<PAGE>
[LOGO]
The
Bear Stearns
Funds
245 Park Avenue
New York, NY 10167
1.800.766.4111
<TABLE>
<S> <C>
Michael Minikes Chairman of the Board
Robert S. Reitzes 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
Christina P. LaMastro Assistant Secretary
INVESTMENT ADVISER DISTRIBUTOR
AND ADMINISTRATOR Bear, Stearns & Co. Inc.
Bear Stearns Funds 245 Park Avenue
Management Inc. New York, NY 10167
245 Park Avenue
New York, NY 10167
CUSTODIAN TRANSFER AND DIVIDEND
Custodial Trust Company DISBURSEMENT AGENT
101 Carnegie Center PFPC Inc.
Princeton, NJ 08540 Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
COUNSEL INDEPENDENT AUDITORS
Kramer, Levin, Deloitte & Touche LLP
Naftalis & Frankel Two World Financial Center
919 Third Avenue New York, NY 10281
New York, NY 10022
</TABLE>
The financial information included herein is taken from the records of each
Portfolio without examination by independent auditors who do not express an
opinion thereon.
This report is submitted for the general information of the shareholders of each
Portfolio. It is not authorized for distribution to prospective investors in
each Portfolio unless it is preceded or accompanied by a current prospectus
which includes details regarding each Portfolio's objectives, policies, sales
commissions and other information. Total investment return is based on
historical results and is not intended to indicate future performance. The
investment return and principal value of an investment in each Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than original cost.
"Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-", and
"STARS-Registered Trademark-" are trademarks of The McGraw-Hill Companies, Inc.
and have been licensed for use by Bear, Stearns & Co. Inc. S&P STARS Portfolio
is not sponsored, managed, advised, sold or promoted by Standard & Poor's.
BSF-R-015-01
S&P STARS
Portfolio
The Insiders
Select Fund
Large Cap
Value Portfolio
Small Cap
Value Portfolio
Semi-Annual Report
September 30, 1997
<PAGE>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
The Insiders Select Fund
Large Cap Value Portfolio
Small Cap Value Portfolio
LETTER TO SHAREHOLDERS
October 20, 1997
Dear Shareholders:
We are pleased to present the semi-annual report to shareholders for S&P STARS
Portfolio ("S&P STARS"), The Insiders Select Fund ("Insiders Select"), Large Cap
Value Portfolio ("Large Cap") and Small Cap Value Portfolio ("Small Cap") (each
a "Portfolio") for the six-months ended September 30, 1997. Detailed performance
data for each class of shares of each Portfolio can be found in the "Financial
Highlights" and in the line graph sections of this report.
S&P STARS PORTFOLIO
For the six months ended September 30, 1997, S&P STARS' class A shares (without
giving effect to the sales charge) had a total return of 36.21%, class C shares
(without giving effect to the contingent deferred sales charge "CDSC") had a
total return of 35.87% and class Y shares returned 36.54%.(1)(5) The S&P STARS'
benchmark, the S&P 500 Composite Index, returned 26.21% for the period.
During this period, the equity market continued to climb to new records - but
not without some painful interruptions as the market slipped twice - first, in
late March-early April and then again in early August. The technology sector,
which remains a core area of concentration for S&P STARS, was hurt in the first
decline but rebounded strongly during the last two months of the period. In
general, the factors that have fueled this bull market remain in place: moderate
inflation, moderate economic growth and generally stable interest rates, coupled
with high employment and positive consumer sentiment.
Since our annual report last spring, the economy has continued to run at a
sustainable 2% to 3% annual pace, with inflation also in a range of 2% to 3%.
However, as was to be expected, earnings reports for some large companies proved
to be disappointing this summer although they were still running in the double
digits. In particular, U.S.-based international firms were beginning to feel the
impact of the strengthened dollar on sales.
MAINTAINING A DISCIPLINED APPROACH
Regardless of these larger trends, we have maintained our discipline of seeking
out and holding onto quality companies with earnings growth rates that we
believe will continue to exceed their P/E multiples and pare back or sell those
that do not. Our consistency was borne out by the fact that throughout the six
months, Intel Corp. (10.83% of S&P STARS' net assets), Warner-Lambert Co.
(9.39%), Adaptec, Inc. (7.18%), Cisco Systems, Inc. (6.74%) and Citicorp (5.61%)
remained a significant part of the S&P STARS' core holdings.
In the third quarter, however, we cut back on our General Electric Co. holdings
(3.80%) based on its high valuation, and we eliminated Avon, whose overseas
growth may be slowing due to the strength of the dollar and weakness in
Southeast Asia.
In S&P STARS, we continue to own quality names that meet our valuation
guidelines and have a good outlook for growth. For example, we have added to our
financial stocks based on our belief that the economy will continue to grow. We
bought NationsBank Corp. (1.90%) and added to The Bank of New York Co., Inc.
(2.15%) and Citicorp positions. In addition, some of our technology stocks
performed particularly well. Summit Design, Inc. (1.49%), a software design
firm, and DSP Communications, Inc. (2.57%), a chip maker, both turned in
impressive returns for the third calendar quarter.
1
<PAGE>
A FOCUS ON TECHNOLOGY
We expect S&P STARS to continue to experience volatility, given its
concentration in technology issues, which are more volatile than stocks on
average. However, we continue to focus on quality technology stocks since we
believe they stand to benefit long term from increasing global dependence on
technological advances. In general, we continue to look for quality companies
with good medium to long-term growth prospects whose earnings are growing faster
than their P/E ratios.
THE INSIDERS SELECT FUND
For the six months ended September 30, 1997, Insiders Select class A shares
(without giving effect to the sales charge) had a total return of 27.37%, class
C shares (without giving effect to CDSC) had a total return of 27.00% and class
Y shares returned 27.70%.(2)(5) The Insiders Select benchmark, the S&P 500
Composite Index, returned 26.21% for the period.
BEAR STEARNS FUNDS MANAGEMENT ASSUMES DAY-TO-DAY OPERATIONS
As of September 22, 1997, the Equity Team of Bear Stearns Funds Management
assumed the responsibility for the day-to-day management of Insiders Select.
Insiders Select's investment objective - capital appreciation - remains the
same, as does its focus on companies with significant insider buying activity,
as identified by CDA/Investnet. In addition, we will employ the fundamental
research and analysis techniques that are applied to all of the Bear Stearns
equity portfolios. Subsequent to this reporting period, the Fund's Board of
Trustees approved (subject to Fund shareholders' approval in January, 1998) a
change to Insiders Select's benchmark to the S&P MidCap 400 Index to more
accurately reflect the Equity Team's management style.
A NEAR-IDEAL BACKDROP FOR STOCKS
During the six-month period, stock prices continued to push higher as economic
conditions remained nearly ideal for financial assets. As has been the case for
much of this year, financial stocks were among the best performers, benefiting
from strong earnings growth and continued consolidation in the financial
services sector. Paine Webber Group Inc. (1.17% of Insider Select's net assets)
and Morgan Stanley, Dean Witter, Discover and Co. (1.78%) were particularly
strong as recent transactions within the brokerage industry helped highlight the
value of these companies.
In addition, consumer cyclical stocks such as TJX Companies, Inc. (1.18%) and
Hilton Hotels Corp. (1.07%) benefited from their attractive valuations and
earnings growth prospects. Stocks that lagged include Johnson & Johnson (2.58%)
and Abbott Laboratories (1.82%) due to a shift in sentiment away from
health-care issues. However, we continue to find these health-care securities
attractive based on their long-term earnings outlook. We have recently added to
positions in Conseco, Inc. (1.85%), The Dial Corp. (1.36%) and Coltec
Industries, Inc. (0.47%) based on their strong earnings outlook and significant
positive insider buyer activity.
Despite the relatively high valuations and high returns of the past few years,
we believe that the positive economic backdrop of moderate growth coupled with
moderate inflation bodes well for the equity market going forward. Barring some
unanticipated event, we would expect stocks to continue their upward climb,
although as the past months indicate, their progress may be choppy.
LARGE CAP VALUE PORTFOLIO
For the six months ended September 30, 1997, Large Cap's class A shares (without
giving effect to the sales charge) had a total return of 26.15%, class C shares
(without giving effect to CDSC) had a total return of 25.77% and class Y shares
returned 26.43%.(3)(5) Large Cap's benchmark, the S&P 500 Composite Index,
returned 26.21% for the period.
2
<PAGE>
Responding to a near-ideal economic backdrop of low inflation, high employment,
strong corporate profit growth and improving fiscal restraint at the Federal
level, stock prices continued their upward climb, hitting a succession of new
highs throughout the period. After retreating briefly in August on earnings
concerns at large multi-national firms hurt by the rising dollar, the indices
ended September near historical highs.
STRENGTH IN THE FINANCIAL SECTOR
As has been the case for the past two-and-a-half years, financial stocks were
again among the best-performers in Large Cap, benefiting from strong earnings
growth and continued consolidation in the financial services sector. The
Equitable Companies Inc. (4.53% of Large Cap's net assets) was particularly
strong as recent transactions within the brokerage industry helped highlight the
value of its majority-owned Donaldson, Lufkin & Jenrette Corporation brokerage
unit. Auto stocks were also strong due to their attractive valuations and
better-than-expected earnings reports.
During the period, we added to our positions in The Dial Corp. (2.04%) and Viad
Corp. (2.26%) - the former, a consumer products manufacturer, and the latter, a
diversified services firm - created when The Dial Corp. split into two companies
in August 1996. In addition, we initiated a position in H&R Block, Inc. (2.71%),
as we expect the company's sale of CompuServe and renewed focus on its tax
business to lead to an accelerated earnings growth rate over the next several
years. We also initiated positions in UCAR International, Inc. (2.15%), a
supplier to steel mini-mills, and McDonald's Corp. (2.51%), two companies whose
valuations, we believe, do not reflect their leading global market positions and
long-term earnings growth prospects.
Among Large Cap's laggards were Corning Inc. (2.61%), which experienced slowing
but still impressive growth in its fiber-optic business in the third quarter of
the year; Wendy's International, Inc. (2.34%), which reported
lower-than-expected - but double-digit - earnings growth in the second quarter;
Owens Corning (1.21%), which suffered from delays in implementing cost-cutting
programs and from pricing pressures; and Kimberly-Clark Corp. (1.96%) which is
experiencing difficulties in certain segments of its tissue business. We
continue to find Corning, Wendy's and Kimberly-Clark attractive on a valuation
basis, but reduced our holdings significantly in Owens Corning near the end of
the last quarter.
Although the historically high returns of the past few years along with lofty
valuations - by historical standards - give us some discomfort, the positive
economic conditions of moderate growth coupled with moderate inflation bode well
for the equity market going forward. Barring some unanticipated event, we would
expect stocks to continue to move higher, although as the past months indicate,
their progress may be choppy.
SMALL CAP VALUE PORTFOLIO*
During the past quarter, Small Cap's investing universe was expanded with a new
focus on companies with market capitalizations between $500 million and $1
billion. (Previously, it had been restricted to companies with market
capitalizations of $500 million or less).
The six-month period ended September 30, 1997, was characterized by a major
shift in market sentiment from large-cap issues to small-cap stocks. The turning
point came in early August, after the Dow Jones Industrial Average and the S&P
500 Composite Index pulled back from a succession of new records on concerns
that some of the largest companies in the indices would not be able to sustain
their level of earnings growth.
SMALL-CAPS OVERTAKE LARGE-CAPS
The renewed investor interest in small-cap stocks, where recent valuations have
been more attractive relative to growth expectations, was clearly reflected in
the Russell 2000 Index. After consolidating briefly in early August, it
continued its upward trend through August and September, outperforming the
larger-cap indices and hitting a new high at the end of the period. Its total
return of 33.39% for the six-month period outdistanced the S&P 500 Composite
Index by more than 700 basis points.
3
<PAGE>
Small Cap performed particularly well - benefiting from both the strong market
generally and specifically, our methodical moves to increase the Small Cap's
technology exposure and enter new industries while maintaining our value
discipline. For the six months ended September 30, 1997, Small Cap's class A
shares (without giving effect to the sales charge) had a total return of 30.61%,
class C shares (without giving effect to CDSC) had a total return of 30.26% and
class Y shares returned 30.91%.(4)(5)
Small Cap's largest holdings, Universal Stainless & Alloy Products, Inc. (4.02%
of Small Cap's net assets), Steiner Leisure Ltd. (3.70%), Giant Cement Holding,
Inc. (3.51%) and Jacor Communications, Inc. (3.30%), continue to exceed our
quarterly earnings expectations, and we see further gains as they remain
attractive value stocks, despite the increase in their stock prices this year.
During the period, we entered new industries, first with the purchase of Jacor,
one of the fastest-growing radio broadcasters, and Butler International, Inc.
(2.76%), a temporary-help company, both of which illustrate our strategy of
seeking out undervalued, high-growth stocks.
Butler International, Inc., for example, is focusing on its higher-margin
information technology and fleet-services businesses, while de-emphasizing its
lower-margin activities, and has also started to make strategic acquisitions of
smaller companies in the industry. Even though its stock has appreciated since
we bought it, Butler still trades at only 12 times next year's EPS estimates,
half the temporary-services industry's average of roughly 24 times earnings.
In summary, we believe small-cap stocks continue to be undervalued relative to
larger-capitalized companies in general and selectively on an absolute basis. We
strive to continue to find these opportunities while minimizing risk through our
in-depth internal research.
In conclusion, we value the confidence you have placed in us and would be
pleased to address any questions or concerns you may have. Please feel free to
call us at 1-800-766-4111.
Sincerely,
<TABLE>
<S> <C> <C>
[LOGO]
Robert S. Reitzes
President
The Bear Stearns Funds
</TABLE>
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* Small-cap funds typically carry additional risks, since smaller companies
generally have a higher risk of failure than well-established larger
companies. Historically, stocks of smaller companies have experienced a
greater degree of market volatility than stocks on average.
(1)For the six months ended September 30, 1997, the Portfolio's class A shares
had a total return of 29.77%, including the initial 4.75% maximum sales
charge, and class C shares returned 34.87%, including the 1.00% CDSC.
(2)For the six months ended September 30, 1997, the Portfolio's class A shares
had a total return of 21.29%, including the initial 4.75% maximum sales
charge, and class C shares returned 26.00%, including the 1.00% CDSC.
(3)For the six months ended September 30, 1997, the Portfolio's class A shares
had a total return of 20.13%, including the initial 4.75% maximum sales
charge, and class C shares returned 24.77%, including the 1.00% CDSC.
(4)For the six months ended September 30, 1997, the Portfolio's class A shares
had a total return of 24.41%, including the initial 4.75% maximum sales
charge, and class C shares returned 29.26%, including the 1.00% CDSC.
(5)Bear Stearns Funds Management Inc. waived its advisory fee and agreed to
voluntarily reimburse a portion of each Portfolio's operating expenses, as
necessary, to maintain the expense limitation as set forth in the notes to
the financial statements. Total returns shown include fee waivers and expense
reimbursements, if any; total returns would have been lower had there been no
assumption of fees and expenses in excess of expense limitations.
4
<PAGE>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A AND C SHARES(1)(2)(3) VS. VARIOUS INDICES
(UNAUDITED)
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURNS
<CAPTION>
ONE YEAR ENDED AVERAGE
SEPTEMBER 30, 1997 ANNUAL(4)
------------------- -------------------
<S> <C> <C>
S&P STARS Portfolio(2)
Class A shares(5)................................... 38.81% 30.32%
Class C shares...................................... 44.98 32.21
Class Y shares(3)................................... 46.51 29.26
S&P 500 Composite Index(1).............................. 40.36 31.40
Consumer Price Index(1)................................. 2.15 2.60
</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, as
necessary, to maintain the expense limitation, as set forth in the notes to
the financial statements. Total returns shown include fee waivers and
expense reimbursements, if any; total returns would have been lower had
there been no assumption of fees and expenses in excess of expense
limitations.
(3) The return of class Y shares (for which August 7, 1995 was the initial
public offering date) would have been higher than class A and C shares if
operations were commenced on the same day. The higher return is due to the
fact that there is no sales load, CDSC or 12b-1 fee charged to class Y
shares.
(4) For the period of April 5, 1995 (commencement of investment operations)
through September 30, 1997 for class A and C shares.
(5) Reflects the initial maximum 4.75% sales charge. Without the applicable
sales charge, the total returns would have been 45.70% and 32.90%
respectively, for each period shown.
CDSC -- Contingent Deferred Sales Charge.
5
<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)(3) VS. VARIOUS INDICES
(UNAUDITED)
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURNS
<CAPTION>
ONE YEAR ENDED
SEPTEMBER 30, AVERAGE
1997 ANNUAL(4)
----------------- -----------------
<S> <C> <C>
The Insiders Select Fund(2)
Class A shares(5).................... 30.71% 25.21%
Class C shares....................... 36.56 27.25
Class Y shares(3).................... 37.94 28.06
S&P 500 Composite Index(1)............... 40.36 83.94
Consumer Price Index(1).................. 2.15 2.53
</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, as
necessary, to maintain the expense limitation, as set forth in the notes to
the financial statements. Total returns shown include fee waivers and
expense reimbursements; total returns would have been lower had there been
no assumption of fees and expenses in excess of expense limitations.
(3) The return of class Y shares (for which June 20, 1995 was the initial public
offering date) would have been higher than class A and C shares if
operations were commenced on the same day. The higher return is due to the
fact that there is no sales load, CDSC or 12b-1 fee charged to class Y
shares.
(4) For the period of June 16, 1995 (commencement of investment operations)
through September 30, 1997 for class A and C shares.
(5) Reflects the initial maximum 4.75% sales charge. Without the applicable
sales charge, the total returns would have been 37.26% and 27.90%
respectively, for each period shown.
CDSC -- Contingent Deferred Sales Charge.
6
<PAGE>
THE BEAR STEARNS FUNDS
Large Cap Value Portfolio
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A AND C SHARES(1)(2)(3) VS. VARIOUS INDICES
(UNAUDITED)
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURNS
<CAPTION>
ONE YEAR ENDED AVERAGE
SEPTEMBER 30, 1997 ANNUAL(4)
------------------- -------------------
<S> <C> <C>
Large Cap Value Portfolio(2)
Class A shares(5)................................... 36.19% 25.21%
Class C shares...................................... 42.21 27.01
Class Y shares(3)................................... 43.64 25.47
S&P 500 Composite Index(1).............................. 40.36 31.73
Consumer Price Index(1)................................. 2.15 2.60
</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, as
necessary, to maintain the expense limitation, as set forth in the notes to
the financial statements. Total returns shown include fee waivers and
expense reimbursements; total returns would have been lower had there been
no assumption of fees and expenses in excess of expense limitations.
(3) The return of class Y shares (for which September 11, 1995 was the initial
public offering date) would have been higher than class A and C shares if
operations were commenced on the same day. The higher return is due to the
fact that there is no sales load, CDSC or 12b-1 fee charged to class Y
shares.
(4) For the period of April 4, 1995 (commencement of investment operations)
through September 30, 1997 for class A and C shares.
(5) Reflects the initial maximum 4.75% sales charge. Without the applicable
sales charge, the total returns would have been 43.00% and 27.64%
respectively, for each period shown.
CDSC -- Contingent Deferred Sales Charge.
7
<PAGE>
THE BEAR STEARNS FUNDS
Small Cap Value Portfolio
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CLASS A AND C SHARES(1)(2)(3) VS. VARIOUS INDICES
(UNAUDITED)
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURNS
<CAPTION>
ONE YEAR ENDED
SEPTEMBER 30, AVERAGE
1997 ANNUAL(4)
----------------- -----------------
<S> <C> <C>
Small Cap Value Portfolio(2)
Class A shares(5).................... 24.83% 28.39%
Class C shares....................... 30.46 30.20
Class Y shares(3).................... 31.74 29.86
Russell 2000 Index(1).................... 32.96 26.59
Consumer Price Index(1).................. 2.15 2.60
</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, as
necessary, to maintain the expense limitation, as set forth in the notes to
the financial statements. Total returns shown include fee waivers and
expense reimbursements; total returns would have been lower had there been
no assumption of fees and expenses in excess of expense limitations.
(3) The return of class Y shares (for which June 22, 1995 was the initial public
offering date) would have been higher than class A and C shares if
operations were commenced on the same day. The higher return is due to the
fact that there is no sales load, CDSC or 12b-1 fee charged to class Y
shares.
(4) For the period of April 3, 1995 (commencement of investment operations)
through September 30, 1997 for class A and C shares.
(5) Reflects the initial maximum 4.75% sales charge. Without the applicable
sales charge, the total returns would have been 31.04% and 30.92%
respectively, for each period shown.
CDSC -- Contingent Deferred Sales Charge.
8
<PAGE>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
SEPTEMBER 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
(AS A PERCENTAGE OF NET ASSETS)
- --------------------------------------------------------------------------------
[GRAPH]
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS SECTOR NET ASSETS
- ------------------------------------------------------ ----------- -------------
<C> <S> <C> <C>
1. Intel Corp........................................ Electronics 10.83
2. Warner-Lambert Co................................. Drugs & 9.39
Hospital
Supplies
3. Adaptec, Inc...................................... Networking 7.18
Products
4. Cisco Systems, Inc................................ Networking 6.74
Products
5. Citicorp.......................................... Banks 5.61
6. EMC Corp.......................................... Computers - 4.89
Memory
Devices
7. Global Marine Inc................................. Oil & Gas 4.27
Drilling
8. Boeing Co. (The).................................. Aerospace & 4.26
Defense
9. Monsanto Co....................................... Chemicals - 4.25
Diversified
10. Analog Devices, Inc............................... Electronics 4.12
</TABLE>
9
<PAGE>
THE BEAR STEARNS FUNDS
The Insiders Select Fund
SEPTEMBER 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
(AS A PERCENTAGE OF NET ASSETS)
- --------------------------------------------------------------------------------
[GRAPH]
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS SECTOR NET ASSETS
- ------------------------------------------------------ ----------- -------------
<C> <S> <C> <C>
1. Merck & Co., Inc.................................. Drugs & 3.66
Hospital
Supplies
2. Microsoft Corp.................................... Computer 3.36
Services
3. Bristol-Myers Squibb Co........................... Drugs & 3.28
Hospital
Supplies
4. Travelers Group, Inc.............................. Credit & 3.24
Finance
5. Intel Corp........................................ Electronics 3.13
6. American International Group, Inc................. Life/Health 3.04
Insurance
7. City National Corp................................ Banks 2.94
8. Texaco Inc........................................ Oil & 2.62
Natural Gas
9. Mobil Corp........................................ Oil & 2.61
Natural Gas
10. Johnson & Johnson................................. Drugs & 2.58
Hospital
Supplies
</TABLE>
10
<PAGE>
THE BEAR STEARNS FUNDS
Large Cap Value Portfolio
SEPTEMBER 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
(AS A PERCENTAGE OF NET ASSETS)
- --------------------------------------------------------------------------------
[GRAPH]
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS SECTOR NET ASSETS
- ------------------------------------------------------ ----------- -------------
<C> <S> <C> <C>
1. Equitable Companies Inc. (The).................... Life/Health 4.53
Insurance
2. Intel Corp........................................ Electronics 4.16
3. Bank of New York Co., Inc. (The).................. Banks 4.07
4. Travelers Group, Inc.............................. Credit & 3.97
Finance
5. Xerox Corp........................................ Computers & 3.92
Office
Equipment
6. Goodyear Tire & Rubber Co. (The).................. Automotive 3.86
Equipment
7. Bristol-Myers Squibb Co........................... Drugs & 3.65
Hospital
Supplies
8. Raychem Corp...................................... Diversified 3.39
Operations
9. Baxter International Inc.......................... Drugs & 3.17
Hospital
Supplies
10. Ford Motor Co..................................... Automobiles 3.09
</TABLE>
11
<PAGE>
THE BEAR STEARNS FUNDS
Small Cap Value Portfolio
SEPTEMBER 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
(AS A PERCENTAGE OF NET ASSETS)
- --------------------------------------------------------------------------------
[GRAPH]
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
RANK HOLDINGS SECTOR NET ASSETS
- ------------------------------------------------------ ----------- -------------
<C> <S> <C> <C>
1. Universal Stainless & Alloy Products, Inc......... Steel 4.02
2. Steiner Leisure Ltd............................... Commercial 3.70
Services
3. Giant Cement Holding, Inc......................... Building & 3.51
Housing
4. Jacor Communications, Inc......................... Radio 3.30
5. Bowne & Co., Inc.................................. Commercial 3.14
Printing
6. Triangle Pacific Corp............................. Home 3.12
Furnishings
7. Morningstar Group, Inc............................ Food - 3.07
Dairy
Products
8. Terex Corp........................................ Machinery - 2.96
Construction
& Mining
9. SPS Technologies, Inc............................. Diversified 2.82
Operations
10. Butler International, Inc......................... Human 2.76
Resources
</TABLE>
12
<PAGE>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES+ VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 98.58%
AEROSPACE & DEFENSE - 4.26%
140,000 Boeing Co. (The) ............................. $ 7,621,250
---------------
BANKS - 9.66%
80,000 Bank of New York Co., Inc. (The) ............. 3,840,000
75,000 Citicorp ..................................... 10,045,312
55,000 NationsBank Corp. ............................ 3,403,125
---------------
17,288,437
---------------
CHEMICALS - DIVERSIFIED - 4.25%
195,000 Monsanto Co. ................................. 7,605,000
---------------
CHEMICALS - SPECIALTY - 2.82%
190,000 Crompton & Knowles Corp.+++ .................. 5,046,875
---------------
COMPUTER SOFTWARE - 9.01%
117,500 Cadence Design Systems, Inc.*++ .............. 6,286,250
100,000 Computer Associates International, Inc. ...... 7,181,250
150,000 Summit Design, Inc.*++ ....................... 2,662,500
---------------
16,130,000
---------------
COMPUTERS - MEMORY DEVICES - 4.91%
2,000 Advanced Digital Information Corp. *++ ....... 40,750
150,000 EMC Corp.* ................................... 8,756,250
---------------
8,797,000
---------------
COSMETICS & TOILETRIES - 1.61%
41,400 Colgate-Palmolive Co. ........................ 2,885,062
---------------
DIVERSIFIED OPERATIONS - 3.80%
100,000 General Electric Co. ......................... 6,806,250
---------------
DRUGS & HOSPITAL SUPPLIES - 9.39%
124,500 Warner-Lambert Co. ........................... 16,799,719
---------------
ELECTRONIC MEASURING INSTRUMENTS - 1.03%
70,000 Vishay Intertechnology, Inc.* ................ 1,850,625
---------------
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES+ VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
ELECTRONICS - 16.44%
220,000 Analog Devices, Inc.* ........................ $ 7,370,000
210,000 Intel Corp. .................................. 19,385,625
75,000 Silicon Valley Group, Inc.* ++ ............... 2,667,188
---------------
29,422,813
---------------
LASERS - SYSTEMS & COMPONENTS - 2.47%
80,000 Coherent, Inc.* .............................. 4,430,000
---------------
NETWORKING PRODUCTS - 13.92%
275,000 Adaptec, Inc.* ............................... 12,856,250
165,000 Cisco Systems, Inc.* ......................... 12,055,312
---------------
24,911,562
---------------
OIL & GAS DRILLING - 4.27%
230,000 Global Marine Inc.* .......................... 7,647,500
---------------
OIL & GAS EQUIPMENT - 1.47%
60,000 Baker Hughes Inc. ............................ 2,625,000
---------------
PAPER & PAPER RELATED PRODUCTS - 4.23%
105,000 Fort James Corp. ............................. 4,810,313
50,000 International Paper Co. ...................... 2,753,125
---------------
7,563,438
---------------
TELECOMMUNICATIONS - 5.04%
220,000 DSP Communications, Inc.*++ .................. 4,606,250
60,000 ECI Telecommunications Limited ............... 1,942,500
70,000 WorldCom, Inc. * ............................. 2,476,250
---------------
9,025,000
---------------
Total Common Stocks
(cost - $136,960,030) ...................... 176,455,531
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS -- 0.24%
INVESTMENT COMPANIES - 0.24%
357 Federated Investors, Trust for Short-Term U.S.
Government Securities**++ .................. $ 357
423,761 The Milestone Funds Treasury Obligations
Portfolio, Institutional Shares**++ ........ 423,761
---------------
Total Short-Term Investments
(cost - $424,118) .......................... 424,118
---------------
Total Investments -- 98.82%
(cost - $137,384,148) ...................... 176,879,649
Other assets in excess of liabilities --
1.18% ...................................... 2,111,677
---------------
Net Assets -- 100.00% ........................ $ 178,991,326
---------------
---------------
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
CONTRACTS VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
WRITTEN CALL OPTIONS
DRUG & HOSPITAL SUPPLIES
100 Warner-Lambert Co.*++
10/17/97 @ $145
(premiums received - $24,074) .............. $ (8,750)
---------------
---------------
</TABLE>
- ---------
+ Unless otherwise indicated all common stocks are ranked five stars.
++ Currently ranked three stars.
+++ Currently ranked four stars.
++ Not ranked by STARS.
* Non-income producing security.
** Money market fund.
S&P STARS RANKINGS:
Five stars - Buy - Expected to be among the best performers over the next twelve
months and to rise in price.
Four stars - Accumulate - Expected to be an above-average performer.
Three stars - Hold - Expected to be an average performer.
Two stars - Avoid - Expected to be a below-average performer.
One star - Sell - Expected to be a well-below-average performer and to fall in
price.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
THE BEAR STEARNS FUNDS
The Insiders Select Fund
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 87.36%
AEROSPACE & DEFENSE - 2.69%
11,600 Boeing Co. (The) ................................. $ 631,475
1,900 Thiokol Corp. .................................... 163,400
-----------
794,875
-----------
AUTOMOTIVE PARTS & EQUIPMENT - 0.65%
3,500 TRW Inc. ......................................... 192,062
-----------
BANKS - 5.13%
27,100 City National Corp. .............................. 867,200
1,300 Republic New York Corp. .......................... 147,712
11,250 Summit Bancorp ................................... 499,922
-----------
1,514,834
-----------
BUILDING & CONSTRUCTION PRODUCTS - 1.36%
6,000 Armstrong World Industries, Inc. ................. 402,375
-----------
COMPUTER SERVICES - 3.36%
7,500 Microsoft Corp.* ................................. 992,344
-----------
COMPUTERS & OFFICE EQUIPMENT - 1.72%
4,500 Cadence Design Systems, Inc.* .................... 240,750
3,200 Pitney Bowes, Inc. ............................... 266,200
-----------
506,950
-----------
COSMETICS & TOILETRIES - 0.43%
4,200 Alberto-Culver Co., Class B ...................... 127,837
-----------
CREDIT & FINANCE - 7.06%
7,600 Price (T. Rowe) Associates, Inc. ................. 511,100
4,000 SLM Holding Corp. ................................ 618,000
14,000 Travelers Group, Inc. ............................ 955,500
-----------
2,084,600
-----------
DIVERSIFIED OPERATIONS - 2.37%
9,000 Corning Inc. ..................................... 425,250
4,200 Textron, Inc. .................................... 273,000
-----------
698,250
-----------
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
DRUGS & HOSPITAL SUPPLIES - 11.33%
8,400 Abbott Laboratories .............................. $ 537,075
11,700 Bristol-Myers Squibb Co. ......................... 968,175
13,200 Johnson & Johnson ................................ 760,650
10,800 Merck & Co., Inc. ................................ 1,079,325
-----------
3,345,225
-----------
ELECTRICAL EQUIPMENT - 0.96%
6,200 Harris Corp. ..................................... 283,650
-----------
ELECTRONICS - 3.68%
10,000 Intel Corp. ...................................... 923,125
1,200 Texas Instruments, Inc. .......................... 162,150
-----------
1,085,275
-----------
ELECTRONICS - MILITARY - 1.01%
6,400 Coltec Industries, Inc.* ......................... 138,400
5,200 Tracor, Inc.* .................................... 159,900
-----------
298,300
-----------
ENTERTAINMENT & LEISURE - 0.92%
7,700 Brunswick Corp. .................................. 271,425
-----------
FINANCIAL SERVICES - 3.48%
1,900 American Express Co. ............................. 155,562
9,735 Morgan Stanley, Dean Witter, Discover and Co. .... 526,298
7,400 Paine Webber Group Inc. .......................... 344,562
-----------
1,026,422
-----------
FOOD - MISCELLANEOUS / DIVERSIFIED - 0.89%
3,000 Kellogg Co. ...................................... 126,375
3,500 SUPERVALU, Inc. .................................. 137,375
-----------
263,750
-----------
HOUSEHOLD PRODUCTS - 1.36%
23,000 Dial Corp. (The) ................................. 401,063
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
THE BEAR STEARNS FUNDS
The Insiders Select Fund
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INSTRUMENTS - SCIENTIFIC - 0.32%
1,300 Perkin-Elmer Corp. ............................... $ 94,981
-----------
INSURANCE - PROPERTY & CASUALTY - 0.76%
5,500 Everest Reinsurance Holdings, Inc. ............... 225,500
-----------
LIFE/HEALTH INSURANCE - 9.72%
8,700 American International Group, Inc. ............... 897,731
11,200 Conseco, Inc. .................................... 546,700
8,500 Equitable Companies Inc. (The) ................... 349,031
22,800 Humana, Inc.* .................................... 542,925
23,300 USF&G Corp. ...................................... 534,444
-----------
2,870,831
-----------
LODGING - 1.76%
9,400 Hilton Hotels Corp. .............................. 316,662
4,500 Promus Hotel Corp.* .............................. 201,656
-----------
518,318
-----------
MACHINERY - FARM - 0.49%
2,700 Deere & Co. ...................................... 145,125
-----------
MEDICAL SERVICES - 0.90%
9,200 Columbia/HCA Healthcare Corp. .................... 264,500
-----------
METAL PROCESSORS & FABRICATORS - 0.54%
3,300 Trinity Industries, Inc. ......................... 159,225
-----------
MULTIMEDIA - 0.51%
2,800 Tribune Co. ...................................... 149,275
-----------
OIL & NATURAL GAS - 8.73%
3,600 Halliburton Co. .................................. 187,200
10,400 Mobil Corp. ...................................... 769,600
9,200 Royal Dutch Petroleum Co. ........................ 510,600
4,400 Sun Company, Inc. ................................ 192,775
12,600 Texaco Inc. ...................................... 774,113
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
OIL & NATURAL GAS (CONTINUED)
2,400 Tidewater, Inc. .................................. $ 142,200
-----------
2,576,488
-----------
OIL FIELD MACHINERY & EQUIPMENT - 0.80%
5,500 Dresser Industries, Inc. ......................... 236,500
-----------
PAPER & PAPER RELATED PRODUCTS - 0.59%
3,800 Fort James Corp. ................................. 174,088
-----------
PUBLISHING - BOOKS - 2.15%
9,400 McGraw-Hill Companies, Inc. ...................... 636,263
-----------
PUBLISHING - NEWSPAPER - 2.12%
1,400 Washington Post Co. .............................. 627,375
-----------
RETAILING - DEPARTMENT STORES - 3.27%
4,300 Dayton Hudson Corp. .............................. 257,731
6,500 Federated Department Stores, Inc.* ............... 280,313
7,500 Sears, Roebuck and Co. ........................... 427,031
-----------
965,075
-----------
RETAILING - DISCOUNT - 1.18%
11,400 TJX Companies, Inc. .............................. 348,413
-----------
RETAILING - GROCERY STORES - 2.95%
10,800 American Stores Co. .............................. 263,250
11,200 Safeway, Inc.* ................................... 609,000
-----------
872,250
-----------
TELECOMMUNICATIONS - 1.41%
800 360 Degrees Communications Co.* .................. 16,700
6,500 SBC Communications, Inc. ......................... 398,938
-----------
415,638
-----------
WASTE DISPOSAL - 0.76%
5,900 Browning-Ferris Industries, Inc. ................. 224,569
-----------
Total Common Stocks
(cost - $19,314,093) ........................... 25,793,651
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
THE BEAR STEARNS FUNDS
The Insiders Select Fund
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MARKET
(000'S) VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS -- 12.60%
U.S. GOVERNMENT AGENCY OBLIGATION - 12.36%
$3,650 Federal Home Loan
Bank Discount Notes 5.920% 10/01/97 ............ $ 3,650,000
-----------
<CAPTION>
SHARES
- ---------------
<C> <S> <C>
INVESTMENT COMPANY - 0.24%
71,113 The Milestone Funds Treasury Obligations
Portfolio, Institutional Shares** .............. 71,113
-----------
Total Short-Term Investments
(cost - $3,721,113) ............................ 3,721,113
-----------
Total Investments -- 99.96%
(cost - $23,035,206) ........................... 29,514,764
Other assets in excess of liabilities -- 0.04% ... 11,127
-----------
Net Assets -- 100.00% ............................ $29,525,891
-----------
-----------
</TABLE>
- ---------
* Non-income producing security.
** Money market fund.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
THE BEAR STEARNS FUNDS
Large Cap Value Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 96.56%
AEROSPACE & DEFENSE -- 2.23%
5,500 United Technologies Corp. ......................... $ 445,500
--------------
AUTOMOBILES -- 5.30%
13,600 Ford Motor Co. .................................... 615,400
6,600 General Motors Corp. .............................. 441,787
--------------
1,057,187
--------------
AUTOMOTIVE EQUIPMENT - 3.86%
11,200 Goodyear Tire & Rubber Co. (The) .................. 770,000
--------------
BANKS - 4.07%
16,900 Bank of New York Co., Inc. (The) .................. 811,200
--------------
BUILDING & CONSTRUCTION - 7.08%
8,900 Armstrong World Industries, Inc. .................. 596,856
6,600 Owens Corning ..................................... 240,900
12,000 USG Corp.* ........................................ 575,250
--------------
1,413,006
--------------
CHEMICALS - SPECIALTY - 2.95%
8,000 W.R. Grace & Co. .................................. 589,000
--------------
COMPUTERS & OFFICE EQUIPMENT - 3.93%
9,300 Xerox Corp. ....................................... 782,944
--------------
CREDIT & FINANCE - 6.84%
12,200 Fannie Mae ........................................ 573,400
11,600 Travelers Group, Inc. ............................. 791,700
--------------
1,365,100
--------------
DIVERSIFIED OPERATIONS - 11.12%
11,000 Corning Inc. ...................................... 519,750
8,400 General Electric Co. .............................. 571,725
8,000 Raychem Corp. ..................................... 676,000
23,600 Viad Corp. ........................................ 449,875
--------------
2,217,350
--------------
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
DRUGS & HOSPITAL SUPPLIES - 6.82%
12,100 Baxter International Inc. ......................... $ 632,225
8,800 Bristol-Myers Squibb Co. .......................... 728,200
--------------
1,360,425
--------------
ELECTRONICS - 6.32%
9,000 Intel Corp. ....................................... 830,812
9,000 UCAR International, Inc.* ......................... 429,750
--------------
1,260,562
--------------
FINANCIAL SERVICES - 2.71%
14,000 H&R Block, Inc. ................................... 540,750
--------------
HOUSEHOLD PRODUCTS - 2.04%
23,300 Dial Corp. (The) .................................. 406,294
--------------
LIFE/HEALTH INSURANCE - 11.48%
10,350 Aon Corp. ......................................... 547,256
22,000 Equitable Companies Inc. (The) .................... 903,375
13,000 Humana, Inc.* ..................................... 309,563
23,100 USF&G Corp. ....................................... 529,856
--------------
2,290,050
--------------
OIL & NATURAL GAS - 2.16%
7,000 Texaco Inc. ....................................... 430,063
--------------
PAPER & PAPER RELATED PRODUCTS - 1.96%
8,000 Kimberly-Clark Corp. .............................. 391,500
--------------
RESTAURANTS - 4.85%
10,500 McDonald's Corp. .................................. 500,063
22,000 Wendy's International, Inc. ....................... 467,500
--------------
967,563
--------------
RETAILING - APPAREL/SHOE - 2.61%
10,400 Gap, Inc. ......................................... 520,650
--------------
RETAILING - DEPARTMENT STORES - 2.43%
8,300 J.C. Penney Co., Inc. ............................. 483,475
--------------
SAVINGS & LOAN - 2.23%
6,390 Washington Mutual, Inc. ........................... 445,703
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
THE BEAR STEARNS FUNDS
Large Cap Value Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TOBACCO - 2.59%
12,450 Philip Morris Cos. Inc. ........................... $ 517,453
--------------
WASTE DISPOSAL - 0.98%
5,600 Waste Management Inc. ............................. 195,650
--------------
Total Common Stocks
(cost - $14,610,783) ............................ 19,261,425
--------------
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS -- 3.50%
INVESTMENT COMPANIES - 3.50%
9 Federated Investors, Trust for Short-term U.S.
Government Securities** ......................... $ 9
697,842 The Milestone Funds Treasury Obligations Portfolio,
Institutional Shares** .......................... 697,842
--------------
Total Short-Term Investments
(cost - $697,851) ............................... 697,851
--------------
Total Investments -- 100.06%
(cost - $15,308,634) ............................ 19,959,276
Liabilities in excess of other assets -- (0.06%) .. (11,337)
--------------
Net Assets -- 100.00% ............................. $ 19,947,939
--------------
--------------
</TABLE>
- ---------
* Non-income producing security.
** Money market fund.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
THE BEAR STEARNS FUNDS
Small Cap Value Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
EQUITY SECURITIES -- 92.33%
BANKS - 2.77%
50,200 Bay View Capital Corp. ........................... $ 1,374,225
14,100 Hamilton Bancorp, Inc.* .......................... 387,750
-----------
1,761,975
-----------
BUILDING & HOUSING - 3.51%
91,500 Giant Cement Holding, Inc.* ...................... 2,230,312
-----------
CHEMICALS & FERTILIZERS - 0.82%
24,700 Lilly Industries, Inc., Class A .................. 518,700
-----------
COAL - 2.65%
72,000 Zeigler Coal Holding Co. ......................... 1,683,000
-----------
COMMERCIAL PRINTING - 3.14%
56,800 Bowne & Co., Inc. ................................ 1,995,100
-----------
COMMERCIAL SERVICES - 4.76%
30,350 COMARCO, Inc.* ................................... 673,391
64,000 Steiner Leisure Ltd.* ............................ 2,352,000
-----------
3,025,391
-----------
COMMUNICATIONS - 4.69%
46,900 Data Transmission Network Corp.* ................. 1,383,550
35,500 DSP Communications, Inc.* ........................ 743,281
20,700 Dynatech Corp.* .................................. 849,994
-----------
2,976,825
-----------
COMMUNICATIONS SOFTWARE - 1.73%
25,600 Dialogic Corp.* .................................. 1,100,800
-----------
COSMETICS & TOILETRIES- 1.97%
80,550 Guest Supply, Inc.* .............................. 1,248,525
-----------
DIVERSIFIED OPERATIONS - 6.39%
75,100 Alyn Corp.* ...................................... 1,013,850
77,000 Griffon Corp.* ................................... 1,251,250
38,100 SPS Technologies, Inc.* .......................... 1,790,700
-----------
4,055,800
-----------
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
DRUGS & HOSPITAL SUPPLIES - 2.04%
92,500 Global Pharmaceutical Corp.* ..................... $ 543,437
73,500 HumaScan Inc.* ................................... 753,375
-----------
1,296,812
-----------
ELECTRICAL EQUIPMENT - 1.91%
51,000 Windmere-Durable Holdings Inc.* .................. 1,214,438
-----------
ELECTRONICS - 1.55%
26,100 Cubic Corp. ...................................... 985,275
-----------
FINANCIAL SERVICES - 2.84%
13,300 Aames Financial Corp. ............................ 215,294
35,900 Bank United Corp., Class A ....................... 1,588,575
-----------
1,803,869
-----------
FOOD - DAIRY PRODUCTS - 3.07%
45,300 Morningstar Group, Inc.* ......................... 1,947,900
-----------
FOOD - MEAT PRODUCTS - 0.38%
61,000 Hibernia Foods plc - ADR * ....................... 244,000
-----------
HOME FURNISHINGS - 5.50%
80,000 Furniture Brands International Inc.* ............. 1,510,000
57,000 Triangle Pacific Corp.* .......................... 1,980,750
-----------
3,490,750
-----------
HUMAN RESOURCES - 2.76%
102,200 Butler International, Inc.* ...................... 1,750,175
-----------
LASERS - SYSTEMS & COMPONENTS - 1.40%
16,000 Coherent, Inc.* .................................. 886,000
-----------
MACHINERY - CONSTRUCTION & MINING - 2.96%
90,600 Terex Corp.* ..................................... 1,879,950
-----------
MEDICAL - DRUGS - 0.62%
21,100 Cephalon, Inc.* .................................. 247,925
15,000 International Isotopes Inc.* ..................... 146,250
-----------
394,175
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
THE BEAR STEARNS FUNDS
Small Cap Value Portfolio
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
EQUITY SECURITIES (CONTINUED)
MEDICAL SUPPLIES - 1.42%
70,000 Novametrix Medical Systems, Inc.* ................ $ 704,375
40,000 Novametrix Medical Systems, Inc.
Warrants, Class A* ............................. 200,000
-----------
904,375
-----------
NON-FERROUS METALS - 4.52%
53,900 Chase Industries, Inc.* .......................... 1,549,625
29,100 Mueller Industries, Inc.* ........................ 1,322,231
-----------
2,871,856
-----------
OIL & GAS - 1.24%
25,000 Equitable Resources, Inc. ........................ 787,500
-----------
OIL - FIELD SERVICES - 1.36%
13,900 SEACOR SMIT Inc.* ................................ 861,800
-----------
PAPER & PAPER RELATED PRODUCTS - 3.89%
58,900 P.H. Glatfelter Co. .............................. 1,306,844
27,300 Schweitzer-Mauduit International, Inc. ........... 1,160,250
-----------
2,467,094
-----------
PHARMACEUTICALS - 0.93%
5,000 Global Pharmaceutical Corp. Convertible Series
A* ............................................. 587,500
-----------
RADIO - 3.30%
47,500 Jacor Communications, Inc. * ..................... 2,098,906
-----------
REAL ESTATE INVESTMENT TRUST - 1.31%
30,000 Glenborough Realty Trust, Inc. ................... 830,625
-----------
RENTAL AUTO / EQUIPMENT - 0.31%
6,000 Budget Group, Inc., Class A* ..................... 198,000
-----------
RESORTS - 1.67%
46,400 Silverleaf Resorts, Inc.* ........................ 1,061,400
-----------
RETAIL - RESTAURANTS - 5.03%
83,000 Apple South, Inc. ................................ 1,597,750
84,800 Foodmaker, Inc.* ................................. 1,595,300
-----------
3,193,050
-----------
<CAPTION>
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
STEEL - 4.02%
163,500 Universal Stainless & Alloy Products, Inc.* ...... $ 2,554,688
-----------
TELECOMMUNICATIONS - 1.97%
54,500 Davel Communications Group, Inc.* ................ 1,253,500
-----------
TEXTILES - 0.25%
54,000 Frenchtex, Inc. * ................................ 156,924
-----------
TOBACCO - 2.56%
65,100 DIMON, Inc. ...................................... 1,627,500
-----------
WIRE & CABLE PRODUCTS - 1.09%
18,000 Essex International, Inc.* ....................... 693,000
-----------
Total Equity Securities
(cost - $42,847,366) ........................... 58,637,490
-----------
<CAPTION>
PRINCIPAL
AMOUNT
(000'S)
- ---------------
<C> <S> <C>
SHORT-TERM INVESTMENTS -- 8.36%
U.S. GOVERNMENT AGENCY OBLIGATION - 8.27%
$5,250 Federal Home Loan Bank Discount Notes 5.920%
10/01/97 ....................................... 5,250,000
-----------
<CAPTION>
SHARES
- ---------------
<C> <S> <C>
INVESTMENT COMPANY - 0.09%
58,671 The Milestone Funds Treasury Obligations
Portfolio, Institutional Shares** .............. 58,671
-----------
Total Short-Term Investments
(cost - $5,308,671) ............................ 5,308,671
-----------
Total Investments -- 100.69%
(cost - $48,156,037) ........................... 63,946,161
Liabilities in excess of other assets --
(0.69%) ........................................ (436,435)
-----------
Net Assets -- 100.00% ............................ $63,509,726
-----------
-----------
</TABLE>
- ---------
* Non-income producing security.
** Money market fund.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
THE BEAR STEARNS FUNDS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
LARGE CAP SMALL CAP
S&P STARS THE INSIDERS VALUE VALUE
PORTFOLIO SELECT FUND PORTFOLIO PORTFOLIO
---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (cost - $137,384,148,
$23,035,206, $15,308,634 and $48,156,037,
respectively)................................. $ 176,879,649 $ 29,514,764 $ 19,959,276 $ 63,946,161
Receivable for Portfolio shares sold............ 1,653,718 7,493 44,093 244,879
Receivable for investments sold................. 1,092,856 -- 85,917 291,365
Dividends and interest receivable............... 35,992 32,593 24,978 10,843
Receivable from investment adviser.............. -- 19,370 28,621 3,122
Deferred organization expenses and other
assets........................................ 135,843 124,179 63,053 75,697
---------------- -------------- -------------- --------------
Total assets.............................. 179,798,058 29,698,399 20,205,938 64,572,067
---------------- -------------- -------------- --------------
LIABILITIES
Payable for investments purchased............... -- -- 188,451 885,498
Payable for Portfolio shares repurchased........ 354,864 36,783 61,368 21,443
Distribution fee payable (class A and C
shares)....................................... 244,843 46,482 18,257 58,384
Advisory fee payable............................ 52,929 -- -- 9,606
Administration fee payable...................... 22,750 12,043 2,363 7,427
Custodian fee payable........................... 5,680 2,085 1,337 --
Written call options, at value (premiums
received - $24,074)........................... 8,750 -- -- --
Accrued expenses................................ 116,916 75,115 86,223 79,983
---------------- -------------- -------------- --------------
Total liabilities......................... 806,732 172,508 357,999 1,062,341
---------------- -------------- -------------- --------------
NET ASSETS
Capital stock, $0.001 par value (unlimited
shares of
beneficial interest authorized)............... 8,153 1,595 917 2,787
Paid-in capital................................. 122,172,372 19,522,836 11,692,330 43,997,158
Undistributed net investment income/(loss)...... (1,477,150) (10,472) 42,842 (140,109)
Accumulated net realized gain from investments
and option transactions, if any............... 18,777,126 3,532,374 3,461,208 3,859,766
Net unrealized appreciation on investments and
option transactions, if any................... 39,510,825 6,479,558 4,650,642 15,790,124
---------------- -------------- -------------- --------------
Net assets................................ $178,991,326 $29,525,891 $19,847,939 $63,509,726
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
CLASS A
Net assets...................................... $ 93,630,979 $ 18,161,279 $ 6,509,368 $ 21,702,891
---------------- -------------- -------------- --------------
Shares of beneficial interest outstanding....... 4,261,557 978,101 300,536 950,527
---------------- -------------- -------------- --------------
Net asset value per share....................... $21.97 $18.57 $21.66 $22.83
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
Maximum offering price per share (net asset
value plus sales charge of 4.75%* of the
offering price)............................... $23.07 $19.50 $22.74 $23.97
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
CLASS C
Net assets...................................... $ 56,127,875 $ 9,703,364 $ 4,153,695 $ 16,822,709
---------------- -------------- -------------- --------------
Shares of beneficial interest outstanding....... 2,572,812 527,606 192,991 743,062
---------------- -------------- -------------- --------------
Net asset value and offering price per
share**....................................... $21.82 $18.39 $21.52 $22.64
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
CLASS Y
Net assets...................................... $ 29,232,472 $ 1,661,248 $ 9,184,876 $ 24,984,126
---------------- -------------- -------------- --------------
Shares of beneficial interest outstanding....... 1,319,324 88,750 422,787 1,092,248
---------------- -------------- -------------- --------------
Net asset value, offering and redemption price
per share..................................... $22.16 $18.72 $21.72 $22.87
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
</TABLE>
- ---------
*On investments of $50,000 or more, the offering price is reduced.
**Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
THE BEAR STEARNS FUNDS
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
LARGE CAP SMALL CAP
S&P STARS THE INSIDERS VALUE VALUE
PORTFOLIO SELECT FUND PORTFOLIO PORTFOLIO
---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 448,527 $ 176,109 $ 137,258 $ 121,715
Interest........................................ 37,574 65,708 18,856 88,392
---------------- -------------- -------------- --------------
486,101 241,817 156,114 210,107
---------------- -------------- -------------- --------------
EXPENSES
Advisory fees................................... 574,993 83,229 66,232 183,956
Distribution fees - class A..................... 206,222 41,098 15,029 41,406
Distribution fees - class C..................... 235,665 49,268 18,310 63,532
Accounting fees................................. 102,877 58,613 54,229 60,451
Transfer agent fees and expenses................ 110,054 44,697 46,133 54,558
Administration fees............................. 114,965 21,120 13,246 36,791
Federal and state registration fees............. 46,079 31,157 24,783 32,294
Legal and auditing fees......................... 47,534 17,127 19,254 23,255
Amortization of organization expenses........... 25,069 18,112 9,957 10,832
Reports and notices to shareholders............. 20,807 15,633 13,035 13,035
Custodian fees and expenses..................... 22,417 11,531 5,014 10,718
Insurance expenses.............................. 7,203 8,122 7,589 7,589
Trustees' fees and expenses..................... 8,375 4,011 3,510 3,510
Other........................................... 13,689 1,563 2,055 2,055
---------------- -------------- -------------- --------------
Total expenses before waivers and related
reimbursements............................ 1,535,949 405,281 298,376 543,982
Less: waivers and related reimbursements.... (322,299) (152,992) (176,728) (193,766)
---------------- -------------- -------------- --------------
Total expenses after waivers and related
reimbursements............................ 1,213,650 252,289 121,648 350,216
---------------- -------------- -------------- --------------
Net investment income/(loss).................... (727,549) (10,472) 34,466 (140,109)
---------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND OPTION TRANSACTIONS
Net realized gain/(loss) from:
Investments................................... 8,041,023 2,441,278 808,204 4,322,082
Option transactions........................... (1,368) -- -- --
Net change in unrealized appreciation on:
Investments................................... 37,630,715 4,236,245 3,024,516 9,706,005
Option transactions........................... (74,715) -- -- --
---------------- -------------- -------------- --------------
Net realized and unrealized gain on investments
and option transactions....................... 45,595,655 6,677,523 3,832,720 14,028,087
---------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................................. $ 44,868,106 $ 6,667,051 $ 3,867,186 $ 13,887,978
---------------- -------------- -------------- --------------
---------------- -------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
THE BEAR STEARNS FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
S&P STARS PORTFOLIO THE INSIDERS SELECT FUND
----------------------------------- -----------------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED FISCAL YEAR MONTHS ENDED FISCAL YEAR
SEPTEMBER 30, 1997 ENDED SEPTEMBER 30, 1997 ENDED
(UNAUDITED) MARCH 31, 1997 (UNAUDITED) MARCH 31, 1997
------------------ -------------- ------------------ --------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment loss............................. $ (727,549) $ (687,406) $ (10,472) $ (15,171)
Net realized gain from investments and
option transactions, if any................... 8,039,655 16,488,691 2,441,278 3,006,957
Net change in unrealized appreciation on
investments and option transactions, if any... 37,556,000 (4,048,192) 4,236,245 792,036
------------------ -------------- ------------------ --------------
Net increase in net assets resulting from
operations.................................... 44,868,106 11,753,093 6,667,051 3,783,822
------------------ -------------- ------------------ --------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A shares................................ -- -- -- (8,066)
Class C shares................................ -- -- -- --
Class Y shares................................ -- -- -- (1,784)
------------------ -------------- ------------------ --------------
-- -- -- (9,850)
------------------ -------------- ------------------ --------------
Net realized capital gains
Class A shares................................ -- (4,448,797) -- (1,540,623)
Class C shares................................ -- (2,375,768) -- (1,088,043)
Class Y shares................................ -- (956,196) -- (170,326)
------------------ -------------- ------------------ --------------
-- (7,780,761) -- (2,798,992)
------------------ -------------- ------------------ --------------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares............ 39,009,551 66,340,756 4,829,598 7,652,245
Cost of shares repurchased...................... (24,762,355) (39,406,235) (6,905,833) (9,576,787)
Shares issued in reinvestment of dividends...... -- 7,060,655 -- 2,531,683
------------------ -------------- ------------------ --------------
Net increase/(decrease) in net assets derived
from shares of beneficial interest
transactions.................................. 14,247,196 33,995,176 (2,076,235) 607,141
------------------ -------------- ------------------ --------------
Total increase in net assets.................... 59,115,302 37,967,508 4,590,816 1,582,121
NET ASSETS
Beginning of period............................. 119,876,024 81,908,516 24,935,075 23,352,954
------------------ -------------- ------------------ --------------
End of period................................... $178,991,326 $ 119,876,024 $ 29,525,891 $ 24,935,075
------------------ -------------- ------------------ --------------
------------------ -------------- ------------------ --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
THE BEAR STEARNS FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LARGE CAP VALUE PORTFOLIO SMALL CAP VALUE PORTFOLIO
----------------------------------- -----------------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED FISCAL YEAR MONTHS ENDED FISCAL YEAR
SEPTEMBER 30, 1997 ENDED SEPTEMBER 30, 1997 ENDED
(UNAUDITED) MARCH 31, 1997 (UNAUDITED) MARCH 31, 1997
------------------ -------------- ------------------ --------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income/(loss).................... $ 34,466 $ 131,375 $ (140,109) $ (296,012)
Net realized gain from investments.............. 808,204 2,770,141 4,322,082 210,104
Net change in unrealized appreciation on
investments................................... 3,024,516 486,773 9,706,005 3,397,726
------------------ -------------- ------------------ --------------
Net increase in net assets resulting from
operations.................................... 3,867,186 3,388,289 13,887,978 3,311,818
------------------ -------------- ------------------ --------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A shares................................ -- (36,680) -- --
Class C shares................................ -- (5,113) -- --
Class Y shares................................ -- (86,346) -- --
------------------ -------------- ------------------ --------------
-- (128,139) -- --
------------------ -------------- ------------------ --------------
Net realized capital gains
Class A shares................................ -- (66,024) -- (191,411)
Class C shares................................ -- (46,015) -- (113,992)
Class Y shares................................ -- (97,133) -- (274,790)
------------------ -------------- ------------------ --------------
-- (209,172) -- (580,193)
------------------ -------------- ------------------ --------------
SHARES OF BENEFICIAL INTEREST
Net proceeds from the sale of shares............ 2,882,742 21,189,714 12,859,368 31,319,342
Cost of shares repurchased...................... (983,821) (20,911,123) (4,175,144) (15,839,169)
Shares issued in reinvestment of dividends...... -- 203,090 -- 509,481
------------------ -------------- ------------------ --------------
Net increase in net assets derived from shares
of
beneficial interest transactions.............. 1,898,921 481,681 8,684,224 15,989,654
------------------ -------------- ------------------ --------------
Total increase in net assets.................... 5,766,107 3,532,659 22,572,202 18,721,279
NET ASSETS
Beginning of period............................. 14,081,832 10,549,173 40,937,524 22,216,245
------------------ -------------- ------------------ --------------
End of period*.................................. $ 19,847,939 $ 14,081,832 $ 63,509,726 $ 40,937,524
------------------ -------------- ------------------ --------------
------------------ -------------- ------------------ --------------
</TABLE>
- --------
*Includes undistributed net investment income of $42,842 for the six months
ended September 30, 1997 and $8,376 for the fiscal year end March 31, 1997 for
Large Cap Value Portfolio.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
S&P STARS Portfolio
--------------------------------------------------------------------
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 SIX MONTHS FOR THE FISCAL
ENDED SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
-------------------------------------------- --------------------------------------------
CLASS A CLASS C CLASS Y CLASS A CLASS C CLASS Y
---------- ------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of
period......................... $ 16.13 $ 16.06 $ 16.23 $ 14.92 $ 14.86 $ 14.97
---------- ------------ ------------ ---------- ------------ ------------
Net investment
income/(loss)(1)............... (0.08) (0.11) (0.04) (0.09) (0.17) (0.02)
Net realized and unrealized gain
on investments and option
transactions(2)................ 5.92 5.87 5.97 2.63 2.62 2.66
---------- ------------ ------------ ---------- ------------ ------------
Net increase in net assets
resulting from operations...... 5.84 5.76 5.93 2.54 2.45 2.64
---------- ------------ ------------ ---------- ------------ ------------
Dividends and distributions to
shareholders from
Net investment income.......... -- -- -- -- -- --
Net realized capital gains..... -- -- -- (1.33) (1.25) (1.38)
---------- ------------ ------------ ---------- ------------ ------------
-- -- -- (1.33) (1.25) (1.38)
---------- ------------ ------------ ---------- ------------ ------------
Net asset value, end of period... $ 21.97 $ 21.82 $ 22.16 $ 16.13 $ 16.06 $ 16.23
---------- ------------ ------------ ---------- ------------ ------------
---------- ------------ ------------ ---------- ------------ ------------
Total investment return(3)....... 36.21% 35.87% 36.54% 16.87% 16.33% 17.48%
---------- ------------ ------------ ---------- ------------ ------------
---------- ------------ ------------ ---------- ------------ ------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)....................... $ 93,631 $ 56,128 $ 29,232 $ 67,491 $ 37,622 $ 14,763
Ratio of expenses to average net
assets(1)(6)................... 1.50%(5) 2.00%(5) 1.00%(5) 1.50% 2.00% 1.00%
Ratio of net investment
income/(loss) to average net
assets(1)(6)................... (0.87)%(5) (1.38)%(5) (0.37)%(5) (0.59)% (1.09)% (0.10)%
Decrease reflected in above
expense ratios and net
investment income/(loss) due to
waivers and reimbursements..... 0.42%(5) 0.42%(5) 0.42%(5) 0.70% 0.70% 0.70%
Portfolio turnover rate(7)....... 83.44% 83.44% 83.44% 220.00% 220.00% 220.00%
Average commission rate per
share(7)(8).................... $ 0.0651 $ 0.0651 $ 0.0651 $ 0.0595 $ 0.0595 $ 0.0595
<CAPTION>
FOR THE PERIOD
APRIL 3, 1995* THROUGH
MARCH 31, 1996
--------------------------------------------
CLASS A CLASS C CLASS Y
---------- ------------ ------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of
period......................... $ 12.00 $ 12.00 $ 14.13
---------- ------------ ------------
Net investment
income/(loss)(1)............... -- (0.06) 0.07
Net realized and unrealized gain
on investments and option
transactions(2)................ 3.31 3.28 1.20
---------- ------------ ------------
Net increase in net assets
resulting from operations...... 3.31 3.22 1.27
---------- ------------ ------------
Dividends and distributions to
shareholders from
Net investment income.......... -- -- (0.03)
Net realized capital gains..... (0.39) (0.36) (0.40)
---------- ------------ ------------
(0.39) (0.36) (0.43)
---------- ------------ ------------
Net asset value, end of period... $ 14.92 $ 14.86 $ 14.97
---------- ------------ ------------
---------- ------------ ------------
Total investment return(3)....... 27.68% 26.91% 9.09%(4)
---------- ------------ ------------
---------- ------------ ------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)....................... $ 45,049 $ 28,081 $ 8,779
Ratio of expenses to average net
assets(1)(6)................... 1.50%(5) 2.00%(5) 1.00%(5)
Ratio of net investment
income/(loss) to average net
assets(1)(6)................... (0.01)%(5) (0.45)%(5) 0.82%(4)(5)
Decrease reflected in above
expense ratios and net
investment income/(loss) due to
waivers and reimbursements..... 0.89%(5) 0.92%(5) 0.99%(4)(5)
Portfolio turnover rate(7)....... 295.97% 295.97% 295.97%
Average commission rate per
share(7)(8).................... $ 0.0603 $ 0.0603 $ 0.0603
</TABLE>
- ------------
* Commencement of investment operations. Class Y shares commenced its intial
public offering on August 7, 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 dates of distributions.
(1) Reflects waivers and reimbursements, if any.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses 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) Includes S&P STARS' share of S&P STARS Master Series' expenses for periods
prior to June 25, 1997.
(7) Portfolio turnover rate and average commission rate per share are related to
S&P STARS Master Series for periods prior to June 25, 1997.
(8) 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.
26
<PAGE>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
The Insiders Select Fund
--------------------------------------------------------------------
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 SIX MONTHS
ENDED SEPTEMBER 30, 1997 FOR THE FISCAL YEAR
(UNAUDITED) ENDED MARCH 31, 1997
---------------------------------------- ----------------------------------------
CLASS A CLASS C CLASS Y CLASS A CLASS C CLASS Y
---------- ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of
period......................... $ 14.58 $ 14.48 $ 14.66 $ 14.00 $ 13.96 $ 14.02
---------- ------------ ---------- ---------- ------------ ----------
Net investment
income/(loss)(1)............... -- (0.05) 0.08 0.02 (0.06) 0.08
Net realized and unrealized gain
on investments(2).............. 3.99 3.96 3.98 2.48 2.47 2.49
---------- ------------ ---------- ---------- ------------ ----------
Net increase in net assets
resulting from operations...... 3.99 3.91 4.06 2.50 2.41 2.57
---------- ------------ ---------- ---------- ------------ ----------
Dividends and distributions to
shareholders from
Net investment income.......... -- -- -- (0.01) -- (0.02)
Net realized capital gains..... -- -- -- (1.91) (1.89) (1.91)
---------- ------------ ---------- ---------- ------------ ----------
-- -- -- (1.92) (1.89) (1.93)
---------- ------------ ---------- ---------- ------------ ----------
Net asset value, end of period... $ 18.57 $ 18.39 $ 18.72 $ 14.58 $ 14.48 $ 14.66
---------- ------------ ---------- ---------- ------------ ----------
---------- ------------ ---------- ---------- ------------ ----------
Total investment return(3)....... 27.37% 27.00% 27.70% 18.31% 17.69% 18.81%
---------- ------------ ---------- ---------- ------------ ----------
---------- ------------ ---------- ---------- ------------ ----------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)....................... $ 18,161 $ 9,703 $ 1,661 $ 13,860 $ 9,519 $ 1,557
Ratio of expenses to average net
assets(1)...................... 1.65%(5) 2.15%(5) 1.15%(5) 1.65% 2.15% 1.15%
Ratio of net investment
income/(loss) to average net
assets(1)...................... 0.06%(5) (0.43)%(5) 0.55%(5) 0.11% (0.38)% 0.60%
Decrease reflected in above
expense ratios and net
investment income/(loss) due to
waivers and reimbursements..... 1.08%(5) 1.10%(5) 1.08%(5) 1.82% 1.81% 1.81%
Portfolio turnover rate.......... 42.95% 42.95% 42.95% 128.42% 128.42% 128.42%
Average commission rate per
share(6)....................... $ 0.0229 $ 0.0229 $ 0.0229 $ 0.0264 $ 0.0264 $ 0.0264
<CAPTION>
FOR THE PERIOD
JUNE 16, 1995* THROUGH
MARCH 31, 1996
----------------------------------------
CLASS A CLASS C CLASS Y
---------- ------------ ----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of
period......................... $ 12.00 $ 12.00 $ 12.12
---------- ------------ ----------
Net investment
income/(loss)(1)............... 0.03 (0.01) 0.07
Net realized and unrealized gain
on investments(2).............. 1.98 1.97 1.87
---------- ------------ ----------
Net increase in net assets
resulting from operations...... 2.01 1.96 1.94
---------- ------------ ----------
Dividends and distributions to
shareholders from
Net investment income.......... (0.01) -- (0.04)
Net realized capital gains..... -- -- --
---------- ------------ ----------
(0.01) -- (0.04)
---------- ------------ ----------
Net asset value, end of period... $ 14.00 $ 13.96 $ 14.02
---------- ------------ ----------
---------- ------------ ----------
Total investment return(3)....... 16.75% 16.33% 15.98%(4)
---------- ------------ ----------
---------- ------------ ----------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)....................... $ 12,132 $ 9,928 $ 1,293
Ratio of expenses to average net
assets(1)...................... 1.65%(5) 2.15%(5) 1.15%(5)
Ratio of net investment
income/(loss) to average net
assets(1)...................... 0.38%(5) (0.12)%(5) 0.97%(4)(5)
Decrease reflected in above
expense ratios and net
investment income/(loss) due to
waivers and reimbursements..... 1.87%(5) 1.92%(5) 2.04%(4)(5)
Portfolio turnover rate.......... 93.45% 93.45% 93.45%
Average commission rate per
share(6)....................... $ 0.0294 $ 0.0294 $ 0.0294
</TABLE>
- ------------
* Commencement of investment operations. Class Y shares commenced its intial
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 dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses 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) 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.
27
<PAGE>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
Large Cap Value Portfolio
--------------------------------------------------------------------
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 SIX MONTHS
ENDED SEPTEMBER 30, 1997 FOR THE FISCAL YEAR
(UNAUDITED) ENDED MARCH 31, 1997
---------------------------------------- ----------------------------------------
CLASS A CLASS C CLASS Y CLASS A CLASS C CLASS Y
---------- ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of
period......................... $ 17.17 $ 17.11 $ 17.18 $ 15.13 $ 15.08 $ 15.12
---------- ------------ ---------- ---------- ------------ ----------
Net investment
income/(loss)(1)............... 0.03 (0.02) 0.07 0.04 (0.02) 0.23
Net realized and unrealized gain
on investments(2).............. 4.46 4.43 4.47 2.28 2.25 2.17
---------- ------------ ---------- ---------- ------------ ----------
Net increase in net assets
resulting from operations...... 4.49 4.41 4.54 2.32 2.23 2.40
---------- ------------ ---------- ---------- ------------ ----------
Dividends and distributions to
shareholders from
Net investment income.......... -- -- -- (0.10) (0.02) (0.16)
Net realized capital gains..... -- -- -- (0.18) (0.18) (0.18)
---------- ------------ ---------- ---------- ------------ ----------
-- -- -- (0.28) (0.20) (0.34)
---------- ------------ ---------- ---------- ------------ ----------
Net asset value, end of period... $ 21.66 $ 21.52 $ 21.72 $ 17.17 $ 17.11 $ 17.18
---------- ------------ ---------- ---------- ------------ ----------
---------- ------------ ---------- ---------- ------------ ----------
Total investment return(3)....... 26.15% 25.77% 26.43% 15.44% 14.87% 16.04%
---------- ------------ ---------- ---------- ------------ ----------
---------- ------------ ---------- ---------- ------------ ----------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)....................... $ 6,509 $ 4,154 $ 9,185 $ 4,987 $ 2,986 $ 6,109
Ratio of expenses to average net
assets(1)...................... 1.50%(5) 2.00%(5) 1.00%(5) 1.50% 2.00% 1.00%
Ratio of net investment
income/(loss) to average net
assets(1)...................... 0.28%(5) (0.23)%(5) 0.76%(5) 0.43% (0.08)% 1.00%
Decrease reflected in above
expense ratios and net
investment income/(loss) due to
waivers and reimbursements..... 2.01%(5) 2.00%(5) 2.00%(5) 1.58% 1.61% 1.50%
Portfolio turnover rate.......... 30.13% 30.13% 30.13% 136.67% 136.67% 136.67%
Average commission rate per
share(6)....................... $ 0.0600 $ 0.0600 $ 0.0600 $ 0.0593 $ 0.0593 $ 0.0593
<CAPTION>
FOR THE PERIOD
APRIL 3, 1995* THROUGH
MARCH 31, 1996
----------------------------------------
CLASS A CLASS C CLASS Y
---------- ------------ ----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of
period......................... $ 12.00 $ 12.00 $ 13.98
---------- ------------ ----------
Net investment
income/(loss)(1)............... 0.06 (0.01) 0.07
Net realized and unrealized gain
on investments(2).............. 3.10 3.10 1.16
---------- ------------ ----------
Net increase in net assets
resulting from operations...... 3.16 3.09 1.23
---------- ------------ ----------
Dividends and distributions to
shareholders from
Net investment income.......... (0.02) -- (0.08)
Net realized capital gains..... (0.01) (0.01) (0.01)
---------- ------------ ----------
(0.03) (0.01) (0.09)
---------- ------------ ----------
Net asset value, end of period... $ 15.13 $ 15.08 $ 15.12
---------- ------------ ----------
---------- ------------ ----------
Total investment return(3)....... 26.35% 25.71% 8.75%(4)
---------- ------------ ----------
---------- ------------ ----------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)....................... $ 3,616 $ 3,520 $ 3,413
Ratio of expenses to average net
assets(1)...................... 1.50%(5) 2.00%(5) 1.00%(5)
Ratio of net investment
income/(loss) to average net
assets(1)...................... 0.46%(5) (0.06)%(5) 0.76%(4)(5)
Decrease reflected in above
expense ratios and net
investment income/(loss) due to
waivers and reimbursements..... 4.34%(5) 4.39%(5) 4.41%(4)(5)
Portfolio turnover rate.......... 45.28% 45.28% 45.28%
Average commission rate per
share(6)....................... $ 0.0596 $ 0.0596 $ 0.0596
</TABLE>
- ------------
* Commencement of operations. Commenced investment operations on April 4,
1995. Class Y shares commenced its intial public offering on September 11,
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 dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses 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) 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.
28
<PAGE>
THE BEAR STEARNS FUNDS
FINANCIAL HIGHLIGHTS
Small Cap Value Portfolio
--------------------------------------------------------------------
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 SIX MONTHS
ENDED SEPTEMBER 30, 1997 FOR THE FISCAL YEAR
(UNAUDITED) ENDED MARCH 31, 1997
---------------------------------------- ----------------------------------------
CLASS A CLASS C CLASS Y CLASS A CLASS C CLASS Y
---------- ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of
period......................... $ 17.48 $ 17.38 $ 17.47 $ 15.87 $ 15.79 $ 15.85
---------- ------------ ---------- ---------- ------------ ----------
Net investment loss(1)........... (0.02) (0.05) (0.01) (0.10) (0.18) (0.05)
Net realized and unrealized gain
on investments(2).............. 5.37 5.31 5.41 1.95 1.93 1.97
---------- ------------ ---------- ---------- ------------ ----------
Net increase in net assets
resulting from operations...... 5.35 5.26 5.40 1.85 1.75 1.92
---------- ------------ ---------- ---------- ------------ ----------
Distributions to shareholders
from
Net realized capital gains..... -- -- -- (0.24) (0.16) (0.30)
---------- ------------ ---------- ---------- ------------ ----------
Net asset value, end of period... $ 22.83 $ 22.64 $ 22.87 $ 17.48 $ 17.38 $ 17.47
---------- ------------ ---------- ---------- ------------ ----------
---------- ------------ ---------- ---------- ------------ ----------
Total investment return(3)....... 30.61% 30.26% 30.91% 11.71% 11.12% 12.19%
---------- ------------ ---------- ---------- ------------ ----------
---------- ------------ ---------- ---------- ------------ ----------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)....................... $ 21,703 $ 16,823 $ 24,984 $ 13,143 $ 11,071 $ 16,724
Ratio of expenses to average net
assets(1)...................... 1.50%(5) 2.00%(5) 1.00%(5) 1.50% 2.00% 1.00%
Ratio of net investment loss to
average net assets(1).......... (0.64)%(5) (1.15)%(5) (0.15)%(5) (0.81)% (1.31)% (0.31)%
Decrease reflected in above
expense ratios and net
investment loss due to waivers
and reimbursements............. 0.79%(5) 0.79%(5) 0.79%(5) 1.00% 0.99% 1.00%
Portfolio turnover rate.......... 49.16% 49.16% 49.16% 56.88% 56.88% 56.88%
Average commission rate per
share(6)....................... $ 0.0557 $ 0.0557 $ 0.0557 $ 0.0550 $ 0.0550 $ 0.0550
<CAPTION>
FOR THE PERIOD
APRIL 3, 1995* THROUGH
MARCH 31, 1996
----------------------------------------
CLASS A CLASS C CLASS Y
---------- ------------ ----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of
period......................... $ 12.00 $ 12.00 $ 13.09
---------- ------------ ----------
Net investment loss(1)........... (0.07) (0.10) --
Net realized and unrealized gain
on investments(2).............. 4.17 4.11 3.05
---------- ------------ ----------
Net increase in net assets
resulting from operations...... 4.10 4.01 3.05
---------- ------------ ----------
Distributions to shareholders
from
Net realized capital gains..... (0.23) (0.22) (0.29)
---------- ------------ ----------
Net asset value, end of period... $ 15.87 $ 15.79 $ 15.85
---------- ------------ ----------
---------- ------------ ----------
Total investment return(3)....... 34.36% 33.59% 23.52%(4)
---------- ------------ ----------
---------- ------------ ----------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)....................... $ 6,474 $ 6,753 $ 8,989
Ratio of expenses to average net
assets(1)...................... 1.50%(5) 2.00%(5) 1.00%(5)
Ratio of net investment loss to
average net assets(1).......... (0.66)%(5) (1.09)%(5) --
Decrease reflected in above
expense ratios and net
investment loss due to waivers
and reimbursements............. 2.32%(5) 2.39%(5) 2.45%(4)(5)
Portfolio turnover rate.......... 40.79% 40.79% 40.79%
Average commission rate per
share(6)....................... $ 0.0572 $ 0.0572 $ 0.0572
</TABLE>
- ------------
* Commencement of investment operations. Class Y shares commenced its intial
public offering on June 22, 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 dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses 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) 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.
29
<PAGE>
THE BEAR STEARNS FUNDS
S&P STARS Portfolio
The Insiders Select Fund
Large Cap Value Portfolio
Small Cap Value Portfolio
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business
trust on September 29, 1994 and is registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as an open-end management investment
company. The Fund currently consists of seven separate portfolios: four
diversified portfolios, Large Cap Value Portfolio ("Large Cap"), Small Cap Value
Portfolio ("Small Cap"), Total Return Bond Portfolio and Prime Money Market
Portfolio and three non-diversified portfolios, S&P STARS Portfolio ("S&P
STARS"), The Insiders Select Fund ("Insiders Select") and Focus List Portfolio
(each a "Portfolio" and collectively, the "Portfolios"). Each Portfolio is
treated as a separate entity for certain matters under the Investment Company
Act, and for other purposes, and a shareholder of one portfolio is not deemed to
be a shareholder of any other portfolio. As of the date hereof, each Portfolio
offers three classes of shares, which have been designated as class A, C and Y
shares (except the Prime Money Market Portfolio, which only offers shares
designated as class Y, and Focus List Portfolio which has not yet commenced the
initial public offering of its classes of shares).
ORGANIZATIONAL MATTERS -- Prior to commencing operations on April 3, 1995, the
Portfolios did not have any transactions other than those relating to
organizational matters and the sale of 5,209, 1, 1,042 and 1,042 class A shares
and 5,209, 1, 1,042 and 1,042 class C shares of beneficial interest of S&P
STARS, Insiders Select, Large Cap, and Small Cap, respectively, to Bear, Stearns
& Co. Inc., ("Bear Stearns" or the "Distributor"). Costs of $203,596, $181,965,
$99,875 and $107,203 which were incurred by S&P STARS, Insiders Select, Large
Cap and Small Cap, respectively, in connection with the organization,
registration with the Commission and initial public offering of its shares, have
been deferred and are being amortized using the straight-line method over the
period of benefit not exceeding sixty months, beginning with the commencement of
investment operations of each Portfolio. The Portfolios commenced investment
operations on April 5, 1995, June 16, 1995, April 4, 1995 and April 3, 1995 for
S&P STARS, Insiders Select, Large Cap and Small Cap, respectively. In the event
that the Distributor or any transferee of the Distributor redeems any of its
original shares in a particular Portfolio prior to the end of the sixty month
period, the proceeds of the redemption payable in respect of such shares shall
be reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares outstanding at
the time of the redemption) of the unamortized deferred organization expenses as
of the date of such redemption. In the event that a particular Portfolio is
liquidated prior to the end of the sixty month period, the Distributor or the
transferee of the Distributor shall bear the unamortized deferred organization
expenses.
MANAGEMENT ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
certain estimates and assumptions that may affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those
estimates.
PORTFOLIO VALUATION -- Each Portfolio calculates the net asset value of and
completes orders to purchase or repurchase its shares of beneficial interest on
each business day, with the exception of those days on which the New York Stock
Exchange is closed.
Portfolios' securities, including covered call options written by the
Portfolios, are valued at the last sale price on the securities exchange or
national securities market on which such securities primarily are traded.
Securities not listed on an exchange or
30
<PAGE>
national securities market, or securities in which there were no transactions,
are valued at the average of the most recent bid and asked prices, except in the
case of open short positions where the asked price is used for valuation
purposes. Bid price is used when no asked price is available. Securities which
mature in 60 days or less are valued at amortized cost, which approximates
market value, unless this method does not represent fair value. Expenses and
fees, including the investment advisory, administration and distribution fees,
are accrued daily and taken into account for the purpose of determining the net
asset value of each Portfolio's shares. Because of the differences in operating
expenses incurred by each class, the per share net asset value of each class
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. Each 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).
OPTIONS WRITTEN -- When a Portfolio writes an option, an amount equal to the
premium received by the Portfolio is recorded as a liability and is subsequently
adjusted to the current market value of the option written. Premiums received
from writing options which expire unexercised are recorded by the Portfolio on
the expiration date as realized gains from option transactions. The difference
between the premium and the amount paid on effecting a closing purchase
transaction, including brokerage commissions, is also treated as a realized
gain, or if the premium is less than the amount paid for the closing purchase
transaction, as a realized loss. If a call option is exercised, the premium is
added to the proceeds from the sale of the underlying securities in determining
whether the Portfolio has a realized gain or loss. If a put option is exercised,
the premium reduces the cost basis of the securities purchased by the Portfolio.
The use of written options involves, to varying degrees, elements of market risk
in excess of the amount recognized in the statement of assets and liabililties.
The contract or notional amounts reflect the extent of the Portfolio's
involvment in these financials instruments. In writing an option, the Portfolio
bears the market risk of an unfavorable change in the price of the security
underlying the written option. Exercise of an option written by the Portfolio
could result in the Portfolio selling or buying a security at a price different
from the current market value. Each Portfolio's activities in written options
are conducted through regulated exchanges which do not result in counterparty
credit risks.
Option activity for S&P STARS* for the six months ended September 30, 1997 was
as follows:
<TABLE>
<CAPTION>
CALL OPTIONS
--------------------------------
CONTRACTS PREMIUMS
------------- -----------------
<S> <C> <C>
Outstanding at beginning of period....................................................... 400 $ 332,539
Options written.......................................................................... 3,735 1,155,694
Options purchased........................................................................ -- --
Options closed or expired................................................................ (4,035) (1,464,159)
------ -----------------
Outstanding at end of period............................................................. 100 $ 24,074
------ -----------------
------ -----------------
<CAPTION>
PUT OPTIONS
-----------------------------
CONTRACTS PREMIUMS
------------- --------------
<S> <C> <C>
Outstanding at beginning of period....................................................... -- --
Options written.......................................................................... -- --
Options purchased........................................................................ 1,950 $ 341,759
Options closed or expired................................................................ (1,950) (341,759)
------ --------------
Outstanding at end of period............................................................. -- --
------ --------------
------ --------------
</TABLE>
- -------
*Includes option transactions of the S&P STARS Master Series, a series of S&P
STARS Fund, for the period April 1, 1997 through June 24, 1997.
SHORT SELLING -- When a Portfolio makes a short sale, an amount equal to the
proceeds received by a Portfolio is recorded as a liability and is subsequently
adjusted to the current market value of the short sale. Short sales represent
obligations of a Portfolio to make future delivery of specific securities and
correspondingly, create an obligation to purchase the security at market prices
prevailing at the later delivery date (or to deliver the security if already
owned by a Portfolio). Upon termination of a short sale, a Portfolio will
recognize a gain, limited to the price at which the Portfolio sold the security
short, if the market price is less than the proceeds originally received. The
Portfolio will recognize a loss, unlimited in magnitude, if the market price at
termination is greater than the proceeds originally received. As a result, short
sales create the risk that a Portfolio's
31
<PAGE>
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 Portfolios had not engaged in short selling during the six
months ended September 30, 1997.
U.S. FEDERAL TAX STATUS -- Each Portfolio intends to distribute substantially
all of its taxable income and to comply with the other requirements of the
Internal Revenue Code of 1986, as amended, applicable to regulated investment
companies. Accordingly, no provision for U.S. federal income taxes is required.
In addition, by distributing during each calendar year substantially all of its
ordinary income and capital gains, if any, each Portfolio intends not to be
subject to a U.S. federal excise tax.
For U.S. federal income tax purposes, realized capital losses incurred after
October 31, 1996, within the prior fiscal year, are deemed to arise on the first
day of the current fiscal year. Small Cap incurred and elected to defer such
losses of $397,438.
DIVIDENDS AND DISTRIBUTIONS -- Each Portfolio intends to distribute at least
annually to shareholders substantially all of its net investment income.
Distribution of net realized gains, if any, will be declared and paid at least
annually. Dividends and distributions to shareholders are recorded on the
ex-dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within capital accounts based on their
U.S. federal tax-basis treatment, temporary differences do not require
reclassification.
TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
For the six months ended September 30, 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 each Portfolio. Under the terms of Investment Advisory Agreement,
each Portfolio, except Insiders Select, has agreed to pay BSFM a monthly fee at
the annual rate of 0.75% of each Portfolio's average daily net assets. Prior to
June 25, 1997, S&P STARS did not retain an investment adviser, rather S&P STARS
invested all of its assets in the S&P STARS Master Series, a series of S&P STARS
Fund, which was advised by BSFM.
For Insiders Select, 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. 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 Insider's average
daily net assets. The performance adjustment fee reduced the total advisory fee
by $71,189 or 0.50% of the value of Insiders Select's average net assets due to
its underperformance in comparison to the S&P 500 Composite Index during the
period.
Prior to September 22, 1997, BSFM had engaged Symphony Asset Management
("Symphony"), a subsidiary of BARRA, Inc., as the Portfolio's sub-investment
adviser. If not for the voluntary undertaking to limit Insiders Select's total
operating costs, BSFM would have paid Symphony a monthly fee equal to an annual
rate of 0.45% of the Portfolio's average daily net assets. Effective September
22, 1997, BSFM assumed portfolio management responsibilities for Insiders
Select.
For the six months ended September 30, 1997, BSFM (or the "Administrator")
serves as administrator to each Portfolio pursuant to an Administration
Agreement. The Administrator is entitled to receive from each Portfolio a
monthly fee equal to an annual rate of 0.15% of each Portfolio's average daily
net assets. Under the terms of an Administrative Services Agreement with each
Portfolio, PFPC Inc. provides certain administrative services to each Portfolio.
For providing these services, PFPC Inc. is entitled to receive from each
Portfolio a monthly fee equal to an annual rate of 0.10% of each 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 $132,000 for each Portfolio. Prior to June
25, 1997, PFPC Inc. was entitled to receive from S&P STARS a monthly fee of
$5,500.
32
<PAGE>
For the six months ended September 30, 1997, the Adviser has continued to
voluntarily limit each Portfolio's total operating expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary items) to a maximum
annual level of 1.50%, 1.65%, 1.50%, and 1.50% of the average daily net assets
of its class A shares, 2.00%, 2.15%, 2.00%, and 2.00% of the average daily net
assets of its class C shares and 1.00%, 1.15%, 1.00%, and 1.00% of the average
daily net assets of its class Y shares of the S&P STARS, Insiders Select, Large
Cap and Small Cap, respectively. As necessary, this limitation is effected by
waivers by the Adviser of its advisory fees and reimbursements of expenses
exceeding the advisory fee. For the six months ended September 30, 1997, the
Adviser waived advisory fees of $322,299, $83,229, $66,232, and $173,918 for S&P
STARS, Insiders Select, Large Cap and Small Cap, respectively. In addition, the
Adviser reimbursed $69,763, $110,496, and $19,848 for Insiders, Large Cap and
Small Cap, respectively, in order to maintain the voluntary expense limitation.
For the six months ended September 30, 1997, Bear Stearns, an affiliate of the
Adviser and the Administrator, earned approximately $76,182 , $4,303, $300 and
$528 in brokerage commissions from portfolio transactions executed on behalf of
S&P STARS, Insiders Select, Large Cap and Small Cap, respectively.
Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies
Inc. and an affiliate of the Adviser and the Administrator, serves as custodian
to each of the Portfolios.
DISTRIBUTION PLAN
The Fund, on behalf of class A and C shares of each Portfolio, has entered into
a Distribution and Servicing Plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act. Under the Plan in effect for the six months ended
September 30, 1997, the Portfolios each paid Bear Stearns a fee at an annual
rate of 0.50% for class A shares and 1.00% for class C shares (of which 0.25%
was attributed to shareholder servicing with respect to each class). Such fees
are based on the average daily net assets in each class of the respective
Portfolios 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 six months
ended September 30, 1997, Bear Stearns earned $279,860, $57,500, $21,247, and
$68,352 for S&P STARS, Insiders Select, Large Cap and Small Cap, respectively,
in distribution fees. Bear Stearns uses these fees to pay its broker-dealers
whose clients hold Portfolio shares and for other distribution-related
activities. For the same period, Bear Stearns earned $162,027, $32,866, $12,092,
and $36,586 for S&P STARS, Insiders Select, Large Cap and Small Cap,
respectively, in shareholder servicing fees. Bear Stearns uses these fees to pay
broker-dealers and other financial institutions whose clients hold Portfolio
shares primarily for shareholder liaison and other account maintenance services.
In addition, as Distributor of the Portfolios, Bear Stearns collects the sales
charges imposed on sales of each Portfolio's class A shares, and reallows a
portion of such charges to dealers through which the sales are made. 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 April 3, 1995 (commencement
of 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.
33
<PAGE>
For the six months ended September 30, 1997, Bear Stearns has advised each
Portfolio that it received approximately $441,833, $95,591, $17,689, and $98,526
in front-end sales charges resulting from sales of class A shares of S&P STARS,
Insiders Select, Large Cap, and Small Cap, respectively. From these fees, Bear
Stearns paid such sales charges to dealers which in turn paid commissions to
sales persons. In addition, Bear Stearns has advised S&P STARS, Insiders Select,
Large Cap, and Small Cap that during the period, it received approximately
$9,995, $1,402, $165, and $1,731 from the Portfolios, respectively, in
contingent deferred sales charges upon certain redemptions by class C
shareholders.
INVESTMENTS IN SECURITIES
For U.S. federal income tax purposes, the costs of securities owned at September
30, 1997 were $137,995,070, $23,035,206, $15,323,304, and $48,156,037 for S&P
STARS, Insiders Select, Large Cap and Small Cap, respectively. Accordingly, the
net unrealized appreciation/(depreciation) of investments are as follows:
<TABLE>
<CAPTION>
NET
PORTFOLIO APPRECIATION DEPRECIATION APPRECIATION
- ---------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
S&P STARS............................... $39,327,537 $(442,958) $38,884,579
Insiders Select......................... 6,522,620 (43,062) 6,479,558
Large Cap............................... 4,682,226 (46,254) 4,635,972
Small Cap............................... 16,075,585 (285,461) 15,790,124
</TABLE>
For the six months ended September 30, 1997, aggregate purchases and sales of
investment securities (excluding short-term securities) for each Portfolio were
as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- ---------------------------------------- ----------- -----------
<S> <C> <C>
S&P STARS*.............................. $138,038,479 $124,189,819
Insiders Select......................... 10,899,186 15,668,889
Large Cap............................... 6,434,490 5,040,965
Small Cap............................... 28,693,865 22,871,242
</TABLE>
Prior to June 25, 1997, S&P STARS invested all of its assets in the S&P STARS
Master Series, a series of S&P STARS Fund. Pursuant to a plan of liquidation
adopted by the Trustees of the S&P STARS Fund on June 25, 1997, S&P STARS
redeemed in-kind its investment in the S&P STARS Master Series. The value of the
investments and cash (after the unamortized organization costs absorbed by the
Distributor and net of any accrued liabilities) received by S&P totalled
$147,186,137.
- -------
*Includes the investment transactions of the S&P STARS Master Series for the
period April 1, 1997 through June 24, 1997.
34
<PAGE>
SHARES OF BENEFICIAL INTEREST
Each Portfolio offers class A, C and Y shares. Class A shares are sold with a
front-end sales charge of up to 4.75%. 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 September 30, 1997, there was an unlimited amount of $0.001 par value shares
of beneficial interest authorized for each Portfolio, of which Bear Stearns
owned 5,209, 1, 1,042, and 1,042 of class A shares and 5,209, 1, 1,042, and
1,042 of class C shares of S&P STARS, Insiders Select, Large Cap, and Small Cap,
respectively.
Transactions in the classes of shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
S&P STARS INSIDERS SELECT
------------------------------- -------------------------------
CLASS A CLASS C CLASS Y CLASS A CLASS C CLASS Y
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
SALES:
Shares.................................. 984,982 518,705 498,472 210,558 62,158 19,220
Amount.................................. $19,338,682 $10,304,097 $9,366,772 $3,476,762 $1,032,046 $ 320,789
REPURCHASES:
Shares.................................. 906,430 288,063 88,699 182,962 191,915 36,620
Amount.................................. $17,551,382 $5,506,314 $1,704,659 $3,031,949 $3,209,281 $ 664,603
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP SMALL CAP
------------------------------- -------------------------------
CLASS A CLASS C CLASS Y CLASS A CLASS C CLASS Y
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
SALES:
Shares.................................. 43,237 27,721 75,508 309,736 185,144 165,234
Amount.................................. $ 829,604 $ 553,233 $1,499,905 $5,917,515 $3,715,013 $3,226,840
REPURCHASES:
Shares.................................. 33,127 9,318 8,277 111,000 79,124 30,341
Amount.................................. $ 648,809 $ 172,908 $ 162,104 $2,092,874 $1,514,741 $ 567,529
</TABLE>
<TABLE>
<CAPTION>
S&P STARS INSIDERS SELECT
------------------------------- -------------------------------
CLASS A CLASS C CLASS Y CLASS A CLASS C CLASS Y
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
SALES:
Shares.................................. 2,517,105 935,884 429,911 331,726 148,520 29,508
Amount.................................. $42,363,300 $15,772,161 $8,205,295 $4,976,082 $2,231,793 $ 444,370
REINVESTMENTS:
Shares.................................. 242,732 134,250 53,147 97,925 70,623 11,179
Amount.................................. $3,986,019 $2,197,714 $ 876,922 $1,381,727 $ 991,548 $ 158,408
REPURCHASES:
Shares.................................. 1,596,708 617,043 223,037 345,460 273,058 26,728
Amount.................................. $25,841,545 $9,919,428 $3,645,262 $5,185,795 $3,992,295 $ 398,697
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP SMALL CAP
------------------------------- -------------------------------
CLASS A CLASS C CLASS Y CLASS A CLASS C CLASS Y
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
SALES:
Shares.................................. 231,427 61,362 1,085,350 589,041 464,417 771,522
Amount.................................. $3,703,414 $ 950,313 $16,535,987 $10,117,507 $8,013,394 $13,188,441
REINVESTMENTS:
Shares.................................. 5,640 3,077 3,863 10,191 6,403 13,693
Amount.................................. $ 91,138 $ 49,600 $ 62,352 $ 171,713 $ 107,447 $ 230,321
REPURCHASES:
Shares.................................. 185,652 123,270 959,370 255,449 261,409 394,936
Amount.................................. $3,216,798 $2,089,876 $15,604,449 $4,464,886 $4,565,675 $6,808,608
</TABLE>
35
<PAGE>
CREDIT AGREEMENT
The Fund, on behalf of the Portfolios, has entered into a credit agreement with
The First National Bank of Boston and Bear Stearns Investment Trust, which
consists of the Emerging Markets Debt Portfolio, is also a party to the credit
agreement. The agreement provides that each party to the credit agreement is
permitted to borrow in an amount equal to the lesser of $25 million or 25% of
the net assets of a Portfolio. At no time shall the aggregate outstanding
principal amount of all loans to any of the Portfolios exceed $25 million. Each
Portfolio as a fundamental policy is permitted to borrow in an amount up to
33 1/3% of the value of such Portfolio's assets. However, each Portfolio
currently intends to borrow money only for temporary or emergency (not
leveraging) purposes in an amount up to 15% (10% for the Emerging Markets Debt
Portfolio) of its net assets. The line of credit will bear interest at the
greater of: (i) the annual rate of interest announced from time to time from the
bank at its head office as its Base Rate, or (ii) the Federal Funds 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.
Amounts outstanding under the line of credit agreement for S&P STARS and
Insiders Select averaged $148,531 and $813, respectively, during the six months
ended September 30, 1997. Large Cap and Small Cap had no amounts outstanding
under the line of credit agreement during the six months ended September 30,
1997. The maximum amount outstanding at any month-end under such agreement
during the six months ended September 30, 1997 was $712,000 for S&P STARS. The
average interest rates during 1997, on amounts outstanding under such line of
credit agreement were 7.20% and 8.53% for S&P STARS and Insiders Select,
respectively. The Portfolios had no amounts outstanding under the agreement at
September 30, 1997.
36
