BEAR STEARNS FUNDS, 485BPOS, 1997-07-28

BEAR STEARNS FUNDS
485BPOS, 1997-07-28

Previous: WHAT A WORLD INC/DE/, SC 13D, 1997-07-28

Next: KTI INC, S-3/A, 1997-07-28

As filed via EDGAR with the Securities and Exchange Commission on July 28, 1997

Registration Nos. 33-84842
ICA No. 811-8798

==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. ________ [ ]

Post-Effective Amendment No. 13 [X]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 13 [X]

(Check appropriate box or boxes)

THE BEAR STEARNS FUNDS
(Exact Name of Registrant as Specified in Charter)

245 Park Avenue
New York, New York 10167
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (212) 272-2000

copy to:

Ellen Arthur, Esq. Jay G. Baris, Esq.
Bear, Stearns & Co. Inc. Kramer, Levin, Naftalis & Frankel
245 Park Avenue 919 Third Avenue
New York, New York 10167 New York, New York 10022
(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box)

immediately upon filing pursuant to paragraph (b)
-----

X on July 29, 1997 pursuant to paragraph (b)
-----

----- 60 days after filing pursuant to paragraph (a)(i)
----- on (date) pursuant to paragraph (a)(i)
----- 75 days after filing pursuant to paragraph (a)(ii)
----- on (date) pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

----- this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.

Registrant has registered an indefinite number of shares of its beneficial
interest under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the fiscal
year ended March 31, 1997 was filed on May 27, 1997.

<PAGE>

THE BEAR STEARNS FUNDS
THE INSIDERS SELECT FUND

CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933

N-1A Item No. Location
- ------------- --------

Part A Prospectus Caption
- ------ ---------- -------

Item 1. Cover Page Cover Page

Item 2. Synopsis Fee Table

Item 3 . Condensed Financial Information Condensed Financial
Information

Item 4. General Description of Description of the
Registrant Fund; General
Information; Appendix

Item 5. Management of the Fund Management of the
Fund

Item 5A. Management's Discussion of Performance
Fund's Performance Information

Item 6. Capital Stock and Other Not Applicable
Securities

Item 7. Purchase of Securities Being Alternative Purchase
Offered Methods; How to Buy
Shares

Item 8 . Redemption or Repurchase How to Redeem Shares

Item 9. Pending Legal Proceedings Not Applicable

-ii-

<PAGE>

Statement of Additional
Part B Information Caption
-----------------------

Item 10. Cover Page Cover Page

Item 11. Table of Contents Table of Contents

Item 12. General Information and History Information About
the Fund

Item 13. Investment Objectives and Investment Objective
Policies and Management Policies;
Appendix

Item 14. Management of the Fund Management of the
Fund

Item 15. Control Persons and Principal Information About the
Fund

Holders of Securities

Item 16. Investment Advisory and Other Management Arrangements;
Services Custodian, Transfer and
Dividend Disbursing
Agent, Counsel and
Independent Auditors

Item 17. Brokerage Allocation Portfolio Transactions

Item 18. Capital Stock and Other Not Applicable
Securities

Item 19. Purchase, Redemption and Pricing Management of the
of Securities Fund; Purchase and
Redemption of Shares;
Determination of Net
Asset Value

Item 20. Tax Status Dividends,
Distributions and Taxes

Item 21. Underwriters Cover Page

Item 22. Calculation of Performance Data Performance Information

Item 23. Financial Statements Financial Statements

Part C
- ------

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.

-iii-

<PAGE>

T H E B E A R S T E A R N S F U N D S
2 4 5 P A R K A V E N U E N E W Y O R K, N Y 1 0 1 6 7
1 . 8 0 0 . 7 6 6 . 4 1 1 1

PROSPECTUS

The Insiders Select Fund

CLASS A AND C SHARES

THE BEAR STEARNS FUNDS (the "Fund") is an open-end management investment
company, known as a mutual fund. The Fund permits you to invest in separate
portfolios. By this Prospectus, shares of The Insiders Select Fund, a non-
diversified portfolio (the "Portfolio") are offered. The Portfolio's
investment objective is capital appreciation.

By this Prospectus, the Portfolio is offering two classes of shares. Class A
shares are subject to a sales charge imposed at the time of purchase and Class
C shares are subject to a 1% contingent deferred sales charge imposed on
redemptions made within the first year of purchase. Other differences between
the classes include the services offered to and the expenses borne by each
class and certain voting rights, as described herein. These alternatives are
offered so an investor may choose the method of purchasing shares that is most
beneficial given the amount of the purchase, the length of time the investor
expects to hold the shares and other circumstances. The Portfolio issues
another class of shares which has different expenses which would affect
performance. Investors desiring to obtain information about this class of
shares should call 1-800-766-4111 or ask their sales representative or the
Portfolio's distributor.

BEAR STEARNS FUNDS MANAGEMENT INC. ("BSFM"), a wholly-owned subsidiary of The
Bear Stearns Companies Inc., serves as the Portfolio's investment adviser.
BSFM is also referred to herein as the "Adviser."

BEAR, STEARNS & CO. INC. ("Bear Stearns"), an affiliate of BSFM, serves as the
Portfolio's distributor.

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

THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE PORTFOLIO THAT YOU
SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.

Part B (also known as the Statement of Additional Information), dated July 29,
1997, which may be revised from time to time, provides a further discussion of
certain areas in this Prospectus and other matters which may be of interest to
some investors. It has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. For a free copy, write to the address
or call one of the telephone numbers listed under "General Information" in
this Prospectus.

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

Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency.

The net asset value for funds of this type will fluctuate.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

JULY 29, 1997
<PAGE>

Table of Contents

<TABLE>
<CAPTION>
PAGE
<S> <C>
Fee Table.................................................................. 3
Financial Highlights....................................................... 4
Alternative Purchase Methods............................................... 5
Description of the Portfolio............................................... 5
Risk Factors............................................................. 9
Management of the Fund..................................................... 10
How to Buy Shares.......................................................... 12
Shareholder Services....................................................... 16
How to Redeem Shares....................................................... 17
Dividends, Distributions and Taxes......................................... 20
Performance Information.................................................... 21
General Information........................................................ 22
Appendix................................................................... A-1
</TABLE>

2
<PAGE>

Fee Table
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CLASS A CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price)........................................ 4.75% None
Maximum Deferred Sales Charge Imposed on Redemptions (as a
percentage of the amount subject to charge)............... * 1.00%
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
Advisory Fees (after fee waiver)**........................ 0.00%*** 0.00%***
12b-1 Fees................................................ 0.50% 1.00%
Other Expenses (after expense reimbursement)**............ 1.15% 1.15%
Total Portfolio Operating Expenses (after fee waiver and
expense reimbursement)**.................................. 1.65% 2.15%
EXAMPLE:
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:
1 YEAR................................................... $ 63 $ 32
3 YEARS.................................................. $ 97 $ 67
5 YEARS.................................................. $133 $115
10 YEARS................................................. $234 $248
EXAMPLE:
You would pay the following expenses on the same
investment, assuming no redemption:
1 YEAR................................................... $ 63 $ 22
3 YEARS.................................................. $ 97 $ 67
5 YEARS.................................................. $133 $115
10 YEARS................................................. $234 $248
</TABLE>

- ------
*In certain situations, where no sales charge is assessed at the time of
purchase, a contingent deferred sales charge of up to 1.00% may be imposed on
redemptions within the first year after purchase. See "How to Buy Shares--
Class A Shares."

**BSFM has undertaken to waive its investment advisory fee and assume certain
expenses of the Portfolio other than brokerage commissions, extraordinary
items, interest and taxes to the extent Total Portfolio Operating Expenses
exceed 1.65% for Class A and 2.15% for Class C. Without such waiver and
expense reimbursement, Advisory Fees stated above would be 1.00%, Other
Expenses would be 1.97% for Class A and 1.96% for Class C, and Total Portfolio
Operating Expenses would be 3.47% for Class A and 3.96% for Class C.

***The Advisory Fee is payable at an annual rate equal to 1% of the
Portfolio's average daily net assets, subject to increase or decrease by up to
0.50% annually depending on the Portfolio's performance. See "Management of
the Fund--Investment Adviser."

THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE
PORTFOLIO'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.

The purpose of the foregoing table is to assist you in understanding the costs
and expenses borne by the Portfolio and investors, the payment of which will
reduce investors' annual return. In addition to the expenses noted above, the
Fund will charge $7.50 for each wire redemption. See "How to Redeem Shares."
Long-term investors could pay more in 12b-1 fees than the economic equivalent
of paying a front-end sales charge. For a description of the expense
reimbursements or fee waiver arrangements in effect, see "Management of the
Fund."

3
<PAGE>

Financial Highlights

The information in the table below covering the Portfolio's investment results
for the periods indicated has been audited by Deloitte & Touche LLP. Further
financial data and related notes appear in the Portfolio's Annual Report for
the fiscal year ended March 31, 1997 which is incorporated by reference into
the Portfolio's Statement of Additional Information which is available upon
request.

Contained below is per share operating performance data, total investment
return, ratios to average net assets and other supplemental data for Class A
and C shares of the Portfolio for the periods indicated. This information has
been derived from information provided in the Portfolio's financial
statements.

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL JUNE 16, 1995*
YEAR ENDED THROUGH
MARCH 31, 1997 MARCH 31, 1996
---------------- -------------------
CLASS A CLASS C CLASS A CLASS C
------- ------- ------- -------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of
period........................... $ 14.00 $ 13.96 $ 12.00 $ 12.00
------- ------- ------- -------
Net investment income/(loss) (1).. 0.02 (0.06) 0.03 (0.01)
Net realized and unrealized gain
on investments and securities
sold short (2)................... 2.48 2.47 1.98 1.97
------- ------- ------- -------
Net increase in net assets
resulting from operations........ 2.50 2.41 2.01 1.96
------- ------- ------- -------
Dividends and distributions to
shareholders from
Net investment income............. (0.01) -- (0.01) --
Net realized capital gains........ (1.91) (1.89) -- --
------- ------- ------- -------
(1.92) (1.89) (0.01) --
------- ------- ------- -------
Net asset value, end of period.... $ 14.58 $14.48 $ 14.00 $13.96
======= ======= ======= =======
Total investment return (3)....... 18.31% 17.69% 16.75% 16.33%
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted).......................... $13,860 $9,519 $12,132 $9,928
Ratio of expenses to average net
assets (1)........................ 1.65% 2.15% 1.65%(4) 2.15%(4)
Ratio of net investment
income/(loss) to average net
assets (1)....................... 0.11% (0.38)% 0.38%(4) (0.12)%(4)
Decrease reflected in above
expense ratios and net investment
income/(loss) due to waivers and
reimbursements................... 1.82% 1.81% 1.87%(4) 1.92%(4)
Portfolio turnover rate........... 128.42% 128.42% 93.45%(5) 93.45%(5)
Average commission rate per
share (6)......................... $0.0264 $0.0264 $0.0294 $0.0294
</TABLE>
- ------

* Commencement of investment operations.

** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the date of distribution.

(1) Reflects waivers and reimbursements.

(2) The amounts shown for a share outstanding throughout the respective
periods are not in accord with the changes in the aggregate gains and
losses in investments during the respective periods because of the timing
of sales and repurchases of Portfolio shares in relation to fluctuating
net asset values during the respective periods.

(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends
and distributions, if any. Total investment return is not annualized.

(4)Annualized.

(5)Not annualized.

(6) Represents average commission rate per share charged to the Portfolio on
purchases and sales of investments subject to such commissions during each
period.

Further information about performance is contained in the Portfolio's Annual
Report, which may be obtained without charge by writing to the address or
calling one of the telephone numbers listed under "General Information."

4
<PAGE>

Alternative Purchase Methods

By this Prospectus, the Portfolio offers investors two methods of purchasing
its shares; investors may choose the class of shares that best suits their
needs, given the amount of purchase, the length of time the investor expects
to hold the shares and any other relevant circumstances. Each Portfolio share
represents an identical pro rata interest in the Portfolio's investment
portfolio.

Class A shares of the Portfolio are sold at net asset value per share plus a
maximum initial sales charge of 4.75% of the public offering price imposed at
the time of purchase. The initial sales charge may be reduced or waived for
certain purchases. See "How to Buy Shares--Class A shares." Class A shares of
the Portfolio are subject to an annual distribution and shareholder servicing
fee at the rate of 0.50 of 1% of the value of the average daily net assets.
See "Management of the Fund--Distribution and Shareholder Servicing Plan."

Class C shares of the Portfolio are subject to a 1% contingent deferred sales
charge ("CDSC") which is assessed only if Class C shares are redeemed within
one year of purchase. See "How to Redeem Shares--Class C shares." These shares
also are subject to an annual distribution and shareholder servicing fee at
the rate of 1% of the value of the average daily net assets of Class C. See
"Management of the Fund--Distribution and Shareholder Servicing Plan." The
distribution and shareholder servicing fee paid by Class C will cause such
class to have a higher expense ratio and to pay lower dividends than Class A
shares.

The decision as to which class of shares is more beneficial to each investor
depends on the amount and the intended length of time of the investor's
investment. Each investor should consider whether, during the anticipated life
of the investor's investment in the Portfolio, the accumulated distribution
and shareholder servicing fee and CDSC, if any, on Class C shares would be
less than the initial sales charge on Class A shares purchased at the same
time, and to what extent, if any, such differential would be offset by the
investment return of Class A shares. Additionally, investors qualifying for
reduced initial sales charges who expect to maintain their investment for an
extended period of time might consider purchasing Class A shares because the
accumulated continuing distribution and shareholder servicing fees on Class C
shares may exceed the initial sales charge on Class A shares during the life
of the investment. Finally, each investor should consider the effect of the
CDSC period in the context of the investor's own investment time frame.
Generally, for example, Class A shares would be more appropriate for investors
who invest $1,000,000 or more in the Portfolio's shares, but may not be
appropriate for investors who invest less than $50,000 in the Portfolio's
shares, depending on the investor's time horizon.

Description of the Portfolio

INVESTMENT OBJECTIVE

The Portfolio's investment objective is capital appreciation. The Portfolio's
investment objective cannot be changed without approval by the holders of a
majority as defined in the Investment Company Act of 1940, as amended, (the
"1940 Act") of the Portfolio's outstanding voting shares. There can be no
assurance that the Portfolio's investment objective will be achieved.

INVESTMENT STRATEGY

The Adviser selects portfolio securities by analyzing the behavior of (i)
corporate insiders--officers, directors and significant stockholders--through
an analysis of their publicly filed reports of their trading activities in the
equity securities of the companies for which they are insiders, (ii) financial
analysts, through an analysis of their published reports about covered
companies, including predicted earnings and revisions to predicted earnings,
and (iii) the company itself, through an analysis of its behavior as to
corporate finance matters, such as stock repurchase programs, dividend
policies and new securities issuance.

Corporate insiders are believed by the Adviser to be in the best position to
understand the near-term prospects of their companies. The Adviser believes
that insider behavior can be observed and analyzed since insiders are required
to disclose transactions in their company's equity securities to the
Securities and Exchange Commission generally no later than the tenth day of
the month following the transaction. Each month many thousands of these
disclosures are received. The Adviser believes that collecting, classifying
and analyzing these transactions provides valuable investment management
information.

5
<PAGE>

These insiders may have many reasons for transacting in company stock and
stock options. Many of these are entirely incidental to the future of the
company. For example, an insider may sell stock to buy a home or finance a
college education for his or her child. Likewise a new management team may
wish to signal confidence in the company by making token purchases of the
company's equity. Many other transactions, however, are related directly to
the insider's beliefs about the near-term price expectations for the company's
stock. An insider who exercises long-term options early for small profits
likely believes the stock soon will decline. Insiders who exercise options,
hold the stock, and buy in the open market probably believe that the stock
soon will rise. Clusters of insiders making substantial buys or sells indicate
broad agreement within a firm as to the direction of the stock.

Financial analysts use a variety of means to learn more about the companies
they follow. Among these are visits to the company and in-depth discussions
with management. Successful analysts learn to interpret the words and actions
of management and the firm itself. Likewise, management uses its discussions
with certain analysts as a means of signaling their views to the marketplace.
The Adviser monitors changes in analysts' predicted earnings and ratings. The
Adviser believes that analysts' revisions can be a valuable indicator of
future returns for the company's stock.

Part of the normal activity of every public company is its financing
decisions. A company must routinely decide whether to maintain or change its
dividend policy, whether to buy its own stock in the open market or whether to
issue new securities. From time to time the company may decide that its stock
is undervalued. Many companies see undervaluation as an opportunity to
purchase the company's stock in the open market. The Adviser believes that by
monitoring changes in shares outstanding (in the hands of the public), a
useful signal can be extracted relating to the companies beliefs about its
prospects. Similarly, the company's decision to sell securities to the public
or another firm can be an indication that the company believes that its stock
has reached a near-term high, a potentially useful sell signal.

Insiders, analysts and the company each send signals that can be analyzed by
the Adviser to produce valuable information about the prospects for individual
companies. The Adviser believes that the most powerful analysis, however,
comes from the interaction of all three sources. While no one signal alone
determines whether a security will be purchased or sold, no security will be
considered for purchase or sale unless a positive or negative signal, as the
case may be, is received from insider behavior. In its analysis, the Adviser
uses only data that is available to the public. The Adviser obtains the data
on insider trading activity from CDA/Investnet, which compiles this
information from publicly available Securities and Exchange Commission
filings.

MANAGEMENT POLICIES

Under normal market conditions, the Adviser invests substantially all of the
Portfolio's assets in the equity securities of U.S. issuers. The Adviser
selects equity securities believed by it to provide opportunities for capital
appreciation or gains through short selling. Issuers are selected without
regard to market capitalization, although the Adviser anticipates that the
issuers principally will be mid- to large capitalization companies; that is,
those with market capitalizations exceeding $1 billion.

The Adviser selects from the universe of U.S. equity securities those
securities it believes, in the aggregate, will approximate or exceed the total
return performance of the Standard & Poor's 500 Stock Index* (the "S&P 500
Index"). The S&P 500 Index is composed of 500 selected common stocks, most of
which are listed on the New York Stock Exchange. The composition of the S&P
500 Index is determined by Standard & Poor's based on such factors as the
market capitalization and trading activity of each stock and its adequacy as a
representative of stocks in a particular industry group, and may be changed
from time to time. The weightings of stocks in the S&P 500 Index are based on
each stock's relative total market capitalization; that is, its market price
per share times the number of shares outstanding. Because of this weighting,
as of March 31, 1997, approximately 48% of the S&P 500 Index was composed of
the 50 largest companies. The Portfolio will not invest in all or
substantially all of the common stocks included in the S&P 500 Index and may
invest in stocks that are not included in the S&P 500 index. The Portfolio
expects ordinarily to invest in approximately 60 to 150 stocks.

By investing in this manner--that is purchasing other equity securities in a
manner intended to approximate or exceed the performance of the S&P 500
Index--the Adviser seeks to exceed the total return of the S&P 500 Index.
- ------
*"Standard & Poor's," "S&P(R)" and "S&P 500(R)" are trademarks of The McGraw-
Hill Companies, Inc. The Portfolio is not sponsored, endorsed, sold or
promoted by Standard & Poor's or The McGraw-Hill Companies, Inc.

6
<PAGE>

Equity securities consist of common stocks, convertible securities and
preferred stocks. The convertible securities and preferred stocks in which the
Portfolio may invest will be rated at least investment grade by a nationally
recognized statistical rating organization at the time of purchase.
Convertible securities rated in the lowest investment grade rating may be
considered to have speculative characteristics. Preferred stock generally
receives dividends before distributions are paid on common stock and
ordinarily has a priority claim over common stockholders if the issuer of the
stock is liquidated. The Portfolio may invest, in anticipation of investing
cash positions, in money market instruments consisting of U.S. Government
securities, certificates of deposit, time deposits, bankers' acceptances,
short-term investment grade corporate bonds and other short-term debt
instruments, and repurchase agreements, as set forth in the Appendix. Under
normal market conditions, the Portfolio expects to have less than 15% of its
assets invested in money market instruments. However, when the Adviser
determines that adverse market conditions exist, the Portfolio may adopt a
temporary defensive posture and invest all of its assets in money market
instruments.

The 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 1940 Act, and for other purposes, and a shareholder of one portfolio
is not deemed to be a shareholder of any other portfolio. As described below,
for certain matters Fund shareholders vote together as a group; as to others
they vote separately by portfolio. By this Prospectus, shares of the Portfolio
are being offered. From time to time, other portfolios may be established and
sold pursuant to other offering documents. See "General Information."

INVESTMENT TECHNIQUES

The Portfolio may engage in various investment techniques, such as short
selling, lending portfolio securities and options and futures transactions,
each of which involves risk. Options and futures transactions involve
"derivative securities." Short selling and futures transactions are discussed
below. For a discussion of these other investment techniques and their related
risks, see "Appendix--Investment Techniques" and "Risk Factors."

SHORT SELLING
Short sales are transactions in which the Portfolio sells a security it does
not own in anticipation of a decline in the market value of that security. To
complete such a transaction, the Portfolio must borrow the security to make
delivery to the buyer. The Portfolio then is obligated to replace the security
borrowed by purchasing it at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security
was sold by the Portfolio. Until the security is replaced, the Portfolio is
required to pay to the lender amounts equal to any dividend which accrues
during the period of the loan. To borrow the security, the Portfolio also may
be required to pay a premium, which would increase the cost of the security
sold. The proceeds of the short sale will be retained by the broker, to the
extent necessary to meet margin requirements, until the short position is
closed out.

Until the Portfolio replaces a borrowed security in connection with a short
sale, the Portfolio will: (a) maintain daily a segregated account, containing
liquid securities, at such a level that the amount deposited in the account
plus the amount deposited with the broker as collateral always equals the
current value of the security sold short; or (b) otherwise cover its short
position in accordance with positions taken by the staff of the Securities and
Exchange Commission.

The Portfolio will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and the date on
which the Portfolio replaces the borrowed security. The Portfolio will realize
a gain if the security declines in price between those dates. This result is
the opposite of what one would expect from a cash purchase of a long position
in a security. The amount of any gain will be decreased, and the amount of any
loss increased, by the amount of any premium or amounts in lieu of interest
the Portfolio may be required to pay in connection with a short sale. The
Portfolio may purchase call options to provide a hedge against an increase in
the price of a security sold short by the Portfolio. See "Appendix--Investment
Techniques--Options Transactions."

The Portfolio anticipates that the frequency of short sales will vary
substantially in different periods, and it does not intend that any specified
portion of its assets, as a matter of practice, will be invested in short
sales. However, no securities will be sold short if, after effect is given to
any such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Portfolio's net assets. The Portfolio may not
sell short the securities of any single issuer listed on a national securities

7
<PAGE>

exchange to the extent of more than 5% of the value of its net assets. The
Portfolio may not sell short the securities of any class of an issuer to the
extent, at the time of the transaction, of more than 2% of the outstanding
securities of that class.

In addition to the short sales discussed above, the Portfolio may make short
sales "against the box," a transaction in which the Portfolio enters into a
short sale of a security which the Portfolio owns. The proceeds of the short
sale will be held by a broker until the settlement date at which time the
Portfolio delivers the security to close the short position. The Portfolio
receives the net proceeds from the short sale. The Portfolio at no time will
have more than 15% of the value of its net assets in deposits on short sales
against the box. It currently is anticipated that the Portfolio will make
short sales against the box for purposes of protecting the value of the
Portfolio's net assets.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Portfolio may enter into stock index futures contracts, and options with
respect thereto, in U.S. domestic markets. See "Appendix--Investment
Techniques--Options Transactions." These transactions will be entered into as
a substitute for comparable market positions in the underlying securities or
for hedging purposes. Although the Portfolio is not a commodity pool, it is
subject to rules of the Commodity Futures Trading Commission (the "CFTC")
limiting the extent to which it may engage in these transactions.

The Portfolio's commodities transactions must constitute bona fide hedging or
other permissible transactions pursuant to regulations promulgated by the
CFTC. In addition, the Portfolio may not engage in such transactions if the
sum of the amount of initial margin deposits and premiums paid for unexpired
commodity options, other than for bona fide hedging transactions, would exceed
5% of the liquidation value of the Portfolio's assets, after taking into
account unrealized profits and unrealized losses on such contracts it has
entered into; provided, however, that in the case of an option that is in-the-
money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. To the extent the Portfolio engages in the use of futures
and options on futures for other than bona fide hedging purposes, the
Portfolio may be subject to additional risk.

Engaging in these transactions involves risk of loss to the Portfolio which
could adversely affect the value of a shareholder's investment. Although the
Portfolio intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be made
that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could move
to the limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and potentially
subjecting the Portfolio to substantial losses. In addition, engaging in
futures transactions in foreign markets may involve greater risks than trading
on domestic exchanges.

Successful use of futures by the Portfolio also is subject to the Adviser's
ability to predict correctly movements in the direction of the market or
foreign currencies and, to the extent the transaction is entered into for
hedging purposes, to ascertain the appropriate correlation between the
transaction being hedged and the price movements of the futures contract. For
example, if the Portfolio has hedged against the possibility of a decline in
the market adversely affecting the value of securities held in its portfolio
and prices increase instead, the Portfolio will lose part or all of the
benefit of the increased value of securities which it has hedged because it
will have offsetting losses in its futures positions. In addition, in such
situations, if the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which reflect
the rising market. The Portfolio may have to sell securities at a time when it
may be disadvantageous to do so.

Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, the Portfolio may be required to segregate cash or high
quality money market instruments in connection with its commodities
transactions in an amount generally equal to the value of the underlying
commodity. The segregation of such assets will have the effect of limiting the
Portfolio's ability otherwise to invest those assets.

FUTURE DEVELOPMENTS
The Portfolio may take advantage of opportunities in the area of options and
futures contracts, options on futures contracts and any other derivative
investments which are not presently

8
<PAGE>

contemplated for use by the Portfolio or which are not currently available but
which may be developed, to the extent such opportunities are both consistent
with the Portfolio's investment objective and legally permissible for the
Portfolio. Before entering into such transactions or making any such
investment, the Portfolio will provide appropriate disclosure in its
prospectus.

CERTAIN FUNDAMENTAL POLICIES

The Portfolio may (i) borrow money to the extent permitted under the 1940 Act;
and (ii) invest up to 25% of the value of its total assets in the securities
of issuers in a single industry, provided that there is no such limitation on
investments in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. This paragraph describes fundamental policies
that cannot be changed as to the Portfolio without approval by the holders of
a majority (as defined in the 1940 Act) of the Portfolio's outstanding voting
shares. See "Investment Objective and Management Policies--Investment
Restrictions" in the Statement of Additional Information.

CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES

The Portfolio may (i) pledge, hypothecate, mortgage or otherwise encumber its
assets, but only to secure permitted borrowings; and (ii) invest up to 15% of
the value of its net assets in repurchase agreements providing for settlement
in more than seven days after notice and in other illiquid securities. See
"Investment Objective and Management Policies--Investment Restrictions" in the
Statement of Additional Information.

RISK FACTORS

No investment is free from risk. Investing in the Portfolio will subject
investors to certain risks which should be considered.

NET ASSET VALUE FLUCTUATIONS
The Portfolio's net asset value per share is not fixed and should be expected
to fluctuate. Investors should purchase Portfolio shares only as a supplement
to an overall investment program and only if investors are willing to
undertake the risks involved.

EQUITY SECURITIES
Investors should be aware that equity securities fluctuate in value, often
based on factors unrelated to the value of the issuer of the securities, and
that fluctuations can be pronounced. Changes in the value of the equity
securities in the Portfolio's portfolio will result in changes in the value of
the Portfolio's shares and thus the Portfolio's yield and total return to
investors.

CERTAIN INVESTMENT TECHNIQUES
The use of investment techniques such as short selling, lending portfolio
securities and engaging in options and futures transactions, involves greater
risk than that incurred by many other funds with a similar objective. Using
these techniques may produce higher than normal portfolio turnover and may
affect the degree to which the Portfolio's net asset value fluctuates. See
"Appendix--Investment Techniques."

The Portfolio's ability to engage in certain short-term transactions may be
limited by the requirement that, to qualify as a regulated investment company,
it must earn less than 30% of its gross income from the disposition of
securities held for less than three months. This 30% test limits the extent to
which the Portfolio may sell securities held for less than three months,
effect short sales of securities held for less than three months, write
options expiring in less than three months and invest in certain futures
contracts, among other strategies. With the exception of the above
requirement, the amount of portfolio activity will not be a limiting factor
when making portfolio decisions. Under normal market conditions, the
Portfolio's portfolio turnover rate generally will not exceed 150%. Higher
portfolio turnover rates are likely to result in comparatively greater
brokerage commissions or transaction costs. Short-term gains realized from
portfolio transactions are taxable to shareholders as ordinary income. See
"Portfolio Transactions" in the Portfolio's Statement of Additional
Information.

NON-DIVERSIFIED STATUS

9
<PAGE>

Portfolio's total assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets be
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies). Since a
relatively high percentage of the Portfolio's assets may be invested in the
securities of a limited number of issuers, some of which may be within the
same industry or economic sector, the Portfolio's securities may be more
susceptible to any single economic, political or regulatory occurrence than
the portfolio securities of a diversified investment company.

SIMULTANEOUS INVESTMENTS

Investment decisions for the Portfolio are made independently from those of
other investment companies or accounts advised by the Adviser. However, if
such other investment companies or accounts are prepared to invest in, or
desire to dispose of, securities of the type in which the Portfolio invests at
the same time as the Portfolio, available investments or opportunities for
sales will be allocated equitably to each. In some cases, this procedure may
adversely affect the size of the position obtained for or disposed of by the
Portfolio or the price paid or received by the Portfolio.

Management of the Fund

BOARD OF TRUSTEES

The Fund's business affairs are managed under the general supervision of its
Board of Trustees. The Portfolio's Statement of Additional Information
contains the name and general business experience of each Trustee.

INVESTMENT ADVISER

The Portfolio's investment adviser is BSFM, a wholly-owned subsidiary of The
Bear Stearns Companies Inc., which is located at 245 Park Avenue, New York,
New York 10167. The Bear Stearns Companies Inc. is a holding company which,
through its subsidiaries including its principal subsidiary, Bear Stearns, is
a leading United States investment banking, securities trading and brokerage
firm serving United States and foreign corporations, governments and
institutional and individual investors. BSFM is a registered investment
adviser and offers, either directly or through affiliates, investment advisory
and administrative services to open-end and closed-end investment funds and
other managed pooled investment vehicles with net assets at March 31, 1997 of
over $2.9 billion.

BSFM supervises and assists in the overall management of the Portfolio's
affairs under an Investment Advisory Agreement between BSFM and the Fund,
subject to the overall authority of the Fund's Board of Trustees in accordance
with Massachusetts law. BSFM uses a team approach to money management
consisting of portfolio managers, assistant portfolio managers and analysts
performing as a dynamic unit to manage the assets of the Portfolio. The team
consists of Mark Kurland, Senior Portfolio Manager; Robert Reitzes, Senior
Portfolio Manager; Jim McCluskey, Senior Portfolio Manager; Gail Sprute,
Portfolio Manager/Analyst and Harris Cohen, Portfolio Manager/Analyst. Jim
McCluskey leads the portfolio manager team for the Portfolio. Mr. McCluskey, a
Chartered Financial Analyst, joined BSFM in May 1997 as a Senior Managing
Director and Senior Portfolio Manager. From 1989 through 1997, he was a Senior
Portfolio Manager at Spare, Kaplan, Bischel & Associates, an institutional
asset management firm where he co-managed over $2 billion in assets.

The Portfolio pays BSFM an advisory fee at an annual rate equal to 1% of the
Portfolio's average daily net assets which will be adjusted monthly depending
on the extent to which the investment performance of Portfolio shares exceeded
or was exceeded by the percentage change in the investment record of the S&P
500 Index.

Under the terms of the Investment Advisory Agreement, the Portfolio has agreed
to pay BSFM a monthly fee at the annual rate of 1% of the Portfolio's average
daily net assets (the "Basic Fee") which will be adjusted monthly (the
"Monthly Performance Adjustment") depending on the extent to which the
investment performance of the class of shares (currently, Class C) expected to
bear the highest total Portfolio operating expenses, after expenses, exceeded
or was exceeded by the percentage change in the investment record of the S&P
500 Index. The Monthly Performance Adjustment may increase or decrease the
total advisory fee payable to BSFM (the "Total Advisory Fee") by up to 0.50%
per year of the value of the Portfolio's average daily net assets.

10
<PAGE>

month, giving a dollar amount which is the Basic Fee for that month; (b) one-
twelfth of the applicable performance adjustment rate from the table below is
applied to the Portfolio's average daily net assets over the most recent
calendar month, giving a dollar amount which is the Monthly Performance
Adjustment (for the first twelve-month period, no performance adjustment will
be made); and (c) the Monthly Performance Adjustment is then added to or
subtracted from the Basic Fee and the result is the amount payable by the
Portfolio to BSFM as the Total Advisory Fee for that month.

The full range of Total Advisory Fees on an annualized basis is as follows:

<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PERCENTAGE POINT DIFFERENCE
BETWEEN DESIGNATED CLASS'
PERFORMANCE (NET OF
EXPENSES INCLUDING ADVISORY FEES) PERFORMANCE
AND PERCENTAGE CHANGE IN THE ADJUSTMENT
S&P 500 INDEX BASIC FEE (%) RATE (%) TOTAL FEE (%)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
+3.00 percentage points or more........ 1% 0.50% 1.50%
+2.75 percentage points or more but
less than +3.00 percentage points...... 1% 0.40% 1.40%
+2.50 percentage points or more but
less than +2.75 percentage points...... 1% 0.30% 1.30%
+2.25 percentage points or more but
less than +2.50 percentage points...... 1% 0.20% 1.20%
+2.00 percentage points or more but
less than +2.25 percentage points...... 1% 0.10% 1.10%
Less than +2.00 percentage points but
more than
- -2.00 percentage points................ 1% 0.00% 1.00%
- -2.00 percentage points or less but
more than -2.25 percentage points...... 1% -0.10% 0.90%
- -2.25 percentage points or less but
more than -2.50 percentage points...... 1% -0.20% 0.80%
- -2.50 percentage points or less but
more than -2.75 percentage points...... 1% -0.30% 0.70%
- -2.75 percentage points or less but
more than -3.00 percentage points...... 1% -0.40% 0.60%
- -3.00 percentage points or less........ 1% -0.50% 0.50%
</TABLE>

The period over which performance is measured is a rolling twelve-month period
and the performance of the S&P 500 Index is calculated as the sum of the
change in the level of the S&P 500 Index during the period, plus the value of
any dividends or distributions made by the companies whose securities comprise
the S&P 500 Index. For the fiscal year ended March 31, 1997, no fees were paid
by the Portfolio pursuant to a voluntary undertaking by BSFM.

The Portfolio's administrator is BSFM. Under the terms of an Administration
Agreement with the Fund, BSFM generally supervises all aspects of the
operation of the Portfolio, subject to the overall authority of the Fund's
Board of Trustees in accordance with Massachusetts law. For providing
administrative services to the Portfolio, the Fund has agreed to pay BSFM a
monthly fee at the annual rate of 0.15 of 1% of the Portfolio's average daily
net assets. Under the terms of an Administrative Services Agreement with the
Fund, PFPC Inc. provides certain administrative services to the Portfolio. For
providing these services, the Fund has agreed to pay PFPC Inc. an annual fee,
as follows: 0.10 of 1% per annum of the first $200 million of the Portfolio's
average daily net assets, 0.075 of 1% per annum of the next $200 million up to
$400 million of the Portfolio's average daily net assets, 0.05 of 1% of the
next $200 million up to $600 million of the Portfolio's average daily net
assets, 0.03 of 1% of per annum of average daily net assets in excess of $600
million. These advisory fees are subject to a monthly minimum fee of $11,000.

For the fiscal year ended March 31, 1997, the Portfolio paid PFPC Inc. a monthly
fee at the effective annual rate of 0.45 of 1% of the Portfolio's average daily
net assets.

From time to time, BSFM may waive receipt of its fees and/or voluntarily
assume certain Portfolio expenses, which would have the effect of lowering the
Portfolio's expense ratio and increasing yield to investors at the time such
amounts are waived or assumed, as the case may be. The Portfolio will

11
<PAGE>

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. From time to time,
PFPC Inc. may waive or a portion of its fee. Effective May 1, 1996, and until
further notice, PFPC Inc. will reduce its monthly minimum to $7,500 for net
assets of less than $25 million; $9,167 for net assets of $25 million to $50
million; $11,000 for net assets in excess of $50 million. PFPC Inc. reserves
the right to revoke this voluntary fee waiver at any time.

Brokerage commissions may be paid to Bear Stearns for executing transactions
if the use of Bear Stearns is likely to result in price and execution at least
as favorable as those of other qualified broker-dealers. The allocation of
brokerage transactions also may take into account a broker's sales of the
Portfolio's shares. See "Portfolio Transactions" in the Statement of
Additional Information.

Bear Stearns has agreed to permit the Fund to use the name "Bear Stearns" or
derivatives thereof as part of the Fund name for as long as the Investment
Advisory Agreement is in effect.

DISTRIBUTOR

Bear Stearns, located at 245 Park Avenue, New York, New York 10167, serves as
the Portfolio's principal underwriter and distributor of the Portfolio's
shares pursuant to an agreement which is renewable annually. Bear Stearns is
entitled to receive the sales load described under "How to Buy Shares" and
payments under the Portfolio's Distribution and Shareholder Servicing Plan
described below.

CUSTODIAN AND TRANSFER AGENT

Custodial Trust Company, 101 Carnegie Center, Princeton, New Jersey 08540, an
affiliate of Bear Stearns, is the Portfolio's custodian. PFPC Inc., Bellevue
Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, is the
Portfolio's transfer agent, dividend disbursing agent and registrar (the
"Transfer Agent"). The Transfer Agent also provides certain administrative
services to the Portfolio.

DISTRIBUTION AND SHAREHOLDER SERVICING PLAN

Under a plan adopted by the Fund's Board of Trustees pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), the Portfolio pays Bear Stearns for
distributing Portfolio shares and for providing personal services to, and/or
maintaining accounts of, Portfolio shareholders a fee at the annual rate of
0.50% and 1% of the average daily net assets of Class A and Class C,
respectively. Under the Plan, Bear Stearns may pay third parties in respect of
these services such amount as it may determine. The fees paid to Bear Stearns
under the Plan are payable without regard to actual expenses incurred. The
Fund understands that these third parties also may charge fees to their
clients who are beneficial owners of Portfolio shares in connection with their
client accounts. These fees would be in addition to any amounts which may be
received by them from Bear Stearns under the Plan.

EXPENSE LIMITATION

BSFM has undertaken until such time as it gives investors at least 60 days
notice to the contrary that, if in any fiscal year, certain expenses,
including the investment advisory fee and fees under the Plan, exceed 1.65% of
Class A's average daily net assets and 2.15% of Class C's average daily net
assets for the fiscal year, BSFM may waive a portion of its investment
advisory fee or bear other expenses to the extent of the excess expense.

How to Buy Shares

GENERAL

The minimum initial investment is $1,000, or $500 if the investment is for
Keogh Plans, IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant.
Subsequent investments ordinarily must be at least $250 or $100 for retirement
plans. Share certificates are issued only upon written request. No
certificates are issued for fractional shares. The Fund reserves the right to
reject any purchase order. The Fund reserves the right to vary the initial and
subsequent investment minimum requirements at any time. Investments by
employees of Bear Stearns and its affiliates are not subject to minimum
investment requirements.

Purchases of the Portfolio's shares may be made through a brokerage account
maintained with Bear Stearns or through certain investment dealers who are
members of the National Association of Securities Dealers, Inc. who have sales
agreements with Bear Stearns (an "Authorized Dealer"). Purchases of the
Portfolio's shares also may be made directly through the Transfer Agent. When
purchasing Portfolio shares, investors must specify which class is being
purchased.

12
<PAGE>

Purchases are effected at the public offering price next determined after a
purchase order is received by Bear Stearns, an Authorized Dealer or the
Transfer Agent (the "trade date"). Payment for Portfolio shares generally is
due to Bear Stearns or the Authorized Dealer on the third business day (the
"settlement date") after the trade date. Investors who make payment before the
settlement date may permit the payment to be held in their brokerage accounts
or may designate a temporary investment for payment until the settlement date.
If a temporary investment is not designated, Bear Stearns or the Authorized
Dealer will benefit from the temporary use of the funds if payment is made
before the settlement date.

PURCHASE PROCEDURES

Purchases through Bear Stearns account executives or Authorized Dealers may be
made by check (except that a check drawn on a foreign bank will not be
accepted), Federal Reserve draft or by wiring Federal Funds with funds held in
brokerage accounts at Bear Stearns or the Authorized Dealer. Checks or Federal
Reserve drafts should be made payable as follows: (i) to Bear Stearns or an
investor's Authorized Dealer or (ii) to "The Bear Stearns Funds--The Insiders
Select Fund" if purchased directly from the Portfolio, and should be directed
to the Transfer Agent: PFPC Inc., Attention: The Bear Stearns Funds--The
Insiders Select Fund, P.O. Box 8960, Wilmington, Delaware 19899-8960. Direct
overnight deliveries to PFPC Inc., 400 Bellevue Parkway, Suite 108,
Wilmington, Delaware 19809. Payment by check or Federal Reserve draft must be
received within three business days of receipt of the purchase order by Bear
Stearns or an Authorized Dealer. Shareholders may not purchase shares of the
Portfolio with a check issued by a third party and endorsed over to the
Portfolio. Orders placed directly with the Transfer Agent must be accompanied
by payment. Bear Stearns (or an investor's Authorized Dealer) is responsible
for forwarding payment promptly to the Fund. The Fund will charge $7.50 for
each wire redemption. The payment proceeds of a redemption of shares recently
purchased by check may be delayed as described under "How to Redeem Shares."

Investors who are not Bear Stearns clients may purchase Portfolio shares
through the Transfer Agent. To make an initial investment in the Portfolio, an
investor must establish an account with the Portfolio by furnishing necessary
information to the Fund. An account with the Portfolio may be established by
completing and signing the Account Information Form, a copy of which is
attached to this Prospectus, indicating which class of shares is being
purchased and mailing it, together with a check to cover the purchase, to PFPC
Inc., Attention: The Bear Stearns Funds--The Insiders Select Fund, P.O. Box
8960, Wilmington, Delaware 19899-8960.

Subsequent purchases of shares may be made by checks made payable to the Fund
and directed to the address set forth in the preceding paragraph. The account
number should appear on the check.

Purchase orders received by Bear Stearns, an Authorized Dealer or the Transfer
Agent before the close of regular trading on the New York Stock Exchange
(currently 4:00 p.m., New York time) on any day the Portfolio calculates its
net asset value are priced according to the net asset value determined on that
date. Purchase orders received after the close of trading on the New York
Stock Exchange are priced as of the time the net asset value is next
determined.

Shares of the Portfolio are sold on a continuous basis. Net asset value per
share is determined as of the close of regular trading on the floor of the New
York Stock Exchange (currently 4:00 p.m., New York time) on each business day.
The net asset value per share of each class of the Portfolio is computed by
dividing the value of the Portfolio's net assets represented by such class
(i.e., the value of its assets less liabilities) by the total number of shares
of such class outstanding. The Portfolio's investments are valued based on
market value or, where market quotations are not readily available, based on
fair value as determined in good faith by, or in accordance with procedures
established by, the Fund's Board of Trustees. For further information
regarding the methods employed in valuing the Portfolio's investments, see
"Determination of Net Asset Value" in the Portfolio's Statement of Additional
Information.

Federal regulations require that investors provide a certified Taxpayer
Identification Number (a "TIN") upon opening or reopening an account. See
"Dividends, Distributions and Taxes." Failure to furnish a certified TIN to
the Fund could subject the investor to backup withholding and a $50 penalty
imposed by the Internal Revenue Service (the "IRS").

13
<PAGE>

CLASS A SHARES

The sales charge may vary depending on the dollar amount invested in the
Portfolio. The public offering price for Class A shares of the Portfolio is
the net asset value per share of that class plus a sales load, which is
imposed in accordance with the following schedule:

<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
TOTAL SALES LOAD
------------------------------
AS A % OF AS A % OF DEALER CONCESSIONS
OFFERING PRICE NET ASSET VALUE AS A % OF
AMOUNT OF TRANSACTION PER SHARE PER SHARE OFFERING PRICE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000............ 4.75% 4.99% 4.25%
$50,000 to less than
$100,000.................... 4.25 4.44 3.75
$100,000 to less than
$250,000.................... 3.75 3.90 3.25
$250,000 to less than
$500,000.................... 3.25 3.36 3.00
$500,000 to less than
$750,000.................... 2.75 2.83 2.50
$750,000 to less than
$1,000,000.................. 2.25 2.30 2.00
$1,000,000 and above......... 0.00* 0.00 1.00
</TABLE>

There is no initial sales charge on purchases of $1,000,000 or more of Class A
shares. However, if an investor purchases Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeems those
shares within one year after purchase, a CDSC of 1.00% will be imposed at the
time of redemption.

The terms contained in the section of the Fund's Prospectus entitled "How to
Redeem Shares--Contingent Deferred Sales Charge--Class C Shares" are
applicable to the Class A shares subject to a CDSC. Letter of Intent and Right
of Accumulation apply to such purchases of Class A shares.

The dealer concession may be changed from time to time but will remain the
same for all dealers. From time to time, Bear Stearns may make or allow
additional payments or promotional incentives to dealers that sell Class A
shares. In some instances, these incentives may be offered only to certain
dealers who have sold or may sell significant amounts of Class A shares.
Dealers may receive a larger percentage of the sales load from Bear Stearns
than they receive for selling most other funds.

Class A shares may be sold at net asset value to (a) the Adviser, its
affiliates or its officers, directors or employees (including retired
employees), any partnership of which the Adviser is a general partner, any
Trustee or officer of the Fund and designated family members of any of the
above individuals; (b) qualified retirement plans of the Adviser; (c) any
employee or registered representative of any Authorized Dealer or their
respective spouses and minor children; (d) trustees or directors of investment
companies for which the Adviser or an affiliate acts as sponsor; (e) any
state, county or city, or any instrumentality, department, authority or agency
thereof, which is prohibited by applicable investment laws from paying a sales
load or commission in connection with the purchase of Portfolio shares; (f)
any institutional investment clients including corporate sponsored pension and
profit-sharing plans and other benefit plans (excluding Keogh Plans, IRAs and
SEP-IRAs), and insurance companies; (g) any pension funds (excluding Keogh
Plans, IRAs and SEP-IRAs), state and municipal governments or funds, Taft-
Hartley plans and qualified non-profit organizations, foundations and
endowments; (h) trust institutions (including bank trust departments)
investing on their own behalf or on behalf of their clients; and (i) accounts
as to which an Authorized Dealer charges an asset management fee. To take
advantage of these exemptions, a purchaser must indicate its eligibility for
an exemption to Bear Stearns along with its Account Information Form. Such
purchaser agrees to notify Bear Stearns if, at any time of any additional
purchases, it is no longer eligible for an exemption. Bear Stearns reserves
the right to request certification or additional information from a purchaser
in order to verify that such purchaser is eligible for an exemption. Bear
Stearns reserves the right to limit the participation of its employees in
Class A shares of the Portfolio. Dividends and distributions reinvested in
Class A shares of the Portfolio will be made at the net asset value per share
on the reinvestment date.

Class A shares of the Portfolio also may be purchased at net asset value, with
the proceeds from the redemption of shares of an investment company sold with
a sales charge or commission and not distributed by Bear Stearns. However, if
such investor redeems those shares within one year after purchase, a CDSC of
1.00% will be imposed at the time of redemption. This includes shares of a
mutual fund which were subject to a contingent deferred sales charge upon
redemption. The purchase must be made within 60 days of the redemption, and
Bear Stearns must be notified by the investor in writing, or by the investor's
investment professional, at the time the purchase is made. Bear Stearns will
offer to pay Authorized Dealers an amount up to 1.00% of the net asset value
of shares purchased by the dealers' clients or customers in this manner.

14
<PAGE>

--------------------------------------------------------------------------
The Bear Stearns Funds
--------------------------------------------------------------------------

Account Information Form
Please Note: Do not use this form to open a retirement plan account. For
retirement plan forms call 1-800-766-4111. For assistance in completing
this form, contact PFPC Inc. at 1-800-447-1139.

(1) Account Type (Please print indicate only one registration type)
[_] Individual [_] Joint Tenant

---------------------------------------------------------------------------
NAME

---------------------------------------------------------------------------
JOINT REGISTRANT, IF ANY (SEE NOTES 1 AND 2)

- - -
------ --- ------ ----- ----------------
SOCIAL SECURITY NUMBER TAXPAYER IDENTIFICATION NUMBER
OF PRIMARY OWNER

(1) Use only the Social Security number or Taxpayer Identification Number
of the first listed joint tenant.

(2) For joint registrations, the account registrants will be joint tenants
with right of survivorship and not tenants in common unless tenants in
common or community property registrations are requested.

---------------------------------------------------------------------------
[_] Uniform Gift to Minors, or [_] Uniform Transfer to Minors (where
allowed by law)

---------------------------------------------------------------------------
NAME OF ADULT CUSTODIAN (ONLY ONE PERMITTED)

---------------------------------------------------------------------------
NAME OF MINOR (ONLY ONE PERMITTED)

Under the _______________________ Uniform Gift/Transfers to Minors Act.
STATE RESIDENCE OF MINOR

/ / - -
------ ----- ------ ------ --- ------
MINOR'S DATE OF BIRTH MINOR'S SOCIAL SECURITY NUMBER
(REQUIRED TO OPEN AN ACCOUNT)

--------------------------------------------------------------------------
[_] Corporation [_] Partnership [_] Trust* [_] Other

--------------------------------------------------------------------------
NAME OF CORPORATION, PARTNERSHIP, OR OTHER

--------------------------------------------------------------------------
NAME(S) OF TRUSTEE(S) DATE OF THE TRUST AGREEMENT

- - -
------ ----- ------ ----- ----------------
SOCIAL SECURITY NUMBER TAXPAYER IDENTIFICATION NUMBER
(REQUIRED TO OPEN ACCOUNT) (REQUIRED TO OPEN ACCOUNT)

* If a Trust, include date of trust instrument and list of trustees if they
are to be named in the registration.

(2) Mailing Address

---------------------------------------------------------------------------
STREET OF P.O. BOX APARTMENT NUMBER

---------------------------------------------------------------------------
CITY STATE ZIP CODE

( ) ( )
---------------------------------- -----------------------------------
DAY TELEPHONE EVENING TELEPHONE

(3) Investment Information
Method of Investment

[_] I have enclosed a check for a minimum investment of $1,000 per Fund.

[_] I have enclosed a check for a minimum subsequent investment of $250 per
Fund or completed the Systematic Investment Plan information in Section
13.

[_] I purchased ____________ shares of __________________ through my broker

on____/____/_____. Confirm #__________________.

Please make my investment in the Funds designated below:

---------------------------------------------------------------------------
CLASS A CLASS C BEAR STEARNS FUNDS INVESTMENT AMOUNT
---------------------------------------------------------------------------

S&P STARS Portfolio $
------ ------- --------------
Large Cap Value Portfolio $
------ ------- --------------
Small Cap Value Portfolio $
------ ------- --------------
Total Return Bond Portfolio $
------ ------- --------------
The Insiders Select Fund $
------ ------- --------------
Emerging Markets Debt Portfolio $
------ ------- --------------
Money Market Portfolio $
------ ------- --------------
N/A Focus List Portfolio $
------ ------- --------------
TOTAL INVESTMENT AMOUNT $
==============

Note: All shares purchased will be held in a shareholder account for the
investor at the Transfer Agent. Checks drawn on foreign banks and checks
made payable to persons or entities other than the Fund will not be
accepted. Checks should be made payable to the Fund which you are investing
in. If no class is designated, your investment will be made in Class A
shares.

NOT PART OF THE PROSPECTUS
<PAGE>

(4) Reduced Sales Charge (Available for Class A Shares)

Method of Investment

Are you a shareholder in another Bear Stearns Fund? Yes [_] No

[_] I apply for Right of Accumulation reduced sales charges based on the
following Bear Stearns Fund Accounts (excluding Class C Shares).

---------------------------------------------------------------------------
FUND ACCOUNT NUMBER OR SOCIAL SECURITY NUMBER

Letter of Intent

[_] I am already investing under an existing Letter of Intent.

[_] I agree to the Letter of Intent provisions in the Fund's current
prospectus. During a 13-month period, I plan to invest a dollar amount
of at least [_] $50,000 [_] $100,000 [_] $250,000 [_] $500,000
[_] $750,000 [_] $1,000,000

Net Asset Value Purchase

[_] I qualify for an exemption from the sales charge by meeting the
conditions set forth in the prospectus. (Please attach certification to
this form.)

[_] I qualify to purchase shares at net asset value, with proceeds received
from a mutual fund or closed-end fund not distributed by Bear Stearns.
(Please attach proof of fund share redemption.)

(5) Distribution Options

Dividends and capital gains may be reinvested or paid by check. If no
options are selected below, both dividends and capital gains will be
reinvested in additional Fund shares.

Dividends [_] Pay by check. [_] Reinvest.

Capital Gains [_] Pay by check. [_] Reinvest.

The Redirected Distribution Option allows an investor to have dividends and
any other distributions from a Fund automatically used to purchase shares
of the same class of any other Fund. The receiving account must be in the
same name as your existing account.

[_] Please reinvest dividends and capital gains from the __________________
(NAME OF FUND)
to the _________________.
(NAME OF FUND)

If you elect to have distributions paid by check, distributions will be
sent to the address of record. Distributions may also be sent to another
payee:

---------------------------------------------------------------------------
NAME

---------------------------------------------------------------------------
STREET OR P.O. BOX APARTMENT NUMBER

---------------------------------------------------------------------------
CITY STATE ZIP CODE

---------------------------------------------------------------------------
Optional Features

(6) Automatic Withdrawal Plan

[_] Fund Name [_] Amount
--------------------------------- ------------
[_] Startup Month
-----------------------

Frequency option: [_] Monthly [_] Every other month [_] Quarterly
[_] Semiannually [_] Annually

* A minimum account value of $5,000 in a single account is required to
establish an automatic withdrawal plan.
* Payments will be made on or near the 25th of the month
* Shareholders holding share certificates are not eligible for the
Automatic Withdrawal Plan.

[_] Please mail checks to Address of Record (Named in Section 2)

[_] Please electronically credit my Bank of Record (Named in Section 9)

[_] Special payee as specified below:

---------------------------------------------------------------------------
NAME

---------------------------------------------------------------------------
STREET OR P.O. BOX APARTMENT NUMBER

---------------------------------------------------------------------------
CITY STATE ZIP CODE

(7) Telephone Exchange Privilege

Unless indicated below, I authorize the Transfer Agent to accept
instructions from any persons to exchange shares in my account(s) by
telephone, in accordance with the procedures and conditions set forth in
the Fund's current prospectus.

[_] I DO NOT want the Telephone Exchange Privilege.

NOT PART OF THE PROSPECTUS
<PAGE>

(8) Telephone Redemption Privilege

[_] I authorize the Transfer Agent to accept instructions from any person
to redeem shares in my account(s) by telephone, in accordance with the
procedures and conditions set forth in the Fund's current prospectus.

Checks for redemption of proceeds will be sent by check via U.S. Mail to
the address of record, unless the information in Section 9 is completed for
redemption by wire of $500 or more.

(9) Bank of Record (for Telephone Redemptions and/or Systematic Investment
Plans)

Please attach a voided check (for electronic credit to your checking
account) in the space provided in Section 13.

---------------------------------------------------------------------------
BANK NAME

---------------------------------------------------------------------------
STREET OR P.O. BOX APARTMENT NUMBER

---------------------------------------------------------------------------
CITY STATE ZIP CODE

---------------------------------------------------------------------------
BANK ASA NUMBER BANK ACCOUNT NUMBER

---------------------------------------------------------------------------
ACCOUNT NAME

(10) Signature and Taxpayer Certification

The undersigned warrants that I (we) have full authority and, if a natural
person, I (we) am (are) of legal age to purchase shares pursuant to this
Account Information Form, and have received a current prospectus for the
Bear Stearns Fund(s) in which I (we) am (are) investing. The undersigned
acknowledges that the Telephone Exchange Privilege is automatic and that I
(we) may bear the risk of loss in event of fraudulent use of the Privilege.
If I (we) do not want the Telephone Exchange Privilege, I (we) have so
indicated on this Account Information Form.

Under the Interest and Dividend Tax Compliance Act of 1983, the Fund is
required to have the following certification:

Under penalty of perjury, I certify that:

(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me), and

(2) I am not subject to backup withholding because (a) I am exempt from
backup withholding or (b) I have not been notified by the Internal Revenue
Service that I am subject to 31% backup withholding as a result of a
failure to report all interest or dividends or (c) the IRS has notified me
that I am no longer subject to backup withholding.

Certification Instructions -- You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup
withholding because of underreporting of interest or dividends on your tax
return. Mutual fund shares are not deposits of, or guaranteed by, any
depository institution, nor are they insured by the FDIC. Investment in the
funds involves investment risks, including possible loss of principal.

[_] Exempt from backup withholding

[_] Nonresident alien (Form W-8 attached)
---------------------------------
COUNTRY OF CITIZENSHIP

---------------------------------------------------------------------------
AUTHORIZED SIGNATURE TITLE DATE

(11) For Authorized Dealer Use Only (Please Print)

We hereby authorize the Transfer Agent to act as our agent in connection
with the transactions authorized by the Account Information Form and agree
to notify the Transfer Agent of any purchases made under a Letter of Intent
or Right of Accumulation. If this Account Information Form includes a
Telephone Exchange Privilege authorization, a Telephone Redemption
Privilege authorization or an Automatic Withdrawal Plan request, we
guarantee the signature(s) above.

---------------------------------------------------------------------------
DEALER'S NAME DEALER NUMBER

---------------------------------------------------------------------------
MAIN OFFICE ADDRESS BRANCH NUMBER

---------------------------------------------------------------------------
REPRESENTATIVE'S NAME REP. NUMBER
( )
----------------------------------------------------- --------------------
BRANCH ADDRESS TELEPHONE NUMBER

---------------------------------------------------------------------------
AUTHORIZED SIGNATURE OF DEALER TITLE DATE

(12) Additional Account Statements (Please Print)

In addition to myself and my representative, please send copies of my
account statements to:

------------------------------------- ------------------------------------
NAME NAME

------------------------------------- ------------------------------------
ADDRESS ADDRESS

------------------------------------- ------------------------------------
CITY, STATE, ZIP CODE CITY, STATE, ZIP CODE

NOT PART OF THE PROSPECTUS
<PAGE>

(13) Systematic Investment Plan

The Systematic Investment Plan, which is available to shareholders of The
Bear Stearns Funds, makes possible regularly scheduled purchases of Fund
shares to allow dollar-cost averaging. The Funds' Transfer Agent can
arrange for an amount of money selected by you ($100) minimum to be
deducted from your checking account and used to purchase shares of a
specified Bear Stearns Fund. A $250 minimum initial investment is required.
This may not be used in conjunction with the Automatic Withdrawal Plan.

Please debit $ ____________ from my checking account (named in Section 9)
on or about the 20th of the month. Depending on the Application receipt
date, the Plan may take 10 to 20 days to be in effect.

[_] Monthly [_] Every alternate month
[_] Quarterly [_] Other _______________

$_____________ into the __________________ Fund _____________ Start Month.
$100 MINIMUM

If you are applying for the Telephone Redemption Privilege or Systematic
Investment Plan, please tape your voided check on top of our sample below.

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

John Smith 000
123 First Avenue
Anytown, USA 12345

$[_____]
------------------------------------------------------------

--------------------------------------------------------------------
V O I D
-------------------------- --------------------------------------

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

Service Assistance

Our knowledgeable Client Services Representatives are available to assist you
between 8:00 a.m. and 6:00 p.m. Eastern Time at:

1-800-447-1139

Mailing or Fax Instructions

Mail your completed Account Information Form and check to:

The Bear Stearns Funds
c/o PFPC Inc.
P.O. Box 8960
Wilmington, DE 19899-8960

Fax: 302-791-1777

If applications will be faxed, please call and notify Client Services at
1-800-447-1139 before placing an order.

Bear Stearns & Co. Inc.
7.97

NOT PART OF THE PROSPECTUS

<PAGE>
In addition, Class A shares of the Portfolio may be purchased at net asset
value by the following customers of a broker that operates a master account
for purchasing and redeeming, and otherwise providing shareholder services in
respect of, Fund shares pursuant to agreements with the Fund or Bear Stearns:
(i) investment advisers and financial planners who place trades for their own
accounts or for the accounts of their clients and who charge a management,
consulting or other fee, (ii) clients of such investment advisers and
financial planners if such clients place trades through accounts linked to
master accounts of such investment advisers or financial planners on the books
and records of such broker and (iii) retirement and deferred compensation
plans, and trusts used to fund such plans, including, but not limited to,
plans or trusts defined in Section 401(a), 403(b) or 457 of the Code and
"rabbi trusts", provided, in each case, the purchase transaction is effected
through such broker. The broker may charge a fee for transactions in Portfolio
shares.

CLASS C SHARES

The public offering price for Class C shares is the next determined net asset
value per share of that class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class C shares made
within the first year of purchase. See "How to Redeem Shares."

RIGHT OF ACCUMULATION--CLASS A SHARES

Investors in Class A shares may qualify for a reduced sales charge. Pursuant
to the Right of Accumulation, certain investors are permitted to purchase
Class A shares of the Portfolio at the sales charge applicable to the total of
(a) the dollar amount then being purchased plus (b) the current public
offering price of all Class A shares of the Portfolio, shares of the Fund's
other portfolios and shares of certain other funds sponsored or advised by
Bear Stearns, including the Emerging Markets Debt Portfolio of Bear Stearns
Investment Trust, then held by the investor. The following purchases of Class
A shares may be aggregated for the purposes of determining the amount of
purchase and the corresponding sales load: (a) individual purchases on behalf
of a single purchaser, the purchaser's spouse and their children under the age
of 21 years including shares purchased in connection with a retirement account
exclusively for the benefit of such individual(s), such as an IRA, and
purchases made by a company controlled by such individual(s); (b) individual
purchases by a trustee or other fiduciary account, including an employee
benefit plan (such as employer-sponsored pension, profit-sharing and stock
bonus plans, including plans under Section 401(k) of the Code, and medical,
life and disability insurance trusts); or (c) individual purchases by a
trustee or other fiduciary purchasing shares concurrently for two or more
employee benefit plans of a single employer or of employers affiliated with
each other.

LETTER OF INTENT--CLASS A SHARES

By checking the appropriate box in the Letter of Intent section of the Account
Information Form, investors become eligible for the reduced sales load
applicable to the total number of Class A shares of the Portfolio, Class A
shares of the Fund's other portfolios and shares of certain other funds
sponsored or advised by Bear Stearns, including the Emerging Markets Debt
Portfolio of Bear Stearns Investment Trust, purchased in a 13-month period
pursuant to the terms and under the conditions set forth herein. A minimum
initial purchase of $1,000 is required. The Transfer Agent will hold in escrow
5% of the amount indicated in the Account Information Form for payment of a
higher sales load if the investor does not purchase the full amount indicated
in the Account Information Form. The escrow will be released when the investor
fulfills the terms of the Letter of Intent by purchasing the specified amount.
If an investor's purchases qualify for a further sales load reduction, the
sales load will be adjusted to reflect the total purchase at the end of 13
months. If total purchases are less than the amount specified, the investor
will be requested to remit an amount equal to the difference between the sales
load actually paid and the sales load applicable to the aggregate purchases
actually made. If such remittance is not received within 20 days, the Transfer
Agent, as attorney-in-fact, will redeem an appropriate number of shares held
in escrow to realize the difference. Checking a box in the Letter of Intent
section of the Account Information Form does not bind an investor to purchase,
or the Portfolio to sell, the full amount indicated at the sales load in
effect
at the time of signing, but the investor must complete the intended purchase
to obtain the reduced sales load. At the time an investor purchases shares of
any of the above-listed funds, the investor must indicate its intention to do
so under the Letter of Intent section of the Account Information Form.

15
<PAGE>

SYSTEMATIC INVESTMENT PLAN

The Systematic Investment Plan permits investors to purchase shares of the
Portfolio (minimum initial investment of $250 and minimum subsequent
investments of $100 per transaction) at regular intervals selected by the
investor. Provided the investor's bank or other financial institution allows
automatic withdrawals, Portfolio shares may be purchased by transferring funds
from the account designated by the investor. At the investor's option, the
account designated will be debited in the specified amount, and Portfolio
shares will be purchased once a month, on the twentieth day. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. Investors desiring to participate in the
Systematic Investment Plan should call the Transfer Agent at 1-800-447-1139 to
obtain the appropriate forms. The Systematic Investment Plan does not assure a
profit and does not protect against loss in declining markets. Since the
Systematic Investment Plan involves the continuous investment in the Portfolio
regardless of fluctuating price levels of the Portfolio's shares, investors
should consider their financial ability to continue to purchase through
periods of low price levels. The Fund may modify or terminate the Systematic
Investment Plan at any time or charge a service fee. No such fee currently is
contemplated.

Shareholder Services

EXCHANGE PRIVILEGE

The Exchange Privilege enables an investor to purchase, in exchange for shares
of a class of the Portfolio, shares of the same class of the Fund's other
portfolios or shares of certain other funds sponsored or advised by Bear
Stearns, including the Emerging Markets Debt Portfolio of Bear Stearns
Investment Trust, and the Money Market Portfolio of The RBB Fund, Inc., to the
extent such shares are offered for sale in the investor's state of residence.
These funds have different investment objectives which may be of interest to
investors. To use this Privilege, investors should consult their account
executive at Bear Stearns, their account executive at an Authorized Dealer or
the Transfer Agent to determine if it is available and whether any conditions
are imposed on its use.

To use this privilege, exchange instructions must be given to the Transfer
Agent in writing or by telephone. A shareholder wishing to make an exchange
may do so by sending a written request to the Transfer Agent at the address
given above in "How to Buy Shares--General." Shareholders are automatically
provided with telephone exchange privileges when opening an account, unless
they indicate on the account application that they do not wish to use this
privilege. Shareholders holding share certificates are not eligible to
exchange shares of the Portfolio by phone because share certificates must
accompany all exchange requests. To add this feature to an existing account
that previously did not provide for this option, a Telephone Exchange
Authorization Form must be filed with the Transfer Agent. This form is
available from the Transfer Agent. Once this election has been made, the
shareholder may contact the Transfer Agent by telephone at 1-800-447-1139 to
request the exchange. During periods of substantial economic or market change,
telephone exchanges may be difficult to complete and shareholders may have to
submit exchange requests to the Transfer Agent in writing.

If the exchanging shareholder does not currently own shares of the portfolio
or fund whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gain options and Authorized
Dealer of record as the account from which shares are exchanged, unless
otherwise specified in writing by the shareholder with all signatures
guaranteed by an eligible guarantor institution as described below. To
participate in the Systematic Investment Plan or establish automatic
withdrawal for the new account, however, an exchanging shareholder must file a
specific written request. The Exchange Privilege may be modified or terminated
at any time, or from time to time, by the Fund on 60 days notice to the
affected portfolio or fund shareholders. The Fund, BSFM and Bear Stearns will
not be liable for any loss, liability, cost or expense for acting upon
telephone instructions that are reasonably believed to be genuine. In
attempting to confirm that telephone instructions are genuine, the Fund will
use such procedures as are considered reasonable, including recording those
instructions and requesting information as to account registration (such as
the name in which an account is registered, the account number, recent
transactions in the account, and the account holder's Social Security number,
address and/or bank).

16
<PAGE>

Personal Retirement Plans, the shares being exchanged must have a current
value of at least $250; furthermore, when establishing a new account by
exchange, the shares being exchanged must have a value of at least the minimum
initial investment required for the portfolio or fund into which the exchange
is being made; if making an exchange to an existing account, the dollar value
must equal or exceed the applicable minimum for subsequent investments. If any
amount remains in the investment portfolio from which the exchange is being
made, such amount must not be below the minimum account value required by the
Portfolio or Fund.

Shares will be exchanged at the next determined net asset value; however,
except in the instances described below, a sales load may be charged with
respect to exchanges of Class A shares into portfolios or funds sold with a
sales load. Generally, a sales load will be charged if the shares being
exchanged were subject to a sales load which is lower than the sales load to
which the shares being purchased are subject or were not subject to any sales
load. No CDSC will be imposed on Class C shares at the time of an exchange.
The CDSC applicable on a redemption of the acquired Class C shares will be
calculated from the date of the initial purchase of the Class C shares
exchanged. If an investor is exchanging Class A shares into a portfolio or
fund that charges a sales load, the investor may qualify for share prices
which do not include the sales load or which reflect a reduced sales load, if
the shares of the portfolio or fund from which the investor is exchanging
were: (a) purchased with a sales load; (b) acquired by a previous exchange
from shares purchased with a sales load; or (c) acquired through reinvestment
of dividends or distributions paid with respect to the foregoing categories of
shares. To qualify, at the time of the exchange the investor must notify Bear
Stearns, the Authorized Dealer or the Transfer Agent. Any such qualification
is subject to confirmation of the investor's holdings through a check of
appropriate records. No fees currently are charged shareholders directly in
connection with exchanges, although the Fund reserves the right, upon not less
than 60 days written notice, to charge shareholders a $5.00 fee in accordance
with rules promulgated by the Securities and Exchange Commission. The Fund
reserves the right to reject any exchange request in whole or in part. The
Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.

The exchange of shares of one portfolio or fund for shares of another is
treated for federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
recognize a taxable gain or loss.

REDIRECTED DISTRIBUTION OPTION

The Redirected Distribution Option enables a shareholder to invest
automatically dividends and/or capital gain distributions, if any, paid by the
Portfolio in shares of the same class of another portfolio of the Fund or a
fund advised or sponsored by Bear Stearns of which the shareholder is an
investor, or the Money Market Portfolio of The RBB Fund, Inc. Shares of the
other portfolio or fund will be purchased at the then-current net asset value.
If an investor is investing in a class that charges a CDSC, the shares
purchased will be subject on redemption to the CDSC, if any, applicable to the
purchased shares.

This privilege is available only for existing accounts and may not be used to
open new accounts. Minimum subsequent investments do not apply. The Fund may
modify or terminate this privilege at any time or charge a service fee. No
such fee currently is contemplated.

How to Redeem Shares

GENERAL

The redemption price will be based on the net asset value next computed after
receipt of a redemption request; in certain instances a CDSC will be charged.
Investors may request redemption of Portfolio shares at any time. Redemption
requests may be made as described below. When a request is received in proper
form, the Portfolio will redeem the shares at the next determined net asset
value. If the investor holds Portfolio shares of more than one class, any
request for redemption must specify the class of shares being redeemed. If the
investor fails to specify the class of shares to be redeemed or if the
investor owns fewer shares of the class than specified to be redeemed, the
redemption request may be delayed until the Transfer Agent receives further
instructions from the investor, the investor's Bear Stearns account executive
or the investor's Authorized Dealer. The Fund imposes no charges (other than
any applicable CDSC) when shares are redeemed directly through Bear Stearns.

17
<PAGE>

The Portfolio ordinarily will make payment for all shares redeemed within
three days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. However, if an investor has purchased Portfolio shares by check
and subsequently submits a redemption request by mail, the redemption proceeds
will not be transmitted until the check used for investment has cleared, which
may take up to 15 days. The Fund will reject requests to redeem shares by
telephone or wire for a period of 15 days after receipt by the Transfer Agent
of the purchase check against which such redemption is requested. This
procedure does not apply to shares purchased by wire payment.

The Fund reserves the right to redeem investor accounts at its option upon not
less than 60 days written notice if the account's net asset value is $750 or
less, for reasons other than market conditions, and remains so during the
notice period. Shareholders who have redeemed Class A shares may reinstate
their Portfolio account without a sales charge up to the dollar amount
redeemed by purchasing Class A shares of the same Portfolio within 60 days of
the redemption. To take advantage of this reinstatement privilege,
shareholders must notify their Bear Stearns account executive, Authorized
Dealer or the Transfer Agent at the time the privilege is exercised.

CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES

A CDSC of 1% payable to Bear Stearns is imposed on any redemption of Class C
shares within one year of the date of purchase. No CDSC will be imposed to the
extent that the net asset value of the Class C shares redeemed does not exceed
(i) the current net asset value of Class C shares acquired through
reinvestment of dividends or capital gain distributions, plus (ii) increases
in the net asset value of an investor's Class C shares above the dollar amount
of all such investor's payments for the purchase of Class C shares held by the
investor at the time of redemption.

If the aggregate value of Class C shares redeemed has declined below their
original cost as a result of the Portfolio's performance, the applicable CDSC
may be applied to the then-current net asset value rather than the purchase
price.

In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in net asset value of Class C shares above
the total amount of payments for the purchase of Class C shares made during
the preceding year; then of amounts representing shares purchased more than
one year prior to the redemption; and finally, of amounts representing the
cost of shares purchased within one year prior to the redemption.

For example, assume an investor purchased 100 shares of the Portfolio at $10
per share for a cost of $1,000. Subsequently, the shareholder acquired 5
additional shares through dividend reinvestment. During the first year after
the purchase the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the net asset value had appreciated to
$12 per share, the value of the investor's shares would be $1,260 (105 shares
at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 1% for a total CDSC of $2.40.

The CDSC applicable to Class C shares will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined in
Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by employees
participating in Eligible Benefit Plans, (c) redemptions as a result of a
combination of any investment company with the Portfolio by merger,
acquisition of assets or otherwise, and (d) a distribution following
retirement under a tax-deferred retirement plan or upon attaining age 70 1/2
in the case of an IRA or Keogh plan or custodial account pursuant to Section
403(b) of the Code. If the Fund's Trustees determine to discontinue the waiver
of the CDSC, the disclosure in the Portfolio's prospectus will be revised
appropriately. Any Portfolio shares subject to a CDSC which were purchased
prior to the termination of such waiver will have the CDSC waived as provided
in the Portfolio's prospectus at the time of the purchase of such shares.

To qualify for a waiver of the CDSC, at the time of redemption an investor
must notify the Transfer Agent or the investor's Bear Stearns account
executive or the investor's Authorized Dealer must notify the Distributor. Any
such qualification is subject to confirmation of the investor's entitlement.

18
<PAGE>

PROCEDURES

Clients with a brokerage account may submit redemption requests to their
account executives or Authorized Dealers in person or by telephone, mail or
wire. As the Fund's agent, Bear Stearns or Authorized Dealers may honor a
redemption request by repurchasing Fund shares from a redeeming shareholder at
the shares' net asset value next computed after receipt of the request by Bear
Stearns or the Authorized Dealer. Under normal circumstances, within three
days, redemption proceeds will be paid by check or credited to the
shareholder's brokerage account at the election of the shareholder. Bear
Stearns account executives or Authorized Dealers are responsible for promptly
forwarding redemption requests to the Transfer Agent.

If an investor authorizes telephone redemption, the Transfer Agent may act on
telephone instructions from any person representing himself or herself to be a
representative of Bear Stearns or the Authorized Dealer and reasonably
believed by the Transfer Agent to be genuine. The Fund will require the
Transfer Agent to employ reasonable procedures, such as requiring a form of
personal identification, to confirm that instructions are genuine and, if it
does not follow such procedures, the Transfer Agent or the Fund may be liable
for any losses due to unauthorized or fraudulent instructions. Neither the
Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.

REDEMPTION THROUGH THE TRANSFER AGENT
Shareholders who are not clients with a brokerage account who wish to redeem
shares must redeem their shares through the Transfer Agent by mail; other
shareholders also may redeem Fund shares through the Transfer Agent. Mail
redemption requests should be sent to the Transfer Agent at: PFPC Inc.,
Attention: The Bear Stearns Funds--The Insiders Select Fund, P.O. Box 8960,
Wilmington, Delaware 19899-8960.

ADDITIONAL INFORMATION ABOUT REDEMPTIONS
A shareholder may have redemption proceeds of $500 or more wired to the
shareholder's brokerage account or a commercial bank account designated by the
shareholder. A transaction fee of $7.50 will be charged for payments by wire.
Questions about this option, or redemption requirements generally, should be
referred to the shareholder's Bear Stearns account executive, to any
Authorized Dealer, or to the Transfer Agent if the shares are not held in a
brokerage account.

If share certificates have been issued, written redemption instructions,
indicating the portfolio from which shares are to be redeemed, and duly
endorsed share certificates, must be received by the Transfer Agent in proper
form and signed exactly as the shares are registered. If the proceeds of the
redemption would exceed $25,000, or if the proceeds are not to be paid to the
record owner at the record address, or if the shareholder is a corporation,
partnership, trust or fiduciary, signature(s) must be guaranteed by any
eligible guarantor institution. A signature guarantee is designed to protect
the shareholders and the Portfolio against fraudulent transactions by
unauthorized persons. A signature guarantee may be obtained from a domestic
bank or trust company, broker, dealer, clearing agency or savings association
who are participants in a medallion program recognized by the securities
transfer association. The three recognized medallion programs are Securities
Transfer Agent Medallion Program (STAMP), Stock Exchanges Medallion Program
(SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP).
Signature Guarantees which are not a part of these programs will not be
accepted. Please note that a notary public stamp or seal is not acceptable.
The Fund reserves the right to amend or discontinue its signature guarantee
policy at any time and, with regard to a particular redemption transaction, to
require a signature guarantee at its discretion. Any questions with respect to
signature-guarantees should be directed to the Transfer Agent by calling 1-
800-447-1139.

During times of drastic economic or market conditions, investors may
experience difficulty in contacting Bear Stearns or Authorized Dealers by
telephone to request a redemption of Portfolio shares. In such cases,
investors should consider using the other redemption procedures described
herein. Use of these other redemption procedures may result in the redemption
request being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Portfolio's net asset value
may fluctuate.

AUTOMATIC WITHDRAWAL

Automatic Withdrawal permits investors to request withdrawal of a specified
dollar amount (minimum of $25) on either a monthly or quarterly basis if the
investor has a $5,000 minimum account. An

19
<PAGE>

application for Automatic Withdrawal can be obtained from Bear Stearns or the
Transfer Agent. Automatic Withdrawal may be ended at any time by the investor,
the Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through Automatic Withdrawal. Purchases of additional
shares concurrent with withdrawals generally are undesirable.

Class C shares withdrawn pursuant to the Automatic Withdrawal will be subject
to any applicable CDSC. Purchases of additional Class A shares where the sales
load is imposed concurrently with withdrawals of Class A shares generally are
undesirable.

Dividends, Distributions and Taxes

Dividends will be automatically reinvested in additional Portfolio shares at
net asset value, unless payment in cash is requested or dividends are
redirected into another fund pursuant to the Redirected Distribution Option.
The Portfolio ordinarily pays dividends from its net investment income and
distributes net realized securities gains, if any, once a year, but it may
make distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the 1940 Act. The Portfolio will not make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. Dividends are automatically reinvested in additional
Portfolio shares at net asset value, unless payment in cash is requested or
dividends are redirected into another fund pursuant to the Redirected
Distribution Option. All expenses are accrued daily and deducted before
declaration of dividends to investors. Dividends paid by each class of each
Portfolio will be calculated at the same time and in the same manner and will
be of the same amount, except that the expenses attributable solely to a
particular class will be borne exclusively by such class. Class C shares will
receive lower per share dividends than Class A shares because of the higher
expenses borne by Class C shares. See "Fee Table."

Dividends derived from net investment income, together with distributions from
net realized short-term securities gains and all or a portion of any gains
realized from the sale or disposition of certain market discount bonds, paid
by the Portfolio will be taxable to U.S. shareholders as ordinary income,
whether received in cash or reinvested in additional shares of the Portfolio
or redirected into another portfolio or fund. Distributions from net realized
long-term securities gains of the Portfolio will be taxable to U.S.
shareholders as long-term capital gains for federal income tax purposes,
regardless of how long shareholders have held their Portfolio shares and
whether such distributions are received in cash or reinvested in, or
redirected into other, shares. The Code provides that the net capital gain of
an individual generally will not be subject to federal income tax at a rate in
excess of 28%. Dividends and distributions may be subject to state and local
taxes.

Dividends, together with distributions from net realized short-term securities
gains and all or a portion of any gains realized from the sale or other
disposition of market discount bonds, paid by the Portfolio to a foreign
investor generally are subject to U.S. nonresident withholding taxes at the
rate of 30%, unless the foreign investor claims the benefit of a lower rate
specified in a tax treaty. Distributions from net realized long-term
securities gains paid by the Portfolio to a foreign investor as well as the
proceeds of any redemptions from a foreign investor's account, regardless of
the extent to which gain or loss may be realized, generally will not be
subject to U.S. nonresident withholding tax. However, such distributions may
be subject to backup withholding, as described below, unless the foreign
investor certifies his non-U.S. residency status.

Notice as to the tax status of investors' dividends and distributions will be
mailed to them annually. Investors also will receive periodic summaries of
their accounts which will include information as to dividends and
distributions from securities gains, if any, paid during the year.

The Code provides for the "carryover" of some or all of the sales load imposed
on the Portfolio's Class A shares if an investor exchanges such shares for
shares of another fund or portfolio advised or sponsored by BSFM or its
affiliates within 91 days of purchase and such other fund reduces or
eliminates its otherwise applicable sales load for the purpose of the
exchange. In this case, the amount of the sales load charged the investor for
such shares, up to the amount of the reduction of the sales load charged on
the exchange, is not included in the basis of such shares for purposes of
computing gain or loss on the exchange, and instead is added to the basis of
the fund shares received on the exchange.

20
<PAGE>

Generally, the Fund must withhold ("backup withholding") and remit to the U.S.
Treasury 31% of dividends, distributions from net realized securities gains
and the proceeds of any redemption, regardless of the extent to which gain or
loss may be realized, paid to a shareholder if such shareholder fails to
certify that the TIN furnished in connection with opening an account is
correct and that such shareholder has not received notice from the IRS of
being subject to backup withholding as a result of a failure to properly
report taxable dividend or interest income on a federal income tax return.
Furthermore, the IRS may direct the Fund to institute backup withholding if
the IRS determines that a shareholder's TIN is incorrect or if a shareholder
has failed to properly report taxable dividend and interest income on a
federal income tax return.

A TIN is either the Social Security number or employer identification number
of the record owner of the account. Any tax withheld as a result of backup
withholding does not constitute an additional tax imposed on the record owner
of the account, and may be claimed as a credit on the record owner's federal
income tax return.

While the Portfolio is not expected to have any federal tax liability,
investors should expect to be subject to federal, state or local taxes in
respect of their investment in Portfolio shares.

Management of the Fund believes that the Portfolio has qualified for the
fiscal year ended March 31, 1997 as a "regulated investment company" under the
Code. The Portfolio intends to continue to so qualify if such qualification is
in the best interests of its shareholders. Such qualification relieves the
Portfolio of any liability for federal income tax to the extent its earnings
are distributed in accordance with applicable provisions of the Code. The
Portfolio may be subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable investment income and
capital gains.

Each investor should consult its tax adviser regarding specific questions as
to federal, state or local taxes applicable to an investment in the Portfolio.

Performance Information

For purposes of advertising, performance for each class may be calculated on
the basis of average annual total return and/or total return. These total
return figures reflect changes in the price of the shares and assume that any
income dividends and/or capital gains distributions made by the Portfolio
during the measuring period were reinvested in shares of the same class. These
figures also take into account any applicable distribution and shareholder
servicing fees. As a result, at any given time, the performance of Class C
shares should be expected to be lower than that of Class A shares. Performance
for each class will be calculated separately.

Average annual total return is calculated pursuant to a standardized formula
which assumes that an investment in the Portfolio was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of a
stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements of
the Portfolio's performance will include the Portfolio's average annual total
return for one, five and ten year periods, or for shorter periods depending
upon the length of time during which the Portfolio has operated. Computations
of average annual total return for periods of less than one year represent an
annualization of the Portfolio's actual total return for the applicable
period.

Total return is computed on a per share basis and assumes the reinvestment of
dividends and distributions. Total return generally is expressed as a
percentage rate which is calculated by combining the income and principal
changes for a specified period and dividing by the net asset value (or maximum
public offering price in the case of Class A shares) per share at the
beginning of the period. Class C total return will reflect the deduction of
the CDSC. Advertisements may include the percentage rate of total return or
may include the value of a hypothetical investment at the end of the period
which assumes the application of the percentage rate of total return. Total
return for the Portfolio also may be calculated by using the net asset value
per share at the beginning of the period instead of the maximum offering price
per share at the beginning of the period for Class A shares or without giving
effect to any applicable CDSC at the end of the period for Class C shares.
Calculations based on the net asset value per share do not reflect the
deduction of the sales load on the Portfolio's Class A shares, which, if
reflected, would reduce the performance quoted.

21
<PAGE>

Performance will vary from time to time and past results are not necessarily
representative of future results. Investors should remember that performance
is a function of portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses. Performance
information, such as that described above, may not provide a basis for
comparison with other investments or other investment companies using a
different method of calculating performance.

Comparative performance information may be used from time to time in
advertising or marketing the Portfolio's shares, including data from Lipper
Analytical Services, Inc., Standard & Poor's 500 Composite Stock Price Index,
Wilshire 4500 Stock Index, Russell Small Cap Index, the Dow Jones Industrial
Average and other industry publications.

General Information

The Fund was organized as a business trust under the laws of The Commonwealth
of Massachusetts pursuant to an Agreement and Declaration of Trust (the "Trust
Agreement") dated September 29, 1994. The Fund commenced operations on or
about April 3, 1995 in connection with the offer of shares of certain of its
other portfolios. The Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $.001 per share. The Portfolio's
shares are classified into three Classes--Class A, Class C and Class Y. Each
share has one vote and shareholders will vote in the aggregate and not by
Class, except as otherwise required by law.

Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Portfolio. However, the
Trust Agreement disclaims shareholder liability for acts or obligations of the
Portfolio and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Fund or a
Trustee. The Trust Agreement provides for indemnification from the Portfolio's
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Portfolio. Thus, the risk of a shareholder
incurring financial loss on account of a shareholder liability is limited to
circumstances in which the Portfolio itself would be unable to meet its
obligations, a possibility which management believes is remote. Upon payment
of any liability incurred by the Portfolio, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the
Portfolio. The Fund's Trustees intend to conduct the operations of the
Portfolio in a way so as to avoid, as far as possible, ultimate liability of
the shareholders for liabilities of the Portfolio. As discussed under
"Management of the Fund" in the Portfolio's Statement of Additional
Information, the Portfolio ordinarily will not hold shareholder meetings;
however, shareholders under certain circumstances may have the right to call a
meeting of shareholders for the purpose of voting to remove Trustees.

To date, the Fund's Board has authorized the creation of seven portfolios of
shares. All consideration received by the Fund for shares of one of the
portfolios and all assets in which such consideration is invested will belong
to that portfolio (subject only to the rights of creditors of the Fund) and
will be subject to the liabilities related thereto. The assets attributable
to, and the expenses of, one portfolio (and as to classes within a portfolio)
are treated separately from those of the other portfolios (and classes). The
Fund has the ability to create, from time to time, new portfolios of shares
without shareholder approval.

Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Fund, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each portfolio affected by such matter. Rule 18f-2 further provides that a
portfolio shall be deemed to be affected by a matter unless it is clear that
the interests of such portfolio in the matter are identical or that the matter
does not affect any interest of such portfolio. However, Rule 18f-2 exempts
the selection of independent accountants and the election of Trustees from the
separate voting requirements of Rule 18f-2.

The Transfer Agent maintains a record of share ownership and will send
confirmations and statements of account.

Shareholder inquiries may be made by writing to the Fund at PFPC Inc.,
Attention: The Insiders Select Fund, P.O. Box 8960, Wilmington, Delaware
19899-8960, by calling 1-800-447-1139 or by calling Bear Stearns at 1-800-766-
4111.

22
<PAGE>

Appendix

INVESTMENT TECHNIQUES

In connection with its investment objective and policies, the Portfolio may
employ, among others, the following investment techniques which may involve
certain risks. Options transactions involve "derivative securities."

OPTIONS TRANSACTIONS

The Portfolio is permitted to invest up to 5% of its total assets, represented
by the premium paid, in the purchase of call and put options in respect of
specific securities (or groups or "baskets" of specific securities) in which
the Portfolio may invest. The Portfolio may write and sell covered call option
contracts on securities owned by the Portfolio not exceeding 20% of the value
of its net assets at the time such option contracts are written. The Portfolio
also may purchase call options to enter into closing purchase transactions.
The Portfolio also may write covered put option contracts to the extent of 20%
of the value of its net assets at the time such option contracts are written.
A call option gives the purchaser of the option the right to buy, and
obligates the writer to sell, the underlying security at the exercise price at
any time during the option period. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy,
the underlying security at the exercise price at any time during the option
period. A covered put option sold by the Portfolio exposes the Portfolio
during the term of the option to a decline in price of the underlying security
or securities. A put option sold by the Portfolio is covered when, among other
things, cash or liquid securities are placed in a segregated account with the
Fund's custodian to fulfill the obligation undertaken.

The Portfolio may purchase and sell call and put options on stock indexes
listed on U.S. securities exchanges or traded in the over-the-counter market.
A stock index fluctuates with changes in the market values of the stocks
included in the index. Because the value of an index option depends upon
movements in the level of the index rather than the price of a particular
stock, whether the Portfolio will realize a gain or loss from the purchase or
writing of options on an index depends upon movements in the level of stock
prices in the stock market generally or, in the case of certain indexes, in an
industry or market segment, rather than movements in the price of a particular
stock.

Successful use by the Portfolio of options will be subject to the Adviser's
ability to predict correctly movements in the direction of individual stocks,
the stock market generally, foreign currencies or interest rates. To the
extent the Adviser's predictions are incorrect, the Portfolio may incur losses
which could adversely affect the value of a shareholder's investment.

LENDING PORTFOLIO SECURITIES

From time to time, the Portfolio may lend securities from its portfolio of
investments to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. Such loans may not exceed
33 1/3% of the value of the Portfolio's total assets. In connection with such
loans, the Portfolio will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. The Portfolio can increase its income
through the investment of such collateral. The Portfolio continues to be
entitled to payments in amounts equal to the interest, dividends and other
distributions payable on the loaned security and receives interest on the
amount of the loan. Such loans will be terminable at any time upon specified
notice. The Portfolio might experience risk of loss if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement
with the Portfolio.

BORROWING MONEY

As a fundamental policy, the Portfolio is permitted to borrow to the extent
permitted under the 1940 Act. The 1940 Act permits an investment company to
borrow in an amount up to 33 1/3% of the value of such company's total assets.
However, the Portfolio currently intends to borrow money only for temporary or
emergency (not leveraging) purposes, in an amount up to 15% of the value of
its total assets (including the amount borrowed) valued at the lesser of cost
or market, less liabilities (not including the amount borrowed) at the time
the borrowing is made. While borrowings exceed 5% of the Portfolio's total
assets, the Portfolio will not make any additional investments.

A-1
<PAGE>

CERTAIN PORTFOLIO SECURITIES

CONVERTIBLE SECURITIES

Convertible securities are fixed-income securities that may be converted at
either a stated price or stated rate into a specified number of shares of
common stock of the same or a different issuer. Convertible securities have
general characteristics similar to both fixed-income and equity securities.
Although to a lesser extent than with fixed-income securities generally, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the
underlying common stock, and, therefore, also will react to variations in the
general market for equity securities. A unique feature of convertible
securities is that as the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield basis,
and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.

As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Of course, like all fixed-income securities, there can be no assurance
of current income because the issuers of the convertible securities may
default on their obligations. Convertible securities, however, generally offer
lower interest or dividend yields than non-convertible securities of similar
quality because of the potential for capital appreciation. A convertible
security, in addition to providing fixed income, offers the potential for
capital appreciation through the conversion feature, which enables the holder
to benefit from increases in the market price of the underlying common stock.
There can be no assurance of capital appreciation, however, because securities
prices fluctuate.

Convertible securities generally are subordinated to other similar but non-
convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible
securities.

MONEY MARKET INSTRUMENTS

The Portfolio may invest, in the circumstances described under "Description of
the Fund--Management Policies," in the following types of money market
instruments, each of which at the time of purchase must have or be deemed to
have under rules of the Securities and Exchange Commission remaining
maturities of 13 months or less.

U.S. GOVERNMENT SECURITIES
The Portfolio may purchase securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, which include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Treasury Bills have initial maturities of one year or less; Treasury
Notes have initial maturities of one to ten years; and Treasury Bonds
generally have initial maturities of greater than ten years. Some obligations
issued or guaranteed by U.S. Government agencies and instrumentalities, for
example, Government National Mortgage Association pass-through certificates,
are supported by the full faith and credit of the U.S. Treasury; others, such
as those of the Federal Home Loan Banks, by the right of the issuer to borrow
from the U.S. Treasury; others, such as those issued by the Federal National
Mortgage Association, by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others,
such as those issued by the Student Loan Marketing Association, only by the
credit of the agency or instrumentality. These securities bear fixed, floating
or variable rates of interest. Principal and interest may fluctuate based on
generally recognized reference rates or the relationship of rates. While the
U.S. Government provides financial support to such U.S. Government-sponsored
agencies or instrumentalities, no assurance can be given that it will always
do so, since it is not so obligated by law.

BANK OBLIGATIONS
The Portfolio may invest in bank obligations, including certificates of
deposit, time deposits, bankers' acceptances and other short-term obligations
of domestic banks, foreign subsidiaries of domestic banks, foreign branches of
domestic banks, and domestic and foreign branches of foreign banks,

A-2
<PAGE>

domestic savings and loan associations and other banking institutions. With
respect to such securities issued by foreign branches of domestic banks,
foreign subsidiaries of domestic banks, and domestic and foreign branches of
foreign banks, the Portfolio may be subject to additional investment risks
that are different in some respects from those incurred by a fund which
invests only in debt obligations of U.S. domestic issuers. Such risks include
possible future political and economic developments, the possible imposition
of foreign withholding taxes on interest income payable on the securities, the
possible establishment of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the payment of
principal and interest on these securities and the possible seizure or
nationalization of foreign deposits.

Certificates of deposit are negotiable certificates evidencing the obligation
of a bank to repay funds deposited with it for a specified period of time.

Time deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time at a stated interest rate. Time deposits which
may be held by the Portfolio will not benefit from insurance from the Bank
Insurance Fund or the Savings Association Insurance Fund administered by the
Federal Deposit Insurance Corporation. The Portfolio will not invest more than
15% of the value of its net assets in time deposits maturing in more than
seven days and in other securities that are illiquid.

Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.

REPURCHASE AGREEMENTS
Repurchase agreements involve the acquisition by the Portfolio of an
underlying debt instrument, subject to an obligation of the seller to
repurchase, and the Portfolio to resell, the instrument at a fixed price
usually not more than one week after its purchase. Certain costs may be
incurred by the Portfolio in connection with the sale of the securities if the
seller does not repurchase them in accordance with the repurchase agreement.
In addition, if bankruptcy proceedings are commenced with respect to the
seller of the securities, realization on the securities by the Portfolio may
be delayed or limited.

COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS

Commercial paper consists of short-term, unsecured promissory notes issued to
finance short-term credit needs. The commercial paper purchased by the
Portfolio will consist only of direct obligations which, at the time of their
purchase, are (a) rated not lower than Prime-1 by Moody's Investors Service
Inc. ("Moody's"), A-1 by Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc. ("S&P"), F-1 by Fitch Investors Service, L.P.
("Fitch") or Duff-1 by Duff & Phelps Credit Rating Co. ("Duff"), (b) issued by
companies having an outstanding unsecured debt issue currently rated not lower
than Aa3 by Moody's or AA- by S&P, Fitch or Duff, or (c) if unrated,
determined by the Adviser to be of comparable quality to those rated
obligations which may be purchased by the Portfolio. The Portfolio may
purchase floating and variable rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of one year, but
which permit the holder to demand payment of principal at any time or at
specified intervals.

WARRANTS

The Portfolio may invest up to 5% of its net assets in warrants, except that
this limitation does not apply to warrants acquired in units or attached to
securities. Included in such amount, but not to exceed 2% of the value of the
Portfolio's net assets, may be warrants which are not listed on the New York
or American Stock Exchange. A warrant is an instrument issued by a corporation
which gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time.

INVESTMENT COMPANY SECURITIES

The Portfolio may invest in securities issued by other investment companies.
Under the 1940 Act, the Portfolio's investment in such securities currently is
limited to, subject to certain exceptions, (i) 3% of the total voting stock of
any one investment company, (ii) 5% of the Portfolio's total assets with
respect to any one investment company and (iii) 10% of the Portfolio's total
assets in the aggregate. Investments in the securities of other investment
companies will involve duplication of advisory fees and certain other
expenses.

A-3
<PAGE>

ILLIQUID SECURITIES

The Portfolio may invest up to 15% of the value of its net assets in
securities as to which a liquid trading market does not exist, provided such
investments are consistent with the Portfolio's investment objective. Such
securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, repurchase agreements providing for settlement in more than seven days
after notice, and options traded in the over-the-counter market and securities
used to cover such options. As to these securities, the Portfolio is subject
to a risk that should the Portfolio desire to sell them when a ready buyer is
not available at a price the Portfolio deems representative of their value,
the value of the Portfolio's net assets could be adversely affected.

A-4
<PAGE>

The
Bear Stearns
Funds

245 Park Avenue

New York, NY 10167

1-800-766-4111

Distributor

Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167

Investment Adviser

Bear Stearns Funds Management Inc.
245 Park Avenue
New York, NY 10167

Custodian

Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540

Transfer & Dividend
Disbursement Agent

PFPC Inc.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809

Counsel

Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022

Independent Auditors

Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE INSIDERS SELECT FUND'S
PROSPECTUS AND IN THE INSIDERS SELECT FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFER OF THE INSIDERS SELECT FUND'S SHARES, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND. THE INSIDERS SELECT FUND'S PROSPECTUS DOES
NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.

BSF-P-005-04

<PAGE>

T H E B E A R S T E A R N S F U N D S
2 4 5 P A R K A V E N U E N E W Y O R K, N Y 1 0 1 6 7
1 . 8 0 0 . 7 6 6 . 4 1 1 1

PROSPECTUS

The Insiders Select Fund

CLASS Y SHARES

THE BEAR STEARNS FUNDS (the "Fund") is an open-end management investment com-
pany, known as a mutual fund. The Fund permits you to invest in separate port-
folios. By this Prospectus, Class Y shares of The Insiders Select Fund, a non-
diversified portfolio (the "Portfolio"), are offered. The Portfolio's invest-
ment objective is capital appreciation.

Class Y shares are sold at net asset value without a sales charge to investors
whose minimum investment is $2.5 million. The Portfolio issues other classes
of shares which have sales charges and different expenses which would affect
performance. Investors desiring to obtain information about these other clas-
ses of shares should call 1-800-766-4111 or ask their sales representative or
the Portfolio's distributor.

BEAR, STEARNS & CO. INC. ("Bear Stearns"), an affiliate of BSFM, serves as the
Portfolio's distributor.

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

THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE PORTFOLIO THAT YOU
SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE REFER-
ENCE.

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

Mutual fund shares are not deposits or obligations of, or guaranteed or en-
dorsed by, any bank, and are not federally insured by the Federal Deposit In-
surance Corporation, the Federal Reserve Board, or any other agency.

The net asset value for funds of this type will fluctuate.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

JULY 29, 1997
<PAGE>

Table of Contents

<TABLE>
<CAPTION>
PAGE
<S> <C>
Fee Table.................................................................. 3
Financial Highlights....................................................... 4
Description of the Portfolio............................................... 5
Risk Factors............................................................. 8
Management of the Fund..................................................... 9
How to Buy Shares.......................................................... 11
Shareholder Services....................................................... 13
How to Redeem Shares....................................................... 14
Dividends, Distributions and Taxes......................................... 15
Performance Information.................................................... 16
General Information........................................................ 17
Appendix................................................................... A-1
</TABLE>

2
<PAGE>

Fee Table
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
CLASS Y
- -------------------------------------------------------------------------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)............................................................... None
Maximum Deferred Sales Charge Imposed on Redemptions (as a percentage
of the amount subject to charge)..................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
Advisory Fees (after fee waiver)*.................................... 0.00%**
12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement)*........................ 1.15%
Total Portfolio Operating Expenses (after fee waiver and expense
reimbursement)*...................................................... 1.15%
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period:
1 YEAR............................................................. $ 12
3 YEARS............................................................ $ 37
5 YEARS............................................................ $ 63
10 YEARS............................................................ $140
</TABLE>
- ------

*BSFM has undertaken to waive its investment advisory fee and assume certain
expenses of the Portfolio other than brokerage commissions, extraordinary
items, interest and taxes to the extent Total Portfolio Operating Expenses ex-
ceed 1.15% for Class Y. Without such waiver and expense reimbursement, Advi-
sory Fees stated above would be 1.00%, Other Expenses would be 1.96% and Total
Portfolio Operating Expenses would be 2.96% for Class Y.

**The Advisory Fee is payable at an annual rate equal to 1% of the Portfolio's
average daily net assets, subject to increase or decrease by up to 0.50% annu-
ally depending on the Portfolio's performance. See "Management of the Fund--
Investment Adviser."

THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE
OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE
PORTFOLIO'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.

The purpose of the foregoing table is to assist you in understanding the costs
and expenses borne by the Portfolio and investors, the payment of which will
reduce investors' annual return. In addition to the expenses noted above, the
Fund will charge $7.50 for each wire redemption. See "How to Redeem Shares."
For a description of the expense reimbursement or waiver arrangements in ef-
fect, see "Management of the Fund."

3
<PAGE>

Financial Highlights

Contained below is per share operating performance data, total investment re-
turn, ratios to average net assets and other supplemental data for Class Y
shares of the Portfolio for the periods indicated. This information has been
derived from information provided in the Portfolio's financial statements.

<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 20, 1995*
FOR THE FISCAL YEAR ENDED THROUGH
MARCH 31, 1997 MARCH 31, 1996
------------------------- --------------
CLASS Y CLASS Y
------------------------- --------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of period. $ 14.02 $ 12.12
------- -------
Net investment income (1)............ 0.08 0.07
Net realized and unrealized gain on
investments and securities sold
short (2)........................... 2.49 1.87
------- -------
Net increase in net assets resulting
from operations..................... 2.57 1.94
------- -------
Dividends and distributions to
shareholders from
Net investment income.............. (0.02) (0.04)
Net realized capital gains......... (1.91) --
------- -------
(1.93) (0.04)
------- -------
Net asset value, end of period ...... $ 14.66 $ 14.02
======= =======
Total investment return (3).......... 18.81% 15.98%(4)
======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)............................ $ 1,557 $ 1,293
Ratio of expenses to average net
assets (1).......................... 1.15% 1.15%(4)
Ratio of net investment income to av-
erage net assets (1)................ 0.60% 0.97%(4)
Decrease reflected in above expense
ratios and net investment income due
to waivers and reimbursements....... 1.81% 2.04%(4)
Portfolio turnover rate.............. 128.42% 93.45%(5)
Average commission rate per share
(6)................................. $0.0264 $0.0294
</TABLE>
- ------

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

** Calculated based on shares outstanding on the first and last day of the re-
spective periods, except for dividends and distributions, if any, which are
based on the actual shares outstanding on the date of distribution.

(1) Reflects waivers and reimbursements.

(2) The amounts shown for a share outstanding throughout the period are not in
accord with the changes in the aggregate gains and losses in investments
during the period because of the timing of sales and repurchases of Port-
folio shares in relation to fluctuating net asset value during the period.

(3) Total investment return is calculated assuming a purchase of shares on the
first day and a sale of shares on the last day of each period reported and
includes reinvestment of dividends and distributions, if any. Total in-
vestment return is not annualized.

(4) Annualized.

(5) Not annualized.

(6) Represents average commission rate per share charged to the Portfolio on
purchases and sales of investments subject to such commissions during each
period

4
<PAGE>

Description of the Portfolio

INVESTMENT OBJECTIVE

The Portfolio's investment objective is capital appreciation. The Portfolio's
investment objective cannot be changed without approval by the holders of a
majority as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), of the Portfolio's outstanding voting shares. There can be no as-
surance that the Portfolio's investment objective will be achieved.

INVESTMENT STRATEGY

The Adviser selects portfolio securities by analyzing the behavior of (i) cor-
porate insiders--officers, directors and significant stockholders--through an
analysis of their publicly filed reports of their trading activities in the
equity securities of the companies for which they are insiders, (ii) financial
analysts, through an analysis of their published reports about covered compa-
nies, including predicted earnings and revisions to predicted earnings, and
(iii) the company itself, through an analysis of its behavior as to corporate
finance matters, such as stock repurchase programs, dividend policies and new
securities issuance.

Corporate insiders are believed by the Adviser to be in the best position to
understand the near- term prospects of their companies. The Adviser believes
that insider behavior can be observed and analyzed since insiders are required
to disclose transactions in their company's equity securities to the Securi-
ties and Exchange Commission generally no later than the tenth day of the
month following the transaction. Each month many thousands of these disclo-
sures are received. The Adviser believes that collecting, classifying and ana-
lyzing these transactions provides valuable investment management information.

These insiders may have many reasons for transacting in company stock and
stock options. Many of these are entirely incidental to the future of the com-
pany. For example, an insider may sell stock to buy a home or finance a col-
lege education for his or her child. Likewise a new management team may wish
to signal confidence in the company by making token purchases of the company's
equity. Many other transactions, however, are related directly to the insid-
er's beliefs about the near-term price expectations for the company's stock.
An insider who exercises long-term options early for small profits likely be-
lieves the stock soon will decline. Insiders who exercise options, hold the
stock, and buy in the open market probably believe that the stock soon will
rise. Clusters of insiders making substantial buys or sells indicate broad
agreement within a firm as to the direction of the stock.

Part of the normal activity of every public company is its financing deci-
sions. A company must routinely decide whether to maintain or change its divi-
dend policy, whether to buy its own stock in the open market or whether to is-
sue new securities. From time to time the company may decide that its stock is
undervalued. Many firms see undervaluation as an opportunity to purchase the
company's stock in the open market. The Adviser believes that by monitoring
changes in shares outstanding (in the hands of the public), a useful signal
can be extracted relating to the companies' beliefs about its
prospects. Similarly, the company's decision to sell securities to the public
or another firm can be an indication that the company believes that its stock
has reached a near-term high, a potentially useful sell signal.

Insiders, analysts and the company each send signals that can be analyzed by
the Adviser to produce valuable information about the prospects for individual
companies. The Adviser believes that the most powerful analysis, however,
comes from the interaction of all three sources. While no one signal alone de-
termines whether a security will be purchased or sold, no security will be
considered for purchase or sale unless a positive or negative signal, as the
case may be, is received from insider behavior. In its analysis, the Adviser
uses only data that is available to the public. The Adviser obtains the data
on insider trading activity from CDA/Investnet, which compiles this informa-
tion from publicly available Securities and Exchange Commission filings.

5
<PAGE>

MANAGEMENT POLICIES

By investing in this manner--that is, purchasing other equity securities in a
manner intended to approximate or exceed the performance of the S&P 500
Index--the Adviser seeks to exceed the total return of the S&P 500 Index.

INVESTMENT TECHNIQUES

6
<PAGE>

borrowed by purchasing it at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security
was sold by the Portfolio. Until the security is replaced, the Portfolio is
required to pay to the lender amounts equal to any dividend which accrues
during the period of the loan. To borrow the security, the Portfolio also may
be required to pay a premium, which would increase the cost of the security
sold. The proceeds of the short sale will be retained by the broker, to the
extent necessary to meet margin requirements, until the short position is
closed out.

Until the Portfolio replaces a borrowed security in connection with a short
sale, the Portfolio will: (a) maintain daily a segregated account, containing
liquid securities, at such a level that the amount deposited in the account
plus the amount deposited with the broker as collateral always equals the cur-
rent value of the security sold short; or (b) otherwise cover its short posi-
tion in accordance with positions taken by the staff of the Securities and Ex-
change Commission.

The Portfolio anticipates that the frequency of short sales will vary substan-
tially in different periods, and it does not intend that any specified portion
of its assets, as a matter of practice, will be invested in short sales. How-
ever, no securities will be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed
25% of the value of the Portfolio's net assets. The Portfolio may not sell
short the securities of any single issuer listed on a national securities ex-
change to the extent of more than 5% of the value of its net assets. The Port-
folio may not sell short the securities of any class of an issuer to the ex-
tent, at the time of the transaction, of more than 2% of the outstanding secu-
rities of that class.

In addition to the short sales discussed above, the Portfolio may make short
sales "against the box," a transaction in which the Portfolio enters into a
short sale of a security which the Portfolio owns. The proceeds of the short
sale will be held by a broker until the settlement date at which time the
Portfolio delivers the security to close the short position. The Portfolio re-
ceives the net proceeds from the short sale. The Portfolio at no time will
have more than 15% of the value of its net assets in deposits on short sales
against the box. It currently is anticipated that the Portfolio will make
short sales against the box for purposes of protecting the value of the Port-
folio's net assets.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Portfolio may enter into stock index futures contracts, and options with
respect thereto, in U.S. domestic markets. See "Appendix--Investment Tech-
niques--Options Transactions." These transactions will be entered into as a
substitute for comparable market positions in the underlying securities or for
hedging purposes. Although the Portfolio is not a commodity pool, it is sub-
ject to rules of the Commodity Futures Trading Commission (the "CFTC") limit-
ing the extent to which it may engage in these transactions.

The Portfolio's commodities transactions must constitute bona fide hedging or
other permissible transactions pursuant to regulations promulgated by the
CFTC. In addition, the Portfolio may not engage in such transactions if the
sum of the amount of initial margin deposits and premiums paid for unexpired
commodity options, other than for bona fide hedging transactions, would exceed
5% of the liquidation value of the Portfolio's assets, after taking into ac-
count unrealized profits and unrealized losses on such contracts it has en-
tered into; provided, however, that in the case of an option that is in-the-
money at the time of purchase, the in-the-money amount may be excluded in cal-
culating the 5% limitation. To the extent the Portfolio engages in the use of
futures and options on futures for other than bona fide hedging purposes, the
Portfolio may be subject to additional risk.

7
<PAGE>

day. Once the daily limit has been reached in a particular contract, no trades
may be made that day at a price beyond that limit or trading may be suspended
for specified periods during the trading day. Futures contract prices could
move to the limit for several consecutive trading days with little or no trad-
ing, thereby preventing prompt liquidation of futures positions and poten-
tially subjecting the Portfolio to substantial losses. In addition, engaging
in futures transactions in foreign markets may involve greater risks than
trading on domestic exchanges.

FUTURE DEVELOPMENTS

The Portfolio may take advantage of opportunities in the area of options and
futures contracts, options on futures contracts and any other derivative
investments which are not presently contemplated for use by the Portfolio or
which are not currently available but which may be developed, to the extent
such opportunities are both consistent with the Portfolio's investment
objective and legally permissible for the Portfolio. Before entering into such
transactions or making any such investment, the Portfolio will provide
appropriate disclosure in its prospectus.

CERTAIN FUNDAMENTAL POLICIES

CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES

RISK FACTORS

No investment is free from risk. Investing in the Portfolio will subject
investors to certain risks which should be considered.

NET ASSET VALUE FLUCTUATIONS

The Portfolio's net asset value per share is not fixed and should be expected
to fluctuate. Investors should purchase Portfolio shares only as a supplement
to an overall investment program and only if investors are willing to
undertake the risks involved.

8
<PAGE>

NON-DIVERSIFIED STATUS

The Portfolio's classification as a "non-diversified" investment company means
that the proportion of its assets that may be invested in the securities of a
single issuer is not limited by the 1940 Act. However, the Portfolio intends
to conduct its operations so as to qualify as a "regulated investment company"
for purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
which requires that, at the end of each quarter of its taxable year, (i) at
least 50% of the market value of the Portfolio's total assets be invested in
cash, U.S. Government securities, the securities of other regulated investment
companies and other securities, with such other securities of any one issuer
limited for the purposes of this calculation to an amount not greater than 5%
of the value of the Portfolio's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its
total assets be invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies). Since a relatively high percentage of the Portfolio's assets may
be invested in the securities of a limited number of issuers, some of which
may be within the same industry or economic sector, the Portfolio's securities
may be more susceptible to any single economic, political or regulatory
occurrence than the portfolio securities of a diversified investment company.

SIMULTANEOUS INVESTMENTS

Management of the Fund

BOARD OF TRUSTEES

INVESTMENT ADVISER

9
<PAGE>

BSFM supervises and assists in the overall management of the Portfolio's
affairs under an Investment Advisory Agreement between BSFM and the Fund,
subject to the overall authority of the Fund's Board of Trustees in accordance
with Massachusetts law. BSFM uses a team approach to money management
consisting of portfolio managers, assistant portfolio managers and analysts
performing as a dynamic unit to manage the assets of the Portfolio. The team
consists of Mark Kurland, Senior Portfolio Manager; Robert Reitzes, Senior
Portfolio Manager; Jim McCluskey, Senior Portfolio Manager; Gail Sprute,
Portfolio Manager/Analyst and Harris Cohen, Portfolio Manager/Analyst. Jim
McCluskey leads the portfolio management team for the Portfolio. Mr.
McCluskey, a Chartered Financial Analyst, joined BSFM in May 1997 as a Senior
Managing Director and Senior Portfolio Manager. From 1989 through 1997, he was
a Senior Portfolio Manager at Spare, Kaplan, Bischel & Associates, an
institutional asset management firm where he co-managed over $2 billion in
assets.

The monthly Total Advisory Fee is calculated as follows: (a) one-twelfth of
the 1.0% annual Basic Fee rate (0.083%) is applied to the Portfolio's average
daily net assets over the most recent calendar month, giving a dollar amount
which is the Basic Fee for that month; (b) one-twelfth of the applicable
performance adjustment rate from the table below is applied to the Portfolio's
average daily net assets over the most recent calendar month, giving a dollar
amount which is the Monthly Performance Adjustment (for the first twelve-month
period, no performance adjustment will be made); and (c) the Monthly
Performance Adjustment is then added to or subtracted from the Basic Fee and
the result is the amount payable by the Portfolio to BSFM as the Total
Advisory Fee for that month.

The full range of Total Advisory Fees on an annualized basis is as follows:

10
<PAGE>

The Portfolio's administrator is BSFM. Under the terms of an Administration
Agreement with the Fund, BSFM generally supervises all aspects of the opera-
tion of the Portfolio, subject to the overall authority of the Fund's Board of
Trustees in accordance with Massachusetts law. For providing administrative
services to the Portfolio, the Fund has agreed to pay BSFM a monthly fee at
the annual rate of 0.15 of 1% of the Portfolio's average daily net assets. Un-
der the terms of an Administrative Services Agreement with the Fund, PFPC Inc.
provides certain administrative services to the Portfolio. For providing these
services, the Fund has agreed to pay PFPC Inc. an annual fee, as set as fol-
lows: 0.10 of 1% per annum of the first $200 million of the Portfolio's aver-
age daily net assets, 0.075 of 1% per annum of the next $200 million up to
$400 million of the Portfolio's average daily net assets, 0.05 of 1% of the
next $200 million up to $600 million of the Portfolio's average daily net as-
sets, 0.03 of 1% of per annum of average daily net assets in excess of $600
million. These advisory fees are subject to a monthly minimum fee of $11,000.

For the fiscal year ended March 31, 1997, the Portfolio paid PFPC Inc. a monthly
fee at the effective annual rate of 0.45 of 1% of the Portfolio's average daily
net assets.

From time to time, BSFM may waive receipt of its fees and/or voluntarily as-
sume certain Portfolio expenses, which would have the effect of lowering the
Portfolio's expense ratio and increasing yield to investors at the time such
amounts are waived or assumed, as the case may be. The Portfolio will not pay
BSFM at a later time for any amounts it may waive, nor will the Portfolio re-
imburse BSFM for any amounts it may assume. From time to time, PFPC Inc. may
waive a portion of its fee. Effective May 1, 1996, and until further notice,
PFPC Inc. will reduce its monthly minimum to $7,500 for net assets of less
than $25 million; $9,167 for net assets of $25 million to $50 million; $11,000
for net assets in excess of $50 million. PFPC Inc. reserves the right to re-
voke this voluntary fee waiver at any time.

Bear Stearns has agreed to permit the Fund to use the name "Bear Stearns" or
derivatives thereof as part of the Fund name for as long as the Investment Ad-
visory Agreement is in effect.

DISTRIBUTOR

CUSTODIAN AND TRANSFER AGENT

EXPENSE LIMITATION

BSFM has undertaken until such time as it gives investors at least 60 days no-
tice to the contrary that, if in any fiscal year, certain expenses, including
the investment advisory fee, exceed 1.15% of Class Y's average daily net as-
sets for the fiscal year, BSFM may waive a portion of its investment advisory
fee or bear other expenses to the extent of the excess expense.

How to Buy Shares

GENERAL

The minimum initial investment is $2.5 million. Subsequent investments may be
made in any amount. Share certificates are issued only upon written request.
The Fund reserves the right to reject any purchase order. The Fund reserves
the right to vary the initial and subsequent investment minimum requirements
at any time. Investments by employees of Bear Stearns and its affiliates are
not subject

11
<PAGE>

to the minimum investment requirement. In addition, accounts under management
of Bear Stearns, its affiliates or authorized dealers are not subject to the
minimum investment requirement.

Purchases of the Portfolio's shares may be made through a brokerage account
maintained with Bear Stearns or through certain investment dealers who are
members of the National Association of Securities Dealers, Inc. who have sales
agreements with Bear Stearns (an "Authorized Dealer"). Purchases of the Port-
folio's shares also may be made directly through the Transfer Agent. Investors
must specify that Class Y is being purchased.

Purchases are effected at Class Y's net asset value next determined after a
purchase order is received by Bear Stearns, an Authorized Dealer or the Trans-
fer Agent (the "trade date"). Payment for Portfolio shares generally is due to
Bear Stearns or the Authorized Dealer on the third business day (the "settle-
ment date") after the trade date. Investors who make payment before the set-
tlement date may permit the payment to be held in their brokerage accounts or
may designate a temporary investment for payment until the settlement date. If
a temporary investment is not designated, Bear Stearns or the Authorized
Dealer will benefit from the temporary use of the funds if payment is made be-
fore the settlement date.

PURCHASE PROCEDURES

Purchases through Bear Stearns account executives or Authorized Dealers may be
made by check (except that a check drawn on a foreign bank will not be accept-
ed), Federal Reserve draft or by wiring Federal Funds with funds held in bro-
kerage accounts at Bear Stearns or the Authorized Dealer. Checks or Federal
Reserve drafts should be made payable as follows: (i) to Bear Stearns or an
investor's Authorized Dealer or (ii) to "The Bear Stearns Funds--The Insiders
Select Fund--Class Y" if purchased directly from the Portfolio, and should be
directed to the Transfer Agent: PFPC Inc., Attention: The Bear Stearns Funds--
The Insiders Select Fund--Class Y, P.O. Box 8960, Wilmington, Delaware 19899-
8960. Direct overnight deliveries to PFPC Inc. 400 Bellevue Parkway, Suite
108, Wilmington, Delaware 19809. Payment by check or Federal Reserve draft
must be received within three business days of receipt of the purchase order
by Bear Stearns or an Authorized Dealer. Shareholders may not purchase shares
of the Portfolio with a check payable by a third party and endorsed over to
the Portfolio. Orders placed directly with the Transfer Agent must be accompa-
nied by payment. Bear Stearns (or an investor's Authorized Dealer) is respon-
sible for forwarding payment promptly to the Fund. The Fund will charge $7.50
for each wire redemption. The payment proceeds of a redemption of shares re-
cently purchased by check may be delayed as described under "How to Redeem
Shares."

Investors who are not Bear Stearns clients may purchase Portfolio shares
through the Transfer Agent. To make an initial investment in the Portfolio, an
investor must establish an account with the Portfolio by furnishing necessary
information to the Fund. An account with the Portfolio may be established by
completing and signing the Account Information Form, a copy of which is at-
tached to this Prospectus, indicating which class of shares is being purchased
and mailing it, together with a check to cover the purchase, to PFPC Inc., At-
tention: The Bear Stearns Funds--The Insiders Select Fund--Class Y, P.O. Box
8960, Wilmington, Delaware 19899-8960.

Subsequent purchases of shares may be made by checks made payable to the Fund
and directed to the address set forth in the preceding paragraph.

Purchase orders received by Bear Stearns, an Authorized Dealer or the Transfer
Agent before the close of regular trading on the New York Stock Exchange (cur-
rently 4:00 p.m., New York time) on any day the Portfolio calculates its net
asset value are priced according to the net asset value determined on that
date. Purchase orders received after the close of trading on the New York
Stock Exchange are priced as of the time the net asset value is next deter-
mined.

Shares of the Portfolio are sold on a continuous basis. Net asset value per
share is determined as of the close of regular trading on the floor of the New
York Stock Exchange (currently 4:00 p.m., New York time) on each business day.
The net asset value per share of Class Y of the Portfolio is computed by di-
viding the value of the Portfolio's net assets represented by Class Y (i.e.,
the value of its assets less liabilities) by the total number of shares of
Class Y outstanding. The Portfolio's investments are valued based on market
value or, where market quotations are not readily available, based on fair
value as determined in good faith by, or in accordance with procedures estab-
lished by, the Fund's

12
<PAGE>

Board of Trustees. For further information regarding the methods employed in
valuing the Portfolio's investments, see "Determination of Net Asset Value" in
the Portfolio's Statement of Additional Information.

Federal regulations require that investors provide a certified Taxpayer Iden-
tification Number (a "TIN") upon opening or reopening an account. See "Divi-
dends, Distributions and Taxes." Failure to furnish a certified TIN to the
Fund could subject the investor to backup withholding and a $50 penalty im-
posed by the Internal Revenue Service (the "IRS").

Shareholder Services

EXCHANGE PRIVILEGE

The Exchange Privilege enables an investor to purchase, in exchange for Class
Y shares of the Portfolio, Class Y shares of the Fund's other portfolios or
shares of certain other funds sponsored or advised by Bear Stearns, including
the Emerging Markets Debt Portfolio of Bear Stearns Investment Trust, and the
Money Market Portfolio of The RBB Fund, Inc., to the extent such shares are
offered for sale in the investor's state of residence. These funds have dif-
ferent investment objectives which may be of interest to investors. To use
this privilege, investors should consult their account executive at Bear
Stearns, their account executive at an Authorized Dealer or the Transfer Agent
to determine if it is available and whether any conditions are imposed on its
use.

To use this privilege, exchange instructions must be given to the Transfer
Agent in writing or by telephone. A shareholder wishing to make an exchange
may do so by sending a written request to the Transfer Agent at the address
given above in "How to Buy Shares--General." Shareholders are automatically
provided with telephone exchange privileges when opening an account, unless
they indicate on the account application that they do not wish to use this
privilege. Shareholders holding share certificates are not eligible to ex-
change shares of the Portfolio by phone because share certificates must accom-
pany all exchange requests. To add this feature to an existing account that
previously did not provide for this option, a Telephone Exchange Authorization
Form must be filed with the Transfer Agent. This form is available from the
Transfer Agent. Once this election has been made, the shareholder may contact
the Transfer Agent by telephone at 1-800-447-1139 to request the exchange.
During periods of substantial economic or market change, telephone exchanges
may be difficult to complete and shareholders may have to submit exchange re-
quests to the Transfer Agent in writing.

If the exchanging shareholder does not currently own Class Y shares of the
portfolio or fund whose shares are being acquired, a new account will be es-
tablished with the same registration, dividend and capital gain options and
Authorized Dealer of record as the account from which shares are exchanged,
unless otherwise specified in writing by the shareholder with all signatures
guaranteed by an eligible guarantor institution as described below. The Ex-
change Privilege may be modified or terminated at any time, or from time to
time, by the Fund on 60 days notice to the affected portfolio or fund share-
holders. The Fund, BSFM and Bear Stearns will not be liable for any loss, lia-
bility, cost or expense for acting upon telephone instructions that are rea-
sonably believed to be genuine. In attempting to confirm that telephone in-
structions are genuine, the Fund will use such procedures as are considered
reasonable, including recording those instructions and requesting information
as to account registration (such as the name in which an account is regis-
tered, the account number, recent transactions in the account, and the account
holder's Social Security number, address and/or bank).

Before any exchange, the investor must obtain and should review a copy of the
current prospectus of the portfolio or fund into which the exchange is being
made. Prospectuses may be obtained free of charge from Bear Stearns, any Au-
thorized Dealer or the Transfer Agent. When establishing a new account by ex-
change, the Class Y shares being exchanged must have a value of at least the
minimum initial investment required for the portfolio or fund into which the
exchange is being made; if making an exchange to an existing account, the dol-
lar value must equal or exceed the applicable minimum for subsequent invest-
ments. If any amount remains in the investment portfolio from which the ex-
change is being made, such amount must not be below the minimum account value
required by the Portfolio or Fund.

Class Y Shares will be exchanged at the next determined net asset value. No
fees currently are charged shareholders directly in connection with exchanges,
although the Fund reserves the right,

13
<PAGE>

upon not less than 60 days written notice, to charge shareholders a $5.00 fee
in accordance with rules promulgated by the Securities and Exchange
Commission. The Fund reserves the right to reject any exchange request in
whole or in part. The Exchange Privilege may be modified or terminated at any
time upon notice to shareholders.

The exchange of Class Y shares of one portfolio or fund for Class Y shares of
another is treated for Federal income tax purposes as a sale of the Class Y
shares given in exchange by the shareholder and, therefore, an exchanging
shareholder may recognize a taxable gain or loss.

REDIRECTED DISTRIBUTION OPTION

The Redirected Distribution Option enables a shareholder to invest
automatically dividends and/or capital gain distributions, if any, paid by the
Portfolio in Class Y shares of another portfolio of the Fund or a fund advised
or sponsored by Bear Stearns of which the shareholder is an investor, or the
Money Market Portfolio of The RBB Fund, Inc. Shares of the other portfolio or
fund will be purchased at the then-current net asset value.

How to Redeem Shares

GENERAL

Investors may request redemption of Portfolio shares at any time. Redemption
requests may be made as described below. When a request is received in proper
form, the Portfolio will redeem the shares at the next determined net asset
value. If the investor holds Portfolio shares of more than one class, any
request for redemption must specify the class of shares being redeemed. If the
investor fails to specify the class of shares to be redeemed or if the
investor owns fewer shares of the class than specified to be redeemed, the
redemption request may be delayed until the Transfer Agent receives further
instructions from the investor, the investor's Bear Stearns account executive
or the investor's Authorized Dealer. The Fund imposes no charges when shares
are redeemed directly through Bear Stearns.

REDEMPTION PROCEDURES

14
<PAGE>

--------------------------------------------------------------------------
The Bear Stearns Funds
--------------------------------------------------------------------------

Account Information Form

(1) Account Type (Please print, indicate only one registration type)

[_] Individual [_] Joint Tenant

---------------------------------------------------------------------------
NAME

---------------------------------------------------------------------------
JOINT REGISTRANT, IF ANY (SEE NOTES 1 AND 2)

- - -
------ --- ------ ----- ----------------
SOCIAL SECURITY NUMBER TAXPAYER IDENTIFICATION NUMBER
OF PRIMARY OWNER

(1) Use only the Social Security number or Taxpayer Identification Number
of the first listed joint tenant.

---------------------------------------------------------------------------
[_] Uniform Gift to Minors, or [_] Uniform Transfer to Minors
(where allowed by law)

---------------------------------------------------------------------------
NAME OF ADULT CUSTODIAN (ONLY ONE PERMITTED)

---------------------------------------------------------------------------
NAME OF MINOR (ONLY ONE PERMITTED)

Under the __________________________ Uniform Gift/Transfers to Minors Act.
STATE RESIDENCE OF MINOR

/ / - -
------ ----- ------ ------ --- ------
MINOR'S DATE OF BIRTH MINOR'S SOCIAL SECURITY NUMBER
(REQUIRED TO OPEN AN ACCOUNT)

---------------------------------------------------------------------------
[_] Corporation [_] Partnership [_] Trust* [_] Other

---------------------------------------------------------------------------
NAME OF CORPORATION, PARTNERSHIP, OR OTHER

---------------------------------------------------------------------------
NAME(S) OF TRUSTEES DATE OF THE TRUST AGREEMENT

- - -
------ ----- ------ ----- ----------------
SOCIAL SECURITY NUMBER TAXPAYER IDENTIFICATION NUMBER
(REQUIRED TO OPEN ACCOUNT)

*If a Trust, include date of trust instrument and list of trustees if they
are to be named in the registration.

(2) Mailing Address

--------------------------------------------------------------------------
STREET OR P.O. BOX APARTMENT NUMBER

--------------------------------------------------------------------------
CITY STATE ZIP CODE

( ) ( )
-------------------------------------- ----------------------------------
DAY TELEPHONE EVENING TELEPHONE

(3) Investment Information

Method of Investment

[_] I have enclosed a check for a minimum initial investment of $2,500,000
per Fund.

[_] I will wire the minimum initial investment of $2,500,000 per Fund.

[_] I have enclosed a check for an additional investment of $___________
per Fund

[_] I will wire an additional investment of $__________ per Fund

[_] I purchased ___________ shares of _______________ through my broker on

____/____/____. Confirm #_________.

NOT PART OF THE PROSPECTUS

<PAGE>

(3) Investment Information continued

Writing Instructions

A. Telephone the Fund's transfer agent, PFPC Inc., toll-free 1-800-447-
1139, and provide it with your name, address, telephone number, Social
Security or Taxpayer Identification Number, the Fund or Funds selected, the
amount being wired, and by which bank. PFPC Inc. will then provide a Fund
account number. (Investors with existing accounts should also notify the
Fund's transfer agent prior to writing funds.)

B. Instruct your bank or broker to wire the specified amount, together with
your assigned account number, to the Transfer Agent:
PFPC Inc.
ABA-0310-0005-3
Credit account number: 86-1030-3398
From: (name of investor)
Account number: (investor's account number with the
Fund)
For purchase of (name of the Fund)
Amount: (amount to be invested)

Please make my investment in the Funds designated below:
---------------------------------------------------------------------------
CLASS Y BEAR STEARNS FUNDS INVESTMENT AMOUNT
---------------------------------------------------------------------------
S & P STARS Portfolio $
--------------- --------------------
Large Cap Value Portfolio $
--------------- --------------------
Small Cap Value Portfolio $
--------------- --------------------
Total Return Bond Portfolio $
--------------- --------------------
The Insiders Select Fund $
--------------- --------------------
Money Market Portfolio $
--------------- --------------------
Emerging Markets Debt
Portfolio $
--------------- --------------------

TOTAL INVESTMENT AMOUNT $
====================

NOTE: All shares purchased will be held in a shareholder account for the
investor at the Transfer Agent. Checks drawn on foreign banks and checks
made payable to persons or entities other than the Fund will not be
accepted. Checks should be made payable to the Fund which you are investing
in.

(4) Distribution Options

Dividends and capital gains may be reinvested or paid by check. If no
options are selected below, both dividends and capital gains will be
reinvested in additional Fund Shares.

Dividends [_] Pay by check. [_] Reinvest.

Capital Gains [_] Pay by check. [_] Reinvest.

[_] Please reinvest dividends and capital gains from the
------------------
(NAME OF FUND)
to the .
----------------------
(NAME OF FUND)

If you elect to have distributions paid by check, distributions will be
sent to the address of record. Distributions may also be sent to another
payee:

---------------------------------------------------------------------------
NAME

---------------------------------------------------------------------------
STREET OR P.O. BOX APARTMENT NUMBER

---------------------------------------------------------------------------
CITY STATE ZIP CODE

---------------------------------------------------------------------------
Optional Features

(5) Telephone Exchange Privilege

[_] I DO NOT want the Telephone Exchange Privilege.

(6) Telephone Redemption Privilege

Checks for redemption of proceeds will be sent by check via U.S. Mail to
the address of record, unless the information in Section 7 is completed for
redemption by wire of $500 or more.

N O T P A R T O F T H E P R O S P E C T U S

<PAGE>

(7) Bank of Record (for Telephone Redemptions)
Please attach a voided check (for electronic credit to your checking
account) in the space provided in Section 11.

---------------------------------------------------------------------------
BANK NAME

---------------------------------------------------------------------------
STREET OR P.O. BOX APARTMENT NUMBER

---------------------------------------------------------------------------
CITY STATE ZIP CODE

---------------------------------------------------------------------------
BANK ABA NUMBER BANK ACCOUNT NUMBER

---------------------------------------------------------------------------
ACCOUNT NAME

(8) Signature and Taxpayer Certification

The undersigned warrants that I(we) have full authority and, if a natural
person, I(we) am(are) of legal age to purchase shares pursuant to this
Account Information Form, and have received a current prospectus for the
Bear Stearns Fund(s) in which I(we) am(are)investing. The undersigned
acknowledges that the Telephone Exchange Privilege is automatic and that
I(we) may bear the risk of loss in event of fraudulent use of the
Privilege. If I(we) do not want the Telephone Exchange Privilege, I(we) so
not want the Telephone Exchange Privilege, I(we) have so indicated on this
Account Information Form.

Under the Interest and Dividend Tax Compliance Act of 1983, the Fund is
required to have the following certification:

Under penalty of perjury, I certify that:

(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me), and

[ ] Exempt from backup withholding [ ] Nonresident alien (form W-8
attached)
------------------------------
COUNTRY OF CITIZENSHIP

---------------------------------------------------------------------------
AUTHORIZED SIGNATURE TITLE DATE

(9) For Authorized Dealer Use Only (Please Print)
We hereby authorize the Transfer Agent to act as our agent in connection
with the transactions authorized by the Account Information Form. If this
Account Information Form includes a Telephone Exchange Privilege
authorization or a Telephone Redemption Privilege, we guarantee the
signature(s) above.

---------------------------------------------------------------------------
DEALER'S NAME DEALER NUMBER

---------------------------------------------------------------------------
MAIN OFFICE ADDRESS BRANCH NUMBER

---------------------------------------------------------------------------
REPRESENTATIVE'S NAME REP. NUMBER
( )
------------------------------------------------- ------------------------
BRANCH ADDRESS TELEPHONE NUMBER

---------------------------------------------------------------------------
AUTHORIZED SIGNATURE OF DEALER TITLE DATE

(10) Additional Account Statements (Please Print)

In addition to myself and my representative, please send copies of my
account statements to:

----------------------------------- -------------------------------------
NAME NAME

----------------------------------- -------------------------------------
ADDRESS ADDRESS

----------------------------------- -------------------------------------
CITY, STATE, ZIP CODE CITY, STATE, ZIP CODE

NOT PART OF THE PROSPECTUS
<PAGE>

(11) If you are applying for the Telephone Redemption Privilege, please tape
your voided check on top of our sample below.

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

John Smith 000
123 First Avenue
Anytown, USA 12345

$[_____]
------------------------------------------------------------

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

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

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

Service Assistance

Our knowledgeable Client Services Representatives are available to assist you
between 8:00 a.m. and 6:00 p.m. Eastern Time at:

1-800-447-1139

Mailing or Fax Instructions

Mail your completed Account Information Form and check to:

The Bear Stearns Funds
c/o PFPC Inc.
P.O. Box 8960
Wilmington, DE 19899-8960

Fax: 302-791-1777

If applications will be faxed, please call and notify Client Services at
1-800-447-1139 before placing an order.

NOT PART OF THE PROSPECTUS
<PAGE>

identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Transfer Agent or the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Fund nor
the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.

If share certificates have been issued, written redemption instructions, indi-
cating the portfolio from which shares are to be redeemed, and duly endorsed
share certificates, must be received by the Transfer Agent in proper form and
signed exactly as the shares are registered. If the proceeds of the redemption
would exceed $25,000, or if the proceeds are not to be paid to the record
owner at the record address, or if the shareholder is a corporation, partner-
ship, trust or fiduciary, signature(s) must be guaranteed by any eligible
guarantor institution. A signature guarantee is designed to protect the share-
holders and the Portfolio against fraudulent transactions by unauthorized per-
sons. A signature guarantee may be obtained from a domestic bank or trust com-
pany, broker, dealer, clearing agency or savings association who are partici-
pants in a medallion program recognized by the securities transfer associa-
tion. The three recognized medallion programs are Securities Transfer Agent
Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New
York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature Guaran-
tees which are not a part of these programs will not be accepted. Please note
that a notary public stamp or seal is not acceptable. The Fund reserves the
right to amend or discontinue its signature guarantee policy at any time and,
with regard to a particular redemption transaction, to require a signature
guarantee at its discretion. Any questions with respect to signature-guaran-
tees should be directed to the Transfer Agent by calling 1-800-447-1139.

Dividends, Distributions and Taxes

Dividends will be automatically reinvested in additional Portfolio shares at
net asset value, unless payment in cash is requested or dividends are
redirected into another fund pursuant to the Redirected Distribution Option.
The Portfolio ordinarily pays dividends from its net investment income and
distributes net realized securities gains, if any, once a year, but it may
make distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the 1940 Act. The Portfolio will not make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. Dividends are automatically reinvested in additional
Class Y shares of the Portfolio at net asset value, unless payment in cash is
requested or dividends are redirected into another fund pursuant to the
Redirected Distribution Option. All expenses are accrued daily and deducted
before declaration of dividends to investors.

15
<PAGE>

whether received in cash or reinvested in additional shares of the Portfolio
or redirected into another portfolio or fund. Distributions from net realized
long-term securities gains of the Portfolio will be taxable to U.S.
shareholders as long-term capital gains for federal income tax purposes,
regardless of how long shareholders have held their Portfolio shares and
whether such distributions are received in cash or reinvested in, or
redirected into other, shares. The Code provides that the net capital gain of
an individual generally will not be subject to federal income tax at a rate in
excess of 28%. Dividends and distributions may be subject to state and local
taxes.

Generally, the Fund must withhold ("backup withholding") and remit to the U.S.
Treasury 31% of dividends, distributions from net realized securities gains
and the proceeds of any redemption, regardless of the extent to which gain or
loss may be realized, paid to a shareholder if such shareholder fails to
certify that the TIN furnished in connection with opening an account is
correct and that such shareholder has not received notice from the IRS of
being subject to backup withholding as a result of a failure to properly
report taxable dividend or interest income on a Federal income tax return.
Furthermore, the IRS may direct the Fund to institute backup withholding if
the IRS determines that a shareholder's TIN is incorrect or if a shareholder
has failed to properly report taxable dividend and interest income on a
federal income tax return.

While the Portfolio is not expected to have any federal tax liability,
investors should expect to be subject to federal, state or local taxes in
respect of their investment in Portfolio shares.

Each investor should consult its tax adviser regarding specific questions as
to federal, state or local taxes applicable to an investment in the Portfolio.

Performance Information

For purposes of advertising, performance for Class Y may be calculated on the
basis of average annual total return and/or total return. These total return
figures reflect changes in the price of the shares and assume that any income
dividends and/or capital gains distributions made by the Portfolio during the
measuring period were reinvested in Class Y shares.

16
<PAGE>

dividends and distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result
in the redeemable value of the investment at the end of the period.
Advertisements of the Portfolio's performance will include the Portfolio's
average annual total return for one, five and ten year periods, or for shorter
periods depending upon the length of time during which the Portfolio has
operated. Computations of average annual total return for periods of less than
one year represent an annualization of the Portfolio's actual total return for
the applicable period.

General Information

The Fund was organized as a business trust under the laws of The Commonwealth
of Massachusetts pursuant to an Agreement and Declaration of Trust (the "Trust
Agreement") dated September 29, 1994. The Fund commenced operations on or
about April 3, 1995 in connection with the offer of shares of certain of its
other portfolios. The Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $.001 per share. The Portfolio's
shares are classified into three classes--Class A, Class C and Class Y. Each
share has one vote and shareholders will vote in the aggregate and not by
class, except as otherwise required by law.

17
<PAGE>

The Transfer Agent maintains a record of share ownership and will send
confirmations and statements of account.

18
<PAGE>

Appendix

INVESTMENT TECHNIQUES

OPTIONS TRANSACTIONS

The Portfolio is permitted to invest up to 5% of its total assets, represented
by the premium paid, in the purchase of call and put options in respect of
specific securities (or groups or "baskets" of specific securities) in which
the Portfolio may invest. The Portfolio may write and sell covered call option
contracts on securities owned by the Portfolio not exceeding 20% of the value
of its net assets at the time such option contracts are written. The Portfolio
also may purchase call options to enter into closing purchase transactions.
The Portfolio also may write covered put option contracts to the extent of 20%
of the value of its net assets at the time such option contracts are written.
A call option gives the purchaser of the option the right to buy, and obli-
gates the writer to sell, the underlying security at the exercise price at any
time during the option period. Conversely, a put option gives the purchaser of
the option the right to sell, and obligates the writer to buy, the underlying
security at the exercise price at any time during the option period. A covered
put option sold by the Portfolio exposes the Portfolio during the term of the
option to a decline in price of the underlying security or securities. A put
option sold by the Portfolio is covered when, among other things, cash or liq-
uid securities are placed in a segregated account with the Fund's custodian to
fulfill the obligation undertaken.

The Portfolio may purchase and sell call and put options on stock indexes
listed on U.S. securities exchanges or traded in the over-the-counter market.
A stock index fluctuates with changes in the market values of the stocks in-
cluded in the index. Because the value of an index option depends upon move-
ments in the level of the index rather than the price of a particular stock,
whether the Portfolio will realize a gain or loss from the purchase or writing
of options on an index depends upon movements in the level of stock prices in
the stock market generally or, in the case of certain indexes, in an industry
or market segment, rather than movements in the price of a particular stock.

Successful use by the Portfolio of options will be subject to the Adviser's
ability to predict correctly movements in the direction of individual stocks
or the stock market generally, foreign currencies or interest rates. To the
extent the Adviser's predictions are incorrect, the Portfolio may incur losses
which could adversely affect the value of a shareholder's investment.

LENDING PORTFOLIO SECURITIES

From time to time, the Portfolio may lend securities from its portfolio of in-
vestments to brokers, dealers and other financial institutions needing to bor-
row securities to complete certain transactions. Such loans may not exceed 33
1/3% of the value of the Portfolio's total assets. In connection with such
loans, the Portfolio will receive collateral consisting of cash, U.S. Govern-
ment securities or irrevocable letters of credit which will be maintained at
all times in an amount equal to at least 100% of the current market value of
the loaned securities. The Portfolio can increase its income through the in-
vestment of such collateral. The Portfolio continues to be entitled to pay-
ments in amounts equal to the interest, dividends and other distributions pay-
able on the loaned security and receives interest on the amount of the loan.
Such loans will be terminable at any time upon specified notice. The Portfolio
might experience risk of loss if the institution with which it has engaged in
a portfolio loan transaction breaches its agreement with the Portfolio.

BORROWING MONEY

As a fundamental policy, the Portfolio is permitted to borrow to the extent
permitted under the 1940 Act. The 1940 Act permits an investment company to
borrow in an amount up to 33 1/3% of the value of such company's total assets.
However, the Portfolio currently intends to borrow money only for temporary or
emergency (not leveraging) purposes, in an amount up to 15% of the value of
its total assets (including the amount borrowed) valued at the lesser of cost
or market, less liabilities (not including the amount borrowed) at the time
the borrowing is made. While borrowings exceed 5% of the Portfolio's total as-
sets, the Portfolio will not make any additional investments.

A-1
<PAGE>

CERTAIN PORTFOLIO SECURITIES

CONVERTIBLE SECURITIES

Convertible securities are fixed-income securities that may be converted at
either a stated price or stated rate into underlying shares of common stock.
Convertible securities have general characteristics similar to both fixed-
income and equity securities. Although to a lesser extent than with fixed-
income securities generally, the market value of convertible securities tends
to decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying common stock, and, therefore, also will react
to variations in the general market for equity securities. A unique feature of
convertible securities is that as the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis, and so may not experience market value declines to the same extent as
the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.

MONEY MARKET INSTRUMENTS

U.S. GOVERNMENT SECURITIES

The Portfolio may purchase securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, which include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Treasury Bills have initial maturities of one year or less; Treasury
Notes have initial maturities of one to ten years; and Treasury Bonds
generally have initial maturities of greater than ten years. Some obligations
issued or guaranteed by U.S. Government agencies and instrumentalities, for
example, Government National Mortgage Association pass-through certificates,
are supported by the full faith and credit of the U.S. Treasury; others, such
as those of the Federal Home Loan Banks, by the right of the issuer to borrow
from the U.S. Treasury; others, such as those issued by the Federal National
Mortgage Association, by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others,
such as those issued by the Student Loan Marketing Association, only by the
credit of the agency or instrumentality. These securities bear fixed, floating
or variable rates of interest. Principal and interest may fluctuate based on
generally recognized reference rates or the relationship of rates. While the
U.S. Government provides financial support to such U.S. Government-sponsored
agencies or instrumentalities, no assurance can be given that it will always
do so, since it is not so obligated by law.

BANK OBLIGATIONS

The Portfolio may invest in bank obligations, including certificates of
deposit, time deposits, bankers' acceptances and other short-term obligations
of domestic banks, foreign subsidiaries of domestic banks, foreign branches of
domestic banks, and domestic and foreign branches of foreign banks,

A-2
<PAGE>

Certificates of deposit are negotiable certificates evidencing the obligation
of a bank to repay funds deposited with it for a specified period of time.

REPURCHASE AGREEMENTS

Repurchase agreements involve the acquisition by the Portfolio of an
underlying debt instrument, subject to an obligation of the seller to
repurchase, and the Portfolio to resell, the instrument at a fixed price
usually not more than one week after its purchase. Certain costs may be
incurred by the Portfolio in connection with the sale of the securities if the
seller does not repurchase them in accordance with the repurchase agreement.
In addition, if bankruptcy proceedings are commenced with respect to the
seller of the securities, realization on the securities by the Portfolio may
be delayed or limited.

COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS

WARRANTS

INVESTMENT COMPANY SECURITIES

A-3
<PAGE>

ILLIQUID SECURITIES

A-4
<PAGE>

The
Bear Stearns
Funds

245 Park Avenue

New York, NY 10167

1-800-766-4111

Distributor
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167

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

Custodian
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540

Transfer & Dividend
Disbursement Agent
PFPC Inc.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809

Counsel
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022

Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE INSIDERS SELECT FUND'S
PROSPECTUS AND IN THE INSIDERS SELECT FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFER OF THE INSIDERS SELECT FUND'S SHARES, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND. THE INSIDERS SELECT FUND'S PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.

<PAGE>

- --------------------------------------------------------------------------------
THE BEAR STEARNS FUNDS
THE INSIDERS SELECT FUND
CLASS A, CLASS C AND CLASS Y
PART B
(STATEMENT OF ADDITIONAL INFORMATION)

JULY 29, 1997

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

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current relevant
Prospectus dated July 29, 1997 of The Insiders Select Fund (the "Portfolio") of
The Bear Stearns Funds (the "Fund"), as each may be revised from time to time.
To obtain a free copy of such prospectus, please write to the Fund at PFPC Inc.
("PFPC"), Attention: The Insiders Select Fund, P.O. Box 8960, Wilmington,
Delaware 19899-8960, call 1-800-447-1139 or call Bear, Stearns & Co. Inc. ("Bear
Stearns") at 1-800-766-4111.

Bear Stearns Funds Management Inc. ("BSFM"), a wholly-owned subsidiary
of The Bear Stearns Companies Inc., serves as the Portfolio's investment
adviser. BSFM is referred to herein as the "Adviser."

Bear Stearns, an affiliate of BSFM, serves as distributor of the
Portfolio's shares.

TABLE OF CONTENTS

Page
----

Investment Objective and Management Policies ...................... B-2
Management of the Fund ............................................ B- 9
Management Arrangements ........................................... B- 11
Purchase and Redemption of Shares ................................. B- 14
Determination of Net Asset Value .................................. B- 15
Dividends, Distributions and Taxes ................................ B- 15
Portfolio Transactions ............................................ B- 23
Performance Information ........................................... B- 24
Code of Ethics .................................................... B-24
Information About the Fund ........................................ B- 25

Custodian, Transfer and Dividend Disbursing Agent,

Counsel and Independent Auditors ................................ B- 26
Financial Statements .............................................. B- 26

B-1

<PAGE>

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The following information supplements and should be read in conjunction
with the section in the Portfolio's Prospectus entitled "Description of the
Fund."

Portfolio Securities

Bank Obligations. Domestic commercial banks organized under Federal law
are supervised and examined by the Comptroller of the Currency and are required
to be members of the Federal Reserve System and to have their deposits insured
by the Federal Deposit Insurance Corporation (the "FDIC"). Domestic banks
organized under state law are supervised and examined by state banking
authorities but are members of the Federal Reserve System only if they elect to
join. In addition, state banks whose certificates of deposit ("CDs") may be
purchased by the Portfolio are insured by the FDIC (although such insurance may
not be of material benefit to the Portfolio, depending on the principal amount
of the CDs of each bank held by the Portfolio) and are subject to Federal
examination and to a substantial body of Federal law and regulation. As a result
of Federal or state laws and regulations, domestic branches of domestic banks
whose CDs may be purchased by the Portfolio generally are required, among other
things, to maintain specified levels of reserves, are limited in the amounts
which they can loan to a single borrower and are subject to other regulation
designed to promote financial soundness. However, not all of such laws and
regulations apply to the foreign branches of domestic banks.

Obligations of foreign branches of domestic banks, foreign subsidiaries
of domestic banks and domestic and foreign branches of foreign banks, such as
CDs and time deposits ("TDs"), may be general obligations of the parent banks in
addition to the issuing branch, or may be limited by the terms of a specific
obligation and governmental regulation. Such obligations are subject to
different risks than are those of domestic banks. These risks include foreign
economic and political developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the obligations, foreign
exchange controls and foreign withholding and other taxes on interest income.
These foreign branches and subsidiaries are not necessarily subject to the same
or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial record keeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank or about a foreign
bank than about a domestic bank.

Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation or by Federal or state regulation
as well as governmental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in excess of $1
billion may be subject to reserve requirements imposed by the Federal Reserve
System or by the state in which the branch is located if the branch is licensed
in that state.

In addition, Federal branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may be
required to: (1) pledge to the regulator, by depositing assets with a designated
bank within the state, a certain percentage of their assets as fixed from time
to time by the appropriate regulatory authority; and (2) maintain assets within
the state in an amount equal to a specified percentage of the aggregate amount
of liabilities of the foreign bank payable at or through all of its agencies or
branches within the state. The

B-2

<PAGE>

deposits of Federal and State Branches generally must be insured by the FDIC if
such branches take deposits of less than $100,000.

In view of the foregoing factors associated with the purchase of CDs
and TDs issued by foreign branches of domestic banks, by foreign subsidiaries of
domestic banks, by foreign branches of foreign banks or by domestic branches of
foreign banks, BSFM carefully evaluates such investments on a case-by-case
basis.

Repurchase Agreements. The Portfolio's custodian or sub-custodian will
have custody of, and will hold in a segregated account, securities acquired by
the Portfolio under a repurchase agreement. Repurchase agreements are considered
by the staff of the Securities and Exchange Commission to be loans by the
Portfolio. In an attempt to reduce the risk of incurring a loss on a repurchase
agreement, the Portfolio will enter into repurchase agreements only with
domestic banks with total assets in excess of one billion dollars, or primary
government securities dealers reporting to the Federal Reserve Bank of New York,
with respect to securities of the type in which the Portfolio may invest, and
will require that additional securities be deposited with it if the value of the
securities purchased should decrease below the resale price. The Adviser will
monitor on an ongoing basis the value of the collateral to assure that it always
equals or exceeds the repurchase price. The Portfolio will consider on an
ongoing basis the credit worthiness of the institutions with which it enters
into repurchase agreements.

Commercial Paper and Other Short-Term Corporate Obligations. Variable
rate demand notes include variable amount master demand notes, which are
obligations that permit the Portfolio to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Portfolio, as
lender, and the borrower. These notes permit daily changes in the amounts
borrowed. As mutually agreed between the parties, the Portfolio may increase the
amount under the notes at any time up to the full amount provided by the note
agreement, or decrease the amount, and the borrower may repay up to the full
amount of the note without penalty. Because these obligations are direct lending
arrangements between the lender and the borrower, it is not contemplated that
such instruments generally will be traded, and there generally is no established
secondary market for these obligations, although they are redeemable at face
value, plus accrued interest, at any time. Accordingly, where these obligations
are not secured by letters of credit or other credit support arrangements, the
Portfolio's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. In connection with floating and variable rate
demand obligations, the Advisers will consider, on an ongoing basis, earning
power, cash flow and other liquidity ratios of the borrower, and the borrower's
ability to pay principal and interest on demand. Such obligations frequently are
not rated by credit rating agencies, and the Portfolio may invest in them only
if at the time of an investment the borrower meets the criteria set forth in the
Portfolio's Prospectus for other commercial paper issuers.

Illiquid Securities. When purchasing securities that have not been
registered under the Securities Act of 1933, as amended, and are not readily
marketable, the Portfolio will endeavor to obtain the right to registration at
the expense of the issuer. Generally, there will be a lapse of time between the
Portfolio's decision to sell any such security and the registration of the
security permitting sale. During any such period, the price of the securities
will be subject to market fluctuations. However, if a substantial market of
qualified institutional buyers develops for certain unregistered securities
purchased by the Portfolio pursuant to Rule 144A under the Securities Act of
1933, as amended ("Rule 144A"), the Portfolio intends to treat them as liquid
securities in accordance with procedures approved by the Fund's Board of
Trustees. Because it is not possible to predict with assurance how the market
for restricted securities pursuant to

B-3

<PAGE>

Rule 144A will develop, the Fund's Board of Trustees has directed the Advisers
to monitor carefully the Portfolio's investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that, for a period of
time, qualified institutional buyers cease purchasing restricted securities
pursuant to Rule 144A, the Portfolio's investing in such securities may have the
effect of increasing the level of illiquidity in the Portfolio during such
period.

Management Policies

The Portfolio engages in the following practices in furtherance of its
objective.

Options Transactions. The Portfolio may engage in options transactions,
such as purchasing or writing covered call or covered put options. The principal
reason for writing covered call options, which are call options with respect to
which the Portfolio owns the underlying security or securities, is to

realize, through the receipt of premiums, a greater return than would be
realized on the Portfolio's securities alone. In return for a premium, the
writer of a covered call option forfeits the right to any appreciation in the
value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). Nevertheless,
the call writer retains the risk of a decline in the price of the underlying
security. Similarly, the principal reason for writing covered put options is to
realize income in the form of premiums. The writer of a covered put option
accepts the risk of a decline in the price of the underlying security. The size
of the premiums that the Portfolio may receive may be adversely affected as new
or existing institutions, including other investment companies, engage in or
increase their option-writing activities.

Options written by the Portfolio ordinarily will have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the time the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Portfolio may write: (a) in-the-money call
options when the Adviser expects that the price of the underlying security will
remain stable or decline moderately during the option period, (b) at-the-money
call options when the Adviser expects that the price of the underlying security
will remain stable or advance moderately during the option period and (c)
out-of-the-money call options when the Adviser expects that the premiums
received from writing the call option plus the appreciation in market price of
the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. In these
circumstances, if the market price of the underlying security declines and the
security is sold at this lower price, the amount of any realized loss will be
offset wholly or in part by the premium received. Out-of-the-money, at-the-money
and in-the-money put options (the reverse of call options as to the relation of
exercise price to market price) may be utilized in the same market environments
that such call options are used in equivalent transactions.

So long as the Portfolio's obligation as the writer of an option
continues, the Portfolio may be assigned an exercise notice by the broker-dealer
through which the option was sold, requiring the Portfolio to deliver, in the
case of a call, or take delivery of, in the case of a put, the underlying
security against payment of the exercise price. This obligation terminates when
the option expires or the Portfolio effects a closing purchase transaction. The
Portfolio can no longer effect a closing purchase transaction with respect to an
option once it has been assigned an exercise notice.

B-4

<PAGE>

While it may choose to do otherwise, the Portfolio generally will
purchase or write only those options for which the Adviser believes there is an
active secondary market so as to facilitate closing transactions. There is no
assurance that sufficient trading interest to create a liquid secondary market
on a securities exchange will exist for any particular option or at any
particular time, and for some options no such secondary market may exist. A
liquid secondary market in an option may cease to exist for a variety of
reasons. In the past, for example, higher than anticipated trading activity or
order flow, or other unforeseen events, at times have rendered certain clearing
facilities inadequate and resulted in the institution of special procedures,
such as trading rotations, restrictions on certain types of orders or trading
halts or suspensions in one or more options. There can be no assurance that
similar events, or events that otherwise may interfere with the timely execution
of customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. If as a covered call option
writer the Portfolio is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise or it
otherwise covers its position.

Stock Index Options. The Portfolio may purchase and write
put and call options on stock indexes listed on U.S. or foreign
securities exchanges or traded in the over-the-counter market.
A stock index fluctuates with changes in the market values of
the stocks included in the index.

Options on stock indexes are similar to options on stock except : (a)
the expiration cycles of stock index options are generally monthly, while those
of stock options are currently quarterly, and (b) the delivery requirements are
different. Instead of giving the right to take or make delivery of a stock at a
specified price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (i) the amount, if any, by
which the fixed exercise price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the underlying index
on the date of exercise, multiplied by (ii) a fixed "index multiplier." Receipt
of this cash amount will depend upon the closing level of the stock index upon
which the option is based being greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the option. The amount of cash
received will be equal to such difference between the closing price of the index
and the exercise price of the option expressed in dollars times a specified
multiple. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. The writer may offset its position in
stock index options prior to expiration by entering into a closing transaction
on an exchange or it may let the option expire unexercised.

Futures Contracts and Options on Futures Contracts. The Portfolio may
trade futures contracts and options on futures contracts in U.S. domestic
markets, such as the Chicago Board of Trade and the International Monetary
Market of the Chicago Mercantile Exchange.

Initially, when purchasing or selling futures contracts the Portfolio
will be required to deposit with the Fund's custodian in the broker's name an
amount of cash or cash equivalents up to approximately 10% of the contract
amount. This amount is subject to change by the exchange or board of trade on
which the contract is traded and members of such exchange or board of trade may
impose their own higher requirements. This amount is known as "initial margin"
and is in the nature of a performance bond or good faith deposit on the contract
which is returned to the Portfolio upon termination of the futures position,
assuming all contractual obligations have been satisfied. Subsequent payments,
known as "variation margin," to and from the broker will be made daily as the
price of the index or securities underlying the futures contract fluctuates,
making the long and

B-5

<PAGE>

short positions in the futures contract more or less
valuable, a process known as "marking-to-market." At any time prior to the
expiration of a futures contract, the Portfolio may elect to close the position
by taking an opposite position, at the then prevailing price, which will operate
to terminate the Portfolio's existing position in the contract.

Although the Portfolio intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contract prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting the Portfolio
to substantial losses. If it is not possible, or the Portfolio determines not to
close a futures position in anticipation of adverse price movements, the
Portfolio will be required to make daily cash payments of variation margin. In
such circumstances, an increase in the value of the portion of the portfolio
being hedged, if any, may offset partially or completely losses on the futures
contract. However, no assurance can be given that the price of the securities
being hedged will correlate with the price movements in a futures contract and
thus provide an offset to losses on the futures contract.

In addition, to the extent the Portfolio is engaging in a futures
transaction as a hedging device, due to the risk of an imperfect correlation
between securities owned by the Portfolio that are the subject of a hedging
transaction and the futures contract used as a hedging device, it is possible
that the hedge will not be fully effective in that, for example, losses on the
portfolio securities may be in excess of gains on the futures contract or losses
on the futures contract may be in excess of gains on the portfolio securities
that were the subject of the hedge. In futures contracts based on indexes, the
risk of imperfect correlation increases as the composition of the Portfolio's
investments varies from the composition of the index. In an effort to compensate
for the imperfect correlation of movements in the price of the securities being
hedged and movements in the price of futures contracts, the Portfolio may buy or
sell futures contracts in a greater or lesser dollar amount than the dollar
amount of the securities being hedged if the historical volatility of the
futures contract has been less or greater than that of the securities. Such
"over hedging" or "under hedging" may adversely affect the Portfolio's net
investment results if market movements are not as anticipated when the hedge is
established.

Upon exercise of an option, the writer of the option will deliver to
the holder of the option the futures position and the accumulated balance in the
writer's futures margin account, which represents the amount by which the market
price of the futures contract exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
The potential loss related to the purchase of options on futures contracts is
limited to the premium paid for the option (plus transaction costs). Because the
value of the option is fixed at the time of sale, there are no daily cash
payments to reflect changes in the value of the underlying contract; however,
the value of the option does change daily and that change would be reflected in
the net asset value of each Portfolio.

Lending Portfolio Securities. To a limited extent, the Portfolio may
lend its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value of
the securities loaned. By lending its portfolio securities, the

B-6

<PAGE>

Portfolio can increase its income through the investment of the cash collateral.
For purposes of this policy, the Portfolio considers collateral consisting of
U.S. Government securities or irrevocable letters of credit issued by banks
whose securities meet the standards for investment by the Portfolio to be the
equivalent of cash. From time to time, the Portfolio may return to the borrower
or a third party which is unaffiliated with the Portfolio, and which is acting
as a "placing broker," a part of the interest earned from the investment of
collateral received for securities loaned.

The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Portfolio must receive at least 100% cash collateral from the borrower; (2)
the borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Portfolio must be
able to terminate the loan at any time; (4) the Portfolio must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; (5) the Portfolio may pay only reasonable custodian fees
in connection with the loan; and (6) while voting rights on the loaned
securities may pass to the borrower, the Fund's Board of Trustees must terminate
the loan and regain the right to vote the securities if a material event
adversely affecting the investment occurs. These conditions may be subject to
future modification.

Investment Restrictions. The Portfolio has adopted investment
restrictions numbered 1 through 8 as fundamental policies. These restrictions
cannot be changed without approval by the holders of a majority (as defined in
the Investment Company Act of 1940, as amended (the "1940 Act")) of the
Portfolio's outstanding voting shares. Investment restrictions numbered 9
through 14 are not fundamental policies and may be changed by vote of a majority
of the Trustees at any time. The Portfolio may not:

1. Invest more than 25% of the value of its total assets in the
securities of issuers in any single industry, provided that there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

2. Invest in commodities, except that the Portfolio may purchase and
sell options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.

3. Purchase, hold or deal in real estate, real estate limited
partnership interests, or oil, gas or other mineral leases or exploration or
development programs, but the Portfolio may purchase and sell securities that
are secured by real estate or issued by companies that invest or deal in real
estate or real estate investment trusts.

4. Borrow money, except to the extent permitted under the 1940 Act. The
1940 Act permits an investment company to borrow in an amount up to 33 1/3% of
the value of such company's total assets. For purposes of this Investment
Restriction, the entry into options, forward contracts, futures contracts,
including those relating to indexes, and options on futures contracts or indexes
shall not constitute borrowing.

5. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, the Portfolio may
lend its portfolio securities in an amount not to exceed 33 1/3% of the value of
its total assets. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the Fund's
Board of Trustees.

B-7
<PAGE>

6. Act as an underwriter of securities of other issuers, except to
the extent the Portfolio may be deemed an underwriter under the Securities Act
of 1933, as amended, by virtue of disposing of portfolio securities.

7. Issue any senior security (as such term is defined in
Section 18(f) of the 1940 Act).

8. Purchase securities on margin, but the Portfolio may make margin
deposits in connection with transactions in options, forward contracts, futures
contracts, including those relating to indexes, and options on futures contracts
or indexes.

9. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessor) if such purchase
would cause the value of the Portfolio's investments in all such companies to
exceed 5% of the value of its total assets.

10. Invest in the securities of a company for the purpose of exercising
management or control, but the Portfolio will vote the securities it owns in its
portfolio as a shareholder in accordance with its views.

11. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.

12. Purchase, sell or write puts, calls or combinations thereof, except
as described in the Portfolio's Prospectus and Statement of Additional
Information.

13. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if, in
the aggregate, more than 15% of the value of its net assets would be so
invested.

14. Purchase securities of other investment companies, except to the
extent permitted under the 1940 Act.

If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will not
constitute a violation of such restriction.

The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of the Portfolio's shares in certain
states. Should the Fund determine that a commitment is no longer in the best
interest of the Portfolio and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.

B-8
<PAGE>

MANAGEMENT OF THE FUND

Trustees and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below. Each Trustee who is an "interested person" of the Fund, as defined
in the 1940 Act, is indicated by an asterisk.

Name and Address Position Principal Occupation
(and age) with Fund During Past Five Years
- ---------------- --------- ----------------------

Peter M. Bren (63) Trustee President of The Bren Co.
126 East 56th Street since 1969; President of
New York, NY 10021 Koll, Bren Realty Advisors
and Senior Partner for
Lincoln Properties prior
thereto.

Alan J. Dixon* (69) Trustee Partner of Bryan Cave, a law
7535 Claymont Court firm in St. Louis since
Apt. #2 January 1993; United States
Belleville, IL 62223 Senator of Illinois from
1981 to 1993.

John R. McKernan, Jr. (49) Trustee Chairman and Chief Executive
P.O. Box 15213 Officer of McKernan
Portland, ME 04112 Enterprises since January
1995; Governor of Maine
prior thereto.

M.B. Oglesby, Jr. (55) Trustee President and Chief
700 13th St., N.W., Executive Officer,
Suite 400 Association of American
Washington, D.C. 20005 Railroads since June 23,
1997; Vice Chairman of
Cassidy & Associates since
February 1996; Senior Vice
President of RJR Nabisco,
Inc. from April 1989 to
February 1996; Former Deputy
Chief of Staff-White House
from 1988 to January 1989.

Robert S. Reitzes* (53) Chairman of the Director of Mutual Funds-
245 Park Avenue Board Bear Stearns Asset
New York, NY 10167 Management and Senior
Managing Director of Bear
Stearns since March 1994;
Co-Director of Research and
Senior Chemical Analyst of
C.J. Lawrence/Deutsche Bank
Securities Corp. from
January 1991 to March 1994.

Peter B. Fox (45) Executive Vice Managing Director -Emeritus,
Three First National Plaza President Bear Stearns Since February
Chicago, IL 60602 1997, Bear Stearns Senior
Managing Director,
Public Finance since
September 1987.

William J. Montgoris (50) Executive Vice Chief Financial Officer and
245 Park Avenue President Chief Operating Officer,
New York, NY 10167 Bear Stearns.

B-9

<PAGE>

Name and Address Position Principal Occupation
(and age) with Fund During Past Five Years
- ---------------- --------- ----------------------

Stephen A. Bornstein (54) Vice President Managing Director, Legal
245 Park Avenue Department, Bear Stearns
New York, NY 10167 since September 1990.

Frank J. Maresca (39) Vice President Managing Director of Bear
245 Park Avenue and Treasurer Stearns since September
New York, NY 10167 1994; Associate Director of
Bear Stearns from September
1993 to September 1994;
Executive Vice President of
BSFM since March 1992; Vice
President of Bear Stearns
from March 1992 to September
1993.

Donalda L. Fordyce (38) Vice President Senior Managing Director,
245 Park Avenue Bear Stearns Asset
New York, NY 10167 Management since
March,
1996; previously, Vice
President, Asset
Management Group, Goldman
Sachs from 1986 to 1996.

Ellen T. Arthur (44) Secretary Associate Director of Bear
245 Park Avenue Stearns since January 1996;
New York, NY 10167 Senior Counsel and Corporate
Vice President of
PaineWebber Incorporated
from April 1989 to September
1995.

Vincent L. Pereira (32) Assistant Associate Director of Bear
245 Park Avenue Treasurer Stearns since September 1995
New York, NY 10167 and Vice President of BSFM
since May 1993; Vice
President of Bear Stearns
from May 1993 to September
1995; Assistant Vice
President of Mitchell
Hutchins from October 1992
to May 1993.

Eileen M. Coyle (31) Assistant Vice President of Bear
245 Park Avenue Secretary Stearns since September
New York, NY 10167 1995; Manager of BSFM since
1995; Senior Fund
Administrator and Supervisor
for BSFM from January 1994
to 1995; Accounting
Supervisor and Senior
Accountant for Bear Stearns
since 1990.

The Fund pays its non-affiliated Board members an annual retainer of
$5,000 and a per meeting fee of $500 and reimburses them for their expenses. The
Fund does not compensate its officers. The aggregate amount of compensation paid
to each Board member by the Fund and by all other funds in the Bear Stearns
Funds for which such person is a Board member (the number of which is set forth
in parenthesis next to each Board member's total compensation) for the fiscal
year ended March 31, 1997 is as follows:

B-10
<PAGE>

<TABLE>
<CAPTION>
(5)
(3) Total
(2) Pension or (4) Compensation from
(1) Aggregate Retirement Benefits Estimated Annual Fund and Fund
Name of Board Compensation Accrued as Part of Benefits Upon Complex Paid to
Member from Fund* Fund's Expenses Retirement Board Members
------ ---------- --------------- ---------- -------------
<S> <C> <C> <C> <C>

Peter M. Bren $7,000 None None $11,500
Alan J. Dixon None None $6,500

$7,000
John R. McKernan, Jr. $7,000 None None $12,000
M.B. Oglesby, Jr. $7,000 None None $12,000
Robert S. Reitzes None None None None
</TABLE>

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

* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to approximately $7,000 for Board members of
the Fund, as a group.

Board members and officers of the Fund, as a group, owned less than 1%
of the Portfolio's shares outstanding on May 31, 1997.

For so long as the Plan described in the section captioned "Management
Arrangements--Distribution and Shareholder Servicing Plan" remains in effect,
the Fund's Trustees who are not "interested persons" of the Fund, as defined in
the 1940 Act, will be selected and nominated by the Trustees who are not
"interested persons" of the Fund.

No meetings of shareholders of the Fund will be held for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. Under the 1940 Act, shareholders of record of not less than two-thirds
of the outstanding shares of the Fund may remove a Trustee through a declaration
in writing or by vote cast in person or by proxy at a meeting called for that
purpose. Under the Fund's Agreement and Declaration of Trust, the Trustees are
required to call a meeting of shareholders for the purpose of voting upon the
question of removal of any such Trustee when requested in writing to do so by
the shareholders of record of not less than 10% of the Fund's outstanding
shares.

MANAGEMENT ARRANGEMENTS

The following information supplements and should be read in conjunction
with the section in the Portfolio's Prospectus entitled "Management of the
Fund."

Investment Advisory Agreement. BSFM provides investment advisory
services to the Portfolio pursuant to the Investment Advisory Agreement (the
"Agreement") dated February 22, 1995, as revised May 4, 1995, with the Fund. The
Agreement is subject to annual approval by: (i) the Fund's Board of Trustees or
(ii) vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Portfolio, provided that in either event the continuance also
is approved by a majority of the Board of Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Fund or BSFM, by vote cast in
person at a meeting called for the purpose of voting on such approval. The Board
of Trustees, including a majority of the Trustees who are not "interested
persons" of any party to the Agreement, last approved the Agreement at a meeting
as to the Portfolio, held on January 28, 1997. The Agreement is terminable, as
to the Portfolio, without penalty, on 60 days notice, by the Fund's Board of
Trustees or by vote of the holders of a majority of the Portfolio's shares, or,
on not less than 90 days notice, by

B-11
<PAGE>

BSFM. As to the Portfolio, the Agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).

BSFM is a wholly owned subsidiary of The Bear Stearns Companies Inc.
The following persons are directors and/or senior officers of BSFM: Mark A.
Kurland, Chief Executive Officer, President, Chairman of the Board and Director;
Robert S. Reitzes, Executive Vice President and Director; Frank J. Maresca,
Executive Vice President; Donalda L. Fordyce, Executive Vice President; Vincent
L. Pereira, Vice President and Treasurer ; Ellen T. Arthur, Secretary; and
Michael Minikes, Warren J. Spector and Robert M. Steinberg, Directors.

As compensation for BSFM's advisory services, the Fund has agreed to
pay BSFM a monthly fee at the annual rate of 1% of value of the Portfolio's
average daily net assets which will be adjusted monthly ("Monthly Performance
Adjustment") depending on the extent to which the Portfolio's investment
performance exceeded or was exceeded by the percentage change in the investment
record of the S&P 500 Index. The Monthly Performance Adjustment may increase or
decrease the total advisory fee payable to BSFM by up to 0.50% per year of the
value of the Portfolio's average daily net assets. For the period from June 16,
1995 (commencement of investment operations) through March 31, 1996, the
investment advisory fees payable amounted to $116,606. For the fiscal year ended
March 31, 1997, the investment advisory fees payable amounted to $182,313. These
amounts were waived pursuant to a voluntary undertaking by BSFM, resulting in no
fees being paid by the Portfolio. In addition, the Adviser reimbursed $243,945,
in order to maintain the voluntary expense limitation.

Administration Agreement. BSFM provides certain administrative services
to the Fund pursuant to the Administration Agreement dated February 22, 1995, as
revised April 11, 1995 and June 2, 1997, with the Fund. The Administration
Agreement will continue until February 22, 1998 and thereafter will be subject
to annual approval by (i) the Fund's Board or (ii) vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the Portfolio,
provided that in either event its continuance also is approved by a majority of
the Fund's Board members who are not "interested persons" (as defined in the
1940 Act) of the Fund or BSFM, by vote cast in person at a meeting called for
the purpose of voting on such approval. The Administration Agreement is
terminable without penalty, on 60 days notice, by the Fund's Board or by vote of
the holders of a majority of the Portfolio's shares or upon not less than 90
days notice by BSFM. The Administration Agreement will terminate automatically
in the event of its assignment (as defined in the 1940 Act).

As compensation for BSFM's administrative services, the Fund has agreed
to pay BSFM a monthly fee at the annual rate of .15 of 1% of the Portfolio's
average daily net assets. For the period from June 16, 1995 (commencement of
operations) through March 31, 1996 and the fiscal year ended March 31, 1997, the
administration fees accrued amounted to $21,806 and $35,873 and the amount paid
was $18,824 and $32,547, respectively.

Administrative Services Agreement. PFPC provides certain administrative
services to the Fund pursuant to the Administrative Services Agreement dated
February 22, 1995, with the Fund. The Administrative Services Agreement is
terminable upon 60 days' notice by either the Fund or PFPC. PFPC may assign its
rights or delegate its duties under the Administrative Services Agreement to any
wholly-owned direct or indirect subsidiary of PNC Bank, National Association or
PNC Bank Corp., provided that (i) PFPC gives the Fund 30 days notice; (ii) the
delegate (or assignee) agrees with PFPC and the Fund to comply with all relevant
provisions of the 1940 Act; and (iii) PFPC and such delegate (or assignee)
promptly provide information requested by the Fund in connection with such
delegation.

B-12
<PAGE>

As compensation for PFPC's administrative services, the Fund has agreed
to pay PFPC a monthly fee at the rate set forth in the Portfolio's Prospectus.
For the period from June 16, 1995 (commencement of investment operations)
through March 31, 1996 and the fiscal year ended March 31, 1997, the
administrative fees payable by the Portfolio amounted to $104,500 and $141,467,
respectively. These amounts were reduced to $44,282 and $107,174, respectively,
as a result of a waiver of fees by PFPC.

Distribution and Shareholder Servicing Plan. Rule 12b-1 (the "Rule")
adopted by the Securities and Exchange Commission under the 1940 Act provides,
among other things, that an investment company may bear expenses of distributing
its shares only pursuant to a plan adopted in accordance with the Rule. The
Fund's Trustees have adopted such a plan with respect to Class A and Class C
shares (the "Plan"). The Fund's Trustees believe that there is a reasonable
likelihood that the Plan will benefit the Portfolio and the holders of its Class
A and Class C shares.

A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the Trustees
for their review. In addition, the Plan provides that it may not be amended to
increase materially the costs which holders of a Class of shares may bear
pursuant to the Plan without approval of such effected shareholders and that
other material amendments of the Plan must be approved by the Board of Trustees,
and by the Trustees who are neither "interested persons" (as defined in the 1940
Act) of the Fund nor have any direct or indirect financial interest in the
operation of the Plan or in the related Plan agreements, by vote cast in person
at a meeting called for the purpose of considering such amendments. The Plan and
related agreements are subject to annual approval by such vote cast in person at
a meeting called for the purpose of voting on the Plan. The Plan was so approved
on January 28, 1997. The Plan is terminable at any time by vote of a majority of
the Trustees who are not "interested persons" and who have no direct or indirect
financial interest in the operation of the Plan or in the Plan agreements or by
vote of holders of a majority of the Portfolio's relevant Class of shares. A
Plan agreement is terminable, as to the Portfolio, without penalty, at any time,
by such vote of the Trustees, upon not more than 60 days written notice to the
parties to such agreement or by vote of the holders of a majority of the
Portfolio's Class A and Class C shares. A Plan agreement will terminate
automatically, as to the Portfolio, in the event of its assignment (as defined
in the 1940 Act).

For the fiscal year ended March 31, 1997, the Portfolio paid Bear
Stearns $65,276 with respect to Class A shares and $94,265 with respect to Class
C shares under the Plan. With respect to Class A, of the $56,284 paid under the
Plan, $4,029 was paid to brokers or dealers and $4,963 was paid for advertising.
With respect to Class C, the entire amount paid under the Plan was paid to
brokers or dealers.

Expenses. All expenses incurred in the operation of the Fund are borne
by the Fund, except to the extent specifically assumed by BSFM. The expenses
borne by the Fund include: organizational costs, taxes, interest, loan
commitment fees, interest and distributions paid on securities sold short,
brokerage fees and commissions, if any, fees of Board members who are not
officers, directors, employees or holders of 5% or more of the outstanding
voting securities of BSFM or its affiliates, Securities and Exchange Commission
fees, state Blue Sky qualification fees, advisory, administrative and fund
accounting fees, charges of custodians, transfer and dividend disbursing agents'
fees, certain insurance premiums, industry association fees, outside auditing
and legal expenses, costs of maintaining the Fund's existence, costs of
independent pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
shareholders' reports and meetings, costs of preparing and printing certain
prospectuses and statements of additional information, and any extraordinary
expenses. Expenses attributable to a particular portfolio are charged against
the assets of that portfolio; other expenses of the Fund

B-13
<PAGE>

are allocated among the portfolios on the basis determined by the Board,
including, but not limited to, proportionately in relation to the net assets of
each portfolio.

Expense Limitation. BSFM has agreed that if, in any fiscal year, the
aggregate expenses of the Portfolio, exclusive of taxes, brokerage, interest on
borrowings and (with the prior written consent of the necessary state securities
commissions) extraordinary expenses, exceed the expense limitation of any state
having jurisdiction over the Portfolio, the Fund may deduct from the payment to
be made to BSFM, such excess expense to the extent required by state law. Such
deduction or payment, if any, will be estimated daily, and reconciled and
effected or paid, as the case may be, on a monthly basis.

PURCHASE AND REDEMPTION OF SHARES

The following information supplements and should be read in conjunction
with the sections in the Portfolio's Prospectus entitled "How to Buy Shares" and
"How to Redeem Shares."

The Distributor. Bear Stearns serves as the Portfolio's distributor on a
best efforts basis pursuant to an agreement dated February 22, 1995 which is
renewable annually. For the period from June 16, 1995 (commencement of
operations) through March 31, 1996 and the fiscal year ended March 31, 1997,
Bear Stearns retained $502,600 and $163,000, respectively, from the sales loads
on Class A shares and $9,000 and $14,300, respectively, from contingent deferred
sales charges ("CDSC") on Class C shares. In some states, banks or other
institutions effecting transactions in Portfolio shares may be required to
register as dealers pursuant to state law.

Purchase Order Delays. The effective date of a purchase order may be
delayed if PFPC, the Portfolio's transfer agent, is unable to process the
purchase order because of an interruption of services at its processing
facilities. In such event, the purchase order would become effective at the
purchase price next determined after such services are restored.

Sales Loads--Class A. Set forth below is an example of the method of
computing the offering price of the Class A shares of the Portfolio. The example
assumes a purchase of Class A shares aggregating less than $50,000 subject to
the schedule of sales charges set forth in the Prospectus at a price based upon
the net asset value of the Class A shares on March 31, 1997.

Net Asset Value per Share $14.58

Per Share Sales Charge - 4.75%
of offering price (4.99% of
net asset value per share) $ 0.73

Per Share Offering Price to
the Public $15.31

Redemption Commitment. The Portfolio has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the value of the
Portfolio's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such amount, the
Board of Trustees reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Portfolio to the detriment of the
existing shareholders. In this event, the securities would be valued in the same
manner as the Portfolio is valued. If the recipient sold such securities,
brokerage charges would be incurred. Were the Portfolio to redeem

B-14
<PAGE>

securities in kind, it first would seek to distribute readily marketable
securities.

Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b) when
trading in the markets the Portfolio ordinarily utilizes is restricted, or when
an emergency exists as determined by the Securities and Exchange Commission so
that disposal of the Portfolio's investments or determination of its net asset
value is not reasonably practicable, or (c) for such other periods as the
Securities and Exchange Commission by order may permit to protect Portfolio
shareholders.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in conjunction
with the section in the Portfolio's Prospectus entitled "How to Buy Shares."

Valuation of Portfolio Securities. 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 value. Any
securities or other assets for which recent market quotations are not readily
available are valued at fair value as determined in good faith by the Fund's
Board of Trustees. Expenses and fees, including the management fee and
distribution and service 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.

Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Board of Trustees, are valued at fair value as
determined in good faith by the Board of Trustees. The Board of Trustees will
review the method of valuation on a current basis. In making their good faith
valuation of restricted securities, the Trustees generally will take the
following factors into consideration: restricted securities which are, or are
convertible into, securities of the same class of securities for which a public
market exists usually will be valued at market value less the same percentage
discount at which purchased. This discount will be revised periodically by the
Board of Trustees if the Trustees believe that it no longer reflects the value
of the restricted securities. Restricted securities not of the same class as
securities for which a public market exists usually will be valued initially at
cost. Any subsequent adjustment from cost will be based upon considerations
deemed relevant by the Board of Trustees.

New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Reverend Dr. Martin
Luther King Jr. Day, Thanksgiving and Christmas Day.

DIVIDENDS, DISTRIBUTIONS AND TAXES

The following information supplements and should be read in conjunction
with the section in the Portfolio's Prospectus entitled "Dividends,
Distributions and Taxes."

B-15
<PAGE>

The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Portfolio or its shareholders, and the discussions here and in
the Prospectus are not intended as substitutes for careful tax planning.

Qualification as a Regulated Investment Company

The Portfolio has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, a Portfolio is not subject to
federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital losses)
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by the
Portfolio made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains of the taxable year and will, therefore,
satisfy the Distribution Requirement.

In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, the Portfolio may have
to limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent the Portfolio from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by the Portfolio at
maturity or upon the disposition of a security held for less than three months
will not be treated as gross income derived from the sale or other disposition
of such security within the meaning of the Short-Short Gain Test. However,
income that is attributable to realized market appreciation will be treated as
gross income from such sale or other disposition of securities for this purpose.

In general, a gain or loss recognized by the Portfolio on the
disposition of an asset will be a capital gain or a capital loss.
However, a gain recognized on the disposition of a debt obligation purchased by
the Portfolio at a market discount (generally, at a price less than its
principal amount) will be treated as ordinary income to the extent of the
portion of the market discount which accrued during the period of time the
Portfolio held the debt obligation. In addition, under the rules of Code section
988, gain or loss recognized on the disposition of a debt obligation denominated
in a foreign currency or an option with respect thereto (but only to the extent

B-16
<PAGE>

attributable to changes in foreign currency exchange rates), and gain or loss
recognized on the disposition of a foreign currency forward contract, futures
contract, option or similar financial instrument, or of foreign currency itself,
except for regulated futures contracts or non-equity options subject to Code
section 1256 (unless a Portfolio elects otherwise), will generally be treated as
ordinary income or loss.

Further, the Code also treats as ordinary income a portion of the
capital gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of the Portfolio's net investment in
the transaction and: (1) the transaction consists of the acquisition of property
by the Portfolio and a contemporaneous contract to sell substantially identical
property in the future; (2) the transaction is a straddle within the meaning of
section 1092 of the Code; (2) the transaction is one that was marketed or sold
to the Portfolio on the basis that it would have the economic characteristics of
a loan but the interest-like return would be taxed as capital gain; or (4) the
transaction is described as a conversion transaction in the Treasury
Regulations. The amount of the gain recharacterized generally will not exceed
the amount of the interest that would have accrued on the net investment for the
relevant period at a yield equal to 120% of the federal long-term, mid-term, or
short-term rate, depending upon the type of instrument at issue, reduced by an
amount equal to: (1) prior inclusions of ordinary income items from the
conversion transaction and (2) the capital interest on acquisition indebtedness
under Code section 263(g). Built-in losses will be preserved where the Portfolio
has a built-in loss with respect to property that becomes a part of a conversion
transaction. No authority exists that indicates that the converted character of
the income will not be passed to the Portfolio's shareholders.

In general, for purposes of determining whether capital gain or loss
recognized by the Portfolio on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (depending on the
type of the Portfolio) (1) the asset is used to close a "short sale" (which
includes for certain purposes the acquisition of a put option) or is
substantially identical to another asset so used, (2) the asset is otherwise
held by the Portfolio as part of a "straddle" (which term generally excludes a
situation where the asset is stock and the Portfolio grants a qualified covered
call option (which, among other things, must not be deep-in-the-money) with
respect thereto, or (3) the asset is stock and the Portfolio grants an
in-the-money qualified covered call option with respect thereto. However, for
purposes of the Short-Short Gain Test, the holding period of the asset disposed
of may be reduced only in the case of clause (1) above. In addition, the
Portfolio may be required to defer the recognition of a loss on the disposition
of an asset held as part of a straddle to the extent of any unrecognized gain on
the offsetting position.

Any gain recognized by the Portfolio on the lapse of, or any gain or
loss recognized by the Portfolio from a closing transaction with respect to, an
option written by the Portfolio will be treated as a short-term capital gain or
loss. For purposes of the Short-Short Gain Test, the holding period of an option
written by the Portfolio will commence on the date it is written and end on the
date it lapses or the date of a closing transaction is entered into.
Accordingly, the Portfolio may be limited in its ability to write options which
expire within three months and to enter into closing transactions at a gain
within three months of the writing of options.

Certain transactions that may be engaged in by the Portfolio (such as
regulated futures contracts, certain foreign currency contracts, and options on
stock indexes and futures contracts) will be subject to special tax treatment as
"Section 1256 contracts." Section 1256 contracts are treated as if they are sold
for their fair market value on the last business day of the taxable year, even
though a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a

B-17
<PAGE>

consequence of the year-end deemed disposition of Section 1256 contracts is
taken into account for the taxable year together with any other gain or loss
that was previously recognized upon the termination of Section 1256 contracts
during that taxable year. Any capital gains or losses for the taxable year with
respect to Section 1256 contracts (including any capital gain or loss arising as
a consequence of the year-end deemed sale of such contracts) is generally
treated as 60% long-term capital gain or loss and 40% short-term capital gain or
loss. The Portfolio, however, may elect not to have this special tax treatment
apply to Section 1256 contracts that are part of a "mixed straddle" with other
investments of the Portfolio that are not Section 1256 contracts. Under Treasury
Regulations, gains arising from Section 1256 contracts will be treated for
purposes of the Short-Short Gain Test as being derived from securities held for
not less than three months if the gains arise as a result of a constructive sale
under Code Section 1256.

The Portfolio may purchase securities of certain foreign investment
funds or trusts which constitute passive foreign investment companies ("PFICs")
for federal income tax purposes. If the Portfolio invests in a PFIC, it may
elect to treat the PFIC as a qualified electing fund (a "QEF"), in which event
the Portfolio will each year have ordinary income equal to its pro rata share of
the PFIC's ordinary earnings for the year and long-term capital gain equal to
its pro rata share of the PFIC's net capital gain for year, regardless of
whether the Portfolio receives distributions of any such ordinary earnings or
capital gains from the PFIC. If the Portfolio does not elect to treat the PFIC
as a QEF, then, in general, (1) any gain recognized by the Portfolio upon sale
or other disposition of its interest in the PFIC or any excess distribution
received by the Portfolio from the PFIC will be allocated ratably over the
Portfolio's holding period of its interest in the PFIC, (2) the portion of such
gain or excess distribution so allocated to the year in which the gain is
recognized or the excess distribution is received shall be included in the
Portfolio's gross income for such year as ordinary income (and the distribution
of such portion by the Portfolio to shareholders will be taxable as an ordinary
income dividend, but such portion will not be subject to tax at the Portfolio
level), (3) the Portfolio shall be liable for tax on the portions of such gain
or excess distribution so allocated to prior years in an amount equal to, for
each such prior year, (i) the amount of gain or excess distribution allocated to
such prior year multiplied by the highest tax rate (individual or corporate) in
effect for such prior year plus (ii) interest on the amount determined under
clause (i) for the period from the due date for filing a return for such prior
year until the date for filing a return for the year in which the gain is
recognized or the excess distribution is received at the rates and methods
applicable to underpayments of tax for such period, and (4) the distribution by
the Portfolio to shareholders of the portions of such gain or excess
distribution so allocated to prior years (net of the tax payable by the
Portfolio thereon) will again be taxable to the shareholders as an ordinary
income dividend.

Under proposed Treasury Regulations, the Portfolio can elect to
recognize as gain the excess, as of the last day of its taxable year, of the
fair market value of each share of PFIC stock over the Portfolio's adjusted tax
basis in that share ("mark to market gain"). Such mark to market gain will be
included by the Portfolio as ordinary income and will not be subject to the
Short-Short Gain Test, and the Portfolio's holding period with respect to such
PFIC stock will commence on the first day of the next taxable year. If the
Portfolio makes such election in the first taxable year it holds PFIC stock, it
will not incur the tax described in the preceding paragraphs.

Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or any part of any net
capital loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.

B-18
<PAGE>

In addition to satisfying the requirements described above, the
Portfolio must satisfy an asset diversification test in order to qualify as a
regulated investment company. Under this test, at the close of each quarter of
the Portfolio's taxable year, at least 50% of the value of the Portfolio's
assets must consist of cash and cash items, U.S. Government securities,
securities of other regulated investment companies, and securities of other
issuers (as to each of which the Portfolio has not invested more than 5% of the
value of the Portfolio's total assets in securities of such issuer and does not
hold more than 10% of the outstanding voting securities of such issuer), and no
more than 25% of the value of its total assets may be invested in the securities
of any one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which the Portfolio
controls and which are engaged in the same or similar trades or businesses.
Generally, an option (call or put) with respect to a security is treated as
issued by the issuer of the security, not the issuer of the option.

If for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to a tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Portfolio's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.

Excise Tax on Regulated Investment Companies. A 4% non-deductible excise tax is
imposed on a regulated investment company that fails to distribute in each
calendar year an amount equal to 98% of capital gain net income for the one-year
period ended on October 31 of such calendar year (or, at the election of a
regulated investment company having a taxable year ending November 30 or
December 31, for its taxable year (a "taxable year election")). The balance of
such income must be distributed during the next calendar year. For the foregoing
purposes, a regulated investment company is treated as having distributed any
amount on which it is subject to income tax for any taxable year ending in such
calendar year.

For purposes of the excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).

The Portfolio intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and capital gain net income
prior to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Portfolio may in certain circumstances
be required to liquidate portfolio investments to make sufficient distribution
to avoid excise tax liability.

Portfolio Distributions

The Portfolio anticipates distributing substantially all of its
investment company taxable income for each taxable year. Such distributions will
be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but will qualify for the 70% dividends-received
deduction for corporate shareholders only to the extent discussed below.
Dividends paid on Class A, Class C, and Class Y shares are calculated at the
same time and in the same manner. In general, dividends on Class C

B-19
<PAGE>

shares are expected to be lower than those on Class A shares due to the higher
distribution expenses borne by the Class C shares. Dividends may also differ
between classes as a result of differences in other class specific expenses.

The Portfolio may either retain or distribute to shareholders its net
capital gain for each taxable year. The Portfolio currently intends to
distribute any such amounts. Net capital gain that is distributed and designated
as a capital gain dividend will be taxable to shareholders as long-term capital
gain, regardless of the length of time the shareholder has held his shares or
whether such gain was recognized by the Portfolio prior to the date on which the
shareholder acquired his shares. The Code provides, however, that under certain
conditions only 50% of the capital gain recognized upon the Portfolio's
disposition of domestic "small business" stock will be subject to tax.

Conversely, if the Portfolio elects to retain its net capital gain, the
Portfolio will be taxed thereon (except to the extent of any available capital
loss carryovers) at the 35% corporate tax rate. If the Portfolio elects to
retain its net capital gain, it is expected that the Portfolio also will elect
to have shareholders of record on the last day of its taxable year treated as if
each received a distribution of his pro rata share of such gain, with the result
that each shareholder will be required to report his pro rata share of such gain
on his tax return as long-term capital gain, will receive a refundable tax
credit for his pro rata share of tax paid by the Portfolio on the gain, and will
increase the tax basis for his shares by an amount equal to the deemed
distribution less the tax credit.

Ordinary income dividends paid by the Portfolio with respect to a
taxable year will qualify for the 70% dividends-received deduction generally
available to corporations (other than corporations, such as S corporations,
which are not eligible for the deduction because of their special
characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding company tax) to the extent of
the amount of qualifying dividends received by the Portfolio from domestic
corporations for the taxable year. A dividend received by the Portfolio will not
be treated as a qualifying dividend (1) if it has been received with respect to
any share of stock that the Portfolio has held for less than 46 days (91 days in
the case of certain preferred stock), excluding for this purpose under the rules
of Code section 246(c)(3)and (4) (i) any day more than 45 days (or 90 days in
the case of certain preferred stock) after the date on which the stock becomes
ex-dividend and (ii) any period during which the Portfolio has an option to
sell, is under a contractual obligation to sell, has made and not closed a short
sale of, is the grantor of a deep-in-the-money or otherwise nonqualified option
to buy, or has otherwise diminished its risk of loss by holding other positions
with respect to, such (or substantially identical) stock; (2) to the extent that
the Portfolio is under an obligation (pursuant to a short sale or otherwise) to
make related payments with respect to positions in substantially similar or
related property; or (3) to the extent that the stock on which the dividend is
paid is treated as debt-financed under the rules of Code section 246A. Moreover,
the dividends-received deduction for a corporate shareholder may be disallowed
or reduced (1) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Portfolio or (2) by application
of Code section 246(b) which in general limits the dividends-received deduction
to 70% of the shareholder's taxable income (determined without regard to the
dividends-received deduction and certain other items).

Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum marginal
rate of 28% for noncorporate taxpayers and 20% for corporate taxpayers on the
excess of the taxpayer's alternative minimum taxable income ("AMTI") over an
exemption amount. For purposes of the corporate AMT, the corporate
dividends-received deduction is not itself an item of tax preference that must
be added back to taxable income or is otherwise disallowed in determining a

B-20
<PAGE>

corporation's AMTI. However, a corporate shareholder will generally be required
to take the full amount of any dividend received from the Portfolio into account
(without a dividends-received deduction) in determining its adjusted current
earnings, which are used in computing an additional corporate preference item
(i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings
over its AMTI (determined without regard to this item and the AMT net operating
loss deduction)) includable in AMTI.

Investment income that may be received by the Portfolio from sources
within foreign countries may be subject to foreign taxes withheld at the source.
The United States has entered into tax treaties with many foreign countries
which entitle the Portfolio to a reduced rate of, or exemption from, taxes on
such income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of the Portfolio's assets to be invested in various
countries is not known.

Distributions by the Portfolio that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.

Distributions by the Portfolio will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of another portfolio (or another fund). Shareholders receiving
a distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Portfolio reflects undistributed
net investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Portfolio, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although they economically constitute a return of capital to the shareholder.

Ordinarily, shareholders are required to take distributions by the
Portfolio into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such month will be deemed to have
been received by the shareholders (and made by the Portfolio) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.

The Portfolio will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding for failure to report the receipt of
interest or dividend income properly, or (3) who has failed to certify to the
Portfolio that it is not subject to backup withholding or that it is an exempt
recipient (such as a corporation).

Sale or Redemption of Shares

A shareholder will recognize a gain or loss on the sale or redemption of
shares of the Portfolio in an amount equal to the difference between the
proceeds of the sale or redemption and the shareholder's adjusted tax basis in
the shares. All or a portion of any loss so recognized may be disallowed if the
shareholder purchases other shares of the Portfolio within 30 days before or
after the sale or redemption. In general, any gain or loss arising from (or
treated as arising from) the sale or redemption of shares of the Portfolio will
be considered capital gain or

B-21
<PAGE>

loss and will be long-term capital gain or loss if the shares were held for
longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code section
246(c)(3) and (4) (discussed above in connection with the dividends-received
deduction for corporations) generally will apply in determining the holding
period of shares. Long-term capital gains of noncorporate taxpayers are
currently taxed at a maximum rate 11.6% lower than the maximum rate applicable
to ordinary income. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of
ordinary income.

If a shareholder (1) incurs a sales load in acquiring shares of the
Portfolio,(2) disposes of such shares less than 91 days after they are acquired,
and (3) subsequently acquires shares of the Portfolio or another fund at a
reduced sales load pursuant to a right to reinvest at such reduced sales load
acquired in connection with the acquisition of the shares disposed of, then the
sales load on the shares disposed of (to the extent of the reduction in the
sales load on the shares subsequently acquired) shall not be taken into account
in determining gain or loss on the shares disposed of but shall be treated as
incurred on the acquisition of the shares subsequently acquired.

Foreign Shareholders

Taxation of a shareholder who, as to the U.S., is a non-resident alien
individual, foreign trust or estate, foreign corporation, or foreign partnership
("Foreign Shareholder") depends on whether the income from a Portfolio is
"effectively connected" with a U.S. trade or business carried on by such
shareholder.

If the income from the Portfolio is not effectively connected with a
U.S. trade or business carried on by a foreign shareholder, ordinary income
dividends paid to a foreign shareholder will be subject to U.S. withholding tax
at the rate of 30% (or lower applicable treaty rate) upon the gross amount of
the dividend. Such Foreign Shareholder would generally be exempt from U.S.
federal income tax on gains realized on the sale of shares of a Portfolio,
capital gain dividends, and amounts retained by the Portfolio that are
designated as undistributed capital gains.

If the income from the Portfolio is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain dividends, and any gains realized upon the sale of
shares of the Portfolio will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or domestic corporations.

In the case of foreign noncorporate shareholders, the Portfolio may be
required to withhold U.S. federal income tax at the rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Portfolio with proper notification of
their foreign status.

The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Portfolio, including the applicability of foreign taxes.

Effect of Future Legislation; State and Local Tax Considerations

The foregoing general discussion of U.S. federal income tax consequences
is based on the Code and the Treasury Regulations issued thereunder as in effect
on the date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly

B-22
<PAGE>

change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.

Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Portfolios.

PORTFOLIO TRANSACTIONS

The Adviser assumes general supervision over placing orders on behalf
of the Portfolio for the purchase or sale of investment securities. Allocation
of brokerage transactions, including their frequency, is made in the Adviser's
best judgment and in a manner deemed fair and reasonable to shareholders. The
primary consideration is prompt execution of orders at the most favorable net
price. Subject to this consideration, the brokers selected will include those
that supplement the Adviser's research facilities with statistical data,
investment information, economic facts and opinions. Information so received is
in addition to and not in lieu of services required to be performed by the
Adviser and the Adviser's fees are not reduced as a consequence of the receipt
of such supplemental information.

Such information may be useful to the Adviser in serving both the
Portfolio and the other funds which it advises and, conversely, supplemental
information obtained by the placement of business of other clients may be useful
to the Adviser in carrying out its obligations to the Portfolio. Sales of
Portfolio shares by a broker may be taken into consideration, and brokers also
will be selected because of their ability to handle special executions such as
are involved in large block trades or broad distributions, provided the primary
consideration is met. Large block trades may, in certain cases, result from two
or more funds advised or administered by the Adviser being engaged
simultaneously in the purchase or sale of the same security. Certain of the
Adviser's transactions in securities of foreign issuers may not benefit from the
negotiated commission rates available to the Portfolio for transactions in
securities of domestic issuers. When transactions are executed in the
over-the-counter market, the Portfolio will deal with the primary market makers
unless a more favorable price or execution otherwise is obtainable.

Portfolio turnover may vary from year to year as well as within a year.
The turnover rate for the Portfolio for the period June 16, 1995 (commencement
of investment operations) through March 31, 1996 and the fiscal year ended March
31, 1997 was 93.45% and 128.42%, respectively. In periods in which extraordinary
market conditions prevail, the Adviser will not be deterred from changing
investment strategy as rapidly as needed, in which case higher turnover rates
can be anticipated which would result in greater brokerage expenses. The overall
reasonableness of brokerage commissions paid is evaluated by the Adviser based
upon its knowledge of available information as to the general level of
commissions paid by other institutional investors for comparable services.

To the extent consistent with applicable provisions of the 1940 Act and
the rules and exemptions adopted by the Securities and Exchange Commission
thereunder, the Board of Trustees has determined that transactions for the
Portfolio may be executed through Bear Stearns if, in the judgment of BSFM, the
use of Bear Stearns is likely to result in price and execution at least as
favorable as those of other qualified broker-dealers, and if, in the
transaction, Bear Stearns charges the Portfolio a rate consistent with that
charged to comparable unaffiliated customers in similar transactions. In
addition, under rules recently adopted by the Securities and Exchange
Commission, Bear Stearns may directly execute such transactions for the

B-23
<PAGE>

Portfolio on the floor of any national securities exchange, provided (i) the
Board of Trustees has expressly authorized Bear Stearns to effect such
transactions, and (ii) Bear Stearns annually advises the Board of Trustees of
the aggregate compensation it earned on such transactions. Over-the-counter
purchases and sales are transacted directly with principal market makers except
in those cases in which better prices and executions may be obtained elsewhere.

For the period June 16, 1995 (commencement of operations) through March
31, 1996, the Portfolio paid total brokerage commissions of $38,019, of which
$26,339 was paid to Bear Stearns. The Portfolio paid 69.28% of its commissions
to Bear Stearns, and, with respect to all the securities transactions for the
Portfolio, 39.40% of the transactions involved commissions being paid to Bear
Stearns. For the fiscal year ended March 31, 1997, the Portfolio paid total
brokerage commissions of $39,790, of which $8,925 was paid to Bear Stearns. The
Portfolio paid 22.43% of its commissions to Bear Stearns, and, with respect to
all the securities transactions for the Portfolio, 22.18% of the transactions
involved commissions being paid to Bear Stearns.

PERFORMANCE INFORMATION

The following information supplements and should be read in conjunction
with the section in the Portfolio's Prospectus entitled "Performance
Information."

Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at net asset value (maximum offering
price in the case of Class A) per share with a hypothetical $1,000 payment made
at the beginning of the period (assuming the reinvestment of dividends and
distributions), dividing by the amount of the initial investment, taking the
"n"th root of the quotient (where "n" is the number of years in the period) and
subtracting 1 from the result. A Class' average annual total return figures
calculated in accordance with such formula assume that in the case of Class A
the maximum sales load has been deducted from the hypothetical initial
investment at the time of purchase or in the case of Class C the maximum
applicable CDSC has been paid upon redemption at the end of the period.

The average annual total return for Class A (at maximum offering price)
for the period June 16, 1995 (commencement of investment operations) through
March 31, 1997 was 16.52%. Based on net asset value per share, the average
annual total return for Class A was 19.72% for this period. The average annual
total return for Class C was 19.13% for this period. The average annual total
return for Class Y for the period June 20, 1995 (commencement of initial public
offering) through March 31, 1997 was 19.69%.

Total return is calculated by subtracting the amount of the Portfolio's
net asset value (maximum offering price in the case of Class A) per share at the
beginning of a stated period from the net asset value per share at the end of
the period (after giving effect to the reinvestment of dividends and
distributions during the period and any applicable CDSC), and dividing the
result by the net asset value (maximum offering price in the case of Class A)
per share at the beginning of the period. Total return also may be calculated
based on the net asset value per share at the beginning of the period instead of
the maximum offering price per share at the beginning of the period for Class A
shares or without giving effect to any applicable CDSC at the end of the period
for Class C shares. In such cases, the calculation would not reflect the
deduction of the sales load with respect to Class A shares or any applicable
CDSC with respect to Class C shares, which, if reflected would reduce the
performance quoted.

B-24
<PAGE>

The total return for Class A (at maximum offering price) for the period
June 16, 1995 (commencement of investment operations) through March 31, 1997 was
31.57%. Based on net asset value per

share, the total return for Class A was 38.13% for this period. The total return
for Class C was 36.91% for this period. The total return for Class Y for the
period June 20, 1995 (commencement of initial public offering) through March 31,
1997 was 37.79%.

The total return for Class A (at maximum offering price) for the fiscal
year ended March 31, 1997 was 12.69%. Based on net asset value per share, the
total return for Class A was 18.31% for this period. The total return for Class
C was 17.69% for this period. The total return for Class Y for this period was
18.81%.

CODE OF ETHICS

The Fund, on behalf of the Portfolio, has adopted an amended and
restated Code of Ethics (the "Code of Ethics"), which established standards by
which certain access persons of the Fund must abide relating to personal
securities trading conduct. Under the Code of Ethics, access persons which
include, among others, trustees and officers of the Trust and employees of the
Fund and BSFM, are prohibited from engaging in certain conduct, including: (1)
the purchase or sale of any security being purchased or sold, or being
considered for purchase or sale, by the Portfolio, without prior approval by the
Fund or without the applicability of certain exemptions; (2) the recommendation
of a securities transaction without disclosing his or her interest in the
security or issuer of the security; (3) the commission of fraud in connection
with the purchase or sale of a security held by or to be acquired by the
Portfolio; (4) the purchase of any securities in an initial public offering or
private placement transaction eligible for purchase or sale by the Portfolio
without prior approval by the Fund; and (5) the acceptance of gifts of more than
a de minimus value from those doing business with or on behalf of the Portfolio.
Certain transactions are exempt from item (1) of the previous sentence,
including: (1) purchases or sales on the account of an access person that are
not under the control of or that are non-volitional with respect to that person;
(2) purchases or sales of securities not eligible for purchase or sale by the
Portfolio; (3) purchases or sales relating to rights issued by an issuer pro
rata to all holders of a class of its securities; and (4) any securities
transaction, or series of related transactions, involving 500 or fewer shares of
an issuer having a market capitalization greater than $1 billion.

The Code of Ethics specifies that access persons shall place the
interests of the shareholders of the Portfolio first, shall avoid potential or
actual conflicts of interest with the Portfolio, and shall not take unfair
advantage of their relationship with the Portfolio. Under certain circumstances,
the Investment Manager to the Portfolio may aggregate or bunch trades with other
clients provided that no client is materially disadvantaged. Access persons are
required by the Code of Ethics to file quarterly reports of personal securities
investment transactions. However, an access person is not required to report a
transaction over which he or she had no control. Furthermore, a trustee of the
Fund who is not an "interested person" (as defined in the Investment Company
Act) of the Fund is not required to report a transaction if such person did not
know or, in the ordinary course of his duties as a trustee of the Fund, should
have known, at the time of the transaction, that, within a 15 day period before
or after such transaction, the security that such person purchased or sold was
either purchased or sold, or was being considered for purchase or sale, by the
Portfolio. The Code of Ethics specifies that certain designated supervisory
persons and/or designated compliance officers shall supervise implementation and
enforcement of the Code of Ethics and shall, at their sole discretion, grant or
deny approval of transactions required by the Code of Ethics.

B-25
<PAGE>

INFORMATION ABOUT THE FUND

The following information supplements and should be read in conjunction
with the section in the Portfolio's Prospectus entitled "General Information."

Each Portfolio share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Portfolio shares have no preemptive, subscription or conversion rights and are
freely transferable.

The Fund will send annual and semi-annual financial statements to all
its shareholders.

As of May 31, 1997, the following shareholders owned, directly or
indirectly, 5% or more of the indicated class of the Portfolio's outstanding
shares.

Percent of Class Y
Name and Address Shares Outstanding

Master Works 401k Trustee 44.73%
FBO Barra 401k Plan
c/o Wells Fargo Bank
420 Montgomery St., 8th Flr

San Francisco, CA 94104

A shareholder who beneficially owns, directly or indirectly, more than
25% of a Portfolio's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Portfolio.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS

Custodial Trust Company ("CTC"), 101 Carnegie Center,
Princeton, New Jersey 08540, an affiliate of Bear Stearns, is the Portfolio's
custodian. Under the custody agreement with the Portfolio, CTC holds the
Portfolio's securities and keeps all necessary accounts and records. For its
services, CTC receives an annual fee of the greater of 0.015% of the value of
the domestic assets held in custody or $5,000, such fee to be payable monthly
based upon the total market value of such assets, as determined on the last
business day of the month. In addition, CTC receives certain securities
transactions charges which are payable monthly. PFPC, Bellevue Corporate Center,
400 Bellevue Parkway, Wilmington, Delaware 19809, is the Portfolio's transfer
agent, dividend disbursing agent and registrar. Neither CTC nor PFPC has any
part in determining the investment policies of the Portfolio or which securities
are to be purchased or sold by the Portfolio.

Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, New York
10022, as counsel for the Fund, has rendered its opinion as to certain legal
matters regarding the due authorization and valid issuance of the shares of
beneficial interest being sold pursuant to the Portfolio's Prospectus.

Deloitte & Touche LLP, Two World Financial Center, New York, New York
10281-1434, independent auditors, have been selected as auditors of the Fund.

B-26

<PAGE>

FINANCIAL STATEMENTS

The Portfolio's Annual Report to Shareholders for the fiscal year ended
March 31, 1997 is a separate document supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing therein are incorporated by reference into this
Statement of Additional Information.

B-27

<PAGE>

THE BEAR STEARNS FUNDS
PART C. OTHER INFORMATION
-------------------------

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

Part A:

(i) Financial Highlights are included in Part A

(ii) Annual Report to Shareholders is incorporated by
reference in Part A.

Part B:

Annual Report to Shareholders for the fiscal year ended
March 31, 1997 for The Insiders Select Fund is incorporated
by reference in Part B and filed herewith as Exhibit 99.B12.

(b) Exhibits:

EX-99.B1(a) Agreement and Declaration of Trust is
incorporated by reference to Exhibit
(1)(a) of Post-Effective Amendment No. 7
to the Registration Statement on Form N-
1A filed electronically on November 9,
1995, accession number 0000950130-95-
002359.

EX-99.B1(b) Amendment to Agreement and Declaration
of Trust is incorporated by reference to
Exhibit (1)(b) of Post-Effective
Amendment No. 7 to the Registration
Statement on Form N-1A filed
electronically on November 9, 1995,
accession number 0000950130-95-002359.

EX-99.B2 By-Laws are incorporated by reference to
Exhibit (2) of Post-Effective Amendment
No. 7 to the Registration Statement on
Form N-1A filed electronically on
November 9, 1995, accession number
0000950130-95-002359.

EX-99.B3 None.

EX-99.B4 None.

EX-99.B5(a) Investment Advisory Agreement between
the Registrant and Bear Stearns Funds
Management Inc. ("BSFM") is incorporated

C-1

<PAGE>

by reference to Exhibit (5)(a) of Post-
Effective Amendment No. 7 to the
Registration Statement on Form N-1A
filed electronically on November 9,
1995, accession number 0000950130-95-
002359.

EX-99.B5(b) Investment Advisory Agreement between
the Registrant and BSFM, with respect to
the Prime Money Market Portfolio, is
filed herewith.

EX-99.B5(c) Administration Agreement between the
Registrant and BSFM is incorporated by
reference to Exhibit (5)(b) of Post-
Effective Amendment No. 7 to the
Registration Statement on Form N-1A
filed electronically on November 9,
1995, accession number 0000950130-95-
002359.

EX-99.B5(d) Administrative Services Agreement, as
amended, between the Registrant and PFPC
Inc. is incorporated by reference to
Exhibit (5)(c) of Post-Effective
Amendment No. 7 to the Registration
Statement on Form N-1A filed
electronically on November 9, 1995,
accession number 0000950130-95-002359.

EX-99.B6(a) Distribution Agreement between the
Registrant and Bear, Stearns & Co. Inc.
is incorporated by reference to Exhibit
(6)(a) of Post-Effective Amendment No. 7
to the Registration Statement on Form N
-1A filed electronically on November 9,
1995, accession number 0000950130-95-
002359.

EX-99.B6(b) Form of Dealer Agreement is incorporated
by reference to Exhibit (6)(b) of Post-
Effective Amendment No. 9 to the
Registration Statement on Form N-1A
filed electronically on June 20, 1996,
accession number 0000899681-96-000180.

EX-99.B7 None.

EX-99.B8 Custody Agreements between the
Registrant and Custodial Trust Company
are incorporated by reference to Exhibit
(8) of Post-Effective Amendment No. 7 to
the Registration Statement on Form N-1A
filed electronically on November 9,
1995, accession number 0000950130-95-
002359.

EX-99.B9 None.

EX-99.B10 Opinion (including consent) of Stroock &
Stroock & Lavan is incorporated by
reference to Exhibit (10) of Post-
Effective Amendment No. 7 to the
Registration Statement on Form N-1A

C-2

<PAGE>

filed electronically on November 9,
1995, accession number 0000950130-95-
002359.

EX-99.B11(a) Consent of Kramer, Levin, Naftalis &
Frankel is filed herewith.

EX-99.B11(b) Consent of Independent Auditors is filed
herewith.

EX-99.B12 Annual Report to Shareholders for the
fiscal year ended March 31, 1997 for
The Insiders Select Fund is filed
herewith.

EX-99.B13 None.

EX-99.B14 None.

EX-99.B15 Distribution and Shareholder Servicing
Plan is incorporated by reference to
Exhibit (15) of Post-Effective Amendment
No. 7 to the Registration Statement on
Form N-1A filed electronically on
November 9, 1995, accession number
0000950130-95-002359.

EX-99.B16 Schedules of Computation of Performance
Data are incorporated by reference to
Exhibit (16) of Post Effective Amendment
No. 5 to the Registration Statement on
Form N-1A filed September 1, 1995 and to
Exhibit (16) of Post-Effective Amendment
No. 7 to the Registration Statement on
Form N-1A filed electronically on
November 9, 1995, accession number
0000950130-95-002359.

EX-99.B17 Financial Data Schedules are filed
herewith as Exhibit 27.

EX-99.B18 Rule 18f-3 Plan, as revised is
incorporated by reference to Exhibit
(18) of Post-Effective Amendment No. 9
to the Registration Statement on Form
N-1A filed electronically on June 20,
1996, accession number 0000950130-95-
002359.

Other Exhibits:

EX-99.A Certificate of Corporate Secretary is
incorporated by reference to Other
Exhibit (a) of Post-Effective Amendment
No. 7 to the Registration Statement on
Form N-1A filed electronically on

C-3

<PAGE>

November 9, 1995, accession number
0000950130-95-002359.

EX-99.B Powers of attorney are incorporated by
reference to Other Exhibit (b) of Post-
Effective Amendment No. 7 to the
Registration Statement on Form N-1A
filed electronically on November 9,
1995, accession number
0000950130-95-002359 and to Other
Exhibit (b) of Post-Effective Amendment
No. 8 to the Registration Statement on
Form N-1A filed electronically on April
12, 1996, accession number
0000950130-96-001230.

Item 25. Persons Controlled by or Under Common Control with
Registrant

Not Applicable

Item 26. Number of Holders of Securities

(1) (2)

Number of Record
Holders as of
Title of Class June 23, 1997
-------------- ----------------

Shares of beneficial interest, $.001 par value per share, of the
following portfolios:

S&P STARS Portfolio--Class A 4467
S&P STARS Portfolio--Class C 2707
S&P STARS Portfolio--Class Y 436
Large Cap Value Portfolio--Class A 187
Large Cap Value Portfolio--Class C 195
Large Cap Value Portfolio--Class Y 110
Small Cap Value Portfolio--Class A 833
Small Cap Value Portfolio--Class C 749
Small Cap Value Portfolio--Class Y 310
Total Return Bond Portfolio--Class A 111
Total Return Bond Portfolio--Class C 43
Total Return Bond Portfolio--Class Y 35
The Insiders Select Fund--Class A 1361
The Insiders Select Fund--Class C 672
The Insiders Select Fund--Class Y 105
Focus List Fund--Class A N/A
Focus List Fund--Class Y N/A
Prime Money Market Portfolio--Class Y N/A

Item 27. Indemnification

Reference is made to Article VIII of the Registrant's
Declaration of Trust (filed as Exhibit 1(a) to Registrant's Post- Effective
Amendment No. 7 filed electronically on November 9, 1995, accession number
0000950130-95-002359 and incorporated herein by

C-4

<PAGE>

reference). The application of these provisions is limited by Article 10 of the
Registrant's By-Laws (filed as Exhibit 2 to Registrant's Post-Effective
Amendment No. 7 filed electronically on November 9, 1995, accession number
0000950130-95-002359 and incorporated herein by reference) and by the following
undertaking set forth in the rules promulgated by the Securities and Exchange
Commission:

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in such Act and will be
governed by the final adjudication of such issue.

Reference also is made to the Distribution Agreement
previously filed as Exhibit 6(a) to Registrant's Post-Effective Amendment No. 7
filed electronically on November 9, 1995, accession number 0000950130-95-002359
and incorporated herein by reference.

Item 28(a). Business and Other Connections of Investment Adviser

Registrant is fulfilling the requirement of this Item 28(a) to
provide a list of the officers and directors of Bear Stearns Funds Management
Inc. ("BSFM"), the investment adviser of the Registrant, together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by BSFM or those of its officers and directors
during the past two years, by incorporating by reference the information
contained in the Form ADV filed with the SEC pursuant to the Investment Advisers
Act of 1940 by BSFM (SEC File No. 801-29862).

Item 29. Principal Underwriters

(a) Bear, Stearns & Co. Inc. ("Bear Stearns") acts as
principal underwriter or depositor for the following investment
companies:

o Bear Stearns Investment Trust -- Emerging Markets Debt
Portfolio

C-5

<PAGE>

o Managed Income Securities Plus Fund, Inc.

(b) Set forth below is a list of each executive officer and
director of Bear Stearns. All Directors and Executive Officers are also Senior
Managing Directors. The principal business address of each such person is 245
Park Avenue, New York, New York 10167, except as set forth below.

Positions and Positions and
Offices with Offices with
Name Bear Stearns Registrant
- ---- ------------ ----------

Directors

James E. Cayne
Alan C. Greenberg Chairman of the Board
John L. Knight
Mark E. Lehman
Alan D. Schwartz
Warren J. Spector
John H. Slade Director Emeritus

Executive Officers

Alan C. Greenberg Chairman of the Board
James E. Cayne Chief Executive
Officer/President

William J. Montgoris Chief Operating Officer Executive Vice
President

Mark E. Lehman Executive Vice President/
General Counsel/Chief
Legal Officer

Alan D. Schwartz Executive Vice
President
Warren J. Spector Executive Vice
President
Kenneth L. Edlow Secretary
Michael Minikes Treasurer
Michael J. Abatemarco (1) Controller/Assistant
Secretary

Samuel L. Molinaro, Jr Chief Financial Officer
Senior Vice President - Finance
Frederick B. Casey Assistant Treasurer
- ---------------

1 Michael J. Abatemarco's principal business address is 1 Metrotech
Center North, Brooklyn, New York 11201-3859.

C-6

<PAGE>

Item 30. Location of Accounts and Records

1. Bear Stearns Funds Management Inc.
245 Park Avenue
New York, New York 10167

2. The Bear Stearns Funds
245 Park Avenue
New York, New York 10167

3. Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540

4. PFPC Inc.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, Delaware 19809

Item 31. Management Services

Not Applicable

Item 32. Undertakings

Registrant hereby undertakes

(1) to call a meeting of shareholders for the purpose of
voting upon the question of removal of a trustee or
trustees when requested in writing to do so by the
holders of at least 10% of the Registrant's
outstanding shares of beneficial interest and in
connection with such meeting to comply with the
provisions of Section 16(c) of the Investment Company
Act of 1940 relating to shareholder communications;
and

(2) to furnish each person to whom a prospectus is
delivered with a copy of its most current annual
report to shareholders, upon request and without
charge.

C-7

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of the Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and State of
New York on the 25th day of July, 1997.

THE BEAR STEARNS FUNDS
(Registrant)

By: /s/ Robert S. Reitzes
-----------------------
President

Pursuant to the requirements of the Securities Act of 1933,
this Amendment to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

/s/ Robert S. Reitzes President (Principal July 25, 1997
- --------------------
Robert S. Reitzes Executive Officer)

/s/ Frank J. Maresca Vice President and July 25, 1997
- --------------------
Frank J. Maresca Treasurer (Principal
Financial and
Accounting Officer)

*
- ------------------- Trustee
Peter M. Bren

*
- ------------------ Trustee
Alan J. Dixon

*
- ------------------ Trustee
John R. McKernan, Jr.

*
- ------------------ Trustee
M.B. Oglesby, Jr.

/s/ Robert S. Reitzes Trustee July 25, 1997
- ---------------------
Robert S. Reitzes

*By: /s/ Frank J. Maresca
---------------------
Frank J. Maresca,
Attorney-in-Fact

C-8

<PAGE>

INDEX TO EXHIBITS

EX-99.B5(b) Investment Advisory Agreement between the
Registrant and BSFM, with respect to Prime Money Market
Portfolio

EX-99.B11(a) Consent of Kramer, Levin, Naftalis & Frankel

EX-99.B11(b) Consent of Independent Auditors

EX-99.B12 Annual Report to Shareholders for the fiscal year ended
March 31, 1997 for The Insiders Select Fund

EX-27 Financial Data Schedules

C-9

INVESTMENT ADVISORY AGREEMENT

THE BEAR STEARNS FUNDS
245 Park Avenue
New York, New York 10167

June 2, 1997

Bear Stearns Funds Management Inc.
245 Park Avenue
New York, New York 10167

Dear Sirs:

The above-named investment company (the "Fund"), with respect
to the series named on Schedule 1 hereto, as such Schedule may be revised from
time to time (each, a "Series"), herewith confirms its agreement with you as
follows:

The Fund desires to employ its capital by investing and
reinvesting the same in investments of the type and in accordance with the
limitations specified in its charter documents and in its offering documents
(Part A and Part B) as from time to time in effect, copies of which have been or
will be submitted to you, and in such manner and to such extent as from time to
time may be approved by the Fund's Board. The Fund desires to employ you to act
as its investment adviser.

You may render services through your own employees or the
employees of one or more affiliated companies that are qualified to act as an
investment adviser to the Fund under applicable laws and are under your common
control as long as all such persons are functioning as part of an organized
group of persons, and such organized group of persons, with respect to the
services used by the Fund, is managed at all times by your authorized officers.
You will be as fully responsible to the Fund for the acts and omissions of such
persons as you are for your own acts and omissions.The compensation of such
person or persons shall be paid by you and no obligation may be incurred on the
Fund's behalf in any such respect.

Subject to the supervision and approval of the Fund's Board,
you will provide investment management of each Series' portfolio in accordance
with such Series' investment objectives and policies as stated in the Fund's
offering documents (Part A and Part B) as from time to time in effect. In
connection, therewith, you will obtain and provide investment research and will
supervise each Series' investments and conduct a continuous program of

<PAGE>

investment, evaluation and, if appropriate, sale and reinvestment of such Series
assets. You will furnish to the Fund such statistical information, with respect
to the investments which a Series may hold or contemplate purchasing, as the
Fund may reasonably request. The Fund wishes to be informed of important
developments materially affecting any Series' portfolio and shall expect you, on
your own initiative, to furnish to the Fund from time to time such information
as you may believe appropriate for this purpose.

You shall exercise your best judgment in rendering the
services to be provided to the Fund hereunder, and the Fund agrees as an
inducement to your undertaking the same that you shall not be liable hereunder
for any error of judgment or mistake of law or for any loss suffered by one or
more Series, provided that nothing herein shall be deemed to protect or purport
to protect you against any liability to the Fund or a Series or to its security
holders to which you would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the performance of your duties
hereunder or by reason of your reckless disregard of your obligations or duties
hereunder (hereinafter "Disabling Conduct") would otherwise be subject by reason
of Disabling Conduct.

In consideration of services rendered pursuant to this
Agreement, the Fund will pay you on the first business day of each month a fee
at the rate set forth opposite each Series' name on Schedule 1 hereto or will
pay you in accordance with the methodology described on additional Schedules
hereto. Net asset value shall be computed on such days and at such time or times
as described in the Fund's then-current Part A and Part B. The fee for the
period from the date of the commencement of sales of a Series' shares (after any
sales are made to you) to the end of the month during which such sales shall
have been commenced shall be pro-rated according to the proportion which such
period bears to the full monthly period, and upon any termination of this
Agreement before the end of any month, the fee for such part of a month shall be
pro-rated according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement.

For the purpose of determining fees payable to you, the value
of each Series' net assets shall be computed in the manner specified in the
Fund's charter documents for the computation of the value of each Series' net
assets.

You will bear all expenses in connection with the performance
of your services under this Agreement. All other expenses to be incurred in the
operation of the Fund will be borne by the Fund, except to the extent
specifically assumed by you. The expenses to be borne by the Fund include,
without limitation, the following: organizational costs, taxes, interest, loan
commitment fees, interest and distributions paid on securities sold short,
brokerage fees and commissions, if any, fees of Board members, Securities and
Exchange Commission fees, state Blue Sky qualification fees, advisory,
administration and fund accounting fees, charges of custodians, transfer and
dividend disbursing agents fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining the Series' existence, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of preparing and printing prospectuses and statements of
additional information for regulatory

<PAGE>

purposes and for distribution to existing shareholders, costs of shareholders'
reports and meetings, and any extraordinary expenses.

The Fund understands that you now act, and that from time to
time hereafter you may act, as investment adviser to one or more other
investment companies and fiduciary or other managed accounts, and the Fund has
no objection to your so acting, provided that when the purchase or sale of
securities of the same issuer is suitable for the investment objectives of two
or more companies or accounts managed by you which have available funds for
investment, the available securities will be allocated in a manner believed by
you to be equitable to each company or account. It is recognized that in some
cases this procedure may adversely affect the price paid or received by one or
more Series or the size of the position obtainable for or disposed of by one or
more Series.

In addition, it is understood that the persons employed by you
to assist in the performance of your duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict your right or the right of any of your affiliates to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.

Any person, even though also your officer, director, partner,
employee or agent, who may be or become an officer, Board member, employee or
agent of the Fund, shall be deemed, when rendering services to the Fund or
acting on any business of the Fund, to be rendering such services to or acting
solely for the Fund and not as your officer, director, partner, employee, or
agent or one under your control or direction even though paid by you.

The Fund will indemnify you, your officers, directors,
employees and agents (each, an "indemnitee") against, and hold each indemnitee
harmless from, any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) not resulting from Disabling
Conduct by the indemnitee. Indemnification shall be made only following: (i) a
final decision on the merits by a court or other body before whom the proceeding
was brought that the indemnitee was not liable by reason of Disabling Conduct or
(ii) in the absence of such a decision, a reasonable determination, based upon a
review of the facts, that the indemnitee was not liable by reason of Disabling
Conduct by (a) the vote of a majority of a quorum of Board members who are
neither "interested persons" of the Fund nor parties to the proceeding
("disinterested non-party Board members") or (b) an independent legal counsel in
a written opinion. Each indemnitee shall be entitled to advances from the Fund
for payment of the reasonable expenses incurred by it in connection with the
matter as to which it is seeking indemnification in the manner and to the
fullest extent permissible under the New York Business Corporation Law. Each
indemnitee shall provide to the Fund a written affirmation of its good faith
belief that the standard of conduct necessary for indemnification by the Fund
has been met and a written undertaking to repay any such advance if it should
ultimately be determined that the standard of conduct has not been met. In
addition, at least one of the following additional conditions shall be met: (a)
the indemnitee shall provide security in form and amount acceptable to the Fund
for its undertaking; (b) the Fund is insured against losses arising by reason of
the advance; or (c) a

<PAGE>

majority of a quorum of disinterested non-party Board members, or independent
legal counsel, in a written opinion, shall have determined, based on a review of
facts readily available to the Fund at the time the advance is proposed to be
made, that there is reason to believe that the indemnitee will ultimately be
found to be entitled to indemnification. No provision of this Agreement shall be
construed to protect any Board member or officer of the Fund, or any indemnitee,
from liability in violation of Sections 17(h) and (i) of the Investment Company
Act of 1940, as amended (the "1940 Act").

As to each Series, this Agreement shall continue until the
date set forth opposite such Series' name on Schedule 1 hereto (the "Reapproval
Date") and thereafter shall continue automatically for successive annual periods
ending on the day of each year set forth opposite the Series' name on Schedule 1
hereto (the "Reapproval Day"), provided such continuance is specifically
approved at least annually by (i) the Fund's Board; or (ii) vote of a majority
(as defined in the 1940 Act) of such Series' outstanding voting securities,
provided that in either event its continuance also is approved by a majority of
the Fund's Board members who are not "interested persons" (as defined in the
1940 Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. As to each Series, this
Agreement is terminable without penalty, on 60 days' notice, by the Fund's Board
or by vote of holders of a majority of such Series' shares or, upon not less
than 90 days' notice, by you. This Agreement also will terminate automatically,
as to the relevant Series, in the event of its assignment (as defined in the
1940 Act).

The Fund recognizes that from time to time your directors, officers and
employees may serve as trustees, directors, partners, officers and employees of
other business trusts, corporations, partnerships or other entities (including
other investment companies), and that such other entities may include the name
"Bear Stearns" as part of their name, and that your corporation or its
affiliates may enter into investment advisory or other agreements with such
other entities. If you cease to act as the Fund's investment adviser, the Fund
agrees that, at your request, the Fund will take all necessary action to change
the name of the Fund to a name not including "Bear Stearns" in any form or
combination of words.

This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall only be binding upon the assets and property
of the relevant Series and shall not be binding upon any Board member, officer
or shareholder of the Fund individually.

<PAGE>

If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.

Very truly yours,

THE BEAR STEARNS FUNDS

By: /s/ Ellen T. Arthur
-----------------------
Ellen T. Arthur
Secretary
Accepted:

BEAR STEARNS FUNDS MANAGEMENT INC.

By: /s/ Frank J. Maresca
-------------------------------
Frank J. Maresca
Executive Vice President

<PAGE>

SCHEDULE 1

Annual Fee as
a Percentage
of Average
Daily Net
Name of Series Assets Reapproval Date Reapproval Day
- -------------- --------------- --------------- --------------

Prime Money Portfolio .20 of 1% June 1, 1999 June 1st

Kramer, Levin, Naftalis & Frankel
919 THIRD AVENUE
NEW YORK, N.Y. 10022 - 3852
(212) 715 - 9100

Arthur H. Aufses III Monica C. Lord Sherwin Kamin
Thomas D. Balliett Richard Marlin Arthur B. Kramer
Jay G. Baris Thomas E. Molner Maurice N. Nessen
Philip Bentley Thomas H. Moreland Founding Partners
Saul E. Burian Ellen R. Nadler Counsel
Barry Michael Cass Gary P. Naftalis _____
Thomas E. Constance Michael J. Nassau
Michael J. Dell Michael S. Nelson Martin Balsam
Kenneth H. Eckstein Jay A. Neveloff Joshua M. Berman
Charlotte M. Fischman Michael S. Oberman Jules Buchwald
David S. Frankel Paul S. Pearlman Rudolph de Winter
Marvin E. Frankel Susan J. Penry-Williams Meyer Eisenberg
Alan R. Friedman Bruce Rabb Arthur D. Emil
Carl Frischling Allan E. Reznick Maria T. Jones
Mark J. Headley Scott S. Rosenblum Maxwell M. Rabb
Robert M. Heller Michele D. Ross James Schreiber
Philip S. Kaufman Howard J. Rothman Counsel
Peter S. Kolevzon Max J. Schwartz _____
Kenneth P. Kopelman Mark B. Segall
Michael Paul Korotkin Judith Singer M. Frances Buchinsky
Shari K. Krouner Howard A. Sobel Abbe L. Dienstag
Kevin B. Leblang Jeffrey S. Trachtman Ronald S. Greenberg
David P. Levin Jonathan M. Wagner Debora K. Grobman
Ezra G. Levin Harold P. Weinberger Christian S. Herzeca
Larry M. Loeb E. Lisk Wyckoff, Jr. Jane Lee
Pinchas Mendelson
Lynn R. Saidenberg
Special Counsel
-----

FAX
(212) 715-8000
---
WRITER'S DIRECT NUMBER
(212)715-9100
-------------

July 25, 1997
The Bear Stearns Funds
245 Park Avenue
New York, New York 10167

Re: The Bear Stearns Funds
with respect to the following portfolios only:
The Insiders Select Fund
Registration No. 33-84842
Post-Effective Amendment
to Registration Statement on Form N-1A
----------------------------------------------

Gentlemen:

We consent to the reference to our Firm as Counsel in Post-Effective
Amendment No. 13 to the Registration Statement on Form N-1A.

Very truly yours,

/s/ Kramer, Levin, Naftalis & Frankel
-------------------------------------
Kramer, Levin, Naftalis & Frankel

CONSENT OF INDEPENDENT AUDITORS

The Bear Stearns Funds:

We consent to the incorporation by reference in Post-Effective Amendment No. 13
to Registration Statement No. 33-84842 of our report dated May 9, 1997 relating
to The Insiders Select Fund of The Bear Stearns Funds in the Statement of
Additional Information, which is a part of such Registration Statement and to
the references to us under the caption "Financial Highlights" in the
Prospectuses, which also are a part of such Registration Statement.

/s/ Deloitte & Touche LLP
- -------------------------

DELOITTE & TOUCHE LLP
New York, New York
July 25, 1997

THE BEAR STEARNS FUNDS

The Insiders Select Fund
LETTER TO SHAREHOLDERS

April 21, 1997
Dear Shareholders:

We are pleased to present the annual report to shareholders for The Insiders
Select Fund (the "Portfolio") for the fiscal year ended March 31, 1997.

For this fiscal year, the Portfolio's class A shares (without giving effect to
the sales charge) had a total return of 18.31%*, the class C shares (without
giving effect to the contingent deferred sales charge) had a total return of
17.69% and the class Y shares returned 18.81%. The Portfolio's benchmark, the
S&P 500 Composite Index (the "S&P 500"), returned 19.73% for the period.
Additional performance data for each class of shares can be found in the
"Financial Highlights" section of this report. We lagged our benchmark due to
the fact that roughly 20% of the Portfolio was comprised of mid-cap stocks,
which, as a whole, underperformed the larger stocks represented in the S&P 500.

The Insiders Select Fund seeks to invest in companies where corporate insider
accumulation is coupled with attractive stock valuation. Insiders include
corporate officers and directors, as well as major shareholders. Insider
accumulation has been quite selective over the past 12 months as the bull market
in equities has driven up prices in many stocks. Insiders tend to be
value-oriented investors and as such, find bargain-hunting difficult in a raging
bull market. However, the correction in the stock market in late March made
valuations more favorable.

During the last quarter, our focus was on selectively accumulating stocks in the
financial services, retail, pharmaceutical and technology sectors. Despite the
fact that many of these stocks performed well over the past year, we think they
still offer good earnings growth potential. We continue to favor smaller
regional banks, many of which remain reasonably priced. Many health-care stocks
have underperformed the market over the past year, and we are investing in
stocks of those companies where insider accumulation is picking up.

Looking ahead, we will continue to invest in sectors where insider accumulation
is strong. We expect insider buying activity to pick up if the equity market
corrects further.

We value the confidence you have placed in us and would be pleased to address
any questions or concerns you may have. Please feel free to call us at
1-800-766-4111.

Sincerely,

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

* For the 12 months ended March 31, 1997, the Portfolio's class A shares had a
total return of 12.69% including the initial maximum 4.75% sales charge.

1
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A AND C SHARES(1)(2) VS. VARIOUS INDICES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CLASS A SHARES CLASS C SHARES S&P 500 COMPOSITE INDEX
<S> <C> <C> <C>
June 16, 1995 $9,525.00 $10,000.00 $10,000.00
June 30, 1995 $9,580.56 $10,066.66 $10,099.36
Sept. 30, 1995 $10,469.56 $10,975.00 $10,900.86
Dec. 31, 1995 $10,802.30 $11,316.66 $11,554.74
March 31, 1996 $11,120.01 $11,633.33 $12,154.46
June 30, 1996 $11,683.95 $12,000.00 $12,688.09
Sept. 30, 1996 $12,208.18 $12,733.33 $13,064.72
Dec. 31, 1996 $13,111.41 $13,662.60 $14,122.63
Mar. 31, 1997 $13,157.00 $13,691.00 $14,490.67
$9,525 Investment made on June 16, 1995
Past performance is not predictive of future performance

<CAPTION>
CONSUMER PRICE INDEX
<S> <C>
June 16, 1995 $10,000.00
June 30, 1995 $10,026.30
Sept. 30, 1995 $10,072.32
Dec. 31, 1995 $10,131.49
March 31, 1996 $10,230.11
June 30, 1996 $10,302.43
Sept. 30, 1996 $10,381.33
Dec. 31, 1996 $10,466.80
Mar. 31, 1997 $10,512.82
$9,525 Investment made on June 16, 1995
Past performance is not predictive of future performance
</TABLE>

<TABLE>
<CAPTION>
TOTAL RETURNS
ONE YEAR ENDED AVERAGE
MARCH 31, 1997 ANNUAL (3)
----------------- -------------
<S> <C> <C>
The Insiders Select Fund(2)
Class A shares(4)............................................ 12.69% 16.52%
Class C shares............................................... 17.69 19.13
S&P 500 Composite Index(1)....................................... 19.73 22.96
Consumer Price Index(1).......................................... 2.76 2.83
</TABLE>

- ---------
(1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio
and reflects all Portfolio expenses. Investors should note that the
Portfolio is a professionally managed mutual fund while the indices are
either unmanaged and do not incur sales charges or expenses and/or are not
available for investment.
(2) 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. Total returns shown include fee waivers and reimbursements;
total returns would have been lower had there been no assumption of fees and
expenses in excess of expense limitations.
(3) For the period June 16, 1995 (commencement of investment operations) through
March 31, 1997.
(4) Reflects the initial maximum 4.75% sales charge. Without the applicable
sales charge, the average annual total returns would have been 18.31% and
16.52%, respectively, for each period shown.

2
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS Y SHARES(1)(2) VS. VARIOUS INDICES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CLASS Y SHARES S&P 500 COMPOSITE INDEX
<S> <C> <C>
Jun 20, 1995 10,000 10,000
Jun 30, 1995 9,967 10,012
Sept. 30, 1995 10,891 10,792
Dec. 31, 1995 11,259 11,440
Mar. 31, 1996 11,598 12,051
Jun 30, 1996 12,202 12,590
Sept. 30, 1996 12,756 12,975
Dec. 31, 1996 13,723 14,054
Mar. 31, 1997 13,779 14,428
Past performance is not predivtive of future performance

<CAPTION>
CONSUMER PRICE INDEX
<S> <C>
Jun 20, 1995 10,000
Jun 30, 1995 10,027
Sept. 30, 1995 10,073
Dec. 31, 1995 10,132
Mar. 31, 1996 10,231
Jun 30, 1996 10,303
Sept. 30, 1996 10,382
Dec. 31, 1996 10,467
Mar. 31, 1997 10,513
Past performance is not predivtive of future performance
</TABLE>

<TABLE>
<CAPTION>
TOTAL RETURNS
ONE YEAR ENDED AVERAGE
MARCH 31, 1997 ANNUAL (3)
----------------- -------------
<S> <C> <C>
The Insiders Select Fund(2)
Class Y shares............................................... 18.81% 19.69%
S&P 500 Composite Index(1)....................................... 19.73 22.62
Consumer Price Index(1).......................................... 2.76 2.84
</TABLE>

- ---------
(1) The chart assumes a hypothetical $10,000 initial investment in the Portfolio
and reflects all Portfolio expenses. Investors should note that the
Portfolio is a professionally managed mutual fund while the indices are
either unmanaged and do not incur expenses and/or are not available for
investment.
(2) Bear Stearns Funds Management Inc. waived its advisory fee and agreed to
voluntarily reimburse a portion of the Portfolio's operating expenses, if
necessary, to maintain the expense limitation, as set forth in the notes for
the financial statements. Total returns shown include fee waivers and
reimbursements; total returns would have been lower had there been no
assumption of fees and expenses in excess of expense limitations.
(3) For the period June 20, 1995 (initial public offering date) through March
31, 1997.

3
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund

MARCH 31, 1997
(UNAUDITED)

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

SECTOR ALLOCATION
(AS A PERCENTAGE OF NET ASSETS)
- --------------------------------------------------------------------------------

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Aerospace & Defense (5.35%) 5.35%
Banks (6.36%) 6.36%
Chemicals & Fertilizers (1.14%) 1.41%
Computers & Office Equipment (3.14%) 3.14%
Computer Services (2.76%) 2.76%
Credit & Finance (10.23%) 10.23%
Drugs & Hospital Supplies (12.97%) 12.97%
Electrical Equipment (1.82%) 1.82%
Electronics (4.27%) 4.27%
Entertainment & Liesure (1.54%) 1.54%
Healthcare (2.53%) 2.53%
Lodging (2.32%) 2.32%
Miscellaneous Manufacturing (1.94%) 1.94%
Oil & Natural Gas (11.76%) 11.76%
Publishing - Newspaper (1.34%) 1.34%
Retailing - Department Stores (3.68%) 3.68%
Retailing - Grocery Stores (3.75%) 3.75%
Telecommunications (3.90%) 3.90%
Tools (1.18%) 1.18%
Cash & Cash Equivalents (4.21%) 4.21%
Other (13.54%) 13.54%
</TABLE>

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

TOP TEN HOLDINGS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDING SECTOR NET ASSETS
- ---- -------------------------------------------------- --------------------------- ----------
<C> <S> <C> <C>
1. Merck & Co., Inc. ................................ Drugs & Hospital Supplies 3.65
2. Safeway Inc. ..................................... Retailing -- Grocery Stores 2.77
3. Texaco Inc. ...................................... Oil & Natural Gas 2.77
4. Microsoft Corp. .................................. Computer Services 2.76
5. Mobil Corp. ...................................... Oil & Natural Gas 2.72
6. Johnson & Johnson................................. Drugs & Hospital Supplies 2.65
7. Travelers Group, Inc. ............................ Credit & Finance 2.65
8. Intel Corp. ...................................... Electronics 2.62
9. City National Corp. .............................. Banks 2.39
10. Boeing Co. (The).................................. Aerospace & Defense 2.29
</TABLE>

4
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund
PORTFOLIO OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
----------------------------------------------------------
MARKET
SHARES VALUE
------------------------------------------------------------------------------
<C> <S> <C>

COMMON STOCKS--95.79%

AEROSPACE & DEFENSE - 5.35%
5,800 Boeing Co. (The) ........................................... $ 572,025
2,000 General Dynamics Corp. ..................................... 134,750
5,500 Rockwell International Corp. ............................... 356,812
3,600 United Technologies Corp. .................................. 270,900
-----------
1,334,487
-----------

APPLIANCES - HOUSEHOLD - 0.46%
5,600 Maytag Corp. ............................................... 115,500
-----------

AUTOMOTIVE PARTS & EQUIPMENT - 0.73%
3,500 TRW Inc. ................................................... 181,125
-----------

BANKS - 6.36%
4,100 BankAmerica Corp. .......................................... 413,075
27,100 City National Corp. ........................................ 596,200
2,100 First American Corp. - Tennessee.*.......................... 133,613
1,300 Republic New York Corp. .................................... 114,563
7,500 Summit Bancorp ............................................. 328,125
-----------
1,585,576
-----------
BUILDING & CONSTRUCTION PRODUCTS - 0.57%
3,800 Lowes Companies ............................................ 142,025
-----------

CASINO SERVICES - 0.43%
6,600 International Game Technology .............................. 106,425
-----------
CHEMICALS & FERTILIZERS - 1.41%
6,100 Cytec Industries Inc.*...................................... 231,038
2,700 Praxair, Inc. .............................................. 121,163
-----------
352,201
-----------

COMMERCIAL SERVICES - 0.96%
4,900 Dun & Bradstreet Corp. ..................................... 124,338
5,500 Ogden Corp. ................................................ 116,188
-----------
240,526
-----------

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

COMPUTERS & OFFICE EQUIPMENT - 3.14%
6,500 Cadence Design Systems, Inc.*............................... $ 223,437
7,900 Data General Corp.*......................................... 134,300
3,200 Pitney Bowes, Inc. ........................................ 188,000
5,300 Seagate Technology, Inc.*................................... 237,838
-----------
783,575
-----------

COMPUTER SERVICES - 2.76%
7,500 Microsoft Corp.*............................................ 687,656
-----------

COSMETICS & TOILETRIES - 0.44%
4,200 Alberto-Culver Co., Class B ................................ 109,725
-----------

CREDIT & FINANCE - 10.23%
8,800 Conseco Inc. ............................................... 313,500
8,500 Equitable Companies, Inc. .................................. 231,625
4,500 Freemont General Corp. ..................................... 126,563
5,900 Morgan Stanley Group Inc. .................................. 346,625
3,100 NAC Re Corp. ............................................... 110,437
7,700 Price (T. Rowe) Associates ................................. 285,862
3,400 Student Loan Marketing Association ......................... 323,850
4,000 SunAmerica Inc. ............................................ 150,500
13,800 Travelers Group, Inc. ...................................... 660,662
-----------
2,549,624
-----------

DIVERSIFIED OPERATIONS - 0.92%
2,300 Kansas City Southern Industries, Inc. ...................... 115,000
2,100 Tyco International Ltd. .................................... 115,500
-----------
230,500
-----------

DRUGS & HOSPITAL SUPPLIES - 12.97%
4,400 Abbott Laboratories ........................................ 246,950
3,700 Becton, Dickinson & Co. .................................... 166,500
7,200 Bristol-Myers Squibb Co. ................................... 424,800
6,700 Eli Lilly & Co. ............................................ 551,075
12,500 Johnson & Johnson .......................................... 660,938
10,800 Merck & Co.,Inc. ........................................... 909,900
4,100 Monsanto Co. ............................................... 156,825
1,600 Schering-Plough Corp. ...................................... 116,400
-----------
3,233,388
-----------
</TABLE>

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

5
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund
PORTFOLIO OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
MARKET
SHARES VALUE
------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)

ELECTRICAL EQUIPMENT - 1.82%
1,500 Harris Corp. ............................................... $ 115,312
5,000 Honeywell, Inc. ............................................ 339,375
-----------
454,687
-----------

ELECTRONICS - 4.27%
2,300 Applied Materials, Inc.*.................................... 106,663
4,700 Intel Corp. ................................................ 653,888
4,000 Solectron Corp.*............................................ 200,500
1,400 Texas Instruments, Inc. .................................... 104,825
-----------
1,065,876
-----------
ELECTRONICS - MILITARY - 0.96%
6,400 Coltec Industries, Inc.*.................................... 118,400
5,200 Tracor, Inc.*............................................... 120,900
-----------
239,300
-----------
ENGINES - COMBUSTION - 0.47%
2,300 Cummins Engine Co., Inc. ................................... 117,875
-----------

ENTERTAINMENT & LEISURE - 1.54%
4,200 Brunswick Corp. ............................................ 112,875
7,500 MGM Grand, Inc.*............................................ 271,875
-----------
384,750
-----------

FOOD - MISCELLANEOUS/DIVERSIFIED - 0.69%
2,200 Ralston-Ralston Purina Group ............................... 171,875
-----------

HEALTHCARE - 2.53%
16,500 Humana, Inc. ............................................... 363,000
5,600 United Healthcare Corp. .................................... 266,700
-----------
629,700
-----------

HUMAN RESOURCES - 0.43%
6,700 Olsten Corp. ............................................... 108,038
-----------
INSTRUMENTS - SCIENTIFIC - 0.44%
1,700 Perkin-Elmer Corp. ......................................... 109,437
-----------

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

LODGING - 2.32%
14,900 Hilton Hotels Corp. ........................................ $ 361,325
6,500 Promus Hotel Corp.*......................................... 216,125
-----------
577,450
-----------

MACHINERY - FARM - 1.14%
2,700 Deere & Co. ................................................ 117,450
5,500 Dresser Industries, Inc. ................................... 166,375
-----------
283,825
-----------

MACHINERY - INDUSTRIAL - 0.62%
2,300 Dover Corp. ................................................ 120,750
800 Ingersoll-Rand Co. ......................................... 34,900
-----------
155,650
-----------

MISCELLANEOUS MANUFACTURING - 1.94%
3,500 Case Corp. ................................................. 177,625
8,400 Harsco Corp. ............................................... 305,550
-----------
483,175
-----------

METAL PROCESSORS & FABRICATORS - 0.89%
4,300 Allegheny Teledyne Inc. .................................... 120,937
3,300 Trinity Industries.......................................... 100,238
-----------
221,175
-----------

OIL & NATURAL GAS - 11.76%
3,200 Baker Hughes, Inc. ......................................... 122,800
2,800 Columbia Gas Systems, Inc. ................................. 162,050
5,200 Mobil Corp. ................................................ 679,250
13,900 Oneok, Inc. ................................................ 361,400
3,900 Pacific Enterprises ........................................ 117,975
5,500 Rowan Companies, Inc.*...................................... 124,437
2,300 Royal Dutch Petroleum Co. .................................. 402,500
1,500 Schlumberger, Ltd. ......................................... 160,875
6,300 Texaco Inc. ................................................ 689,850
2,400 Tidewater, Inc. ............................................ 110,400
-----------
2,931,537
-----------

PAPER & PAPER RELATED PRODUCTS - 1.12%
2,800 Kimberly-Clark Corp. ....................................... 278,250
-----------
</TABLE>

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

6
<PAGE>
THE BEAR STEARNS FUNDS

PUBLISHING - BOOKS - 0.96%
4,700 McGraw-Hill Companies, Inc. ................................ $ 240,287
-----------
PUBLISHING - NEWSPAPER - 1.34%
5,700 Media General Inc., Class A ................................ 161,738
500 Washington Post Co. ........................................ 172,000
-----------
333,738
-----------
RESPIRATORY PRODUCTS - 0.47%
6,700 Nellcor Puritan Bennett Inc.*............................... 118,088
-----------

RETAILING - DEPARTMENT STORES - 3.68%
6,600 Costco Inc.*................................................ 182,325
6,500 Federated Department Stores, Inc.*.......................... 213,687
3,500 Fred Meyer, Inc.*........................................... 144,375
7,500 Sears, Roebuck & Co. ....................................... 376,875
-----------
917,262
-----------

RETAILING - GROCERY STORES - 3.75%
5,500 American Stores, Inc. ...................................... 244,750
14,900 Safeway Inc.*............................................... 690,988
-----------
935,738
-----------
TELECOMMUNICATIONS - 3.90%
800 360 Degrees Communications Co.*............................. 13,800
6,700 Equifax Inc. ............................................... 182,575
11,300 Loral Space & Communications*............................... 159,612
11,100 Octel Communications Corp.*................................. 176,212
6,500 SBC Communications Inc. .................................... 342,062
6,500 Scientific-Atlanta Inc. .................................... 99,125
-----------
973,386
-----------

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

TOOLS - 1.18%
2,100 Snap-On, Inc. .............................................. $ 81,375
5,600 Stanley Works (The) ........................................ 212,100
-----------
293,475
-----------

UTILITIES - 0.84%
6,100 Texas Utilities Co. ....................................... 208,925
-----------
Total Common Stocks
(cost - $21,642,520)........................................ 23,885,832
-----------

SHORT-TERM INVESTMENTS - 3.33%

INVESTMENT COMPANIES - 3.33%
581,257 Federated Investors, Trust for Short-Term U.S. Government
Securities**................................................ 581,257
84,713 The Milestone Funds Treasury Obligations Portfolio,
Institutional Shares**...................................... 84,713
164,645 The Treasurers Fund Inc., U.S. Treasury Money Market
Portfolio**................................................. 164,645
-----------
Total Short-Term Investments
(cost - $830,615)........................................... 830,615
-----------
Total Investments
(cost - $22,473,135) - 99.12%............................... 24,716,447
Other assets in excess of liabilities - 0.88%............... 218,628
-----------
Net Assets - 100.00%........................................ $24,935,075
-----------
-----------
</TABLE>

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

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

7
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997

<TABLE>
<S> <C>
ASSETS
Investments, at value (cost - $22,473,135)...... $24,716,447
Receivable for investments sold................. 210,209
Receivable for Portfolio shares sold............ 76,276
Receivable from investment adviser.............. 32,013
Dividends and interest receivable............... 31,609
Deferred organization expenses and other
assets......................................... 164,856
-----------
Total assets.............................. 25,231,410
-----------
LIABILITIES
Payable for investments purchased............... 154,532
Distribution fee payable (class A and C
shares)........................................ 41,745
Payable for Portfolio shares repurchased........ 19,674
Administration fee payable...................... 3,326
Custodian fee payable........................... 3,583
Accrued expenses................................ 73,475
-----------
Total liabilities......................... 296,335
-----------
NET ASSETS
Capital stock, $0.001 par value (unlimited
shares of beneficial interest authorized)...... 1,714
Paid-in capital................................. 21,598,953
Accumulated net realized gain from
investments.................................... 1,091,096
Net unrealized appreciation on investments...... 2,243,312
-----------
Net assets................................ $24,935,075
-----------
-----------
CLASS A
Net assets...................................... $13,859,782
-----------
Shares of beneficial interest outstanding....... 950,505
-----------
Net asset value per share....................... $14.58
-----------
-----------
Maximum offering price per share (net asset
value plus sales charge of 4.75%* of the
offering price)................................ $15.31
-----------
-----------
CLASS C
Net assets...................................... $ 9,518,756
-----------
Shares of beneficial interest outstanding....... 657,363
-----------
Net asset value and offering price per
share**........................................ $14.48
-----------
-----------
CLASS Y
Net assets...................................... $ 1,556,537
-----------
Shares of beneficial interest outstanding....... 106,150
-----------
Net asset value, offering and redemption value
per share...................................... $14.66
-----------
-----------
</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 intergral part of the financial statements.

8
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 1997

<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of withholding taxes of $879).... $ 359,727
Interest........................................ 60,861
----------
420,588
----------
EXPENSES
Advisory fees................................... 182,313
Distribution fees - class A..................... 65,276
Distribution fees - class C..................... 94,265
Transfer agent fees and expenses................ 125,229
Accounting fees................................. 107,174
Federal and state registration fees............. 72,508
Reports and notices to shareholders............. 52,000
Legal and auditing fees......................... 43,000
Amortization of organization expenses........... 36,394
Administration fees............................. 35,873
Custodian fees and expenses..................... 22,999
Insurance expenses.............................. 16,199
Trustees' fees and expenses..................... 3,401
Other........................................... 5,386
----------
Total expenses before waivers and
reimbursements............................. 862,017
Less: waivers and reimbursements.......... (426,258)
----------
Total expenses after waivers and
reimbursements............................. 435,759
----------
Net investment loss............................. (15,171)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND SECURITY SOLD SHORT
Net realized gain from investments.............. 3,006,957
Net change in unrealized appreciation on:
Investments................................... 757,844
Security sold short........................... 34,192
----------
Net realized and unrealized gain on investments
and security sold short........................ 3,798,993
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................... $3,783,822
----------
----------
</TABLE>

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

9
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE
PERIOD
FOR THE JUNE 16,
FISCAL YEAR 1995*
ENDED THROUGH
MARCH 31, MARCH 31,
1997 1996
------------ ------------

<S> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income/(loss).................... $ (15,171) $ 28,761
Net realized gain from investments.............. 3,006,957 891,092
Net change in unrealized apppreciation on
investments and security sold short............ 792,036 1,451,276
------------ ------------
Net increase in net assets resulting from
operations..................................... 3,783,822 2,371,129
------------ ------------

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A shares................................ (8,066) (8,222)
Class Y shares................................ (1,784) (3,479)
------------ ------------
(9,850) (11,701)
------------ ------------
Net realized capital gains
Class A shares................................ (1,540,623) --
Class C shares................................ (1,088,043) --
Class Y shares................................ (170,326) --
------------ ------------
(2,798,992) --
------------ ------------

SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares............ 7,652,245 26,820,998
Cost of shares repurchased...................... (9,576,787) (5,837,996)
Shares issued in reinvestment of dividends...... 2,531,683 10,500
------------ ------------
Net increase in net assets derived from shares
of beneficial interest transactions............ 607,141 20,993,502
------------ ------------
Total increase in net assets.................... 1,582,121 23,352,930

NET ASSETS
Beginning of period............................. 23,352,954 24
------------ ------------
End of period................................... $24,935,075 $23,352,954**
------------ ------------
------------ ------------
</TABLE>

- --------
* Commencement of investment operations.
** Includes undistributed net investment income of $17,060.

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

10
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------

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 each period indicated. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 16, 1995*
FOR THE FISCAL YEAR ENDED THROUGH
MARCH 31, 1997 MARCH 31, 1996
--------------------------------- ---------------------
CLASS A CLASS C CLASS Y CLASS A CLASS C
-------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of period........................... $ 14.00 $ 13.96 $ 14.02 $ 12.00 $ 12.00
-------- --------- -------- -------- ---------
Net investment income/(loss)(1)................................ 0.02 (0.06) 0.08 0.03 (0.01)
Net realized and unrealized gain on
investments and security sold short(2)........................ 2.48 2.47 2.49 1.98 1.97
-------- --------- -------- -------- ---------
Net increase in net assets resulting from operations........... 2.50 2.41 2.57 2.01 1.96
-------- --------- -------- -------- ---------
Dividends and distributions to shareholders from
Net investment income........................................ (0.01) -- (0.02) (0.01) --
Net realized capital gains................................... (1.91) (1.89) (1.91) -- --
-------- --------- -------- -------- ---------
(1.92) (1.89) (1.93) (0.01) --
-------- --------- -------- -------- ---------
Net asset value, end of period................................. $ 14.58 $ 14.48 $ 14.66 $ 14.00 $ 13.96
-------- --------- -------- -------- ---------
-------- --------- -------- -------- ---------
Total investment return(3)..................................... 18.31% 17.69% 18.81% 16.75% 16.33%
-------- --------- -------- -------- ---------
-------- --------- -------- -------- ---------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...................... $13,860 $ 9,519 $ 1,557 $12,132 $ 9,928
Ratio of expenses to average net assets(1)..................... 1.65% 2.15% 1.15% 1.65%(5) 2.15%(5)
Ratio of net investment income/(loss) to average net
assets(1)..................................................... 0.11% (0.38)% 0.60% 0.38%(5) (0.12)%(5)
Decrease reflected in above expense ratios and net investment
income/(loss) due to waivers and reimbursements............... 1.82% 1.81% 1.81% 1.87%(5) 1.92%(5)
Portfolio turnover rate........................................ 128.42% 128.42% 128.42% 93.45%(6) 93.45%(6)
Average commission rate per share(7)........................... $0.0264 $0.0264 $0.0264 $0.0294 $0.0294

<CAPTION>
FOR THE PERIOD
JUNE 20, 1995*
THROUGH
MARCH 31, 1996
---------------
CLASS Y
---------------
<S> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of period........................... $ 12.12
-------
Net investment income/(loss)(1)................................ 0.07
Net realized and unrealized gain on
investments and security sold short(2)........................ 1.87
-------
Net increase in net assets resulting from operations........... 1.94
-------
Dividends and distributions to shareholders from
Net investment income........................................ (0.04)
Net realized capital gains................................... --
-------
(0.04)
-------
Net asset value, end of period................................. $ 14.02
-------
-------
Total investment return(3)..................................... 15.98%(4)
-------
-------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...................... $ 1,293
Ratio of expenses to average net assets(1)..................... 1.15%(5)
Ratio of net investment income/(loss) to average net
assets(1)..................................................... 0.97%(4)(5)
Decrease reflected in above expense ratios and net investment
income/(loss) due to waivers and reimbursements............... 2.04%(4)(5)
Portfolio turnover rate........................................ 93.45%(6)
Average commission rate per share(7)........................... $0.0294
</TABLE>

- ---------
* Commencement of investment operations. Class Y shares commenced its initial
public offering on June 20, 1995.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the date of distribution.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses in
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) The total investment return and ratios for class Y shares are not
necessarily comparable to those of class A and C shares, due to timing
differences in the commencement of the initial public offering of class Y
shares.
(5) Annualized.
(6) Not annualized.
(7) Represents average commission rate per share charged to the Portfolio on
purchases and sales of investments subject to such commissions during each
period.

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

11
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund
NOTES TO FINANCIAL STATEMENTS

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business
trust on September 29, 1994 and is registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as an open-end management investment
company. The Fund currently has 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 Fund ("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 $181,965 which were incurred by the
Portfolio in connection with the organization, registration with the Commission
and initial public offering of its shares, have been deferred and are being
amortized using the straight-line method over the period of benefit not
exceeding sixty months, beginning with the commencement of investment operations
of the Portfolio. In the event that the 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 or under the
direction of 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 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).

12
<PAGE>
SHORT SELLING--When the Portfolio makes a short sale, an amount equal to the
proceeds received by the Portfolio is recorded as a liability and is
subsequently adjusted to the current market value of the short sale. Short sales
represent obligations of the Portfolio to make future delivery of specific
securities and, correspondingly, create an obligation to purchase the security
at market prices prevailing at the later delivery date (or to deliver the
security if already owned by the Portfolio). Upon the termination of a short
sale, the Portfolio will recognize a gain, limited to the price at which the
Portfolio sold the security short, if the market price is less than the proceeds
originally received. The Portfolio will recognize a loss, unlimited in
magnitude, if the market price at termination is greater than the proceeds
originally received. As a result, short sales create the risk that the
Portfolio's ultimate obligation to satisfy the delivery requirements may exceed
the amount of the proceeds initially received or the liability recorded in the
financial statements. The Portfolio had no securities short sold at March 31,
1997.

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 by 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. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within
capital accounts based on their US federal tax-basis treatment; temporary
differences do not require reclassification. At March 31, 1997, the Portfolio
reclassified within the composition of net assets a net operating loss of $7,961
to accumulated realized gains.

TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

During the fiscal year ended March 31, 1997, 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 from which BSFM, in turn, 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. The performance adjustment fee reduced the total
advisory fee by $56,841 or 0.24% of the value of the Portfolio's average net
assets due to underperformance in comparison to the S&P 500 Composite Index
during the period.

During the fiscal year ended March 31, 1997, 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, PFPC Inc. is entitled to receive a monthly fee
equal to an annual rate of 0.10% of the Portfolio's average daily net assets up
to $200 million, 0.075% of the next $200 million, 0.05% of the next $200 million
and 0.03% of net assets above $600 million, subject to a minimum annual fee of
approximately $100,000 for the Portfolio. During the fiscal year ended March 31,
1997, PFPC Inc. has voluntarily waived a portion of its fee.

During the fiscal year ended March 31, 1997, the Adviser has voluntarily
undertaken to limit the Portfolio's total operating expenses (exclusive of
brokerage commissions, taxes, interest 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 year ended March 31, 1997, the
Adviser waived its advisory fee of $182,313. In addition, the Adviser reimbursed
$243,945, in order to maintain the voluntary expense limitation.

13
<PAGE>
For the fiscal year ended March 31, 1997, Bear Stearns, an affiliate of the
Adviser and the Administrator, earned $8,925 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.

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 fiscal year ended March 31, 1997, 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 accrued daily and paid monthly or at such other intervals
as the Board of Trustees may determine. The fees paid to Bear Stearns under the
Plan are payable without regard to actual expenses incurred. For the fiscal year
ended March 31, 1997, Bear Stearns earned $159,541 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. As a result
of an undertaking by the Distributor, it reallowed all of the sales charges to
its dealers selling Portfolio shares for the period June 16, 1995 (commencement
of investment operations) through September 26, 1995 and the period February 15,
1996 through June 30, 1996. Furthermore, the Distributor has increased the
compensation paid to its dealers selling Portfolio shares on net asset value
transfers (purchases made by investors with the proceeds from a redemption of
shares of an investment company sold with a sales charge or commission and not
distributed by Bear Stearns) from 0.50% to 1.00% beginning April 15, 1996 until
further notice. 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 fiscal year ended March 31, 1997, Bear Stearns has advised the Portfolio
that it received approximately $163,000 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 approximately $14,300 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 March 31,
1997 was $22,473,135. Accordingly, the net unrealized appreciation of
investments of $2,243,312 was composed of gross appreciation of $2,734,543 for
those investments having an excess of value over cost and $491,231 of gross
depreciation for those investments having an excess of cost over value.

For the fiscal year ended March 31, 1997, aggregate purchases and sales of
investment securities (excluding short-term investments) for the Portfolio were
$28,876,688 and $31,585,896, 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 ("CDSC") of 1.00% during the first year. There is no sales
charge or CDSC on class Y shares, which are offered primarily to institutional
investors.

At March 31, 1997, 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.

14
<PAGE>
Transactions in the classes of shares of beneficial interest for the fiscal year
ended March 31, 1997 were as follows:

<TABLE>
<CAPTION>
SALES REINVESTMENTS REPURCHASES
---------------------- ------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------ ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Class A shares.................................... 331,726 $ 4,976,082 97,925 $1,381,727 345,460 $5,185,795
Class C shares.................................... 148,520 2,231,793 70,623 991,548 273,058 3,992,295
Class Y shares.................................... 29,508 444,370 11,179 158,408 26,728 398,697
</TABLE>

Transactions in the classes of shares of beneficial interest for the period June
16, 1995 (commencement of investment operations) through March 31, 1996 were as
follows:

<TABLE>
<CAPTION>
SALES REINVESTMENTS REPURCHASES
---------------------- --------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------ ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Class A shares.................................... 1,179,727 $15,128,116 537 $7,389 313,951 $4,288,010
Class C shares.................................... 801,060 10,158,978 -- -- 89,783 1,224,227
Class Y shares*................................... 116,322 1,533,904 226 3,111 24,357 325,759
</TABLE>

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

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 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.

Each loan is payable on demand or upon termination of this credit agreement or,
for money market loans, on the last day of the interest period and, in any
event, not later than 14 days from the date the loan was advanced.

The Portfolio uses the facility to borrow money only for temporary or emergency
(not leveraging) purposes. The amount outstanding under the line of credit
agreement for the Portfolio averaged $2,452 during the fiscal year ended March
31, 1997. The Portfolio did not have any amount outstanding at any month-end
under such line of credit agreement during the fiscal year ended March 31, 1997.
The average interest rate during the fiscal year ended March 31, 1997, on
amounts outstanding under such line of credit agreement, was 8.25%.

15
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund
REPORT OF INDEPENDENT AUDITORS

The Board of Trustees and Shareholders, The Insiders Select Fund (A series of
The Bear Stearns Funds):

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The Insiders Select Fund (the "Portfolio") as
of March 31, 1997, and the related statements of operations, changes in net
assets and the financial highlights for the year ended March 31, 1997 and the
period June 16, 1995 (commencement of operations) to March 31, 1996. These
financial statements and financial highlights are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at March 31, 1997 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The Insiders Select
Fund at March 31, 1997, the results of its operations, the changes in its net
assets and the financial highlights for the periods presented in conformity with
generally accepted accounting principles.

Deloitte & Touche LLP
New York, New York
May 9, 1997

16
<PAGE>
THE BEAR STEARNS FUNDS

The Insiders Select Fund
SHAREHOLDER TAX INFORMATION -- (UNAUDITED)

The Portfolio is required by Subchapter M of the Internal Revenue Code of 1986,
as amended, to advise its shareholders within 60 days of the Portfolio's fiscal
year end (March 31, 1997) as to the U.S. federal tax status of distributions
received by the Portfolio's shareholders in respect of such fiscal year.

During the fiscal year ended March 31, 1997, the following dividends and
distributions per share were paid by the Portfolio:

<TABLE>
<CAPTION>
ORDINARY INCOME LONG-TERM CAPITAL GAINS
- ------------------------------------- -------------------------------
CLASS A CLASS C CLASS Y CLASS A CLASS C CLASS Y
- ----------- ----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 1.720 $ 1.700 $ 1.730 $ 0.200 $ 0.019 $ 0.200
- ----------- ----------- ----------- --------- --------- ---------
- ----------- ----------- ----------- --------- --------- ---------
</TABLE>

The percentage of ordinary income received from The Insiders Select Fund
qualifying for the corporate dividends received deduction is 16.86%. All
Portfolio dividends were derived from dividend income.

Because the Portfolio's fiscal year is not the calendar year, another
notification will be sent with respect to calendar year 1997. The second
notification, which will reflect the amount to be used by calendar year
taxpayers on their U.S. federal income tax returns, will be made in conjunction
with Form 1099-DIV and will be mailed in January 1998.

Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their dividend. They will generally not be entitled to a foreign tax
credit or deduction for the withholding taxes paid by the Portfolio.

In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs)
need not be reported as taxable income for U.S. federal income tax purposes.
However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may
need this information for their annual information reporting.

Shareholders are advised to consult their own tax advisers with respect to the
tax consequences of their investment in the Portfolio.

17
<PAGE>
(This page has been left blank intentionally.)

<PAGE>
BEAR STEARNS

The
Bear Stearns
Funds

245 Park Avenue THE INSIDERS
New York, NY 10167 SELECT FUND
1.800.766.4111

Robert S. Reitzes Chairman of the Board and
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
Donalda L. Fordyce Vice President
Frank J. Maresca Vice President and Treasurer
Ellen T. Arthur Secretary
Vincent L. Pereira Assistant Treasurer
Eileen M. Coyle Assistant Secretary

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

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

Transfer and Dividend Counsel
Disbursement Agent Kramer, Levin, Naftalis & Frankel
PFPC Inc. 919 Third Avenue
Bellevue Corporate Center New York, NY 10022
400 Bellevue Parkway
Wilmington, DE 19809

Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281

This report is submitted for the general ANNUAL REPORT
information of the shareholders of the MARCH 31, 1997
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
investment return is based on historical
results and is not intended to indicate
future performance. The investment
return and principal value of an
investment in the Portfolio will
fluctuate, so that an investors shares,
when redeemed, may be worth more or less
than original cost.

<ARTICLE> 6
<CIK> 0000931145
<NAME> THE BEAR STEARNS FUNDS
<SERIES>
<NUMBER> 041
<NAME> INSIDERS SELECT PORTFOLIO - CLASS A

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 22473135
<INVESTMENTS-AT-VALUE> 24716447
<RECEIVABLES> 350107
<ASSETS-OTHER> 164856
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25231410
<PAYABLE-FOR-SECURITIES> 154532
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141803
<TOTAL-LIABILITIES> 296335
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21600667
<SHARES-COMMON-STOCK> 1714018
<SHARES-COMMON-PRIOR> 1669783
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1091096
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2243312
<NET-ASSETS> 24935075
<DIVIDEND-INCOME> 359727
<INTEREST-INCOME> 60861
<OTHER-INCOME> 0
<EXPENSES-NET> 435759
<NET-INVESTMENT-INCOME> (15171)
<REALIZED-GAINS-CURRENT> 3006957
<APPREC-INCREASE-CURRENT> 792036
<NET-CHANGE-FROM-OPS> 3783822
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9850)
<DISTRIBUTIONS-OF-GAINS> (2798992)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 509754
<NUMBER-OF-SHARES-REDEEMED> (645246)
<SHARES-REINVESTED> 179727
<NET-CHANGE-IN-ASSETS> 1582121
<ACCUMULATED-NII-PRIOR> 17060
<ACCUMULATED-GAINS-PRIOR> 891092
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 182313
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 862017
<AVERAGE-NET-ASSETS> 13053841
<PER-SHARE-NAV-BEGIN> 14.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 2.48
<PER-SHARE-DIVIDEND> (.01)
<PER-SHARE-DISTRIBUTIONS> (1.91)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.58
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>