BEAR
STEARNS
The
Bear Stearns
Funds
245 PARK AVENUE
NEW YORK, NY 10167
1.800.766.4111
Michael Minikes Chairman of the Board
Robert S. Reitzes President
William J. Montgoris Executive Vice President
Peter M. Bren Trustee PRIME MONEY
Alan J. Dixon Trustee MARKET PORTFOLIO
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
Vincent L. Pereira Assistant Treasurer
Christina P. LaMastro Assistant Secretary
INVESTMENT ADVISER
Bear Stearns Asset
Management Inc.
575 Lexington Avenue
New York, NY 10022
ADMINISTRATOR
Bear Stearns Funds
Management Inc.
245 Park Avenue
New York, NY 10167
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
COUNSEL
Kramer Levin
Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
DISTRIBUTOR
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167
TRANSFER AND DIVIDEND
DISBURSEMENT AGENT
PFPC Inc.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19808
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
The financial information included herein is taken from the records of the
Portfolio without examination by independent auditors who do not express an
opinion thereon.
This report is submitted for the general information of the shareholders of the
Portfolio. It is not authorized for distribution to prospective investors in the
Portfolio unless it is preceded or accompanied by a current prospectus which
includes details regarding the Portfolio's objectives, policies, and other
information. Total investment return is based on historical results and is not
intended to indicate future performance.
Prime Money Market Portfolio is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Prime Money Market Portfolio
will be able to maintain a stable net asset value of $1.00 per share.
BSFR-017-03
Semi-Annual Report
September 30, 1998
<PAGE>
T H E B E A R S T E A R N S F U N D S
PRIME MONEY MARKET PORTFOLIO
LETTER TO SHAREHOLDERS
November 13, 1998
Dear Shareholder:
We are pleased to present you with the semi-annual report of the Prime Money
Market Portfolio (the "Portfolio") for the period ended September 30, 1998.
Since the annual report dated March 31, 1998, the interest-rate environment has
experienced periods of extreme volatility, and short-term interest rates
declined significantly. At the September 29, 1998, meeting of the Federal
Reserve Board's Open Market Committee ("FOMC"), the targeted Fed Funds rate was
lowered by 25 basis points from 5.50% to 5.25%. During this period, we
maintained our philosophy of investing in "Tier-One" (highest-quality)
securities to meet our investors' goals of safety of principal, liquidity and
competitive returns.
As of September 30, 1998, the Portfolio's current yield was 5.44% and the 7-day
effective yield was 5.53%. The Portfolio's total return for the twelve months
ending September 30, 1998, was 5.68%, which ranks in the top 10% of tier-one
taxable institutional money market funds as measured by IBC Financial Data, Inc.
In addition, based on information distributed by IBC Financial Data, Inc., the
monthly net yield for the Portfolio for each month from April, 1998 through
September, 1998, exceeded the average of funds in the same class by between 19
and 26 basis points.(1)
On October 1, 1998, the Bear Stearns Prime Money Market Portfolio received a
AAAm rating from Standard & Poor's, its highest, based on the Portfolio's credit
quality, market price exposure and management. The rating signifies a superior
capacity to maintain a $1 per share net asset value at all times, accomplished
through conservative investment practices and strict internal controls.
In addition to the cut in the Fed Funds target rate mentioned above, Federal
Reserve Board Chairman Alan Greenspan reduced the target rate by an additional
25 basis points to 5.00% on October 15, 1998, between the FOMC's regularly
scheduled meetings. At the same time, the discount rate was reduced to 4.75%
from 5.00%. Over the six-month period from March 1998 until September 1998, the
Fed moved from a bias towards tightening to rate cutting.
There were several reasons for this change. First, economic growth slowed
dramatically in the second quarter. Mr. Greenspan, in a strongly worded speech
in early September, declared it unrealistic that the United States could be an
oasis of growth when surrounded by global economic problems. Second, the near
failure of several hedge funds coupled with concerns about a potential financial
crisis in Brazil put additional stress on an already fragile financial system.
There is little doubt the second rate cut was intended to convince investors the
Fed stood ready to provide liquidity to the system. Third, the specter of
deflation continued to loom on the horizon. With inflation at a 30-year low, the
real level of interest rates (nominal rates minus the rate of inflation)
remained high, threatening world financial stability.
1
<PAGE>
Going forward, it appears the Fed is prepared to continue in an easing mode. In
this environment we will look to lengthen the average maturity of the Portfolio.
We will, however, remain cautious and avoid any additional risk.
Again, we appreciate your support and welcome your ideas and inquiries.
Sincerely,
/S/ ROBERT S. REITZES
- ---------------------
Robert S. Reitzes
President
The Bear Stearns Funds
- ------------------
1 The net yield represents past performance which is not a
guarantee of future results. Yields are net of management fees and
expenses. As of September 30, 1998, there were 174 funds in the taxable
First Tier--Institutional Only category, and throughout all periods, some
or all of the funds, including The Bear Stearns Funds, reported fee waivers
from time to time. Without such waivers, the reported yields would have
been lower.
2
<PAGE>
T H E B E A R S T E A R N S F U N D S
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000's) RATE DATE VALUE
- -------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 2.82%
ASSET-BACKED CREDIT CARD - 2.82%
<C> <S> <C> <C> <C>
$ 2,500 Dakota Certificates [P-1, A-1+] ........... 5.600% 10/01/1998 $ 2,500,000
2,618 Dakota Certificates [P-1, A-1+] ........... 5.550 10/09/1998 2,614,771
2,500 Dakota Certificates [P-1, A-1+] ........... 5.200 12/11/1998 2,474,361
-----------
Total Asset-Backed Securities (cost - $7,589,132) 7,589,132
-----------
CERTIFICATES OF DEPOSIT - 11.15%
BANK-EURO - 1.48%
2,000 Barclay's Bank PLC ........................ 5.620 10/28/1998 1,999,926
BANKS-YANKEE-CANADA - 3.34%
2,000 Bank of Nova Scotia [P-1, A-1+] ........... 5.675 03/04/1999 1,999,185
1,000 Bank of Nova Scotia [P-1, A-1+] ........... 5.705 03/31/1999 1,001,127
1,000 Royal Bank of Canada [P-1, A-1+] .......... 5.685 06/30/1999 999,653
2,500 Toronto Dominion Bank LTD. [P-1, A-1+]* ... 5.540 10/01/1998 2,498,703
2,500 Toronto Dominion Bank LTD. [P-1, A-1+] .... 5.640 07/14/1999 2,498,824
-----------
8,997,492
-----------
BANKS-YANKEE-GERMANY - 1.12%
1,000 Deutsche Bank A.G. [P-1, A-1+] ............ 5.940 10/26/1998 1,000,025
2,000 Deutsche Bank A.G. [P-1, A-1+] ............ 5.620 02/26/1999 1,999,611
-----------
2,999,636
-----------
BANKS-YANKEE-FRANCE - 1.12%
2,000 Credit Agricole Indosuez [P-1, A-1+] ...... 5.700 01/07/1999 2,000,207
3,000 Societe Generale [P-1, A-1+] .............. 5.700 03/23/1999 2,998,898
-----------
4,999,105
-----------
BANKS-YANKEE-NETHERLANDS - 1.49%
2,000 Rabobank Nederland [P-1, A-1+] ............ 5.710 04/16/1999 1,998,750
2,000 Rabobank Nederland [P-1, A-1+] ............ 5.770 05/05/1999 2,004,124
-----------
4,002,874
-----------
BANKS-YANKEE-SWITZERLAND - 0.74%
2,000 Credit Suisse First Boston Inc. [P-1, A-1+] 5.740 01/07/1999 1,999,539
-----------
BANKS-YANKEE-U.K. - 1.86%
1,000 Barclay's Bank PLC [P-1, A-1+] ............ 5.530 02/23/1999 1,000,083
2,000 National Westminster Bank NY .............. 5.740 04/28/1999 1,998,904
2,000 National Westminster Bank PLC [P-1, A-1+] . 5.738 05/07/1999 2,000,170
-----------
4,999,157
-----------
Total Certificates of Deposit (cost - $29,997,729) 29,997,729
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
T H E B E A R S T E A R N S F U N D S
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000's) RATE DATE VALUE
- -------------------------------------------------------------------------------------------
COMMERCIAL PAPER - 52.49%
BANKS-DOMESTIC - 1.84%
<C> <S> <C> <C> <C>
$2,000 J.P. Morgan & Co., Inc. [P-1, A-1+]........ 5.220% 11/20/1998 $ 1,985,500
3,000 PNC Bank N.A. [P-1, A-1]................... 5.260 11/13/1998 2,981,152
-----------
4,966,652
-----------
BANK-FOREIGN - 1.86%
5,000 Credit Suisse First Boston Inc. [P-1, A-1+] 5.800 10/01/1998 5,000,000
-----------
COMMERCIAL FINANCE - 11.81%
2,500 Associates Corp. [P-1, A-1+]............... 5.500 10/21/1998 2,492,361
2,500 Ford Motor Credit Corp. [P-1, A-1]......... 5.530 10/01/1998 2,500,000
4,100 Ford Motor Credit Corp. [P-1, A-1]......... 5.460 11/19/1998 4,069,530
2,500 Ford Motor Credit Corp. [P-1, A-1]......... 5.090 01/05/1999 2,466,067
5,000 General Electric Capital Corp. [P-1, A-1+]. 5.510 10/06/1998 4,996,174
3,000 General Electric Capital Corp. [P-1, A-1+]. 5.250 10/19/1998 2,992,125
2,300 General Electric Capital Corp. [P-1, A-1+]. 5.450 11/03/1998 2,288,510
1,500 General Electric Capital Corp. [P-1, A-1+]. 5.470 11/13/1998 1,490,199
6,000 General Motors Acceptance Corp. [P-1, A-1]. 5.540 10/07/1998 5,994,460
2,500 General Motors Acceptance Corp. [P-1, A-1]. 5.250 11/19/1998 2,482,135
-----------
31,771,561
-----------
CORPORATE LOAN CONDUIT - 7.27%
4,500 Centric Capital Corp. [P-1, A-1+].......... 5.500 11/04/1998 4,476,625
2,000 Centric Capital Corp. [P-1, A-1+].......... 5.500 11/13/1998 1,986,861
2,000 Centric Capital Corp. [P-1, A-1+].......... 5.250 11/23/1998 1,984,542
2,500 Greenwich Funding Corp. [P-1, A-1+]........ 5.550 10/02/1998 2,499,615
2,000 Greenwich Funding Corp. [P-1, A-1+]........ 5.540 10/13/1998 1,996,307
2,500 Greenwich Funding Corp. [P-1, A-1+]........ 5.490 11/09/1998 2,485,131
2,500 Wood Street Funding Corp. [P-1, A-1]....... 5.550 10/16/1998 2,494,219
1,650 Wood Street Funding Corp. [P-1, A-1]....... 5.540 11/04/1998 1,641,367
-----------
19,564,667
-----------
DIVERSIFIED OPERATIONS - 6.67%
7,000 Amoco Co. [P-1, A-1+]...................... 5.100 11/23/1998 6,947,442
6,000 Koch Industries Inc. [P-1, A-1+]........... 5.750 10/01/1998 6,000,000
5,000 Koch Industries Inc. [P-1, A-1+]........... 5.550 10/02/1998 4,999,229
-----------
17,946,671
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
T H E B E A R S T E A R N S F U N D S
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000's) RATE DATE VALUE
- -------------------------------------------------------------------------------------------
COMMERCIAL PAPER - 52.49% (continued)
DIVERSIFIED RECEIVABLES CONDUIT - 14.16%
<C> <S> <C> <C> <C>
$ 2,500 Alpine Securitization Corp. [P-1, A-1+].... 5.600% 10/06/1998 $ 2,498,055
2,105 Alpine Securitization Corp. [P-1, A-1+].... 5.300 11/03/1998 2,094,773
2,500 Barton Capitol Corp. [P-1, A-1+]........... 5.560 10/16/1998 2,494,208
2,472 Barton Capitol Corp. [P-1, A-1+]........... 5.540 10/19/1998 2,465,152
3,049 Delaware Funding Corp. [P-1, A-1+]......... 5.500 10/05/1998 3,047,137
2,000 Delaware Funding Corp. [P-1, A-1+]......... 5.570 10/06/1998 1,998,453
2,500 Delaware Funding Corp. [P-1, A-1+]......... 5.480 11/06/1998 2,486,300
2,150 Sheffield Receivables Corp. [P-1, A-1+].... 5.600 10/01/1998 2,150,000
3,000 Sheffield Receivables Corp. [P-1, A-1+].... 5.540 10/20/1998 2,991,228
2,500 Sheffield Receivables Corp. [P-1, A-1+].... 5.530 11/16/1998 2,482,335
3,000 Triple A-1 Funding Corp. [P-1, A-1]........ 5.610 10/01/1998 3,000,000
2,000 Triple A-1 Funding Corp. [P-1, A-1]........ 5.560 10/02/1998 1,999,691
2,000 Windmill Funding Corp. [P-1, A-1+]......... 5.670 10/06/1998 1,998,425
3,000 Windmill Funding Corp. [P-1, A-1+]......... 5.510 10/26/1998 2,988,521
2,000 Windmill Funding Corp. [P-1, A-1+]......... 5.250 11/20/1998 1,985,417
1,420 Windmill Funding Corp. [P-1, A-1+]......... 5.550 11/20/1998 1,409,054
-----------
38,088,749
-----------
ENTERTAINMENT & LEISURE - 1.86%
5,000 Walt Disney Company [P-1, A-1]............. 5.550 10/13/1998 4,990,750
-----------
FOOD-MISCELLANEOUS/DIVERSIFIED - 0.93%
2,500 Hershey Foods Corp. [P-1, A-1]............. 5.470 10/30/1998 2,488,984
-----------
INVESTMENT STRUCTURE - 2.40%
2,000 Sigma Finance Inc. [P-1, A-1+]............. 5.500 11/06/1998 1,989,000
2,500 Sigma Finance Inc. [P-1, A-1+]............. 5.240 11/25/1998 2,479,986
2,000 Sigma Finance Inc. [P-1, A-1+]............. 5.510 12/03/1998 1,980,715
-----------
6,449,701
-----------
SECURITIES DEALERS - 3.69%
5,000 Goldman Sachs Group [P-1, A-1+]............ 5.510 10/14/1998 4,990,051
2,000 Merrill Lynch & Co. [P-1, A-1+]............ 5.500 01/14/1999 1,967,917
3,000 Morgan Stanley Dean Witter Discover
& Co. [P-1, A-1]......................... 5.300 11/13/1998 2,981,008
-----------
9,938,976
-----------
Total Commercial Paper (cost - $141,206,711) 141,206,711
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
T H E B E A R S T E A R N S F U N D S
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000's) RATE DATE VALUE
- -------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 8.92%
BANK-FOREIGN - 1.30%
<C> <S> <C> <C> <C>
3,500 Abbey National Treasury Services PLC
[P-1, A-1+]*............................. 5.535% 10/01/1998 $ 3,497,584
-----------
BANKS-DOMESTIC - 6.13%
$2,000 Bank of America N.A. [P-1, A-1+].......... 5.630 02/26/1999 1,998,895
1,500 Bankers Trust Corp. [P-1, D-1, F-1]*....... 5.590 10/01/1998 1,500,000
2,000 J.P. Morgan & Co., Inc. [P-1, A-1+]*....... 5.515 10/07/1998 1,999,256
2,000 Key Bank N.A. [P-1, A-1]*.................. 5.470 10/01/1998 1,998,997
4,000 Northern Trust Co. [P-1, A-1+]*............ 5.515 10/08/1998 3,997,751
2,500 NationsBank Corp. [P-1, A-1+].............. 5.840 12/28/1998 2,501,825
2,500 PNC Bank N.A. [P-1, A-1]*.................. 5.457 10/16/1998 2,498,389
-----------
16,495,113
-----------
INVESTMENT STRUCTURE - 0.37%
1,000 Sigma Finance Inc. [P-1, A-1+]............. 5.710 03/02/1999 1,000,000
-----------
Securities Dealer - 1.12%
3,000 Morgan Stanley Dean Witter Discover & Co.
[P-1, A-1]*.............................. 5.750 10/01/1998 3,000,000
-----------
Total Corporate Obligations (cost - $23,992,697) 23,992,697
-----------
REPURCHASE AGREEMENTS** - 24.56%
40,000 Barclay's Capital Inc. .................... 5.650 10/01/1998 40,000,000
26,056 Warburg Dillon Read LLC.................... 5.650 10/01/1998 26,056,000
-----------
Total Repurchase Agreements (amortized cost - $66,056,000) 66,056,000
-----------
Total Investments--99.94% (amortized cost - $268,842,269)*** 268,842,269
Other assets in excess of liabilities--0.06% 169,344
Net Assets--100.00%........................ $269,011,613
============
<FN>
* Variable Rate Obligations - The rate shown is the rate as of September 30,
1998 and the maturity date shown is the date the interest rate resets.
** See notes to the financial statements for description of underlying
collateral.
*** The cost of investments for federal income tax purposes is substantially
the same as for financial reporting purposes.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
T H E B E A R S T E A R N S F U N D S
PRIME MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at amortized cost which approximates market value
(identified and tax cost - $268,842,269) ................ $ 268,842,269
Cash ....................................................... 336
Interest receivable ........................................ 1,166,607
Deferred organization expenses and other assets ............ 48,354
-------------
Total assets ............................................ 270,057,566
-------------
LIABILITIES
Dividends payable .......................................... 874,067
Administration fee payable ................................. 8,100
Custodian fee payable ...................................... 5,116
Organization expenses payable .............................. 25,875
Accrued expenses ........................................... 132,795
-------------
Total liabilities ....................................... 1,045,953
-------------
NET ASSETS
Capital stock, $0.001 par value
(unlimited shares of beneficial interest authorized) .... 269,012
Paid-in capital ............................................ 268,742,644
Accumulated net realized loss from investments ............. (43)
-------------
Net assets .............................................. $ 269,011,613
=============
CLASS Y
Net assets ................................................. $ 269,011,613
-------------
Shares of beneficial interest outstanding .................. 269,011,656
-------------
Net asset value, offering and redemption price per share ... $ 1.00
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
T H E B E A R S T E A R N S F U N D S
PRIME MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest .................................................... $ 3,629,890
-----------
EXPENSES
Advisory fees ............................................... 128,072
Accounting fees ............................................. 49,252
Administration fees ......................................... 32,018
Legal and auditing fees ..................................... 29,343
Federal and state registration fees ......................... 21,517
Custodian fees and expenses ................................. 15,895
Reports and notices to shareholders ......................... 12,563
Transfer agent fees and expenses ............................ 10,640
Amortization of organization expenses ....................... 5,664
Insurance expenses .......................................... 3,806
Trustees' fees and expenses ................................. 2,815
Other ....................................................... 2,109
-----------
Total expenses before waivers and related reimbursements . 313,694
-----------
Less: waivers and related reimbursements ................. (194,300)
Total expenses after waivers and related reimbursements .. 119,394
-----------
Net investment income ....................................... 3,510,496
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $ 3,510,496
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
T H E B E A R S T E A R N S F U N D S
PRIME MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE PERIOD
ENDED JULY 14, 1997*
SEPTEMBER 30, 1998 THROUGH
(unaudited) MARCH 31, 1998
------------------ --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income .............................. $ 3,510,496 $ 3,363,564
Net realized loss on investments ................... -- (43)
------------- -------------
Net increase in net assets resulting from operations 3,510,496 3,363,521
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income .............................. (3,510,496) (3,363,564)
------------- -------------
SHARES OF BENEFICIAL INTEREST**
Net proceeds from the sale of shares ............... 264,777,750 203,898,180
Cost of shares repurchased ......................... (119,720,076) (85,207,807)
Shares issued in reinvestment of dividends ......... 2,493,474 2,770,134
------------- -------------
Net increase in net assets derived from shares of
beneficial interest transactions .............. 147,551,148 121,460,507
------------- -------------
Total increase in net assets ....................... 147,551,148 121,460,464
NET ASSETS
Beginning of period ................................ 121,460,465 1
------------- -------------
End of period ...................................... $ 269,011,613 $ 121,460,465
<FN>
============= =============
- ----------
* Commencement of investment operations.
** Share transactions at net asset value of $1.00 per share.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
T H E B E A R S T E A R N S F U N D S
PRIME MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each share
outstanding, total investment return, ratios to average net assets and other
supplemental data for the period. This information has been derived from
information provided in the financial statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE PERIOD
ENDED JULY 14, 1997*
SEPTEMBER 30, THROUGH
1998
(unaudited) MARCH 31, 1998
----------- --------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ....................... $ 1.00 $ 1.00
Net investment income (1) .................................. 0.0275 0.0399
Net increase in net assets resulting from operations ....... 0.0275 0.0399
Dividends and distributions to shareholders from
Net investment income ................................. (0.0275) (0.0399)
Net asset value, end of period ............................. $ 1.00 $ 1.00
Total investment return (2) (3) ............................ 5.63% 5.72%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) .................. $269,012 $ 121,460
Ratio of expenses to average net assets (1) (3) (4) ........ 0.19% 0.13%
Ratio of net investment income to average net assets (1) (3) 5.48% 5.58%
Decrease reflected in above expense ratio and net investment
income due to waivers and reimbursements (3) ............ 0.30% 0.52%
<FN>
- -----------------
* Commencement of investment operations.
(1) Reflects waivers and reimbursements.
(2) Total investment return is calculated assuming a purchase of shares on the
first day and a sale of shares on the last day of each period reported
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, and
includes reinvestments of dividends and distributions.
(3) Annualized.
(4) Without the waiver of advisory fee and related reimbursement of certain
operating expenses, the ratio of expenses to average net assets for Prime
Money Market Portfolio would have been 0.49% annualized for six months
ended September 30, 1998 and 0.65% annualized for the period July 14, 1997
through March 31, 1998.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
T H E B E A R S T E A R N S F U N D S
PRIME MONEY MARKET 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 consists of ten separate portfolios: seven diversified
portfolios, Large Cap Value Portfolio, Small Cap Value Portfolio, Total Return
Bond Portfolio, International Equity Portfolio, Balanced Portfolio, High Yield
Total Return Portfolio and Prime Money Market Portfolio (the "Portfolio"), and
three non-diversified portfolios, The Insiders Select Fund, S&P STARS Portfolio,
and Focus List Portfolio. Each portfolio is treated as a separate entity for
certain matters under the Investment Company Act, and for other purposes, and a
shareholder of one portfolio is not deemed to be a shareholder of any other
portfolio. As of the date hereof, each portfolio (except the Prime Money Market
Portfolio which only offers shares designated as class Y and Focus List and
International Equity which have yet to commence initial public offerings of
their class Y shares) offers four classes of shares, which have been designated
as class A, B, C, and Y shares.
ORGANIZATIONAL MATTERS - Prior to commencing investment operations on July 14,
1997, the Portfolio did not have any transactions other than those relating to
organizational matters and the sale of one class Y share to Bear, Stearns & Co.,
Inc. ("Bear Stearns" or the "Distributor"). Costs of $56,500 which were incurred
by the Portfolio in connection with the organization, registration with the
Commission and initial public offering of its shares, have been deferred and are
being amortized using the straight-line method over the period of benefit not
exceeding sixty months, beginning with the commencement of investment operations
of the Portfolio. In the event that the Portfolio is liquidated prior to the end
of the sixty month period, the Distributor or the transferee of the Distributor
shall bear the unamortized deferred organization expenses.
PORTFOLIO VALUATION - Portfolio securities are valued under the amortized cost
method, which approximates current market value. Securities are valued at cost
when purchased and thereafter a constant proportionate amortization of any
discount or premium is recorded until maturity of the security. Regular review
and monitoring of the valuations are performed in an attempt to avoid dilution
or other unfair results to shareholders. The Portfolio seeks to maintain a net
asset value of $1.00 per share, although there is no assurance that it will be
able to do so on a continuing basis.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME - Investment transactions are
recorded on the trade date (the date on which the order to buy or sell is
executed). Realized gains and losses are calculated on the identified cost basis
for both financial reporting and income tax purposes. Interest income and
expenses are recorded on the accrual basis.
U.S. FEDERAL TAX STATUS - The Portfolio intends to distribute substantially all
of its taxable income and to comply with the other requirements of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing during each calendar year substantially all of its
ordinary income and capital gains, if any, the Portfolio intends not to be
subject to a U.S. federal excise tax.
DIVIDENDS AND DISTRIBUTIONS - Dividends from net investment income are declared
daily and paid monthly. Any net realized capital gains are distributed at least
annually. Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principals.
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<PAGE>
REPURCHASE AGREEMENTS - The Portfolio may purchase securities from financial
institutions subject to the seller's agreement to repurchase and the Portfolio's
agreement to resell the securities at par. The investment adviser only enters
into repurchase agreements with financial institutions that are primary dealers
and deemed to be creditworthy by the investment adviser in accordance with
procedures adopted by the Board of Trustees. Securities purchased subject to
repurchase agreements are maintained with a custodian of the Portfolio and must
have, at all times, an aggregate market value greater than or equal to the
repurchase price plus accrued interest. If the value of the underlying
securities falls below 102% of the value of the repurchase price plus accrued
interest, the Portfolio will require the seller to deposit additional collateral
by the next Portfolio business day. In the event that the seller under the
agreement defaults on its repurchase obligation or fails to deposit sufficient
collateral, the Portfolio has the contractual right, subject to the requirements
of applicable bankruptcy and insolvency laws, to sell the underlying securities
and may claim any resulting loss from the seller.
MANAGEMENT ESTIMATES - The preparation of financial statements in accordance
with generally accepted accounting principals requires management to make
certain estimates and assumptions that may affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those
estimates.
TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
For the six months ended September 30, 1998, Bear Stearns Asset Management Inc.
("BSAM" or the "Adviser"), a wholly-owned subsidiary of The Bear Stearns
Companies Inc., served as the Adviser pursuant to an advisory agreement with the
portfolio. Under the terms of the Investment Advisory Agreement the Adviser is
entitled to receive from the Portfolio a monthly fee equal to an annual rate of
0.20% of the Portfolio's average daily net assets.
For the six months ended September 30, 1998, BSFM (the "Administrator") served
as administrator to the Portfolio pursuant to an Administration Agreement. The
Administrator is entitled to receive from the Portfolio a monthly fee equal to
0.05% of the Portfolio's average daily net assets. Under the terms of an
Administration Services Agreement with the Portfolio, PFPC Inc. provides certain
administrative services to the Portfolio. For providing these services, PFPC
Inc. is entitled to receive from the Portfolio a monthly fee equal to an annual
rate of 0.075% of the Portfolio's average daily net assets up to $150 million,
0.04% of the next $150 million, 0.02% of the next $300 million and 0.0125% of
net assets above $600 million, subject to a minimum monthly fee of $6,250 for
the Portfolio. For the six months ended September 30, 1998, PFPC Inc. has
voluntarily waived a portion of its fee.
For the six months ended September 30, 1998, the Adviser has voluntarily
undertaken to limit the Portfolio's operating expenses (exclusive of brokerage
commissions, taxes, interest, and extraordinary items) to a maximum annual level
of no more than 0.20% of its average daily net assets. The effective net
operating expense ratio for the period was 0.19% of the Portfolio's average
daily net assets (annualized). 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, 1998, the
Adviser waived advisory fees of $128,072. In addition, the Adviser reimbursed
$66,228, in order to maintain the voluntary expense limitation.
Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies
Inc., and an affiliate of the Adviser and the Administrator, serves as custodian
to the Portfolio.
12
<PAGE>
SHARES OF BENEFICIAL INTEREST
The Portfolio currently offers class Y shares. There is no sales charge or CDSC
on class Y shares, which are offered primarily to institutional investors.
At September 30, 1998 there was an unlimited amount of $0.001 par value shares
of beneficial interest authorized for the Portfolio, of which Bear Stearns and
its affiliates (including its officers and directors) owned 207,151,124 of class
Y shares.
COLLATERAL FOR REPURCHASE AGREEMENTS
Listed below is the collateral associated with the repurchase agreement with
Barclay's Capital Inc. outstanding at September 30, 1998.
<TABLE>
<CAPTION>
INTEREST/
PRINCIPAL EFFECTIVE YIELD ACCRUED TOTAL
ISSUER AMOUNT (000) MATURITIES RATES MARKET VALUE INTEREST VALUE
- ------ ------------ ---------- --------------- ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
FNMA* $32,484 09/01/13 - 09/01/28 6.00% - 8.00% $31,990,212 $174,715 $32,164,927
FHLMC** 9,155 04/01/13 - 08/01/33 5.50% - 8.00% 8,589,721 45,353 8,635,074
-----------
$40,800,001
===========
</TABLE>
Listed below is the collateral associated with the repurchase agreement with
Warburg Dillon Read LLC outstanding at September 30, 1998.
<TABLE>
<CAPTION>
INTEREST/
PRINCIPAL EFFECTIVE YIELD ACCRUED TOTAL
ISSUER AMOUNT (000) MATURITIES RATES MARKET VALUE INTEREST VALUE
- ------ ------------ ---------- --------------- ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
U.S. $387 11/15/01 7.50% $420,088 $ 10,884 $430,972
Treasury Note
FNMA* 26,356 04/01/28 - 06/01/28 6.00% 26,056,621 126,772 26,183,393
-----------
$26,614,365
===========
<FN>
- -------------
* Federal National Mortgage Association
** Federal Home Loan Mortgage Corp.
</FN>
</TABLE>
CREDIT AGREEMENT
The Fund (on behalf of Prime Money Market Portfolio) has entered into a credit
agreement with The First National Bank of Boston. Small Cap Value Portfolio,
Large Cap Value Portfolio, The Insiders Select Fund, S&P STARS Portfolio, Total
Return Bond Portfolio, Focus List Portfolio, Balanced Portfolio, International
Equity Portfolio, High Yield Total Return Portfolio and Bear Stearns Investment
Trust, which consists of the Emerging Markets Debt Portfolio, are also parties
to the credit agreement. The agreement provides that each party to the credit
agreement is permitted to borrow in an amount equal to the lesser of $25 million
or 25% of the net assets of each Portfolio. At no time shall the aggregate
outstanding principal amount of all loans to any of the Portfolios exceed $25
million. Each Portfolio as a fundamental policy is permitted to borrow in an
amount up to 331/3% of the value of such Portfolio's assets. However, each
Portfolio currently intends to borrow money only for temporary or emergency (not
leveraging) purposes in an amount up to 15% (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. The Portfolio
had no amounts outstanding under the line of credit agreement during the period
ended September 30, 1998.
13
