Counsel
Disbursement Agent Stroock & Stroock & Lavan
PFPC Inc. 7 Hanover Square
Bellevue Corporate Center New York, NY 10004
400 Bellevue Parkway
Wilmington, DE 19809

Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
</TABLE>

The financial information included herein is taken from the records of the
Portfolio without examination by independent auditors who do not express an
opinion thereon.

This report is submitted for the general information of the shareholders of the
Portfolio. It is not authorized for distribution to prospective investors in the
Portfolio unless it is preceded or accompanied by a current prospectus which
includes details regarding the Portfolio's objectives, policies, sales
commissions and other information. Total return is based on historical results
and is not intended to indicate future performance. The investment return and
principal value of an investment in the Portfolio will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than original cost.
BSF-R-010-01
<PAGE>
The Insiders
Select Portfolio

Semi-Annual Report
September 30, 1995
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Portfolio
LETTER TO SHAREHOLDERS

November 13, 1995
Dear Shareholders,

We are pleased to present the first report to shareholders of The Insiders
Select Portfolio (the "Portfolio") for the period ended September 30, 1995. The
Portfolio has performed well versus its benchmark index, the S&P 500 (Composite)
Index (the "S&P 500"). For the period ended September 30, 1995, the Portfolio's
total return was 9.92%, 9.75% and 8.91% (without giving effect to sales charges
and contingent deferred sales charges, if any) for class A, C and Y shares,
respectively, compared to 8.80% for the S&P 500. Further performance data for
each class of shares during this reporting period is available in the "Financial
Highlights" section of this report.

The Portfolio uses The Intellivest-TM- Model to screen stocks as investment
opportunities by evaluating insider, analyst and company behavior. At this time,
there are fewer opportunities for investments than in June because, in
aggregate, insiders seem not as bullish on the U.S. stock market as they were in
late 1994 and early 1995.

The Portfolio benefited in the quarter ended September 30, 1995 from its
overweighting in regional banks and insurance companies. We believe that further
consolidation is inevitable among the smaller regional banks and we continue to
emphasize banks with insider accumulation in the Portfolio. We are also bullish
on the insurance industry because we believe the valuations are attractive and
are being confirmed by insider activity.

We are being selective in our purchases in the technology area because this
sector has performed well and undervalued stocks are harder to find. The
Portfolio's positions in Applied Materials, Inc. and Texas Instruments Inc.
performed well because earnings were above consensus expectations.

Looking ahead, we will continue to evaluate stocks where insider accumulation is
accompanied by strong earnings expectations and attractive valuations. We
appreciate your support and would be pleased to respond to any questions or
comments. If you have any questions concerning the Portfolio, please call
1-800-766-4111.

Sincerely,

<TABLE>
<S> <C>
[SIG] [SIG]
Praveen Gottipalli
Symphony Asset Management
Robert S. Reitzes Sub-Investment Adviser
Chairman of the Board Portfolio Manager
The Bear Stearns Funds The Insiders Select Portfolio
</TABLE>

1
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Portfolio(1)
Comparison of Change in Value of $10,000 Investment in
Class A and Class C Shares(2) vs. Various Indices
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
S&P Stars Portfolio
<S> <C> <C> <C> <C>
Class A Class C Micropal U.S. Equity Growth Fund S&P 500
April 3, 1995 $ 10,000.00
April 30, 1995 $ 10,280.00
May 31, 1995 $ 10,653.00
June 16, 1995 $ 9,525.00 $ 10,000.00 $ 10,000.00 $ 10,000.00
June 30, 1995 $ 9,580.56 $ 10,066.66 $ 10,183.00 $ 10,142.00
July 31, 1995 $ 10,080.63 $ 10,583.33 $ 10,443.00 $ 10,484.00
August 31, 1995 $ 10,136.19 $ 10,633.33 $ 10,554.00 $ 10,481.00
Sep 30, 1995 $ 10,469.56 $ 10,975.00 $ 10,887.00 $ 10,880.00

<S> <C>
Midatlantic Consumer Price Index
April 3, 1995 $ 10,000.00
April 30, 1995 $ 10,040.00
May 31, 1995 $ 10,066.10
June 16, 1995 10,000
June 30, 1995 $ 10,013.00
July 31, 1995 $ 10,033.03
August 31, 1995 $ 10,046.07
Sep 30, 1995 $ 10,059.13
</TABLE>

<TABLE>
<CAPTION>
Total Return
With applicable sales Without applicable sales
load and CDSC, if any, load and CDSC, if any,
and including fee waivers and including fee waivers
and expense and expense
reimbursements reimbursements
------------------------- -------------------------
<S> <C> <C>
The Insiders Select Portfolio(1)(4)
Class A shares(5).............................. 4.70% 9.92%
Class C shares(6).............................. 8.67 9.75
Class Y shares(2)(7)........................... 8.91 8.91
Micropal U.S. Equity Growth and Income Index(3).... 8.87 --
S&P 500 (Composite) Index(3)....................... 9.02 --
Midatlantic Consumer Price Index(3)................ 1.26 --
</TABLE>

- ---------
(1) For the period June 16, 1995 (commencement of investment operations) through
September 30, 1995.
(2) 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.
(3) The chart assumes a hypothetical $10,000 initial investment in the Portfolio
and reflects all Portfolio expenses. Investors should note that the
Portfolio is a professionally managed mutual fund while the indices are
either unmanaged and do not incur sales charges or expenses and/or are not
available for investment.
(4) Bear Stearns Funds 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.
(5) Reflects the initial maximum 4.75% sales load. Excluding fee waivers and
expense reimbursements, the total return would have been 4.38% with a sales
load charged and 9.58% without a sales load charged.
(6) Reflects the maximum 1.00% CDSC. Excluding fee waivers and expense
reimbursements, the total return would have been 8.33% with a CDSC charged
at the end of the period and 9.42% without a CDSC charged at the end of the
period.
(7) Excluding fee waivers and expense reimbursements, the total return would
have been 8.66%.

CDSC -- Contingent Deferred Sales Charge.

2
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Portfolio
SEPTEMBER 30, 1995
(unaudited)

- --------------------------------------------------------------------------------
Top Ten Sectors

<TABLE>
<CAPTION>
PERCENT OF
RANK SECTOR NET ASSETS
- ----- -------------------------------------------------- -----------
<C> <S> <C>
1. Financial Services................................ 15.00
2. Drug & Hospital Supplies.......................... 9.41
3. Electronics....................................... 8.50
4. Food & Beverages.................................. 8.30
5. Computers & Office Equipment...................... 7.83
6. Oil & Gas......................................... 7.44
7. Miscellaneous Manufacturing....................... 6.52
8. Chemicals & Fertilizers........................... 6.47
9. Forest Products & Paper........................... 4.44
10. Telecommunications................................ 4.15
</TABLE>

- --------------------------------------------------------------------------------
Top Ten Holdings

<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS SECTOR NET ASSETS
- ----- -------------------------------------------------- --------------------------- ----------
<C> <S> <C> <C>
1. Johnson & Johnson................................. Drug & Hospital Supplies 2.99
2. Mobil Corp........................................ Oil & Gas 2.96
3. The Coca-Cola Co.................................. Food & Beverages 2.86
4. Dover Corp. ...................................... Miscellaneous Manufacturing 2.56
5. Texas Instruments Inc............................. Electronics 2.50
6. Applied Materials, Inc............................ Electronics 2.50
7. CPC International, Inc............................ Food & Beverages 2.38
8. AFLAC Inc......................................... Financial Services 2.38
9. City National Corp. .............................. Financial Services 2.37
10. Mead Corp......................................... Forest Products & Paper 2.34
</TABLE>

3
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------
<C> <S> <C>
MARKET
SHARES VALUE

<CAPTION>
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--98.50%

Aerospace & Defense - 1.69%
1,500 Boeing Co........................... $ 102,375
3,200 General Dynamics Corp............... 175,600
600 Lockheed Martin Corp................ 40,275
-----------
318,250
-----------

Automobiles - 0.78%
2,800 Consolidated Freightways, Inc....... 69,300
1,100 Dana Corp. ......................... 31,762
100 Goodyear Tire & Rubber Co........... 3,938
900 PACCAR Inc.......................... 42,075
-----------
147,075
-----------
Building Materials - 1.15%
5,200 Lone Star Industries, Inc. ......... 124,150
3,300 USG Corp.*.......................... 92,400
-----------
216,550
-----------
Chemicals & Fertilizers - 6.47%
3,600 Cytec Industries, Inc.*............. 208,350
1,100 Dow Chemical Co..................... 81,950
1,500 DuPont (E.I.) De Nemours & Co. ..... 103,125
6,100 Eastman Chemical Co................. 390,400
3,600 Georgia Gulf Corp................... 124,200
1,100 Grace (W.R.) & Co. ................. 73,425
2,800 Lubrizol Corp....................... 91,350
3,200 Mallinckrodt Group, Inc............. 126,800
400 PPG Industries Inc.................. 18,600
-----------
1,218,200
-----------

Computers & Office Equipment - 7.83%
3,300 Ceridian Corp.*..................... 146,437
10,350 Computer Associates International
Inc. ............................... 437,288
7,600 Computervision Corp.*. ............. 92,150
3,700 International Business Machines
Corp................................ 349,188
200 Microsoft Corp.*.................... 18,100
2,000 Oak Technology, Inc.*............... 84,000
7,600 3Com Corp........................... 345,800
-----------
1,472,963
-----------
<CAPTION>
----------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------
<C> <S> <C>

Cosmetics & Soaps - 1.74%
2,300 Alberto-Culver Co. Class B.......... $ 70,150
5,400 Gillette Co......................... 257,175
-----------
327,325
-----------

Drug & Hospital Supplies - 9.41%
700 Abbott Laboratories................. 29,837
5,000 Boston Scientific Corp.*............ 213,125
3,600 Bristol-Myers Squibb Co............. 262,350
7,600 Johnson & Johnson................... 563,350
6,300 Merck & Co., Inc.................... 352,800
1,400 Schering-Plough..................... 72,100
6,200 Upjohn Co. ......................... 276,675
-----------
1,770,237
-----------

Electrical Equipment - 0.70%
3,400 Belden, Inc......................... 89,250
600 Emerson Electric Co................. 42,900
-----------
132,150
-----------

Electronics - 8.50%
4,600 Applied Materials, Inc.*............ 470,350
1,700 Arrow Electronics, Inc.*............ 92,438
1,930 Harman International Industries,
Inc. ............................... 94,570
6,600 LSI Logic Corp...................... 381,150
3,100 National Service Industries,
Inc. ............................... 90,675
5,900 Texas Instruments Inc............... 471,262
-----------
1,600,445
-----------

Entertainment & Leisure - 2.97%
5,900 Callaway Golf Co. .................. 91,450
1,600 Capital Cities/ABC, Inc. ........... 188,200
200 Comcast Corp. Class A............... 4,000
5,600 Mirage Resorts, Inc.*............... 184,100
1,600 The Walt Disney Co. ................ 91,800
-----------
559,550
-----------

Environmental Controls - 1.50%
9,300 Browning-Ferris Industries Inc...... 282,487
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

4
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)

Financial Services - 15.00%
100 Aetna Life & Casualty Co............ $ 7,338
10,800 AFLAC Inc. ......................... 448,200
12,100 Allstate Corp. ..................... 428,037
900 American General Corp. ............. 33,638
4,000 American International Group,
Inc................................. 340,000
1,800 BankAmerica Corp.................... 107,775
4,100 Bank of Boston Corp................. 195,262
300 Bank of New York Co. Inc............ 13,950
2,200 Central Fidelity Banks, Inc. ....... 71,500
500 CIGNA Corp. ........................ 52,063
33,600 City National Corp. ................ 445,200
2,200 First Virginia Banks, Inc. ......... 90,750
100 General Re Corp. ................... 15,100
2,500 Jefferson-Pilot Corp. .............. 160,625
2,700 J.P. Morgan & Co.................... 208,912
500 Merrill Lynch & Co. ................ 31,250
5,300 Provident Bankshares Corp. ......... 159,000
400 Salomon Inc......................... 15,300
-----------
2,823,900
-----------

Food & Beverages - 8.30%
6,800 CPC International, Inc.............. 448,800
200 Fleming Cos., Inc................... 4,800
3,000 Pepsico, Inc........................ 153,000
3,600 Philip Morris Cos. Inc. ............ 300,600
7,800 The Coca-Cola Co. .................. 538,200
900 Unilever N.V. ...................... 117,000
-----------
1,562,400
-----------

Forest Products & Paper - 4.44%
2,300 Boise Cascade Corp.................. 92,863
1,900 Kimberly-Clark Corp................. 127,537
7,500 Mead Corp........................... 439,688
2,300 Scott Paper Co. .................... 111,550
1,400 Weyerhauser Co. .................... 63,875
-----------
835,513
-----------

<CAPTION>
----------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------
<C> <S> <C>

Holding Companies - 3.23%
4,400 Eastern Enterprises................. $ 141,350
3,000 ITT Corp. .......................... 372,000
3,500 Teledyne, Inc....................... 94,937
-----------
608,287
-----------

Metal Fabricate & Hardware - 0.70%
3,600 Kennametal Inc. .................... 130,500
-----------

Mining - 0.14%
2,100 Santa Fe Pacific Gold Corp.......... 26,513
-----------

Miscellaneous Manufacturing - 6.52%
2,400 AGCO Corp. ......................... 109,200
12,600 Dover Corp.......................... 481,950
800 Eastman Kodak Co.................... 47,400
3,000 Leggett & Platt, Inc................ 73,875
4,300 Maytag Corp. ....................... 75,250
5,700 Procter & Gamble Co................. 438,900
-----------
1,226,575
-----------

Miscellaneous Services - 0.50%
2,400 Service Corp. International......... 93,900
-----------

Oil & Gas - 7.44%
13,500 Baker Hughes, Inc. ................. 275,062
500 Louisiana Land & Exploration Co..... 17,813
5,600 Mobil Corp.......................... 557,900
4,200 Oneok, Inc. ........................ 97,650
2,000 Panhandle Eastern Corp. ............ 54,500
2,800 Phillips Petroleum Co............... 91,000
1,700 Royal Dutch Petroleum Co.*.......... 208,675
1,500 Schlumberger, Ltd................... 97,875
-----------
1,400,475
-----------

Packaging & Containers - 1.61%
5,500 Sealed Air Corp.*................... 303,187
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

5
<PAGE>
THE BEAR STEARNS FUNDS

Publishing & Broadcasting - 1.98%
4,100 Jostens, Inc. ...................... $ 96,350
4,500 Meredith Corp....................... 178,875
1,400 New York Times Co. Class A.......... 38,325
900 Tribune Co. ........................ 59,738
-----------
373,288
-----------

Retailing - 1.75%
200 Harcourt General, Inc............... 8,375
9,400 Kroger Co.*......................... 320,775
-----------
329,150
-----------

Telecommunications - 4.15%
10,100 Equifax Inc. ....................... 422,938
6,500 SBC Communications Inc.............. 357,500
-----------
780,438
-----------
Total Common Stocks
(cost - $17,510,654)................ 18,539,358
-----------

<CAPTION>
----------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------
<C> <S> <C>

PREFERRED STOCK - 0.00%

Holding Company - 0.00%
29 Teledyne, Inc., Cumulative
Preferred,
Series E, 6.00% (cost - $435)....... $ 402
-----------
PRINCIPAL
AMOUNT
(000's)
- ---------

SHORT-TERM INVESTMENT - 1.42%
Investment Company - 1.42%
$ 268 Federated Trust for Short-term
U.S. Government Securities**
(cost - $267,734)................... 267,734
-----------
Total Investments
(cost - $17,778,823) - 99.92%....... 18,807,494
Other assets in excess of
liabilities - 0.08%................. 15,057
-----------
Net Assets - 100.00%................ $18,822,551
-----------
-----------
</TABLE>

- ---------
* Non-income producing security.
** Money market fund.

The accompanying notes are an integral part of the financial statements.

6
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Portfolio
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<S> <C>
Assets
Investments, at value (cost - $17,778,823)...... $18,807,494
Receivable for Portfolio shares sold............ 624,807
Receivable from investment adviser.............. 31,284
Dividends and interest receivable............... 27,577
Deferred organization expenses and other
assets......................................... 228,189
-----------
Total assets.............................. 19,719,351
-----------
Liabilities
Payable for investments purchased............... 634,183
Distribution fee payable (class A and C
shares)........................................ 22,781
Payable for Portfolio shares repurchased........ 19,090
Administration fee payable...................... 5,135
Custodian fee payable........................... 1,335
Accrued expenses................................ 33,733
Organization expenses payable................... 180,543
-----------
Total liabilities......................... 896,800
-----------
Net Assets
Capital stock, $0.001 par value (unlimited
shares of beneficial interest authorized)...... 1,428
Paid-in capital................................. 17,803,886
Accumulated net investment loss................. (1,423)
Accumulated net realized loss from
investments.................................... (10,011)
Net unrealized appreciation on investments...... 1,028,671
-----------
Net assets................................ $18,822,551
-----------
-----------
Class A
Net assets...................................... $11,112,583
-----------
Shares of beneficial interest outstanding....... 842,646
-----------
Net asset value per share....................... $13.19
Maximum offering price per share (net asset
value plus sales charge of 4.75%* of the
offering price)................................ $13.85
Class C
Net assets...................................... $ 7,226,413
-----------
Shares of beneficial interest outstanding....... 548,596
-----------
Net asset value and offering price per
share**........................................ $13.17
Class Y
Net assets...................................... $ 483,555
-----------
Shares of beneficial interest outstanding....... 36,636
-----------
Net asset value, offering and redemption value
per share...................................... $13.20
</TABLE>

- --------
* 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.

7
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Portfolio
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 16, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<S> <C>
Investment income
Dividends....................................... $ 59,122
Interest........................................ 3,350
----------
62,472
----------
Expenses
Advisory fees................................... 25,674
Distribution fees - Class A..................... 9,168
Distribution fees - Class C..................... 15,293
Amortization of organization expenses........... 14,056
Accounting fees................................. 13,500
Federal and state registration fees............. 6,508
Reports and notices to shareholders............. 5,846
Custodian fees and expenses..................... 5,402
Insurance expenses.............................. 5,274
Legal and auditing fees......................... 5,263
Transfer agent fees and expenses................ 5,185
Administration fees............................. 5,135
Trustees' fees and expenses..................... 2,728
Other........................................... 1,821
----------
Total expenses before waivers and
reimbursements............................. 120,853
Less: Waivers and reimbursements.......... (56,958)
----------
Total expenses after waivers and
reimbursements............................. 63,895
----------
Net investment loss............................. (1,423)
----------
Net realized and unrealized gain/(loss) on
investments
Net realized loss from investments.............. (10,011)
Net change in unrealized appreciation on
investments.................................... 1,028,671
----------
Net realized and unrealized gain on
investments.................................... 1,018,660
----------
Net increase in net assets resulting from
operations....................................... $1,017,237
----------
----------
</TABLE>

- --------
* Commencement of investment operations.

The accompanying notes are an integral part of the financial statements.

8
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Portfolio
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JUNE 16, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<S> <C>
Increase/(decrease) in net assets from
Operations
Net investment loss............................. $ (1,423)
Net realized loss from investments.............. (10,011)
Net change in unrealized appreciation on
investments.................................... 1,028,671
-----------
Net increase in net assets resulting from
operations..................................... 1,017,237
-----------

Shares of beneficial interest
Net proceeds from the sale of shares............ 18,068,706
Cost of shares repurchased...................... (263,416)
-----------
Net increase in net assets derived from shares
of beneficial interest transactions............ 17,805,290
-----------
Total increase in net assets.................... 18,822,527

Net assets
Beginning of period............................. 24
-----------
End of period................................... $18,822,551
-----------
-----------
</TABLE>

- --------
* Commencement of investment operations.

The accompanying notes are an integral part of the financial statements.

9
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Portfolio
FINANCIAL HIGHLIGHTS
FOR THE PERIOD JUNE 16, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)

- --------------------------------------------------------------------------------

Contained below is per share operating performance data for each class of shares
outstanding, total investment return, ratios to average net assets and other
supplemental data for the period. This information has been derived from
information provided in the financial statements.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS CLASS
CLASS A C Y*
------- ------ ------
<S> <C> <C> <C>
Per Share Operating Performance**
Net asset value, beginning of period............ $ 12.00 $12.00 $12.12
------- ------ ------
Net investment income/(loss)(1)................. 0.01 (0.01) 0.01
Net realized and unrealized gain from
investments(2)................................. 1.18 1.18 1.07
------- ------ ------
Net increase in net assets resulting from
operations..................................... 1.19 1.17 1.08
------- ------ ------
Net asset value, end of period.................. $ 13.19 $13.17 $13.20
------- ------ ------
------- ------ ------
Total investment return(3)(5)................... 9.92% 9.75% 8.91%
------- ------ ------
------- ------ ------
Ratios/Supplemental Data
Net assets, end of period (000's omitted)....... $11,113 $7,226 $ 484
Ratio of expenses to average net assets(1)(4)... 1.65% 2.15% 1.15%
Ratio of net investment income/(loss) to average
net assets(1)(4)(5)............................ 0.19% (0.35)% 0.64%
Decrease reflected in above expense ratios and
net investment
income/(loss) due to waivers and
reimbursements(4)(5)........................... 1.69% 1.63% 1.89%
Portfolio turnover rate(6)...................... 8.53% 8.53% 8.53%
Average commission rate per share............... $ 0.03 $ 0.03 $0.03
</TABLE>

- --------
* Commencement of investment operations. Class Y shares commenced initial
public offering on June 20, 1995.
** Calculated based upon weighted average shares outstanding during the period.
(1) Reflects waivers and reimbursements.
(2) The amount shown for a share outstanding throughout the period is not in
accord with the change in the aggregate gains and losses in investments
during the period because of the timing of sales and repurchases of
Portfolio shares in relation to fluctuating net asset value during the
period.
(3) Total return does not consider the effects of sales loads or contingent
deferred sales charges. Total 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 returns are not annualized.
(4) Annualized.
(5) The total investment return and ratios for class Y shares are not
necessarily comparable to those of class A or C shares, due to the timing
difference in the commencement of the initial public offering of class Y
shares.
(6) Not annualized.

The accompanying notes are an integral part of the financial statements.

10
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Portfolio
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED)

Organization and Significant Accounting Policies

The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business
trust on September 29, 1994 and is registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as an open-end management investment
company. The Fund currently has five separate Portfolios in operation: three
diversified Portfolios, Large Cap Value Portfolio, Small Cap Value Portfolio and
Total Return Bond Portfolio and two non-diversified Portfolios, The Insiders
Select Portfolio ("Insiders" or the "Portfolio") and S&P STARS Portfolio
(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, the Portfolio offers three classes of shares,
which have been designated as class A, C and Y shares.

Organizational Matters--Prior to commencing investment operations on June 16,
1995, the Portfolio did not have any transactions other than those relating to
organizational matters and the sale of one class A share and one class C share
of beneficial interest of the Portfolio to Bear, Stearns & Co. Inc. ("Bear
Stearns" or the "Distributor"). Costs of approximately $240,000 which were
incurred by the Portfolio in connection with the organization, registration with
the Commission and with various states, and initial public offering of its
shares, have been deferred and are being amortized using the straight-line
method over the period of benefit not exceeding sixty months, beginning with the
commencement of investment operations of the Portfolio. In the event that the
Distributor or any transferee of the Distributor redeems any of its original
shares in the 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 the Portfolio is liquidated prior to the end of
the sixty month period, the Distributor or the transferee of the Distributor
shall bear the unamortized deferred organization expenses.

Portfolio Valuation--The 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.

Portfolio securities, including covered call options written by the Portfolio,
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. Short-term investments are carried 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
Portfolio's Board of Trustees. Expenses and fees, including the investment
advisory, administration and distribution fees, are accrued daily and taken into
account for the purpose of determining the net asset value of the 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 are calculated on the
identified cost basis. Dividend income is recorded on the ex-dividend date.
Interest income is recorded on an accrual basis. The Portfolio's net

11
<PAGE>
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).

U.S. Federal Tax Status--The Portfolio intends to distribute substantially all
of its taxable income and to comply with the other requirements of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing during each calendar year substantially all of its
ordinary income and capital gains, if any, the Portfolio intends not to be
subject to a U.S. federal excise tax.

Dividends and Distributions--The Portfolio intends to distribute at least
annually to shareholders substantially all of its net investment income.
Distribution of net realized gains, if any, will be declared and paid at least
annually for the Portfolio. Dividends and distributions to shareholders are
recorded on the ex-dividend date. Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.

Transactions with Affiliates and Related Parties

During the period ended September 30, 1995, Bear Stearns Funds Management Inc.
("BSFM" or "Adviser"), a wholly-owned subsidiary of The Bear Stearns Companies
Inc., served as the investment adviser pursuant to an Investment Advisory
Agreement with the Portfolio. BSFM has engaged Symphony Asset Management
("Symphony"), a subsidiary of BARRA, Inc., as the Portfolio's sub-investment
adviser to manage the Portfolio's day-to-day investment activities. BSFM and
Symphony are referred to herein collectively as the "Advisers." BSFM 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 of which BSFM pays Symphony a monthly
fee equal to an annual rate of 0.45% of the Portfolio's average daily net
assets. In addition, starting in the thirteenth month of operation, BSFM 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 the Portfolio's
average daily net assets.

During the period ended September 30, 1995, BSFM (or the "Administrator") served
as the administrator to the Portfolio pursuant to an Administration Agreement.
The Administrator is entitled to receive from the Portfolio a monthly fee equal
to an annual rate of 0.15% of the Portfolio's average daily net assets. Under
the terms of an Administrative Services Agreement with the Portfolio, PFPC Inc.
provides certain administrative services to the Portfolio. For providing these
services, the Portfolio has agreed to pay PFPC Inc. an annual 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
$8,000 for the Portfolio, payable monthly.

These fees are computed daily and paid monthly, and are subject to reduction in
any year to the extent that the Portfolio's expenses (exclusive of brokerage
commissions, distribution fees, taxes, interest and extraordinary items) exceed
the most stringent limits prescribed by the laws or regulations of any state in
which the Portfolio's shares are offered for sale based on the average total net
asset value of the Portfolio. The Portfolio will not pay BSFM at a later time
for any amounts it may waive, nor will the Portfolio reimburse BSFM for any
amounts it may assume.

During the period ended September 30, 1995, the Adviser has voluntarily
undertaken to limit the Portfolio's total operating expenses (exclusive of
brokerage commissions, taxes and extraordinary items) to a maximum annual level
of 1.65% of the average daily net assets of its class A shares, 2.15% of the
average daily net assets of its class C shares and 1.15% of the average daily
net assets of its class Y shares. 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 period ended September 30, 1995, the Adviser
waived its advisory fee of $25,674. In addition, the Adviser reimbursed $31,284,
in order to maintain the voluntary expense limitation.

For the period ended September 30, 1995, Bear Stearns, an affiliate of the
Adviser and the Administrator, earned approximately $11,400 in brokerage
commissions from Portfolio transactions executed on behalf of the Portfolio.

Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies
Inc. and an affiliate of the Adviser and the Administrator, serves as custodian
to the Portfolio.

12
<PAGE>
Distribution Plan

The Fund, on behalf of the Portfolio, has entered into a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act. Under the Plan
in effect for the period ended September 30, 1995, the Portfolio paid Bear
Stearns a fee at an annual rate of 0.50% for class A shares and 1.00% for class
C shares. Such fees are based on the average daily net assets in each class of
the Portfolio and are paid monthly. The fees paid to Bear Stearns under the Plan
are payable without regard to actual expenses incurred. For the period June 16,
1995 (commencement of investment operations) through September 30, 1995, Bear
Stearns earned $24,461 in distribution fees. Bear Stearns uses these fees to pay
dealers whose clients hold Portfolio shares and other distribution-related
activities.

In addition, as Distributor of the Portfolio, Bear Stearns collects the sales
charges imposed on sales of the Portfolio's class A shares, and reallows a
portion of such charges to dealers through which the sales are made. For the
period ended September 30, 1995, as a result of an undertaking by the
Distributor, it reallowed all of the sales charges to dealers selling Portfolio
shares. In addition, Bear Stearns advanced 1.00% in sales commissions on the
sale of class C shares to dealers at the time of such sales.

For the period ended September 30, 1995, Bear Stearns has advised the Portfolio
that it received approximately $224,000 in front-end sales charges resulting
from sales of class A shares of the Portfolio. From these fees, Bear Stearns
paid such sales charges to dealers which in turn paid commissions to sales
persons. In addition, Bear Stearns has advised the Portfolio that during the
period, it received $165 in contingent deferred sales charges upon certain
redemptions by class C shareholders.

Investments in Securities

For U.S. federal income tax purposes, the cost of securities owned at September
30, 1995 was $17,778,823. Accordingly, the net unrealized appreciation of
investments of $1,028,671 was composed of gross appreciation of $1,213,808 for
those investments having an excess of value over cost and $185,137 of gross
depreciation for those investments having an excess of cost over value.

For the period June 16, 1995 (commencement of investment operations) through
September 30, 1995, aggregate purchases and sales of investment securities
(excluding short-term securities) for the Portfolio were $18,590,529 and
$1,069,429, respectively.

Shares of Beneficial Interest

The Portfolio offers class A, C and Y shares. Class A shares are sold with a
front-end sales charge of up to 4.75%. Class C shares are sold with a contingent
deferred sales charge of 1.00% during the first year. There is no sales charge
on class Y shares, which are offered primarily to institutional investors.

At September 30, 1995, there was an unlimited amount of $0.001 par value shares
of beneficial interest authorized for the Portfolio, of which Bear Stearns owned
one class A share and one class C share of the Portfolio.

Transactions in the classes of shares of beneficial interest for the period June
16, 1995 (commencement of investment operations) through September 30, 1995 were
as follows:

<TABLE>
<CAPTION>
SHARES
SHARES SOLD REPURCHASED
-------------------- ----------------
SHARES AMOUNT SHARES AMOUNT
------- ----------- ------ --------
<S> <C> <C> <C> <C>
Class A shares.................................... 854,928 $10,727,091 12,283 $156,058
Class C shares.................................... 556,949 6,873,104 8,354 107,358
Class Y shares*................................... 36,636 468,511 -- --
</TABLE>

- ---------
*Class Y shares commenced initial public offering on June 20, 1995.

13
<PAGE>
Credit Agreement

The Fund, on behalf of the Portfolio, has entered into a credit agreement with
The First National Bank of Boston. S&P STARS Fund, S&P STARS Portfolio, Large
Cap Value Portfolio, Small Cap Value Portfolio, Total Return Bond Portfolio and
Bear Stearns Investment Trust, which consists of the Emerging Markets Debt
Portfolio, are also parties to the credit agreement. The agreement provides that
each Portfolio as a party to the credit agreement is permitted to borrow in an
amount up to 15% of the value of its total assets. Subject to Board approval and
upon making necessary disclosure in its prospectus, each Portfolio may, in
accordance with the provisions of the credit agreement, borrow up to 25% of the
value of its total assets, less all liabilities other than liabilities for
borrowed money outstanding at the time. However, at no time is the aggregate
outstanding principal amount of all loans to any of the Portfolios to exceed
$25,000,000. 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 The First National Bank of Boston.

The Portfolio uses the facility to borrow money only for temporary or emergency
(not leveraging) purposes. The Portfolio had no amount outstanding under the
line of credit agreement at September 30, 1995.

Each loan is payable on demand or upon termination of this credit agreement on
January 23, 1996 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.

14
<PAGE>
The
Bear Stearns
Funds
245 Park Avenue
New York, NY 10167
1.800.766.4111

Investment Adviser Distributor
Bear Stearns Funds Bear, Stearns & Co. Inc.
Management Inc. 245 Park Avenue
245 Park Avenue New York, NY 10167
New York, NY 10167

Custodian Transfer & Dividend
Custodial Trust Company Disbursement Agent
101 Carnegie Center PFPC Inc.
Princeton, NJ 08540 Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809

Counsel Independent Auditors
Stroock & Stroock & Lavan Deloitte & Touche LLP
7 Hanover Square Two World Financial Center
New York, NY 10004 New York, NY 10281
</TABLE>

The financial information included herein is taken from the records of the
Portfolio without examination by independent auditors who do not express an
opinion thereon.

"Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-", and
"STARS-Registered Trademark-" are trademarks of Standard & Poor's and have been
licensed for use by Bear, Stearns & Co. Inc. The S&P STARS Portfolio is not
sponsored, managed, advised, sold or promoted by S&P.

BSF-R-011-01
<PAGE>
S&P STARS
Portfolio

Semi-Annual Report
September 30, 1995

[LOGO]
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Portfolio
LETTER TO SHAREHOLDERS

November 13, 1995
Dear Shareholders,

We are pleased to present the first report on the S&P STARS Portfolio (the
"Portfolio") for the period ended September 30, 1995. The Portfolio was up
20.17%, 19.75% and 2.41% (without giving effect to sales charges and contingent
deferred sales charges, if any) for class A, C, and Y shares respectively, for
the period ended September 30, 1995. Additionally, for the quarter ended
September 30, 1995 the Portfolio returned 8.26% and 8.05% (without giving effect
to sales charges and contingent deferred sales charges, if any) for class A and
C shares, respectively. We are pleased to announce that the Portfolio
outperformed its benchmark, the S&P 500 (Composite) Index, for both periods. The
S&P 500 (Composite) Index gained 18.23% for the period April 5, 1995
(commencement of the Portfolio's investment operations) through September 30,
1995 and 7.95% for the quarter ended September 30, 1995. Further performance
data for each class of shares during this reporting period is available in the
"Financial Highlights" section in this report. Furthermore, your enthusiasm and
support for the Portfolio created the momentum to raise approximately $58
million in total assets in six months.

Over the next two to three quarters, we believe that the economy will continue
in its slow growth phase and the rate of inflation will remain subdued. At
present, many industrial companies are experiencing only modest gains in sales
and commodity prices are weakening. For example, chemical, paper, and metal
prices are declining, while sales are only up marginally. As a result of the
slowdown in the U.S. and other industrial economies, we believe that interest
rates will continue to trend lower.

In this environment, earnings for cyclical companies are likely to slow down and
could even decline over the next two to four quarters, suggesting a rotation
into consumer nondurable stocks. Therefore, S&P STARS Master Series (the "Master
Series"), the fund in which the Portfolio invests, has reduced most of its
positions in industrial stocks and shifted its investments into quality growth
companies such as Pfizer Inc., Merck & Co., Inc. and Philip Morris Cos. Inc.

Despite nervousness in the stock market, technology stocks still appear poised
to report strong gains for the next two quarters. In the fourth quarter, we
believe earnings and revenues will be up well over 30% for several leading
technology companies such as Intel Corp., Adaptec Inc. and Compaq Computer Corp.
In our opinion, growth in the technology sector will be supported by the ongoing
need to improve productivity in the corporate sector. In addition, penetration
of the Personal Computer (PC) in the home is still relatively low (about 30%),
and we expect this level to rise to 50% over the next two to three years.
Industry forecasts suggest that, globally, PC's will grow from about 50 million
units in 1994 to 65 million units in 1995 and 80 million units in 1996. Although
we expect the growth rate will be slowing, it is still rising over 20% for 1996.
We remain overweighted in this sector although the weighting has been reduced
substantially from the prior quarter.

In the quarter ended September 30, 1995, the Master Series has increased its
holdings in quality growth stocks such as Philip Morris, American Brands, Inc.
and The Coca-Cola Co. Philip Morris and American Brands are selling
significantly below market multiples with good earnings projections and
relatively high yields (approximately 5%). The Master Series continues to
maintain large positions in special situation stocks such as IBP Inc.

Going forward, we believe that financial stocks will outperform if rates
continue to ease. These stocks tend to outperform during periods of low
inflation and declining rates. Finally, in an effort to hedge our downside
risks, the Master Series has sold short a limited number of stocks.

In conclusion, we appreciate your support and would be pleased to respond to any
questions or comments. If you have any questions concerning the Portfolio,
please call 1-800-766-4111.

Sincerely,

[SIG]
Robert S. Reitzes
Chairman of the Board
The Bear Stearns Funds
Portfolio Manager
S&P STARS Master Series

1
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Portfolio(1)
Comparison of Change in Value of $10,000 Investment in
Class A and Class C Shares(2) vs. Various Indices
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
S&P Stars Portfolio
<S> <C> <C> <C> <C>
Class A Class C S&P 500 Micropal Equity U.S. Growth
April 3, 1995 $ 9,525.00 $ 10,000.00 $ 10,000.00 $ 10,000.00
April 30, 1995 $ 9,639.36 $ 10,113.06 $ 10,280.00 $ 10,204.00
May 31, 1995 $ 10,099.27 $ 10,587.42 $ 10,653.00 $ 10,492.00
June 30, 1995 $ 10,574.94 $ 11,079.74 $ 10,880.00 $ 10,913.00
July 31, 1995 $ 11,272.50 $ 11,805.15 $ 11,225.00 $ 11,444.00
August 31, 1995 $ 11,341.92 $ 11,873.61 $ 11,222.00 $ 11,548.00
Sep 30, 1995 $ 11,445.68 $ 11,997.85 $ 11,672.00 $ 11,861.00

<S> <C>
MidLantic Consumer Price Index
April 3, 1995 $ 10,000.00
April 30, 1995 $ 10,040.00
May 31, 1995 $ 10,066.10
June 30, 1995 $ 10,079.19
July 31, 1995 $ 10,099.35
August 31, 1995 $ 10,112.48
Sep 30, 1995 $ 10,125.62
</TABLE>

<TABLE>
<CAPTION>
Total Return
With applicable sales Without applicable sales
load and CDSC, if any, load and CDSC, if any,
and including fee waivers and including fee waivers
and expense and expense
reimbursements reimbursements
------------------------- -------------------------
<S> <C> <C>
S&P STARS Portfolio(1)(4)
Class A shares(5)............................. 14.44% 20.17%
Class C shares(6)............................. 18.58 19.75
Class Y shares(2)(7).......................... 2.41 2.41
Micropal U.S. Equity Growth Index(3).............. 18.18 --
S&P 500 (Composite) Index(3)...................... 18.23 --
Midatlantic Consumer Price Index(3)............... 1.26 --
</TABLE>

- ---------
(1) For the period April 5, 1995 (commencement of investment operations) through
September 30, 1995.
(2) 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.
(3) The chart assumes a hypothetical $10,000 initial investment in the Portfolio
and reflects all Portfolio expenses. Investors should note that the
Portfolio invests in a professionally managed mutual fund while the indices
are either unmanaged and do not incur sales charges or expenses and/or are
not available for investment.
(4) Bear Stearns Funds 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.
(5) Reflects the initial maximum 4.75% sales load. Excluding fee waivers and
expense reimbursements, the total return would have been 14.22% with a sales
load charged and 19.88% without a sales load charged.
(6) Reflects the maximum 1.00% contingent deferred sales charge. Excluding fee
waivers and expense reimbursements, the total return would have been 18.50%
with a CDSC charged at the end of the period and 19.50% without a CDSC
charged at the end of the period.
(7) Excluding fee waivers and expense reimbursements, the total return would
have been 2.34%.

CDSC -- Contingent Deferred Sales Charge.

2
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Master Series
SEPTEMBER 30, 1995
(unaudited)

- --------------------------------------------------------------------------------
Top Ten Sectors

<TABLE>
<CAPTION>
PERCENT OF
RANK SECTOR NET ASSETS
- ----- -------------------------------------------------- -----------
<C> <S> <C>
1. Computers & Office Equipment...................... 13.19
2. Banks............................................. 11.51
3. Drug & Hospital Supplies.......................... 10.71
4. Electronics....................................... 9.42
5. Food & Beverages.................................. 7.99
6. Retailing......................................... 6.43
7. Chemicals & Fertilizers........................... 6.17
8. Insurance......................................... 6.09
9. Services.......................................... 5.28
10. Miscellaneous Industrials......................... 4.51
</TABLE>

- --------------------------------------------------------------------------------
Top Ten Holdings

<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS SECTOR NET ASSETS
- ----- -------------------------------------------------- ----------------------------- ----------
<C> <S> <C> <C>
1. Citicorp.......................................... Banks 8.49
2. Grace (W.R.) & Co................................. Chemicals & Fertilizers 6.17
3. Philip Morris Cos. Inc. .......................... Food & Beverages 4.68
4. IBP Inc. ......................................... Miscellaneous Industrials 4.51
5. Merck & Co., Inc. ................................ Drug & Hospital Supplies 4.33
6. Chubb Corp. ...................................... Insurance 3.76
7. Motorola, Inc..................................... Electronics 3.60
8. Intel Corp. ...................................... Electronics 3.47
9. Sterling Software, Inc. .......................... Services 3.40
10. The Coca-Cola Co.................................. Food & Beverages 3.31
</TABLE>

3
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Portfolio
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<S> <C>
Assets
Investment in S&P STARS Master Series
("Master Series"), at value.................... $ 56,239,077
Receivable for Portfolio shares sold............ 1,429,723
Receivable for investment sold in Master
Series......................................... 227,906
Prepaid expenses................................ 27,756
Receivable from Master Series' investment
adviser........................................ 4,424
Deferred organization expenses and other
assets......................................... 239,490
-------------
Total assets.............................. 58,168,376
-------------
Liabilities
Payable for investment purchased in Master
Series......................................... 1,429,723
Payable for Portfolio shares repurchased........ 227,906
Distribution fee payable (class A and C
shares)........................................ 79,852
Administration fee payable...................... 24,888
Custodian fee payable........................... 417
Accrued expenses................................ 22,864
Organization expenses payable................... 247,484
-------------
Total liabilities......................... 2,033,134
-------------
Net Assets
Capital stock, $0.001 par value (unlimited
shares of beneficial interest authorized)...... 3,897
Paid-in capital................................. 50,746,076
Net investment loss............................. (89,940)
Accumulated net realized gain from Master
Series......................................... 845,818
Net unrealized appreciation from Master
Series......................................... 4,629,391
-------------
Net assets................................ $ 56,135,242
-------------
Class A
Net assets...................................... $ 37,433,829
-------------
Shares of beneficial interest outstanding....... 2,595,908
-------------
Net asset value per share....................... $14.42
Maximum offering price per share (net asset
value plus sales charge of 4.75%* of the
offering price)................................ $15.14
Class C
Net assets...................................... $ 18,615,838
-------------
Shares of beneficial interest outstanding....... 1,295,219
-------------
Net asset value and offering price per
share**........................................ $14.37
Class Y
Net assets...................................... $ 85,575
-------------
Shares of beneficial interest outstanding....... 5,914
-------------
Net asset value, offering and redemption price
per share...................................... $14.47
</TABLE>

- ---------
* 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.

4
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Portfolio
STATEMENT OF OPERATIONS
FOR THE PERIOD APRIL 5, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<S> <C>
Investment income
Allocated net investment income from Master
Series......................................... $ 133,349
----------
Expenses
Distribution fees - Class A..................... 55,661
Distribution fees - Class C..................... 57,848
Amortization of organization expenses........... 26,215
Administration fees............................. 24,888
Transfer agent fees and expenses................ 23,630
Reports and notices to shareholders............. 9,845
Insurance expenses.............................. 7,630
Federal and state registration fees............. 7,352
Accounting fees................................. 6,769
Trustees' fees and expenses..................... 4,431
Legal and auditing fees......................... 1,969
Custodian fees.................................. 491
Other........................................... 984
----------
Total expenses before reimbursements...... 227,713
Less: Reimbursements...................... (4,424)
----------
Total expenses after reimbursements....... 223,289
----------
Net investment loss............................. (89,940)
----------
Net realized and unrealized gain from Master
Series
Net realized gain............................... 845,818
Net change in unrealized appreciation........... 4,629,391
----------
Net realized and unrealized gain................ 5,475,209
----------
Net increase in net assets resulting from
operations....................................... $5,385,269
----------
----------
</TABLE>

- --------
* Commencement of investment operations.

The accompanying notes are an integral part of the financial statements.

5
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Portfolio
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 5, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<S> <C>
Increase/(decrease) in net assets from
Operations
Net investment loss............................. $ (89,940)
Net realized gain from Master Series............ 845,818
Net change in unrealized appreciation from
Master Series.................................. 4,629,391
-----------
Net increase in net assets resulting from
operations..................................... 5,385,269
-----------

Shares of beneficial interest
Net proceeds from the sale of shares............ 56,445,631
Cost of shares repurchased...................... (5,820,674)
-----------
Net increase in net assets derived from shares
of beneficial interest transactions............ 50,624,957
-----------
Total increase in net assets.................... 56,010,226

Net assets
Beginning of period............................. 125,016
-----------
End of period................................... $56,135,242
-----------
-----------
</TABLE>

- --------
* Commencement of investment operations.

The accompanying notes are an integral part of the financial statements.

6
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Portfolio
FINANCIAL HIGHLIGHTS
FOR THE PERIOD APRIL 5, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS A CLASS C CLASS Y
-------- -------- --------
<S> <C> <C> <C>
Per Share Operating Performance**
Net asset value, beginning of
period.......................... $ 12.00 $ 12.00 $ 14.13
-------- -------- --------
Net investment loss(1)........... (0.02) (0.04) (0.01)
Net realized and unrealized gain
on investments(2)............... 2.44 2.41 0.35
-------- -------- --------
Net increase in net assets
resulting from operations....... 2.42 2.37 0.34
-------- -------- --------
Net asset value, end of period... $ 14.42 $ 14.37 $ 14.47
-------- -------- --------
-------- -------- --------
Total investment return(3)(6).... 20.17% 19.75% 2.41%
-------- -------- --------
-------- -------- --------
Ratios/Supplemental Data
Net assets, end of period (000's
omitted)........................ $ 37,434 $ 18,616 $ 85
Ratio of expenses to average net
assets(1)(4).................... 1.50% 2.00% 1.00%
Ratio of net investment loss to
average net assets(1)(4)(6)..... (0.37)% (0.87)% (0.95)%
Decrease reflected in above
expense ratios and net
investment loss due to waivers
and reimbursements(4)(5)(6)..... 0.82% 0.84% 0.67%
</TABLE>

- --------
* Commencement of investment operations. Class Y shares commenced initial
public offering on August 7, 1995.
** Calculated based upon weighted average shares outstanding during the
period.
(1) Reflects waivers and reimbursements.
(2) The amount shown for a share outstanding throughout the period is not in
accord with the change in the aggregate gains and losses in investments
during the period because of the timing of sales and repurchases of
Portfolio shares in relation to fluctuating net asset value during the
period.
(3) Total return does not consider the effects of sales loads or contingent
deferred sales charges. Total 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 returns are not annualized.
(4) Annualized.
(5) Includes Portfolio's share of Master Series' expenses.
(6) The total investment return and ratios for class Y shares are not
necessarily comparable to those of class A or C shares, due to timing
differences in the commencement of the initial public offering of class Y
shares.

The accompanying notes are an integral part of the financial statements.

7
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Portfolio
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED)

Organization and Significant Accounting Policies

The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business
trust on September 29, 1994 and is registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as an open-end management investment
company. The Fund currently has five portfolios in operation: three diversified
portfolios, Large Cap Value Portfolio, Small Cap Value Portfolio and Total
Return Bond Portfolio, and two non-diversified portfolios, The Insiders Select
Portfolio and S&P STARS Portfolio. As of the date hereof, S&P STARS Portfolio
(the "Portfolio") offers three classes of shares which have been designated as
class A, C and Y shares.

The Portfolio invests all of its assets in S&P STARS Master Series (the "Master
Series"), a separate series of S&P STARS Fund (the "Master Fund"), which has the
same objective as the Portfolio. The Master Fund was organized as a Delaware
business trust on October 5, 1994 and is registered under the Investment Company
Act as an open-end management investment company. The Master Fund currently has
one fund in operation, the Master Series, a non-diversified fund. The value of
the Portfolio's investment in the Master Series reflects the Portfolio's
proportionate beneficial interest in the net assets of the Master Series (99.9%
at September 30, 1995). The performance of the Portfolio is directly affected by
the performance of the Master Series. The financial statements of the Master
Series, including the portfolio of investments, should be read in conjunction
with the Portfolio's financial statements.

Organizational Matters--Prior to commencing investment operations on April 5,
1995, the Portfolio had not had any transactions other than those relating to
organizational matters and the sale of 5,209 class A shares and 5,209 class C
shares of beneficial interest of S&P STARS Portfolio to Bear, Stearns & Co. Inc.
("Bear Stearns" or the "Distributor"). Costs of approximately $262,500 incurred
by the Fund in connection with the organization, its registration with the
Commission and with various states and the initial public offering of its shares
have been deferred and are being amortized, using the straight-line method over
the period of benefit not exceeding sixty months, beginning with the
commencement of investment operations of the Portfolio. In the event that the
Distributor or any transferee of the Distributor redeems any of its original
shares 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 the Portfolio is liquidated prior to the end of
the sixty month period, the Distributor or the transferee of the Distributor
shall bear the unamortized deferred organization expenses.

Investment Valuation--The Portfolio invests all of its assets in the Master
Series, rather than in a portfolio of securities. Valuation of securities by the
Master Series is discussed in the Master Series' Notes to Financial Statements
which are included elsewhere in this report. Expenses and fees, including
administrative and distribution fees are accrued daily and taken into account
for the purposes of determining the net asset value of the 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 Income--The Portfolio earns income, net of Master Series' expenses,
daily on its investment in the Master Series.

The Portfolio's allocated net investment income from the Master Series is
further allocated each day 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).

8
<PAGE>
U.S. Federal Tax Status--The Portfolio intends to distribute substantially all
of its taxable income and to comply with the other requirements of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing during each calendar year substantially all of its
ordinary income and capital gains, if any, the Portfolio intends not to be
subject to a U.S. federal excise tax.

Dividends and Distributions--The Portfolio intends to distribute at least
annually to shareholders substantially all of its net investment income.
Distribution of net realized gains, if any, will be declared and paid at least
annually. Dividends and distributions to shareholders are recorded on the
ex-dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.

Transactions with Affiliates and Related Parties

During the period ended September 30, 1995, Bear Stearns Funds Management Inc.
("BSFM" or the "Administrator") served as administrator to the Portfolio
pursuant to an Administration Agreement. The Administrator is entitled to
receive from the Portfolio a monthly fee equal to an annual rate of 0.15% of the
Portfolio's average daily net assets. Under the terms of an Administrative
Services Agreement with the Portfolio, PFPC International Ltd. provides certain
administrative services to the Portfolio. For providing these services, PFPC
International Ltd. is entitled to receive from the Portfolio a monthly fee of
$4,000.

During the period ended September 30, 1995, BSFM as the Master Series' Adviser
(the "Adviser") has voluntarily undertaken to limit the Portfolio's total
operating expenses (other than brokerage commissions, taxes and extraordinary
items) to the extent that total Portfolio operating expenses exceeded 1.50% of
the average daily net assets of the Portfolio's class A shares, 2.00% of the
average daily net assets of the Portfolio's class C shares and 1.00% of the
average daily net assets of the Portfolio's class Y shares. As necessary, this
limitation is effected by waivers by the Adviser of its advisory fees (Master
Series only) and reimbursements of expenses exceeding the advisory fee (Master
Series and Portfolio). For the period ended September 30, 1995, the Adviser
reimbursed $4,424 of the Portfolio's expenses in order to maintain the voluntary
expense limitation. The Portfolio will not pay the Adviser at a later time for
any amounts it may waive, nor will the Portfolio reimburse the Adviser for any
amounts it may assume.

Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies
Inc. and an affiliate of the Administrator, serves as custodian to the
Portfolio.

Distribution Plan

The Fund, on behalf of the Portfolio, has entered into a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act. Under the Plan
in effect for the period ended September 30, 1995, the Portfolio paid Bear
Stearns a fee at an annual rate of 0.50% for class A shares and 1.00% for class
C shares based on such class' average daily net assets. For the period April 5,
1995 (commencement of investment operations) through September 30, 1995, Bear
Stearns earned $113,509 in distribution fees. Bear Stearns uses these fees
primarily to pay dealers whose clients hold Portfolio shares and other
distribution-related activities.

In addition, as distributor of the Portfolio, Bear Stearns collects sales
charges imposed on sales of the Portfolio's class A shares, and reallows a
portion of such charges to dealers through which the sales are made. For the
period ended September 26, 1995, as a result of an undertaking by the
Distributor, it reallowed all of the sales charges to dealers selling shares in
the Portfolio. In addition, Bear Stearns pays 1.00% in sales commissions on the
sale of class C shares to dealers at the time of such sales.

9
<PAGE>
For the period ended September 30, 1995, Bear Stearns has advised the Portfolio
that it received approximately $561,000 in front-end sales charges resulting
from sales of class A shares of the Portfolio. From these fees, Bear Stearns
paid such sales charges to dealers which in turn paid commissions to sales
persons. Bear Stearns has advised the Portfolio that for the period ended
September 30, 1995, it received approximately $5,000 in contingent deferred
sales charges paid upon certain redemptions by class C shareholders of the
Portfolio.

Investment Transactions

Additions and reductions to the Portfolio's investment in the Master Series
amounted to $56,432,307 and $5,926,804, respectively.

Shares of Beneficial Interest

The Portfolio offers class A, C and Y shares. Class A shares are sold with a
front-end sales charge of up to 4.75%. Class C shares are sold with a contingent
deferred sales charge of 1.00% during the first year. There are no sales charges
on class Y shares which are offered primarily to institutional investors.

At September 30, 1995, there was an unlimited amount of $0.001 par value shares
of beneficial interest authorized of which Bear Stearns owned 5,209 class A
shares and 5,209 class C shares. Transactions in shares of beneficial interest
for the period April 5, 1995 (commencement of investment operations) through
September 30, 1995 were as follows:

<TABLE>
<CAPTION>
CLASS A CLASS C CLASS Y*
---------------------- ---------------------- -----------------
SHARES AMOUNTS SHARES AMOUNTS SHARES AMOUNTS
--------- ----------- --------- ----------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Sales................................... 2,818,374 $37,045,589 1,473,302 $19,314,311 5,979 $85,731
Repurchases............................. 227,675 3,236,721 183,292 2,583,007 65 946
--------- ----------- --------- ----------- ------ --------
Net increase in shares outstanding...... 2,590,699 $33,808,868 1,290,010 $16,731,304 5,914 $84,785
--------- ----------- --------- ----------- ------ --------
--------- ----------- --------- ----------- ------ --------
<FN>
- ---------
* Class Y shares commenced initial public offering on August 7, 1995.
</TABLE>

Credit Agreement

The Fund, on behalf of the Portfolio, has entered into a credit agreement with
The First National Bank of Boston. S&P STARS Fund, Large Cap Value Portfolio,
Small Cap Value Portfolio, Total Return Bond Portfolio, The Insiders Select
Portfolio and Bear Stearns Investment Trust, which consists of the Emerging
Markets Debt Portfolio, are also parties to the credit agreement. The agreement
provides that each Portfolio as a party to the credit agreement is permitted to
borrow in an amount up to 15% of the value of its total assets. Subject to Board
approval and upon making necessary disclosure in its prospectus, each Portfolio
may, in accordance with the provisions of the credit agreement, borrow up to 25%
of the value of its total assets, less all liabilities other than liabilities
for borrowed money outstanding at the time. However, at no time shall the
aggregate outstanding principal amount of all loans to any of the portfolios
exceed $25,000,000. 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 The First National Bank
of Boston.

The Portfolio uses this facility to borrow money only for temporary or emergency
(not leveraging) purposes. The Portfolio had no amount outstanding under the
line of credit agreement at September 30, 1995.

10
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Master Series
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------
<C> <S> <C>
MARKET
SHARES* VALUE

<CAPTION>
- -------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--94.62%

Automotive Equipment - 1.75%
25,000 Goodyear Tire & Rubber Co. ...... $ 984,375
-----------
Banks - 11.51%
67,500 Citicorp......................... 4,775,625
15,000 Northern Trust Corp.**........... 690,000
16,500 Green Tree Financial Corp.+...... 1,006,500
-----------
6,472,125
-----------
Chemicals & Fertilizers - 6.17%
52,000 Grace (W.R.) & Co. .............. 3,471,000
-----------
Computers & Office Equipment -
13.19%
7,000 Atmel Corp.+..................... 236,250
13,000 Compaq Computer Corp.+........... 628,875
14,500 Cisco Systems, Inc.**+........... 1,000,500
15,000 International Business Machines
Corp. ........................... 1,415,625
25,000 Oracle Systems Corp.+............ 959,375
36,000 Seagate Technology Inc.+......... 1,516,500
52,000 Sequent Computer Systems,
Inc.**+.......................... 1,033,500
10,000 Sun Microsystems, Inc.+.......... 630,000
-----------
7,420,625
-----------
Credit & Finance - 3.16%
40,000 American Express Co.............. 1,775,000
-----------
Drug & Hospital Supplies - 10.71%
40,000 Foundation Health Corp.+......... 1,525,000
16,000 Medtronic, Inc. ................. 860,000
43,500 Merck & Co., Inc. ............... 2,436,000
22,500 Pfizer Inc. ..................... 1,200,938
-----------
6,021,938
-----------
Electrical Equipment - 3.00%
26,500 General Electric Co. ............ 1,689,375
-----------
<CAPTION>
----------------------------------------------------------
MARKET
SHARES* VALUE
- -------------------------------------------------------------
<C> <S> <C>

Electronics - 9.42%
32,000 Adaptec Inc.+.................... $ 1,320,000
32,500 Intel Corp....................... 1,954,063
26,500 Motorola, Inc. .................. 2,023,938
-----------
5,298,001
-----------

Food & Beverages - 7.99%
27,000 The Coca-Cola Co. ............... 1,863,000
31,500 Philip Morris Cos. Inc........... 2,630,250
-----------
4,493,250
-----------

Grocery Products - 2.44%
32,500 American Brands, Inc. ........... 1,373,125
-----------

Insurance - 6.09%
22,500 St. Paul Cos., Inc. ............. 1,313,437
22,000 Chubb Corp....................... 2,112,000
-----------
3,425,437
-----------

Miscellaneous Industrials - 4.51%
47,500 IBP Inc.......................... 2,535,312
-----------

Oil-Offshore Drilling - 0.63%
50,000 Global Marine, Inc.+............. 356,250
-----------

Oil Well Equipment & Services -
0.50%
30,000 Nabors Industries, Inc.+......... 283,125
-----------

Publishing and Broadcasting -
1.84%
47,000 News Corp. Ltd. ADR.............. 1,034,000
-----------

Retailing - 6.43%
33,000 Dollar General Corp.............. 969,375
35,000 Eckerd Corp.+.................... 1,400,000
20,500 Tandy Corp....................... 1,245,375
-----------
3,614,750
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

11
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Master Series
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------
MARKET
SHARES* VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)

Services - 5.28%
42,000 Sterling Software, Inc.+......... $ 1,911,000
15,500 Automatic Data Processing,
Inc.**........................... 1,055,937
-----------
2,966,937
-----------
Total Common Stocks
(cost - $48,572,568)............. 53,214,625
-----------
PRINCIPAL
AMOUNT
(000's)
- -------------

SHORT-TERM INVESTMENT--4.06%
Investment Company - 4.06%
$ 2,285 Federated Trust for Short-term
U.S. Government Securities++
(cost - $2,285,191).............. 2,285,191
-----------
Total Investments
(cost - $50,857,759) - 98.68%.... 55,499,816
Other assets in excess
of liabilities - 1.32%........... 740,480
-----------
Net Assets - 100.00%............. $56,240,296
-----------
-----------
NUMBER OF
CONTRACTS
- -------------
WRITTEN CALL OPTION
Computers & Office Equipment
145 Cisco Systems, Inc.**+
10/21/95 @ $75.00
(premiums received - $34,001).... $ (7,250)
-----------
-----------

<CAPTION>
----------------------------------------------------------
MARKET
SHARES* VALUE
- -------------------------------------------------------------
<C> <S> <C>

SHORT SALE OF COMMON STOCK
Shipping & Freight
10,000 Roadway Services, Inc.
(proceeds received - $458,250)... $ (497,500)
-----------
-----------
</TABLE>

- ---------
* Unless otherwise indicated all common stocks, including those
underlying written options, are ranked five stars and all common stocks sold
short are ranked one star.
** Currently ranked four stars; ranked five stars when purchased.
+ Non-income producing security.
++ Money market fund.
ADR American Depositary Receipt.

S&P STARS RANKINGS:
Five stars - Buy - Expected to be among the best performers over the next twelve
months and to rise in price.
Four stars - Accumulate - Expected to be an above-average performer.
Three stars - Hold - Expected to be an average performer.
Two stars - Avoid - Expected to be a below-average performer.
One star - Sell - Expected to be a well-below-average performer and to fall in
price.

The accompanying notes are an integral part of the financial statements.

12
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Master Series
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<S> <C>
Assets
Investments, at value (cost - $50,857,759)...... $ 55,499,816
Receivable for investments sold................. 3,157,931
Receivable for beneficial interests sold........ 1,429,723
Deposit with broker for security sold short
(including margin requirement of $229,250)..... 687,500
Amount segregated at custodian for security sold
short.......................................... 280,000
Dividends receivable............................ 54,614
Receivable from investment adviser.............. 10,891
Deferred organization expenses and other
assets......................................... 92,822
--------------
Total assets.............................. 61,213,297
--------------
Liabilities
Payable for investments purchased............... 4,112,880
Security sold short, at value (proceeds received
- $458,250).................................... 497,500
Payable for beneficial interests repurchased.... 227,906
Written call options, at value (premiums
received - $34,001)............................ 7,250
Custodian fee payable........................... 824
Accrued expenses................................ 29,307
Organization expenses payable................... 97,334
--------------
Total liabilities......................... 4,973,001
--------------
Net Assets
Net proceeds from capital contributions and
withdrawals.................................... 51,610,738
Net unrealized appreciation on investments,
security sold short and option transactions.... 4,629,558
--------------
Net assets applicable to investors'
beneficial interests....................... $ 56,240,296
--------------
--------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

13
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Master Series
STATEMENT OF OPERATIONS
FOR THE PERIOD APRIL 5, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<S> <C>
Investment Income
Dividends....................................... $ 175,628
Interest........................................ 12,957
-----------
188,585
-----------
Expenses
Advisory fees................................... 124,342
Administration and accounting fees.............. 19,950
Amortization of organization expenses........... 9,845
Custodian fees and expenses..................... 9,845
Legal and auditing fees......................... 8,861
Trustees' fees and expenses..................... 8,369
Insurance expenses.............................. 7,630
Other........................................... 1,621
-----------
Total expenses before waivers and
reimbursements............................. 190,463
Less: Waivers and reimbursements.......... (135,233)
-----------
Total expenses after waivers and
reimbursements............................. 55,230
-----------
Net investment income........................... 133,355
-----------
Net realized and unrealized gain/(loss) on
investments, security sold short and option
transactions
Net realized gain/(loss) from:
Investments............................... 949,190
Option transactions....................... (103,334)
Net change in unrealized
appreciation/(depreciation) on:
Investments............................... 4,642,057
Security sold short....................... (39,250)
Option transactions....................... 26,751
-----------
Net realized and unrealized gain from
investments, security sold short and option
transactions................................... 5,475,414
-----------
Net increase in net assets resulting from
operations....................................... $ 5,608,769
-----------
-----------
</TABLE>

- ---------
* Commencement of investment operations.

The accompanying notes are an integral part of the financial statements.

14
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Master Series
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 5, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<S> <C>
Increase in net assets from
Operations
Net investment income..................................... $ 133,355
Net realized gain from investments and option
transactions............................................. 845,856
Net change in unrealized appreciation on investments,
security sold short and option transactions.............. 4,629,558
---------------
Net increase in net assets resulting from operations...... 5,608,769
---------------

Capital transactions
Contributions............................................. 56,433,315
Withdrawals............................................... (5,926,804)
---------------
Net increase in net assets derived from capital
transactions............................................. 50,506,511
---------------
Total increase in net assets.............................. 56,115,280
Net assets
Beginning of period....................................... 125,016
---------------
End of period............................................. $56,240,296
---------------
---------------
<FN>
- ---------
* Commencement of investment operations.
</TABLE>

The accompanying notes are an integral part of the financial statements.

15
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Master Series
FINANCIAL HIGHLIGHTS
FOR THE PERIOD APRIL 5, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)
- --------------------------------------------------------------------------------

Contained below are ratios to average net assets and other supplemental data for
the period. This information has been derived from information provided in the
financial statements.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Ratios/Supplemental Data
Net assets, end of period (000's
omitted)........................ $56,240
Ratio of expenses to average net
assets(1)(2).................... 0.33%
Ratio of net investment income to
average net assets(1)(2)........ 0.80%
Decrease reflected in above
expense ratios and net
investment income due to waivers
and reimbursements(2)........... 0.81%
Portfolio turnover rate(3)....... 105.58%
Average commission rate per
share........................... $ 0.06
</TABLE>

- --------
* Commencement of investment operations.
(1) Reflects waivers and reimbursements.
(2) Annualized.
(3) Not annualized.

The accompanying notes are an integral part of the financial statements.

16
<PAGE>
THE BEAR STEARNS FUNDS

S&P STARS Fund

S&P STARS Master Series
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED)

Organization and Significant Accounting Policies

S&P STARS Fund (the "Master Fund") was organized as a Delaware business trust on
October 5, 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
Master Fund is a "series fund" which is a mutual fund divided into separate
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. The
Master Fund currently has one portfolio in operation, S&P STARS Master Series
(the "Master Series"), a non-diversified portfolio.

Organizational Matters--Prior to commencing investment operations on April 5,
1995, the Master Fund had not had any transactions other than those relating to
organizational matters and the sale of 10,418 shares of beneficial interest of
the Master Series to S&P STARS Portfolio (the "Portfolio") of The Bear Stearns
Funds. Costs of approximately $100,000 incurred by the Master Fund in connection
with the organization and its registration with the Commission have been
deferred and are being amortized, using the straight-line method over the period
of benefit not exceeding sixty months, beginning with the commencement of
investment operations of the Master Series. The Master Series commenced
investment operations on April 5, 1995. In the event that the Portfolio or any
transferee of the Portfolio redeems any of its original shares 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 the
Master Series is liquidated prior to the end of the sixty month period, the
Portfolio or the transferee of the Portfolio shall bear the unamortized deferred
organization expenses.

Portfolio Valuation--Securities, including covered call options written by the
Master Series, 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. Expenses and fees, including the investment advisory,
administration fees and distribution fees, are accrued daily and taken into
account for the purposes of determining the net asset value of the Master Series
shares.

Investment Transactions and Investment Income--Master Series' 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 are calculated
on the identified cost basis. Dividend income is recorded on the ex-dividend
date. Interest income is recorded on an accrual basis.

Options Writing--When the Master Series writes an option, an amount equal to the
premium received by the Master Series 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 Master Series on the expiration date as realized gains from

17
<PAGE>
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 Master Series has a realized gain or loss.
If a put option is exercised, the premium reduces the cost basis of the
securities purchased by the Master Series. The Master Series' 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 contract or
notional amounts reflect the extent of the Master Series' involvement in these
financial instruments. In writing an option, the Master Series 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 Master Series could result
in the Master Series selling or buying a security at a price different from the
current market value. The Master Series' activities in written options are
conducted through regulated exchanges which do not result in counterparty credit
risks.

Written call option open at September 30, 1995:

<TABLE>
<CAPTION>
PREMIUMS
WRITTEN CALL OPTION EXPIRATION DATE RECEIVED MARKET VALUE UNREALIZED GAIN
- ------------------------------ -------------------- ------------- ---------- ------------------
<S> <C> <C> <C> <C>
Cisco Systems, Inc............ October 21, 1995 $ 34,001 $ 7,250 $ 26,751
</TABLE>

Short Selling--When the Master Series makes a short sale, an amount equal to the
proceeds received by the Master Series is recorded as a liability and is
subsequently adjusted to the current market value of the short sale. Short sales
represent obligations of the Master Series to make future delivery of specific
securities and, correspondingly, create an obligation to purchase the security
at market prices prevailing at the later delivery date (or to deliver the
security if already owned by the Master Series). Upon the termination of a short
sale, the Master Series will recognize a gain, limited to the price at which the
Master Series sold the security short, if the market price is less than the
proceeds originally received. The Master Series 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 Master
Series' ultimate obligation to satisfy the delivery requirements may exceed the
amount of the proceeds initially received or the liability recorded in the
financial statements. The Master Series has segregated $509,250 in separate
accounts as collateral for open short sales.

Security sold short at September 30, 1995:

<TABLE>
<CAPTION>
SHORT SALE PROCEEDS MARKET VALUE UNREALIZED LOSS
- ------------------------------ ------------- ------------------ ------------------
<S> <C> <C> <C>
Roadway Services, Inc......... $ 458,250 $ 497,500 $ 39,250
</TABLE>

U.S. Federal Tax Status--The Master Series intends to distribute substantially
all of its taxable income and to comply with the other requirements of the
Internal Revenue Code of 1986, as amended, applicable to regulated investment
companies. Accordingly, no provision for U.S. federal income taxes is required.
In addition, by distributing during each calendar year substantially all of its
ordinary income and capital gains, if any, the Master Series intends not to be
subject to a U.S. federal excise tax.

Transactions with Affiliates and Related Parties

During the period ended September 30, 1995, Bear Stearns Funds Management Inc.
("BSFM" or the "Adviser"), a wholly-owned subsidiary of The Bear Stearns
Companies Inc., served as the investment adviser of the Master Series pursuant
to an Investment Advisory Agreement. The Adviser is entitled to receive from the
Master Series a monthly fee equal to an annual rate of 0.75% of the Master
Series' average daily net assets.

Under the terms of an Administrative Services Agreement with the Portfolio, PFPC
International Ltd. provides certain administrative services to the Master
Series. For providing these services, PFPC International Ltd. is entitled to
receive from the Master Series a monthly fee equal to an annual rate of 0.12% of
the Master Series' net assets up to $200 million, 0.09% of the next $200
million, 0.075% of the next $200 million, and 0.05% of net assets above $600
million, subject to a minimum annual fee of $8,500 for the Master Series,
payable monthly.

18
<PAGE>
During the period ended September 30, 1995, the Adviser has voluntarily
undertaken to limit the Portfolio's total operating expenses (other than
brokerage commissions, taxes and extraordinary items) to the extent that total
Portfolio operating expenses exceeded 1.50% of the average daily net assets of
the Portfolio's class A shares, 2.00% of the average daily net assets of the
Portfolio's class C shares and 1.00% of the average daily net assets of the
Portfolio's class Y shares. 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 period ended September 30, 1995, the Adviser waived
$124,342 of its advisory fee and reimbursed $10,891 of the Master Series
expenses in order to maintain the voluntary expense limitation. The Master
Series will not pay the Adviser at a later time for any amounts it may waive,
nor will the Master Series reimburse the Adviser for any amounts it may assume.

For the period ended September 30, 1995, Bear, Stearns & Co. Inc., an affiliate
of the Adviser, earned $166,578 in brokerage commissions from portfolio
transactions executed on behalf of the Master Series.

Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies
Inc. and an affiliate of the Adviser, serves as custodian to the Master Series.

Investments in Securities

For U.S. federal income tax purposes, the cost of securities owned at September
30, 1995 was $51,357,941. Accordingly, the net unrealized appreciation of
investments of $4,141,875 was composed of gross appreciation of $5,058,159 for
those investments having an excess of value over cost; and gross depreciation of
$916,284 for those investments having an excess of cost over value.

For the period April 5, 1995 (commencement of investment operations) through
September 30, 1995, aggregate purchases and sales of investment securities
(excluding short-term securities) were $85,761,464 and $38,138,086,
respectively.

Credit Agreement

The S&P STARS Fund, on behalf of the Master Series, has entered into a credit
agreement with The First National Bank of Boston. Bear Stearns Investment Trust,
which consists of the Emerging Markets Debt Portfolio and The Bear Stearns Funds
consisting of S&P STARS Portfolio, Large Cap Value Portfolio, Small Cap Value
Portfolio, Total Return Bond Portfolio and The Insiders Select Portfolio are
also parties to the credit agreement. The agreement provides that each fund as a
party to the credit agreement is permitted to borrow in an amount up to 15% of
the value of its total assets. Subject to Board approval and upon making
necessary disclosure in its prospectus, each fund may, in accordance with the
provisions of the credit agreement, borrow up to 25% of the value of its total
assets, less all liabilities other than liabilities for borrowed money
outstanding at the time. However, at no time shall the aggregate outstanding
principal amount of all loans to any of the funds exceed $25,000,000. 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 The First National Bank of Boston.

The Master Series uses this facility to borrow money only for temporary or
emergency (not leveraging) purposes. The Master Series had no amount outstanding
under the line of credit agreement at September 30, 1995.

19
<PAGE>
The
Bear Stearns
Funds
245 Park Avenue
New York, NY 10167
1.800.766.4111

Investment Adviser Distributor
Bear Stearns Funds Bear, Stearns & Co. Inc.
Management Inc. 245 Park Avenue
245 Park Avenue New York, NY 10167
New York, NY 10167

Custodian Transfer & Dividend
Custodial Trust Company Disbursement Agent
101 Carnegie Center PFPC Inc.
Princeton, NJ 08540 Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809

Counsel Independent Auditors
Stroock & Stroock & Lavan Deloitte & Touche LLP
7 Hanover Square Two World Financial Center
New York, NY 10004 New York, NY 10281
</TABLE>

The financial information included herein is taken from the records of each
Portfolio without examination by independent auditors who do not express an
opinion thereon.

This report is submitted for the general information of the shareholders of each
Portfolio. It is not authorized for distribution to prospective investors in
each Portfolio unless it is preceded or accompanied by a current prospectus
which includes details regarding each Portfolio's objectives, policies, sales
commissions and other information. Total 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.

BSF-R-009-01
Large Cap
<PAGE>
Value Portfolio

Small Cap
Value Portfolio

Total Return
Bond Portfolio

Semi-Annual Report
September 30, 1995

[LOGO]
<PAGE>
THE BEAR STEARNS FUNDS

Large Cap Value Portfolio
Small Cap Value Portfolio
Total Return Bond Portfolio
LETTER TO SHAREHOLDERS

November 13, 1995
Dear Shareholders,

We are pleased to present the first semi-annual report to shareholders for the
Large Cap Value Portfolio ("Large Cap"), Small Cap Value Portfolio ("Small Cap")
and Total Return Bond Portfolio ("Bond Portfolio") (collectively the
"Portfolios") for the period ended September 30, 1995.

LARGE CAP VALUE PORTFOLIO

Large Cap's total return was 18.58%, 18.25% and 1.86% (without giving effect to
sales charges and contingent deferred sales charges, if any) for class A, C and
Y shares, respectively, for the period ended September 30, 1995. For the quarter
ended September 30, 1995, the total return was 10.83% and 10.69% (without giving
effect to sales charges and contingent deferred sales charges, if any) for class
A and C shares, respectively. Large Cap outperformed its benchmark index, the
S&P 500 (Composite) Index, which gained 18.23% for the period ended September
30, 1995 and 7.95% for the quarter ended September 30, 1995. Further performance
data for each class of shares of each Portfolio during this reporting period is
available in the "Financial Highlights" section in this report.

It appears that the U.S. economy has slowed its rate of growth and the soft
landing has occurred. Inflation remains subdued and its resurgence does not
appear to be an immediate threat. During the period ended September 30, 1995,
interest rates in general have declined and the trend is expected to continue in
the near future. On the monetary front, the U.S. dollar's decline against key
currencies appears to be over and we expect the U.S. dollar to recover.

Earnings growth for corporate America continues to be strong even with
substantial write-offs by many companies. The write-offs indicate continuing
attempts by managements to control costs as we move through a period of slowing
sales and earnings growth. We look favorably on the continuing efforts to
increase productivity because such efforts indicate that we, as a country, can
continue to be competitive in what is truly a global economy. The productivity
gains seen this year should allow for earnings growth to continue in the face of
a meaningful slowdown in year-over-year GDP growth rates.

The quarter ended June 30, 1995, proved to be the best quarter for equity mutual
funds in two and a half years. The market reached new all-time highs as economic
growth declined to levels that are commensurate with expected corporate profit
growth. Large Cap fully participated in the impressive market rise during the
quarter ended September 30, 1995. In a market led by a strong technology sector,
Large Cap performed exceptionally well with only a small exposure in this sector
(8%).

As a value manager, we find particular value in the financial sector, which
includes banks, insurance companies and financial service providers, and have
overweighted this sector. This sector has been strong and we expect its strength
to continue given the sector's valuation in the marketplace. In the drug and
hospital sector, Medtronic, Inc. was a standout performer during the quarter
reflecting its spectacular earnings growth. In the electronics sector, Motorola,
Inc. performed well and continues to be one of the great wireless communications
companies in the world today.

We continue to view the equity market as slightly undervalued given our earnings
expectation for the S&P 500 (Composite) Index and our outlook for interest rates
and inflation. After appreciating approximately 30% since January 1, 1995, we
expect any further gains in the S&P 500 (Composite) Index to be somewhat
subdued. Nevertheless, we believe that further appreciation will occur.

1
<PAGE>
SMALL CAP VALUE PORTFOLIO

Whereas small cap investing tends to reward investors with above-market rates of
return over extended periods of time, it has been our experience that when small
cap stocks outperform, it happens in a big way, and generally takes place over a
short time frame. Such was the case during the quarter ended September 30, 1995.
Small capitalization stocks outperformed the large capitalization stocks by a
broad margin and Small Cap fully participated in this rally. Small Cap's total
return was 26.58%, 26.25% and 16.20% (without giving effect to sales charges and
contingent deferred sales charges, if any) for class A, C and Y shares,
respectively, for the period ended September 30, 1995. For the quarter ended
September 30, 1995, the total return was 16.58% and 16.48% (without giving
effect to sales charges and contingent deferred sales charges, if any) for class
A and C shares, respectively. Small Cap outperformed its benchmark index, the
Russell 2000 Index, which gained 20.18% for the period ended September 30, 1995
and 9.43% for the quarter ended September 30, 1995.

During the period ended September 30, 1995, three of our portfolio holdings
received take-over bids: SFFed Corp., Emphesys Financial Group Inc. and Summit
Bancorp Inc. SFFed and Summit Bancorp both moved up sharply after receiving
take-over offers in excess of their then-trading levels. We have since sold
SFFed and Emphesys to take profits, but continue to hold Summit Bancorp. Our
most successful investment for the period was Cephalon Inc., a biotechnology
company that may have found a viable therapy for ALS (Lou Gehrig's disease).
With an average cost of under $8.00 per share, this stock has more than tripled
in value in approximately six months.

We believe that the current trend of interest rates will continue to favor the
financial sector. We expect to continue to emphasize this group. Small Cap
recently purchased shares of three holding companies; Ace, Ltd., RenaissanceRe
Holdings Ltd. and Security-Connecticut Corp., to replace financial sector stocks
sold because of take-over bids. We continue to find value in the small cap arena
and believe that the relative performance of Small Cap compared with large
capitalization stocks and its peer group will continue. Based on what appears to
be the bottoming of the dollar and peaking of profit margins, small cap stocks
should be positioned to translate their growth in operating income into better
earnings per share, and hence outperform the large cap group.

TOTAL RETURN BOND PORTFOLIO

Coming on the heels of 1994, which was one of the worst years in recent history,
1995 has been an extremely strong year for all sectors of the taxable fixed
income market. Corporate bonds have outperformed U.S. Treasuries throughout the
year and even mortgage-backed bonds, whose price performance typically lags
governments and corporates in most bull markets, have held pace and performed in
line with other sectors. In hindsight, the seven successive Federal Reserve
tightening moves in 1994 took some time to work through the financial system.
The economy, which grew at a pace of 5.1% in the fourth quarter in 1994, has
definitely slowed in the second quarter of 1995. Bond Portfolio's total return
was 6.22%, 6.03% and 0.54% (without giving effect to sales charges and
contingent deferred sales charges, if any) for class A, C and Y shares,
respectively, for the period ended September 30, 1995. For the quarter ended
September 30, 1995, the total return was 1.79% and 1.68% (without giving effect
to sales charges and contingent deferred sales charges, if any) for class A and
C shares, respectively. The Salomon Brothers Broad Investment Grade ("BIG")
Index, the Bond Portfolio's benchmark index, gained 8.13% for the period ended
September 30, 1995 and 1.91% for the quarter ended September 30, 1995. The Bond
Portfolio performed below its benchmark due to its overweighting in the mortgage
sector, which did not perform as well as the corporate bond sector.

However, mortgages have performed surprisingly well in the year long rally.
Volatility declined and prepayments started to slow down in the quarter ended
September 30, 1995. The mortgage market remains very dependent upon the
direction of U.S. Treasury rates. In a falling rate environment, mortgages
typically underperform U.S. Treasuries. With the 10-year U.S. Treasury at
approximately 6%, mortgages offer an exceptional yield advantage relative to
U.S. Treasuries. For example, the General National Mortgage Association,
30-year, 7% issue offers a yield advantage of 115 basis points (1.15%) over
comparable U.S. Treasury securities.

The yield curve, which was sloped quite steeply in the beginning of 1994, has
flattened significantly for the nine months ended September 30, 1995. For
example, the yield spread between two-year and thirty-year bonds, which was 270
basis points (2.70%) in January 1994, has contracted to less than 70 basis
points (0.70%) at the end of September 1995. The driving force has not been the
decline in long-term rates (which are quite close to where they were in early
1994), but the increase in short-term rates, which was

2
<PAGE>
orchestrated by the Federal Reserve to slow growth and control inflation last
year. With two-year Treasuries and the Federal Funds rate at virtually the same
level, it appears that the market has built one or more Fed easings into
existing levels. We believe that the Federal Reserve Board meeting in December
is pivotal to market direction in the fourth quarter. If the Fed does not ease,
we believe that rates will head higher; if it does ease, the market will
continue to rally, especially in the short-term position. We are currently
maintaining a duration of 4.95 years in the Bond Portfolio, which is slightly
longer than its benchmark.

As of September 30, 1995, the Bond Portfolio's assets exceeded $16 million. We
are slightly overweighted in corporate and mortgage-
related bonds. Although yield spreads are tight, we do not expect them to widen
significantly in the near future. Additionally, the corporate credits that we
own are of higher quality than the Salomon Brothers BIG Index for a number of
reasons. First, most BBB rated bonds at this point do not yield much more than
the higher quality A and AA rated bonds. Secondly, event risk has once again
increased as a new wave of merger activity has heated up.

On the economic front, inflation, as measured by either the producer or consumer
price index or by growth in wages, has been well contained at less than 3%
annually. This means that real rates of return (nominal rates less inflation)
are still quite high even with the explosive rally. Although November may be a
volatile month, opportunities still exist in the bond market and we will
continue to try to take advantage of them as they occur.

Finally, we would like to take this opportunity to introduce Peter E. Mahoney.
Mr. Mahoney assumed his duties as the Total Return Bond Portfolio's primary
portfolio manager on November 10, 1995. Mr. Mahoney rejoined Bear, Stearns & Co.
Inc. ("Bear Stearns") in November 1995 as a Managing Director of Bear Stearns
and Director of Fixed Income Investments of Bear Stearns Asset Management,
positions he held during his employment with Bear Stearns from June 1987 through
November 1994. From November 1994 to November 1995, he was a financial
consultant.

In conclusion, we appreciate your support and would be pleased to respond to any
questions or comments. If you have any questions concerning these Portfolios,
please call 1-800-766-4111.

Sincerely,

<TABLE>
<S> <C> <C>
[SIG] [SIG] [SIG]
Robert S. Reitzes Neil T. Eigen Peter E. Mahoney
Chairman of the Board President Portfolio Manager
The Bear Stearns Funds The Bear Stearns Funds Total Return Bond Portfolio
Portfolio Manager
Large Cap Value Portfolio
Small Cap Value Portfolio
</TABLE>

3
<PAGE>
THE BEAR STEARNS FUNDS

Large Cap Value Portfolio(1)
Comparison of Change in Value of $10,000 Investment in
Class A and Class C Shares(2) vs. Various Indices
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Large Cap Value Portfolio Class A Large Cap Value Portfolio Class C Large Cap Value Portfolio Class Y
<S> <C> <C> <C>
April 3, 1995 $9,525.00 $10,000.00
April 30, 1995 $9,580.58 $10,050.00
May 31, 1995 $9,993.31 $10,483.33
June 30, 1995 $10,191.75 $10,583.33
July 31, 1995 $10,501.31 $11,008.33
August 31, 1995 $10,771.19 $11,291.67
Sep 8, 1995 $10,000.00
Sep 30, 1995 $11,295.06 $11,825.00 $10,185.98

<CAPTION>
Micropal Equity U.S. Growth S&P 500 MidLantic Consumer Price Index

<S> <C> <C> <C>
April 3, 1995 $10,000.00 $10,000.00 $10,000.00

April 30, 1995 $10,204.00 $10,280.00 $10,040.00

May 31, 1995 $10,492.00 $10,653.00 $10,066.10

June 30, 1995 $10,913.00 $10,880.00
July 31, 1995 $11,444.00 $11,225.00 $10,079.19

August 31, 1995 $11,548.00 $11,222.00 $10,099.35

Sep 8, 1995 $10,112.48

Sep 30, 1995 $11,861.00 $11,672.00 $10,125.62

</TABLE>

<TABLE>
<CAPTION>
Total Return
With applicable sales load Without applicable sales
and CDSC, if any, and load and CDSC, if any, and
including fee waivers and including fee waivers and
expense reimbursements expense reimbursements
--------------------------- ---------------------------
<S> <C> <C>
Large Cap Value Portfolio(1)(4)
Class A shares(5).............................. 12.94% 18.58%
Class C shares(6).............................. 17.08 18.25
Class Y shares(2)(7)........................... 7.80 7.80
S&P 500 (Composite) Index(3)....................... 18.23 --
Micropal U.S. Equity Growth Index(3)............... 18.18 --
Midatlantic Consumer Price Index(3)................ 1.26 --
</TABLE>

- ---------
(1) For the period April 4, 1995 (commencement of investment operations) through
September 30, 1995.
(2) The return of class Y shares (for which August 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.
(3) The chart assumes a hypothetical $10,000 initial investment in the Portfolio
and reflects all Portfolio expenses. Investors should note that the
Portfolio is a professionally managed mutual fund while the indices are
either unmanaged and do not incur sales charges or expenses and/or are not
available for investment.
(4) Bear Stearns Funds 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.
(5) Reflects the initial maximum 4.75% sales load. Excluding fee waivers and
expense reimbursements, the total return would have been 11.44% with a sales
load charged and 17.00% without a sales load charged.
(6) Reflects the maximum 1.00% CDSC. Excluding fee waivers and expense
reimbursements, the total return would have been 15.33% with a CDSC charged
at the end of the period and 16.50% without a CDSC charged at the end of the
period.
(7) Excluding fee waivers and expense reimbursements, the total return would
have been 1.65%.

CDSC -- Contingent Deferred Sales Charge.

4
<PAGE>
THE BEAR STEARNS FUNDS

Small Cap Value Portfolio(1)
Comparison of Change in Value of $10,000 Investment in
Class A and Class C Shares(2) vs. Various Indices
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Small Cap Value Portfolio Class A Small Cap Value Portfolio Class C Small Cap Value Portfolio Class Y
<S> <C> <C> <C>
April 3, 1995 $9,525.00 $10,000.00
April 30, 1995 $9,659.94 $10,141.67
May 31, 1995 $9,937.75 $10,425.00
June 22, 1995 $10,000.00
June 30, 1995 $10,342.56 $10,841.57 $10,342.56
July 31, 1995 $11,215.69 $11,758.33 $11,223.63
August 31, 1995 $11,914.19 $12,475.00 $11,922.13
Sep 30, 1995 $12,057.06 $12,625.00 $12,072.94

<CAPTION>
Micropal Equity U.S. Small Co. Growth Russell 2000 MidLantic Consumer Price Index

<S> <C> <C> <C>
April 3, 1995 $10,000.00 $10,000.00 $10,000.00

April 30, 1995 $10,121.00 $10,207.00 $10,040.00

May 31, 1995 $10,291.00 $10,384.00 $10,066.10

June 22, 1995
June 30, 1995 $10,915.00 $10,877.00 $10,079.19

July 31, 1995 $11,740.00 $11,494.00 $10,099.35

August 31, 1995 $11,916.00 $11,708.00 $10,112.48

Sep 30, 1995 $12,215.00 $11,902.00 $10,125.62

</TABLE>

<TABLE>
<CAPTION>
Total Return
With applicable sales load Without applicable sales
and CDSC, if any, and load and CDSC, if any, and
including fee waivers and including fee waivers and
expense reimbursements expense reimbursements
--------------------------- ---------------------------
<S> <C> <C>
Small Cap Value Portfolio(1)(4)
Class A shares(5).............................. 20.56% 26.58%
Class C shares(6).............................. 25.00 26.25
Class Y shares(2)(7)........................... 16.20 16.20
Micropal U.S. Equity Small Co. Growth Index(3)..... 22.90 --
Russell 2000 Index(3).............................. 20.18 --
Midatlantic Consumer Price Index(3)................ 1.26 --
</TABLE>

- ---------
(1) For the period April 3, 1995 (commencement of investment operations) through
September 30, 1995.
(2) 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.
(3) The chart assumes a hypothetical $10,000 initial investment in the Portfolio
and reflects all Portfolio expenses. Investors should note that the
Portfolio is a professionally managed mutual fund while the indices are
either unmanaged and do not incur sales charges or expenses and/or are not
available for investment.
(4) Bear Stearns Funds 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.
(5) Reflects the initial maximum 4.75% sales load. Excluding fee waivers and
expense reimbursements, the total return would have been 19.78% with a sales
load charged and 25.75% without a sales load charged.
(6) Reflects the maximum 1.00% CDSC. Excluding fee waivers and expense
reimbursements, the total return would have been 24.17% with a CDSC charged
at the end of the period and 25.42% without a CDSC charged at the end of the
period.
(7) Excluding fee waivers and expense reimbursements, the total return would
have been 15.81%.

CDSC -- Contingent Deferred Sales Charge.

5
<PAGE>
THE BEAR STEARNS FUNDS

Total Return Bond Portfolio(1)

Comparison of Change in Value of $10,000 Investment in
Class A and Class C Shares(2) vs. Various Indices
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Large Cap Value Portfolio Class A Large Cap Value Portfolio Class C Large Cap Value Portfolio Class Y
<S> <C> <C> <C>
April 3, 1995 $9,525.00 $10,000.00
April 30, 1995 $9,859.00 $10,038.01
May 31, 1995 $9,959.72 $10,344.58
June 30, 1995 $10,027.37 $10,411.57
July 31, 1995 $10,004.92 $10,384.83
August 31, 1995 $10,114.43 $10,496.00
Sep 15, 1995 $10,000.00
Sep 30, 1995 $10,206.39 $10,585.46 $10,036.31

<CAPTION>
Micropal Taxable Bond Corporate Salomon Broad Investment Grade Index
<S> <C>
April 3, 1995 $10,000.00 $10,000.00
April 30, 1995 $10,134.00 $10,137.00
May 31, 1995 $10,497.00 $10,539.00
June 30, 1995 $10,583.00 $10,613.00
July 31, 1995 $10,535.00 $10,592.00
August 31, 1995 $10,653.00 $10,714.00
Sep 15, 1995
Sep 30, 1995 $10,744.00 $10,815.00

<CAPTION>
MidLantic Consumer Price Index
April 3, 1995 $10,000.00
April 30, 1995 $10,040.00
May 31, 1995 $10,066.10
June 30, 1995
July 31, 1995 $10,079.19
August 31, 1995 $10,099.35
Sep 15, 1995 $10,112.48
Sep 30, 1995 $10,125.62
</TABLE>

<TABLE>
<CAPTION>
Total Return
With applicable sales load Without applicable sales
and CDSC, if any, and load and CDSC, if any, and
including fee waivers and including fee waivers and
expense reimbursements expense reimbursements
--------------------------- ---------------------------
<S> <C> <C>
Total Return Bond Portfolio(1)(4)
Class A shares(1)(5)........................... 2.24% 6.22%
Class C shares(6).............................. 5.01 6.03
Class Y shares(2)(7)........................... 0.54 0.54
Salomon Brothers Broad Investment Grade Index(3)... 8.13 --
Micropal Taxable Bond Corporate Index(3)........... 6.88 --
Midatlantic Consumer Price Index(3)................ 1.26 --
</TABLE>

- ---------
(1) For the period April 5, 1995 (commencement of investment operations) through
September 30, 1995.
(2) The return of class Y shares (for which September 8, 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.
(3) The chart assumes a hypothetical $10,000 initial investment in the Portfolio
and reflects all Portfolio expenses. Investors should note that the
Portfolio is a professionally managed mutual fund while the indices are
either unmanaged and do not incur sales charges or expenses and/or are not
available for investment.
(4) Bear Stearns Funds 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 financial
statements.
(5) Reflects the initial maximum 3.75% sales load. Excluding fee waivers and
expense reimbursements, the total return would have been 1.00% with a sales
load charged and 4.93% without a sales load charged.
(6) Reflects the maximum 1.00% CDSC. Excluding fee waivers and expense
reimbursements, the total return would have been 3.64% with a CDSC charged
at the end of the period and 4.66% without a CDSC charged at the end of the
period.
(7) Excluding fee waivers and expense reimbursements, the total return would
have been 0.46%.
CDSC -- Contingent Deferred Sales Charge.

6
<PAGE>
THE BEAR STEARNS FUNDS

Large Cap Value Portfolio
SEPTEMBER 30, 1995
(unaudited)

- --------------------------------------------------------------------------------
Top Ten Sectors

<TABLE>
<CAPTION>
PERCENT OF
RANK SECTOR NET ASSETS
- ----- -------------------------------------------------- -----------
<C> <S> <C>
1. Electrical Equipment ............................. 11.26
2. Credit & Finance ................................. 8.84
3. Drug & Hospital Supplies ......................... 8.08
4. Retailing ........................................ 7.92
5. Computers & Office Equipment ..................... 7.62
6. Insurance ........................................ 7.40
7. Automobiles ...................................... 6.74
8. Banks ............................................ 6.11
9. Services ......................................... 4.11
10. Food & Beverages ................................. 3.94
</TABLE>

- --------------------------------------------------------------------------------
Top Ten Holdings

<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS SECTOR NET ASSETS
- ----- -------------------------------------------------- --------------------------- ----------
<C> <S> <C> <C>
1. Great Western Financial Corp. .................... Credit & Finance 4.67
2. Stewart & Stevenson Services, Inc. ............... Electrical Equipment 4.56
3. Baxter International, Inc. ....................... Drug & Hospital Supplies 4.53
4. The Limited, Inc. ................................ Retailing 4.48
5. Equitable Cos., Inc. ............................. Insurance 4.35
6. Tandem Computers Inc. ............................ Computers & Office
Equipment 4.24
7. Travelers Group, Inc. ............................ Credit & Finance 4.17
8. Humana Inc. ...................................... Services 4.11
9. General Electric Co. ............................. Electrical Equipment 4.01
10. Philip Morris Cos. Inc. .......................... Food & Beverages 3.94
</TABLE>

7
<PAGE>
THE BEAR STEARNS FUNDS

Small Cap Value Portfolio
SEPTEMBER 30, 1995
(unaudited)

- --------------------------------------------------------------------------------
Top Ten Sectors

<TABLE>
<CAPTION>
PERCENT OF
RANK SECTOR NET ASSETS
- ----- -------------------------------------------------- -----------
<C> <S> <C>
1. Textiles & Shoes ................................. 10.81
2. Miscellaneous Industrials ........................ 10.09
3. Banks ............................................ 9.34
4. Electronics ...................................... 8.73
5. Credit & Finance ................................. 6.36
6. Building & Housing ............................... 5.35
7. Computers & Office Equipment ..................... 4.92
8. Entertainment & Leisure .......................... 4.59
9. Non-Ferrous Metals ............................... 4.56
10. Grocery Products ................................. 3.98
</TABLE>

- --------------------------------------------------------------------------------
Top Ten Holdings

<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS SECTOR NET ASSETS
- ----- -------------------------------------------------- --------------------------- ----------
<C> <S> <C> <C>
1. Dialogic Corp. ................................... Computers & Office
Equipment 4.92
2. Mueller Industries, Inc. ......................... Non-Ferrous Metals 4.56
3. Summit Bancorp Inc. .............................. Banks 4.19
4. Fieldcrest Cannon, Inc. .......................... Textiles & Shoes 4.01
5. Cone Mills Corp. ................................. Textiles & Shoes 3.89
6. Cephalon Inc. .................................... Services 3.78
7. Ornda Healthcorp ................................. Miscellaneous Industrials 3.74
8. Ace, Ltd. ........................................ Insurance 3.68
9. Davel Communications Group, Inc. ................. Electrical Equipment 3.58
10. Furon Co. ........................................ Miscellaneous Industrials 3.44
</TABLE>

8
<PAGE>
THE BEAR STEARNS FUNDS

Total Return Bond Portfolio
SEPTEMBER 30, 1995
(unaudited)

- --------------------------------------------------------------------------------
Duration By Sector

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Total Return Bond Portfolio Salomon Brothers Broad Investment Grade Index
<S> <C> <C>
TSY/GSE 6.0 5.0
Corporations 5.2 5.6
Asset-Backed 1.4 2.9
MBS 3.8 3.2
</TABLE>

- --------------------------------------------------------------------------------
Fixed Income Portfolio Characteristics

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------

<S> <C> <C>
TOTAL RETURN SALOMON BROTHERS BROAD
BOND PORTFOLIO INVESTMENT GRADE INDEX
--------------- ------------------------

9.2 years 8.4 years
Average Maturity..............................................

5.0 years 4.7 years
Duration......................................................

7.2% 7.4%
Coupon........................................................

6.8% 6.7%
Yield to Maturity.............................................
- ---------------------------------------------------------------------------------------------------------
</TABLE>

9
<PAGE>
THE BEAR STEARNS FUNDS

Large Cap Value Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------
<C> <S> <C>
MARKET
SHARES VALUE

<CAPTION>
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--96.88%
Aerospace - 3.47%
2,500 United Technologies Corp........... $ 220,938
----------
Automobiles - 6.74%
6,700 Ford Motor Co...................... 208,537
4,700 General Motors Corp................ 220,313
----------
428,850
----------
Banks - 6.11%
4,500 Bank of New York Co., Inc.......... 209,250
3,000 BankAmerica Corp................... 179,625
----------
388,875
----------
Building & Housing - 3.51%
5,000 Owens-Corning Fiberglas Corp.*..... 223,125
----------
Chemicals & Fertilizers - 2.83%
2,700 Grace (W.R.) & Co.................. 180,225
----------
Computers & Office Equipment -
7.62%
22,000 Tandem Computers Inc.*............. 269,500
1,600 Xerox Corp. ....................... 215,000
----------
484,500
----------
Credit & Finance - 8.84%
12,500 Great Western Financial Corp. ..... 296,875
5,000 Travelers Group, Inc. ............. 265,625
----------
562,500
----------
Drug & Hospital Supplies - 8.08%
7,000 Baxter International, Inc. ........ 287,875
4,200 Medtronic, Inc. ................... 225,750
----------
513,625
----------
Electrical Equipment - 11.26%
4,000 General Electric Co. .............. 255,000
3,800 Raychem Corp. ..................... 171,000
9,000 Stewart & Stevenson Services,
Inc. .............................. 290,250
----------
716,250
----------
Electronics - 2.28%
1,900 Motorola, Inc. .................... 145,112
----------
Food & Beverages - 3.94%
3,000 Philip Morris Cos. Inc. ........... 250,500
----------
<CAPTION>
----------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------
<C> <S> <C>
Furnishings & Appliances - 2.62%
3,000 Armstrong World Industries,
Inc. .............................. $ 166,500
----------
Insurance - 7.40%
11,300 Equitable Cos., Inc. .............. 276,850
10,000 USF&G Corp. ....................... 193,750
----------
470,600
----------
Miscellaneous Industrials - 3.89%
10,000 Dial Corp. ........................ 247,500
----------
Publishing & Broadcasting - 1.00%
800 CBS, Inc. ......................... 63,900
----------
Railroads - 2.08%
2,000 Union Pacific Corp. ............... 132,500
----------
Retailing - 7.92%
5,000 May Department Stores Co. ......... 218,750
15,000 The Limited, Inc. ................. 285,000
----------
503,750
----------
Services - 4.11%
13,000 Humana Inc.* ...................... 261,625
----------
Textiles & Shoes - 3.18%
8,000 Liz Claiborne, Inc. ............... 202,000
----------
Total Common Stocks
(cost - $5,455,536)................ 6,162,875
----------
PRINCIPAL
AMOUNT
(000's)
- -----------
SHORT-TERM INVESTMENT--0.79%
Investment Company - 0.79%
$ 50 Federated Trust for Short-term
U.S. Government Securities**
(cost - $50,202)................... 50,202
----------
Total Investments
(cost - $5,505,738) - 97.67%....... 6,213,077
Other assets in excess of
liabilities - 2.33%................ 148,402
----------
Net Assets - 100.00%............... $6,361,479
----------
----------
</TABLE>

- ---------
* Non-income producing security.
** Money market fund.

The accompanying notes are an integral part of the financial statements.

10
<PAGE>
THE BEAR STEARNS FUNDS

Small Cap Value Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------
<C> <S> <C>
MARKET
SHARES VALUE

<CAPTION>
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--98.11%
Banks - 9.34%
11,000 Bay View Capital Corp. ........... $ 297,000
19,750 California Financial Holding
Co. .............................. 377,719
19,640 Summit Bancorp Inc. .............. 547,465
-----------
1,222,184
-----------
Building & Housing - 5.35%
8,000 Engle Homes, Inc. ................ 70,000
51,520 Fedders Corp. Class A............. 249,844
37,000 M/I Schottenstein Homes, Inc.*.... 379,250
-----------
699,094
-----------
Computers & Office Equipment -
4.92%
26,000 Dialogic Corp. *.................. 643,500
-----------
Cosmetics & Soaps - 3.31%
14,000 Guest Supply, Inc.*............... 432,250
-----------
Credit & Finance - 6.36%
16,000 RenaissanceRe Holdings Ltd. ...... 390,000
16,000 Security-Connecticut Corp. ....... 442,000
-----------
832,000
-----------
Drug & Hospital Supplies - 2.12%
60,000 International Murex Technologies
Corp.*............................ 277,500
-----------
Electrical Equipment - 3.58%
30,200 Davel Communications Group,
Inc.*............................. 468,100
-----------
Electronics - 8.73%
11,100 Cubic Corp. Designs............... 265,012
49,000 Griffon Corp.*.................... 422,625
48,000 Syntellect, Inc.*................. 180,000
5,000 Watkins-Johnson Co. .............. 273,750
-----------
1,141,387
-----------
Entertainment & Leisure - 4.59%
25,000 Avondale Industries, Inc.*........ 390,625
25,000 Graff Pay-Per-View Inc.*.......... 209,375
-----------
600,000
-----------
Furnishings & Appliances - 2.60%
80,000 QSound Labs, Inc.*................ 340,000
-----------
Grocery Products - 3.98%
22,650 ERLY Industries, Inc.*............ 198,187
22,400 FoodBrands America, Inc.*......... 322,000
-----------
520,187
-----------
Insurance - 3.68%
14,000 Ace, Ltd. ........................ 481,250
-----------
Investment Companies - 2.92%
36,000 The Argentina Fund, Inc. ......... 382,500
-----------
<CAPTION>
----------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------
<C> <S> <C>
Lodging & Catering - 1.94%
19,700 John Q. Hammons Hotels, Inc.*..... $ 253,638
-----------
Machinery - 1.38%
4,000 JLG Industries, Inc. ............. 180,000
-----------
Miscellaneous Industrials - 10.09%
8,000 Blount, Inc. Class A.............. 381,000
24,000 Furon Co. ........................ 450,000
23,000 Omda Healthcorp*.................. 488,750
-----------
1,319,750
-----------
Non-Ferrous Metals - 4.56%
11,500 Mueller Industries, Inc.*......... 596,563
-----------
Retailing - 2.94%
19,700 American Eagle Outfitters,
Inc.*............................. 275,492
1,600 Treadco, Inc. .................... 17,600
15,000 Wet Seal, Inc. Class A*........... 91,875
-----------
384,967
-----------
Services - 3.78%
18,000 Cephalon Inc.*.................... 495,000
-----------
Steel - 0.29%
3,600 Laclede Steel Co.*................ 37,350
-----------
Textiles & Shoes - 10.81%
38,000 Cone Mills Corp.*................. 508,250
12,800 Cygne Designs, Inc.*.............. 42,400
12,000 Donnkenny Apparel, Inc.*.......... 337,500
24,000 Fieldcrest Cannon, Inc.*.......... 525,000
-----------
1,413,150
-----------
Toys - 0.84%
13,000 Tandycrafts, Inc.*................ 110,500
-----------
Total Common Stocks
(cost - $11,366,133).............. 12,830,870
-----------
PRINCIPAL
AMOUNT
(000's)
- -----------
SHORT-TERM INVESTMENT--1.29%
Investment Company - 1.29%
$ 169 Federated Trust for Short-term
U.S. Government Securities**
(cost - $168,710)................. 168,710
-----------
Total Investments
(cost - $11,534,843) - 99.40%..... 12,999,580
Other assets in excess of
liabilities - 0.60%............... 79,034
-----------
Net Assets - 100.00%.............. $13,078,614
-----------
-----------
</TABLE>

- ---------
* Non-income producing security.
** Money market fund.

The accompanying notes are an integral part of the financial statements.

11
<PAGE>
THE BEAR STEARNS FUNDS

Total Return Bond Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRINCIPAL
AMOUNT MARKET
DESCRIPTION (000'S) VALUE

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG-TERM INVESTMENTS--90.28%

Corporate Bonds - 22.20%
Associates Corp. N.A., 7.50%, 05/15/99......................................................... $ 150 $ 155,438
Caterpillar, Inc., 6.56%, 11/03/97............................................................. 150 150,830
CIT Group Holdings, Inc., 6.75%, 04/30/98...................................................... 150 151,500
Eastman Chemical Co., 7.25%, 01/15/24.......................................................... 650 640,250
Ford Credit 1995-B Grantor Trust, Asset Backed Certificates, 5.90%, 10/15/00................... 653 651,400
General Motors Acceptance Corp., 6.13%, 09/08/97............................................... 300 299,250
J.C. Penney & Co., 6.38%, 09/15/00............................................................. 600 598,500
Kroger Secured Finance Inc., 9.05%, 12/15/04................................................... 200 231,000
Salomon Inc, 5.34%, 12/17/96................................................................... 500 492,100
Standard Credit Card Trust, 9.38%, 07/10/97.................................................... 190 200,887
-----------
Total Corporate Bonds (cost - $3,555,237)........................................................ 3,571,155
-----------

Federal Home Loan Mortgage Corporation - 14.86%
9.00%, 04/01/25................................................................................ 442 462,770
9.50%, 04/01/25................................................................................ 454 480,456
6.50%, 07/15/25 TBA............................................................................ 1,500 1,446,563
-----------
Total Federal Home Loan Mortgage Corporation (cost - $2,381,043)................................. 2,389,789
-----------

Federal National Mortgage Association - 11.28%
9.00%, 04/01/25................................................................................ 268 280,658
8.00%, 06/15/25 TBA............................................................................ 1,500 1,534,687
-----------
Total Federal National Mortgage Association (cost - $1,811,939).................................. 1,815,345
-----------

Government National Mortgage Association - 9.95%
6.50%, 11/15/23................................................................................ 494 477,065
6.50%, 03/15/24................................................................................ 480 463,686
9.00%, 05/15/25................................................................................ 444 467,473
6.50%, 04/15/25 TBA............................................................................ 200 192,750
-----------
Total Government National Mortgage Association (cost - $1,541,954)............................... 1,600,974
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

12
<PAGE>
THE BEAR STEARNS FUNDS

Total Return Bond Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MARKET
DESCRIPTION (000'S) VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG-TERM INVESTMENTS (continued)
U.S. Government Securities - 31.99%
U.S. Treasury Bonds
7.63%, 02/15/25................................................................................ $ 1,600 $ 1,811,376
U.S. Treasury Notes
6.25%, 05/31/00................................................................................ 1,000 1,009,930
6,25%, 08/31/00................................................................................ 650 656,234
7.88%, 11/15/04................................................................................ 1,500 1,669,545
-----------
Total U.S. Government Securities (cost - $5,154,330)............................................. 5,147,085
-----------
Total Long-Term Investments (cost - $14,444,503)................................................. 14,524,348
-----------

SHORT-TERM INVESTMENTS--27.95%
Federal Home Loan Bank, 6.30%, 10/02/95+....................................................... 1,320 1,319,769
Federal National Mortgage Association, 5.63%, 10/16/95+........................................ 3,075 3,067,786
Federated Trust for Short-term U.S. Government Securities*..................................... 110 110,058
-----------
Total Short-Term Investments (cost - $4,497,613)................................................. 4,497,613
-----------

Total Investments (cost - $18,942,116) - 118.23%................................................. 19,021,961
Liabilities in excess of other assets - (18.23%)................................................. (2,933,580)
-----------
Net Assets - 100%................................................................................ $16,088,381
-----------
-----------
</TABLE>

- ---------
TBA To be Announced. TBA securities are purchased on a firm commitment basis
with an approximate principal and maturity. The actual principal amount and
maturity date is determined upon settlement.
* Money market fund.
+ Segregated as collateral for TBA securities.

The accompanying notes are an integral part of the financial statements.

13
<PAGE>
THE BEAR STEARNS FUNDS

STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<CAPTION>
LARGE CAP SMALL CAP TOTAL RETURN
VALUE VALUE BOND
PORTFOLIO PORTFOLIO PORTFOLIO
------------- -------------- ------------
<S> <C> <C> <C>
Assets
Investments, at value (cost - $5,505,738,
$11,534,843,
$18,942,116, respectively)..................... $ 6,213,077 $ 12,999,580 $19,021,961
Receivable for Portfolio shares sold............ 19,058 178,431 56,688
Receivable for investment securities sold....... 135,672 130,565 --
Receivable from investment adviser.............. 68,402 56,263 72,208
Dividends and interest receivable............... 9,797 3,917 140,445
Deferred organization expenses and other
assets......................................... 132,206 127,699 123,190
------------- -------------- ------------
Total assets.............................. 6,578,212 13,496,455 19,414,492
------------- -------------- ------------
Liabilities
Payable for Portfolio securities purchased...... -- 197,431 3,178,734
Payable for Portfolio shares repurchased........ 40,120 30,060 --
Dividends payable............................... -- -- 23,806
Distribution fee payable (class A and C
shares)........................................ 8,453 14,724 6,785
Custodian fee payable........................... 5,468 4,010 3,956
Administration fee payable...................... 2,893 5,455 3,862
Organization expenses payable................... 111,134 118,281 60,318
Accrued expenses................................ 48,665 47,880 48,650
------------- -------------- ------------
Total liabilities......................... 216,733 417,841 3,326,111
------------- -------------- ------------
Net Assets
Capital stock, $0.001 par value (unlimited
shares of beneficial interest authorized)...... 447 861 1,299
Paid-in capital................................. 5,654,231 11,330,786 15,957,662
Undistributed net investment income/(loss)...... 9,294 (34,656) --
Accumulated net realized gain/(loss) from
investments.................................... (9,832) 316,886 49,575
Net unrealized appreciation on investments...... 707,339 1,464,737 79,845
------------- -------------- ------------
Total net assets.......................... $ 6,361,479 $ 13,078,614 $16,088,381
------------- -------------- ------------
------------- -------------- ------------
Class A
Net assets...................................... $ 3,426,804 $ 6,981,128 $ 4,557,275
------------- -------------- ------------
Shares of beneficial interest outstanding....... 240,803 459,451 368,047
------------- -------------- ------------
Net asset value per share....................... $14.23 $15.19 $12.38
Maximum offering price per share (net asset
value plus sales charge of 4.75%,* 4.75%* and
3.75%,*, respectively, of the offering
price)......................................... $14.94 $15.95 $12.86
Class C
Net assets...................................... $ 2,399,526 $ 4,090,074 $ 1,670,025
------------- -------------- ------------
Shares of beneficial interest outstanding....... 169,050 269,976 134,874
------------- -------------- ------------
Net asset value and offering price per
share**........................................ $14.19 $15.15 $12.38
Class Y
Net assets...................................... $ 535,149 $ 2,007,412 $ 9,861,081
------------- -------------- ------------
Shares of beneficial interest outstanding....... 37,585 131,997 796,396
------------- -------------- ------------
Net asset value, offering and redemption price
per share...................................... $14.24 $15.21 $12.38
</TABLE>

- ---------
* 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.

14
<PAGE>
THE BEAR STEARNS FUNDS

STATEMENT OF OPERATIONS
FOR THE PERIOD APRIL 3, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<CAPTION>
TOTAL
LARGE CAP SMALL CAP RETURN
VALUE VALUE BOND
PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------
<S> <C> <C> <C>
Investment income
Dividends....................................... $ 40,811 $ 21,668 --
Interest........................................ 1,564 2,501 $191,508
---------- ---------- ----------
42,375 24,169 191,508
---------- ---------- ----------
Expenses
Advisory fees................................... 14,463 27,276 11,587
Distribution fees - Class A..................... 5,217 10,620 6,320
Distribution fees - Class C..................... 8,563 11,777 5,063
Accounting fees................................. 16,694 17,756 14,457
Amortization of organization expenses........... 14,449 13,955 13,464
Reports and notices to shareholders............. 9,836 9,836 9,836
Custodian fees and expenses..................... 9,088 9,088 9,088
Insurance expenses.............................. 8,872 8,872 8,872
Legal and auditing fees......................... 8,852 8,852 8,852
Transfer agent fees and expenses................ 7,420 7,420 6,335
Trustees' fees and expenses..................... 4,590 4,590 4,590
Administration fees............................. 2,893 5,455 3,862
Federal and state registration fees............. 2,040 3,855 5,580
Other........................................... 2,969 3,012 2,951
---------- ---------- ----------
Total expenses before waivers and
reimbursements........................... 115,946 142,364 110,857
Less: Waivers and reimbursements.......... (82,865 ) (83,539 ) (83,795 )
---------- ---------- ----------
Total expenses after waivers and
reimbursements........................... 33,081 58,825 27,062
---------- ---------- ----------
Net investment income/(loss).................... 9,294 (34,656 ) 164,446
---------- ---------- ----------
Net realized and unrealized gain/(loss) on
investments
Net realized gain/(loss) from investments....... (9,832 ) 316,886 49,575
Net change in unrealized appreciation on
investments.................................... 707,339 1,464,737 79,845
---------- ---------- ----------
Net realized and unrealized gain on
investments.................................... 697,507 1,781,623 129,420
---------- ---------- ----------
Net increase in net assets resulting from
operations....................................... $706,801 $1,746,967 $293,866
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

- --------
* Commencement of operations.

The accompanying notes are an integral part of the financial statements.

15
<PAGE>
THE BEAR STEARNS FUNDS

STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 3, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)

<TABLE>
<CAPTION>
TOTAL
LARGE CAP SMALL CAP RETURN
VALUE VALUE BOND
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- -----------
<S> <C> <C> <C>
Increase/(decrease) in net assets from
Operations
Net investment income/(loss).................... $ 9,294 $ (34,656 ) $ 164,446
Net realized gain/(loss) from investments....... (9,832 ) 316,886 49,575
Net change in unrealized appreciation on
investments.................................... 707,339 1,464,737 79,845
----------- ----------- -----------
Net increase in net assets resulting from
operations..................................... 706,801 1,746,967 293,866
----------- ----------- -----------

Dividends to shareholders from
Net investment income
Class A shares............................... -- -- (109,665 )
Class C shares................................ -- -- (38,146 )
Class Y shares............................... -- -- (16,635 )
----------- ----------- -----------
-- -- (164,446 )
----------- ----------- -----------

Shares of beneficial interest
Net proceeds from the sale of shares............ 5,644,799 11,357,094 15,890,907
Cost of shares repurchased...................... (15,129 ) (50,455 ) (33,535 )
Shares issued in reinvestment of dividends...... -- -- 76,605
----------- ----------- -----------
Net increase in net assets derived from shares
of beneficial interest transactions............ 5,629,670 11,306,639 15,933,977
----------- ----------- -----------
Total increase in net assets.................... 6,336,471 13,053,606 16,063,397

Net assets
Beginning of period............................. 25,008 25,008 24,984
----------- ----------- -----------
End of period................................... $6,361,479 $13,078,614 $16,088,381
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

- --------
* Commencement of operations.

The accompanying notes are an integral part of the financial statements.

16
<PAGE>
THE BEAR STEARNS FUNDS

FINANCIAL HIGHLIGHTS
FOR THE PERIOD APRIL 3, 1995* THROUGH SEPTEMBER 30, 1995
(unaudited)
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
LARGE CAP VALUE
PORTFOLIO (1) SMALL CAP VALUE TOTAL RETURN BOND
---------------------- PORTFOLIO (2) PORTFOLIO (3)
CLASS CLASS CLASS ------------------------------ ---------------------------
A C Y CLASS A CLASS C CLASS Y CLASS A CLASS C CLASS Y
------ ------ ------ -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance**
Net asset value, beginning of
period.......................... $12.00 $12.00 $13.98 $12.00 $12.00 $13.09 $12.00 $12.00 $12.35
------ ------ ------ -------- -------- -------- ------- ------- -------
Net investment
income/(loss)(4)................ 0.05 0.01 0.01 (0.06) (0.09) (0.01) 0.36 0.40 0.04
Net realized and unrealized gain
on investments(5)............... 2.18 2.18 0.25 3.25 3.24 2.13 0.38 0.38 0.03
------ ------ ------ -------- -------- -------- ------- ------- -------
Net increase in net assets
resulting from operations....... 2.23 2.19 0.26 3.19 3.15 2.12 0.74 0.78 0.07
------ ------ ------ -------- -------- -------- ------- ------- -------
Dividends to shareholders from:
Net investment income............ -- -- -- -- -- -- (0.36) (0.40) (0.04)
------ ------ ------ -------- -------- -------- ------- ------- -------
Net asset value, end of period... $14.23 $14.19 $14.24 $15.19 $15.15 $15.21 $12.38 $12.38 $12.38
------ ------ ------ -------- -------- -------- ------- ------- -------
------ ------ ------ -------- -------- -------- ------- ------- -------
Total investment return(6)(9).... 18.58% 18.25% 1.86% 26.58% 26.25% 16.20% 6.22% 6.03% 0.54%
------ ------ ------ -------- -------- -------- ------- ------- -------
------ ------ ------ -------- -------- -------- ------- ------- -------
Ratios/Supplemental Data
Net assets, end of period (000's
omitted)........................ $3,427 $2,399 $ 535 $6,981 $4,090 $2,008 $4,557 $1,670 $9,861
Ratio of expenses to average net
assets(4)(7).................... 1.50% 2.00% 1.00% 1.50% 2.00% 1.00% 0.93% 1.33% 0.45%
Ratio of net investment
income/(loss) to average net
assets(4)(7)(9)................. 0.71% 0.19% 1.22% (0.83)% (1.33)% (0.38)% 6.07% 5.65% 5.95%
Decrease reflected in above
expense ratios and net
investment income/ (loss) due to
waivers and
reimbursements(7)(9)............ 4.31% 4.31% 3.66% 2.34% 2.33% 1.96% 3.10% 3.24% 2.13%
Portfolio turnover rate(8)....... 9.78% 9.78% 9.78% 26.97% 26.97% 26.97% 46.46% 46.46% 46.46%
Average commission rate per
share........................... $0.06 $0.06 $0.06 $ 0.06 $ 0.06 $ 0.06 -- -- --
</TABLE>

- ---------
* Commencement of operations.
** Calculated based upon weighted average shares outstanding during the
period, except for Total Return Bond Portfolio which was based on the first
and last day of the period.
(1) Commenced investment operations on April 4, 1995. Class Y shares commenced
initial public offering on August 11, 1995.
(2) Commenced investment operations on April 3, 1995. Class Y shares commenced
initial public offering on June 22, 1995.
(3) Commenced investment operations on April 5, 1995. Class Y shares commenced
initial public offering on September 8, 1995.
(4) Reflects waivers and reimbursements.
(5) The amount shown for a share outstanding throughout the period is not in
accord with the change in the aggregate gains and losses in investments
during the period because of the timing of sales and repurchases of
Portfolio shares in relation to fluctuating net asset value during the
period.
(6) Total return does not consider the effects of sales loads or contingent
deferred sales charges. Total 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 returns are not annualized.
(7) Annualized.
(8) Not annualized.
(9) 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 initial public offering of class Y
shares.

The accompanying notes are an integral part of the financial statements.

17
<PAGE>
THE BEAR STEARNS FUNDS

Large Cap Value Portfolio
Small Cap Value Portfolio
Total Return Bond Portfolio
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED)

Organization and Significant Accounting Policies

The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business
trust on September 29, 1994 and is registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as an open-end management investment
company. The Fund currently has five separate portfolios in operation: three
diversified portfolios, Large Cap Value Portfolio ("Large Cap"), Small Cap Value
Portfolio ("Small Cap") and Total Return Bond Portfolio ("Bond Portfolio")
(collectively, the "Portfolios") and two non-diversified portfolios, The
Insiders Select Portfolio and S&P STARS Portfolio. Each portfolio is treated as
a separate entity for certain matters under the Investment Company Act, and for
other purposes, and a shareholder of one portfolio is not deemed to be a
shareholder of any other portfolio. As of the date hereof, the Portfolios offer
three classes of shares, which have been designated as class A, C and Y shares.

Organizational Matters--Prior to commencing operations on April 3, 1995, the
Portfolios did not have any transactions other than those relating to
organizational matters and the sale of 1,042, 1,042 and 1,041 class A shares and
1,042, 1,042 and 1,041 class C shares of beneficial interest of Large Cap, Small
Cap and Bond Portfolio, respectively, to Bear, Stearns & Co. Inc., ("Bear
Stearns" or the "Distributor"). Costs of approximately $147,000, $142,000 and
$137,000 which were incurred by the Large Cap, Small Cap and Bond Portfolio,
respectively, in connection with the organization, registration with the
Commission and with various states, 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. The Portfolios
commenced investment operations on April 3, 1995, April 4, 1995 and April 5,
1995 for Small Cap, Large Cap and Bond Portfolio, respectively. In the event
that the Distributor or any transferee of the Distributor redeems any of its
original shares in any of the Portfolios 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 any of the Portfolios are
liquidated prior to the end of the sixty month period, the Distributor or the
transferee of the Distributor shall bear the unamortized deferred organization
expenses.

Portfolio Valuation--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.

The Equity Portfolios' (consisting of Large Cap and Small Cap) securities,
including covered call options written by the Equity 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. For the
Bond Portfolio, substantially all of the investments (including short-term
investments) are valued at each business day by one or more independent pricing
services (the "Service") approved by the Trust's Board of Trustees. Securities
valued by the Service for

18
<PAGE>
which quoted bid prices in the judgment of the Service are readily available and
are representative of the bid side of the market, are valued at the mean between
the quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). 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. Expenses and fees, including
the investment advisory, administration fees 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.

The Equity 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). The Bond Portfolio's 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 the settled
shares value of each class at the beginning of the day.

U.S. Federal Tax Status--Each Portfolio intends to distribute substantially all
of its taxable income and to comply with the other requirements of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing during each calendar year substantially all of its
ordinary income and capital gains, if any, each Portfolio intends not to be
subject to a U.S. federal excise tax.

Dividends and Distributions--Each Equity Portfolio intends to distribute at
least annually to shareholders substantially all of its net investment income.
The Bond Portfolio declares dividends from net investment income on each day the
New York Stock Exchange is open for business. These dividends on the Bond
Portfolio are paid usually on or about the twentieth day of each month.
Distribution of net realized gains, if any, will be declared and paid at least
annually for all Portfolios. 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.

Transactions with Affiliates and Related Parties

During the period ended September 30, 1995, 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 administrative services to each Portfolio. For providing these
services, PFPC Inc. is entitled to receive from each Portfolio an annual 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
$8,000 for each Portfolio, payable monthly.

These fees are computed daily and paid monthly, and are subject to reduction in
any year to the extent that a Portfolio's expenses (exclusive of brokerage
commissions, distribution fees, taxes, interest and extraordinary items) exceed
the most stringent limits prescribed by the laws or regulations of any state in
which the Portfolio's shares are offered for sale based on the average total net
asset value of the Portfolio. The Portfolios will not pay BSFM at a later time
for any amounts it may waive, nor will the Portfolios reimburse BSFM for any
amounts it may assume.

19
<PAGE>
During the period ended September 30, 1995, the Adviser has voluntarily
undertaken to limit each Equity Portfolio's total operating expenses (exclusive
of brokerage commissions, taxes and extraordinary items) to a maximum annual
level of 1.50% of the average daily net assets of its class A shares, 2.00% of
the average daily net assets of its class C shares and 1.00% of the average
daily net assets of its class Y shares. During the period April 3, 1995 through
August 31, 1995, the Adviser had voluntarily undertaken to limit the total
operating expenses (exclusive of brokerage commissions, taxes and extraordinary
items) of the Bond Portfolio, to a maximum annual level of 1.00%, 1.40%, and
0.65% of such Portfolio's average daily net assets for class A, C and Y shares,
respectively. Effective September 1, 1995 through September 30, 1995, the total
operating expenses (exclusive of brokerage commissions, taxes and extraordinary
items) were further reduced by the Adviser with respect to the Bond Portfolio
only, to a maximum annual level of 0.80%, 1.20% and 0.45% of the Bond
Portfolio's average daily net assets for class A, C and Y shares, respectively.
As necessary, this limitation is effected by waivers by the Adviser of its
advisory fees and reimbursements of expenses exceeding the advisory fee. For the
period ended September 30, 1995, the Adviser waived advisory fees of $14,463,
$27,276 and $11,587 for the Large Cap, Small Cap and Bond Portfolio,
respectively. In addition, the Adviser reimbursed $68,402, $56,263 and $72,208
for the Large Cap, Small Cap and Bond Portfolio, respectively, in order to
maintain the voluntary expense limitation.

For the period ended September 30, 1995, Bear Stearns, an affiliate of the
Adviser and the Administrator, earned approximately $1,200 and $1,700 in
brokerage commissions from portfolio transactions executed on behalf of Large
Cap and Small Cap, 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 the Portfolios.

Distribution Plan

The Fund, on behalf of each Portfolio, has entered into a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act. Under the Plan
in effect for the period ended September 30, 1995, the Equity Portfolios each
paid Bear Stearns a fee at an annual rate of 0.50% for class A shares and 1.00%
for class C shares and the Bond Portfolio paid Bear Stearns a fee at an annual
rate of 0.35% for class A shares and 0.75% for class C shares. Such fees are
based on the average daily net assets in each class of the respective Portfolios
and are paid monthly. For the period April 3, 1995 (commencement of operations)
through September 30, 1995, Bear Stearns earned $13,780, $22,397 and $11,383 for
Large Cap, Small Cap and Bond Portfolio, respectively, in distribution fees.
Bear Stearns uses these fees to pay its dealers whose clients hold Portfolio
shares and for other distribution-related activities.

In addition, as distributor of the Fund, 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. For the period April
3, 1995 (commencement of operations) through September 26, 1995, as a result of
an undertaking by the Distributor, it reallowed all of the sales charges to its
dealers selling Portfolio shares. In addition, Bear Stearns advanced 1.00% in
sales commissions on the sale of class C shares to dealers at the time of such
sales.

For the period ended September 30, 1995, Bear Stearns has advised each Portfolio
that it received approximately $34,000, $53,000 and $37,000 in front-end sales
charges resulting from sales of class A shares of the Large Cap, Small Cap and
Bond Portfolio, respectively. From these fees, Bear Stearns paid such sales
charges to dealers which in turn paid commissions to sales persons. In addition,
Bear Stearns has advised Large Cap, Small Cap and Bond Portfolio that during the
period, it received $0, $118, and $81 from the Portfolios, respectively, in
contingent deferred sales charges upon certain redemptions by class C
shareholders.

20
<PAGE>
Investments in Securities

For U.S. federal income tax purposes, the costs of securities owned at September
30, 1995 were $5,505,738, $11,534,843 and $18,942,116 for the Large Cap, Small
Cap and Bond Portfolio, respectively. Accordingly, the net unrealized
appreciation/ (depreciation) of investments are as follows:

<TABLE>
<CAPTION>
PORTFOLIO APPRECIATION DEPRECIATION NET APPRECIATION
- ------------------------------ -------------- ------------- ------------------
<S> <C> <C> <C>
Large Cap..................... $ 754,087 $ (46,748) $707,339
Small Cap..................... 1,776,305 (311,568) 1,464,737
Bond Portfolio................ 96,282 (16,437) 79,845
</TABLE>

For the period April 3, 1995 (commencement of operations) through September 30,
1995, aggregate purchases and sales of investment securities (excluding
short-term securities) for each Portfolio were as follows:

<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- ------------------------------ ------------ ------------
<S> <C> <C>
Large Cap..................... $ 5,872,835 $ 407,467
Small Cap..................... 13,217,831 2,168,584
Bond Portfolio................ 17,556,868 2,988,020
</TABLE>

Shares of Beneficial Interest

Each Portfolio offers class A, C and Y shares. Class A shares are sold with a
front-end sales charge of up to 4.75% (3.75% in the case of the Bond Portfolio).
Class C shares are sold with a contingent deferred sales charge of 1.00% during
the first year. There is no sales charge on class Y shares, which are offered
primarily to institutional investors.

At September 30, 1995, there was an unlimited amount of $0.001 par value shares
of beneficial interest authorized for each Portfolio, of which Bear Stearns
owned 1,042, 1,042 and 1,041 of class A shares and 1,042, 1,042 and 1,041 of
class C shares of Large Cap, Small Cap and Bond Portfolio, respectively.

Transactions in the classes of shares of beneficial interest for the period
April 3, 1995 (commencement of operations) through September 30, 1995 were as
follows:

<TABLE>
<CAPTION>
SHARES
SHARES SOLD SHARES REINVESTED REPURCHASED
-------------------------- ----------------- -----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- ----------------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Large Cap
Class A Shares................ 240,683 $3,038,333 -- -- 922 $12,093
Class C Shares................ 168,008 2,077,996 -- -- -- --
Class Y Shares (1)............ 37,812 528,470 -- -- 227 3,036
Small Cap
Class A Shares................ 461,080 5,994,964 -- -- 2,671 38,746
Class C Shares................ 269,746 3,516,558 -- -- 812 11,709
Class Y Shares (2)............ 131,997 1,845,572 -- -- -- --
Bond Portfolio
Class A Shares................ 364,144 4,399,546 4,921 $60,452 2,059 25,454
Class C Shares................ 133,181 1,610,889 1,315 16,153 663 8,081
Class Y Shares (3)............ 796,396 9,880,472 -- -- -- --
</TABLE>

- ---------
(1) Class Y Shares commenced initial public offering on August 11, 1995.

(2) Class Y Shares commenced initial public offering on June 22, 1995.

(3) Class Y Shares commenced initial public offering on September 8, 1995.

Credit Agreement

The Fund, on behalf of the Portfolios, has entered into a credit agreement with
The First National Bank of Boston. S&P STARS Fund, The Insiders Select
Portfolio, S&P STARS Portfolio and Bear Stearns Investment Trust, which consists
of the Emerging

21
<PAGE>
Markets Debt Portfolio, are also parties to the credit agreement. The agreement
provides that each portfolio as a party to the credit agreement is permitted to
borrow in an amount up to 15% of the value of its total assets. Subject to Board
approval and upon making necessary disclosure in its prospectus, each portfolio
may, in accordance with the provisions of the credit agreement, borrow up to 25%
of the value of its total assets, less all liabilities other than liabilities
for borrowed money outstanding at the time. However, at no time is the aggregate
outstanding principal amount of all loans to any of the Portfolios to exceed
$25,000,000. 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 The First National Bank of Boston.

The Portfolios use the facility to borrow money only for temporary or emergency
(not leveraging) purposes. The Portfolios have no amounts outstanding under the
line of credit agreement at September 30, 1995.

Each loan is payable on demand or upon termination on this credit agreement on
January 23, 1996 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.