BEAR STEARNS FUNDS, 497, 1998-01-05

BEAR STEARNS FUNDS
497, 1998-01-05

Previous: PRUDENTIAL DIVERSIFIED BOND FUND INC, 497, 1998-01-05

Next: AMERICAN BINGO & GAMING CORP, POS462B, 1998-01-05

Rule 497(c)
Registration No. 33-84842

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

PROSPECTUS

Balanced Portfolio

CLASS A, B AND C SHARES

The Bear Stearns Funds (the "Fund") is an open-end management investment
company, known as a mutual fund. The Fund permits you to invest in separate
portfolios. By this Prospectus, the Fund offers Class A, B and C shares of the
Balanced Portfolio, a diversified portfolio (the "Portfolio"). The Portfolio's
investment objective is long-term capital growth and current income. The
Portfolio seeks to achieve this objective by investing between 40% and 60% of
its total assets in equity securities and at least 25% in fixed-income senior
securities.

Class A shares are subject to a sales charge imposed at the time of purchase.
Class B shares are subject to a contingent deferred sales charge of up to 5%
imposed on redemptions made within the first six years of purchase. Class C
shares are subject to a 1% contingent deferred sales charge imposed on
redemptions made within the first year of purchase. The Portfolio also issues
another class of shares (Class Y shares), which has different expenses that
would affect performance. Investors desiring to obtain information about this
other class of shares should call 1-800-766-4111 or ask their sales
representative or the Portfolio's distributor.

BEAR STEARNS FUNDS MANAGEMENT INC. ("BSFM"), a wholly-owned subsidiary of The
Bear Stearns Companies Inc., is the Administrator of the Portfolio.

BEAR, STEARNS & CO. INC. ("Bear Stearns"), an affiliate of BSAM, serves as the
Portfolio's distributor. Bear Stearns is also referred to herein as the
"Distributor."

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

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

Part B (also known as the Statement of Additional Information), dated December
24, 1997, which may be revised from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which may be
of interest to some investors. It has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. For a free copy,
write to the address or call one of the telephone numbers listed under
"General Information" in this Prospectus. Additional information, including
this Prospectus and the Statement of Additional Information, may be obtained
by accessing the Internet Web site maintained by the Securities and Exchange
Commission (http://www.sec.gov).

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

Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank; are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency; and are
subject to investment risks, including possible loss of the principal amount
invested.

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

DECEMBER 24, 1997
<PAGE>

Table of Contents

<TABLE>
<CAPTION>
PAGE
<S> <C>
Fee Table.................................................................. 3
Alternative Purchase Methods............................................... 4
Description of the Portfolio............................................... 4
Risk Factors............................................................... 9
Management of the Portfolio................................................ 9
Prior Performance of Related Accounts...................................... 11
How to Buy Shares.......................................................... 12
Shareholder Services....................................................... 18
How to Redeem Shares....................................................... 19
Dividends, Distributions and Taxes......................................... 22
Performance Information.................................................... 24
General Information........................................................ 25
</TABLE>

2
<PAGE>

Fee Table

A summary of estimated expenses investors will incur when investing in the
Portfolio is set forth below.

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)......................... 5.50% -- --
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)..... * 5.00% 1.00%
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE DAILY NET ASSETS)
Advisory Fees (after fee waiver)**.................... 0.00% 0.00% 0.00%
12b-1 Fees............................................ 0.25% 0.75% 0.75%
Other Expenses (after expense reimbursement)**........ 0.95% 0.95% 0.95%
---- ---- ----
Total Portfolio Operating Expenses (after fee waiver
and expense reimbursement)**.......................... 1.20% 1.70% 1.70%
==== ==== ====
EXAMPLE:
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:
1 YEAR.............................................. $ 67 $ 68 $ 27
3 YEARS............................................. $ 91 $ 86 $ 54
5 YEARS............................................. $117 $115 $ 92
10 YEARS***.......................................... $192 $187 $201
EXAMPLE:
You would pay the following expenses on the same
investment, assuming no redemption:
1 YEAR.............................................. -- $ 17 $ 17
3 YEARS............................................. -- $ 54 $ 54
5 YEARS............................................. -- $ 92 $ 92
10 YEARS***.......................................... -- $187 $201
</TABLE>

**Other Expenses include a shareholder servicing fee of 0.25%. BSAM has
undertaken to waive its investment advisory fee and assume certain expenses of
the Portfolio other than brokerage commissions, extraordinary items, interest
and taxes. Without such fee waiver and expense reimbursement, (i) Advisory
Fees stated above would have been 0.65% for the Portfolio, (ii) Other Expenses
are estimated to be 1.44% for Class A, Class B shares and Class C shares and
(iii) Total Portfolio Operating Expenses are estimated to be 2.34% for Class A
shares, 2.84% for Class B shares and 2.84% for Class C shares.

***Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used in the hypothetical example after year
eight in the case of Class B shares.

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

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

3
<PAGE>

Alternative Purchase Methods

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

CLASS A SHARES

Class A shares of the Portfolio are sold at net asset value per share plus a
maximum initial sales charge of 5.50% of the public offering price imposed at
the time of purchase. The initial sales charge may be reduced or waived for
certain purchases. See "How to Buy Shares--Class A Shares." The Class A shares
of the Portfolio are subject to an annual distribution fee at the rate of 0.25
of 1% of the average daily net assets of Class A. Class A shares are subject
to an annual shareholder servicing fee at the rate of 0.25 of 1% of the value
of the average daily net assets of Class A shares incurred in connection with
the personal service and maintenance of accounts holding Portfolio shares. See
"Management of the Portfolio--Distribution Plan" and "Shareholder Servicing
Plan."

CLASS B SHARES

Class B shares of the Portfolio are sold without an initial sales charge, but
are subject to a Contingent Deferred Sales Charge ("CDSC") of up to 5% if the
Class B shares are redeemed within six years of purchase. See "How to Redeem
Shares--Class B Shares." The Class B shares of the Portfolio also are subject
to an annual distribution fee at the rate of 0.75 of 1% of the value of the
average daily net assets of Class B. Class B shares are subject to an annual
shareholder servicing fee at the rate of 0.25 of 1% of the value of the
average daily net assets of Class B shares incurred in connection with the
personal service and maintenance of accounts holding Portfolio shares. See
"Management of the Portfolio--Distribution Plan" and "Shareholder Servicing
Plan". Class B shares will convert to Class A shares, based on their relative
net asset values, eight years after the initial purchase. The distribution and
shareholder servicing fees will cause Class B shares to have a higher expense
ratio and to pay lower dividends than Class A shares.

CLASS C SHARES

Class C shares of the Portfolio are subject to a 1% CDSC which is assessed
only if Class C shares are redeemed within one year of purchase. See "How to
Redeem Shares--Class C Shares." These shares of the Portfolio also are subject
to an annual distribution fee at the rate of 0.75 of 1% of the average daily
net assets of Class C. Class C shares are subject to an annual shareholder
servicing fee at the rate of 0.25 of 1% of the value of the average daily net
assets of Class C shares incurred in connection with the personal service and
maintenance of accounts holding Portfolio shares. See "Management of the
Portfolio--Distribution Plan" and "Shareholder Servicing Plan." The
distribution and shareholder servicing fees will cause Class C shares to have
a higher expense ratio and to pay lower dividends than Class A shares.

The decision as to which class of shares is more beneficial to each investor
depends on the amount and the intended length of time of the investor's
investment. Each investor should consider whether, during the anticipated life
of the investor's investment in the Portfolio, the accumulated distribution
and shareholder servicing fees and CDSC, if any, on Class B or C shares would
be less than the initial sales charge on Class A shares purchased at the same
time, and to what extent, if any, such differential would be offset by the net
return of Class A. See "How to Buy Shares--Choosing a Class of Shares."

Description of the Portfolio

GENERAL

The Fund is a "series fund," which is a mutual fund divided into separate
portfolios. Each portfolio is treated as a separate entity for certain matters
under the Investment Company Act of 1940, as amended (the "1940 Act"), and for
other purposes. A shareholder of one portfolio is not deemed to be a
shareholder of any other portfolio. As described below, for certain matters
Fund shareholders vote together as a group; as to others they vote separately
by portfolio. By this Prospectus, shares of the Portfolio are being offered.
From time to time, other portfolios may be established and sold pursuant to
other offering documents. See "General Information."

4
<PAGE>

INVESTMENT OBJECTIVE

The Portfolio's investment objective is long-term capital growth and current
income. The Portfolio seeks capital appreciation primarily through the equity
component of its portfolio while investing in fixed-income securities
primarily to provide income for regular quarterly dividends. The Portfolio's
investment objective cannot be changed without approval by the holders of a
majority of the Portfolio's outstanding voting shares (as defined in the 1940
Act). There can be no assurance that the Portfolio's investment objective will
be achieved.

MANAGEMENT POLICIES

The Portfolio invests, under normal circumstances, between 40% and 60% of its
total assets in equity securities. The Portfolio also invests at least 25% of
its total assets in fixed-income senior securities and the remainder of its
assets in other fixed-income securities and cash. The percentage of the
Portfolio invested in equity and fixed-income securities will vary from time
to time as BSAM evaluates their relative attractiveness based on market
valuations, economic growth and inflation prospects. This allocation is
subject to the Portfolio's intention to pay regular quarterly dividends. The
amount of quarterly dividends can also be expected to fluctuate in accordance
with factors such as prevailing interest rates and the percentage of the
Portfolio's assets invested in fixed-income securities.

A portion of the Portfolio's portfolio of equity securities may be selected
primarily to provide current income. Equity securities selected to provide
current income may include interests in real estate investment trusts,
convertible securities, preferred stocks, utility stocks and interests in
limited partnerships.

The Portfolio's fixed income securities primarily include securities issued by
the U.S. Government, its agencies, instrumentalities or sponsored enterprises,
corporations or other entities, mortgage-backed and asset-backed securities,
municipal securities, custodial receipts and U.S. dollar denominated
securities issued by foreign governments. Such securities are collectively
referred to herein as "fixed-income securities."

INVESTMENT INSTRUMENTS AND STRATEGIES

EQUITY SECURITIES
The Portfolio may invest in equity securities. These securities may include
foreign and domestic common stocks or preferred stocks, rights and warrants
and debt securities which are convertible or exchangeable for common stock or
preferred stock. Under normal conditions, the Portfolio will not invest less
than 40% or more than 60% of its total assets in equity securities.

CONVERTIBLE SECURITIES
The Portfolio may invest in convertible securities, which are bonds,
debentures, notes, preferred stocks or other securities that may be converted
into or exchanged for a prescribed amount of common stock of the same or a
different issuer within a particular period of time at a specified price or
formula. A convertible security entitles the holder to receive interest
generally paid or accrued on debt or the dividend paid on preferred stock
until the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have several unique investment characteristics such as
(1) higher yields than common stocks, but lower yields than comparable
nonconvertible securities, (2) a lesser degree of fluctuation in value than
the underlying stock since they have fixed income characteristics, and (3) the
potential for capital appreciation if the market price of the underlying
common stock increases. In evaluating a convertible security, BSAM will give
primary emphasis to the attractiveness of the underlying common stock. The
convertible debt securities in which the Portfolio invests will be rated, at
the time of investment, BBB or better by Standard & Poor's Ratings Group
("Standard & Poor's") or Baa or better by Moody's Investors Service, Inc.
("Moody's"), or if unrated by such rating organizations, determined to be of
comparable quality by BSAM. Convertible debt securities are equity investments
for purposes of the Portfolio's investment policies. Under normal conditions,
the Portfolio will not invest more than 20% of its total assets in convertible
securities.

5
<PAGE>

represent a proportionate interest in underlying U.S. Treasury securities. A
zero coupon security pays no interest to its holder during its life and its
value consists of the difference between its face value at maturity and its
cost. The market prices of zero coupon securities generally are more volatile
than the market prices of securities that pay interest periodically. Under
normal conditions, the Portfolio will not invest more than 60% of its total
assets in U.S. Government securities.

MORTGAGE-RELATED SECURITIES
The Portfolio may invest in mortgage-related securities, consistent with its
investment objective, that provide funds for mortgage loans made to commercial
and residential owners. These include securities which represent interests in
pools of mortgage loans made by lenders such as savings and loan institutions,
mortgage bankers, commercial banks and others. Pools of mortgage loans are
assembled for sale to investors (such as the Portfolio) by various
governmental, government-related and private organizations. Interests in pools
of mortgage-related securities differ from other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the borrowers on their mortgage loans, net of any
fees paid to the issuer or guarantor of such securities. Prepayments are
caused by repayments of principal resulting from the sale of the underlying
residential or commercial property, refinancing or foreclosure, net of fees or
costs which may be incurred.

Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers
may in addition be the originators of the underlying mortgage loans as well as
the guarantors of the mortgage-related securities. Pools created by such non-
governmental issuers generally offer a higher rate of interest than government
and government-related pools because there are no direct or indirect
government guarantees of payments in such pools. However, timely payment of
interest and/or principal of these pools is supported by various forms of
insurance or guarantees, including individual loan, title, pool or hazard
insurance. There can be no assurance that the private insurers can meet their
obligations under the policies. The Portfolio may buy mortgage-related
securities without insurance or guarantees if through an examination of the
loan experience and practices of the poolers the Adviser determines that the
securities meet the Portfolio's investment criteria. Although the market for
such securities is becoming increasingly liquid, securities issued by certain
private organizations may not be readily marketable. Under normal conditions,
the Portfolio will not invest more than 25% of its total assets in mortgage-
related securities.

ASSET-BACKED SECURITIES
The Portfolio may invest in asset-backed securities in accordance with its
investment objective and policies. Asset-backed securities represent an
undivided ownership interest in a pool of installment sales contracts and
installment loans collateralized by, among other things, credit card
receivables and automobiles. In general, asset-backed securities and the
collateral supporting them are of shorter maturity than mortgage loans. As a
result, investment in these securities should result in greater price
stability for the Portfolio.

Asset-backed securities are often structured with one or more types of credit
enhancement. For a description of the types of credit enhancement that may
accompany asset-backed securities, see the Statement of Additional
Information. The Portfolio will not limit its investments to asset-backed
securities with credit enhancements. Although asset-backed securities are not
generally traded on a national securities exchange, such securities are widely
traded by brokers and dealers, and to such extent will not be considered
illiquid for the purposes of the Portfolio's limitation on investment in
illiquid securities. Under normal conditions, the Portfolio will not invest
more than 10% of its total assets in asset-backed securities.

CORPORATE DEBT OBLIGATIONS.
The Portfolio may invest in corporate debt obligations rated BBB or higher by
Standard & Poor's or Baa or higher by Moody's. Corporate debt obligations are
subject to the risk of an issuer's inability to meet principal and interest
payments on the obligations. Under normal conditions, the Portfolio will not
invest more than 60% of its total assets in corporate debt obligations.

CASH EQUIVALENTS.
The Portfolio may invest in short-term securities readily convertible to cash,
including U.S. Treasury bills, certificates of deposit and commercial paper
rated A-1 by Standard & Poor's or P-1 by Moody's. Under normal conditions, the
Portfolio will not invest more than 20% of its total assets in cash
equivalents.

6
<PAGE>

REAL ESTATE INVESTMENT TRUSTS ("REITS")
The Portfolio may invest in REITs. REITs are pooled investment vehicles that
invest primarily in either real estate or real estate related loans. The value
of a REIT may increase or decrease based on changes in the value of the
underlying properties or mortgage loans. REITs are also subject to risks
generally associated with investments in real estate. Under normal conditions,
the Portfolio will not invest more than 10% of its total assets in REITs.

INVESTMENT STRATEGIES

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Portfolio may purchase when-issued securities. When-issued transactions
arise when securities are purchased by the Portfolio with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous price and yield to the Portfolio at the time of entering into the
transaction. The Portfolio may also purchase securities on a forward
commitment basis; that is, make contracts to purchase securities for a fixed
price at a future date beyond the customary three-day settlement period. The
Portfolio is required to hold and maintain in a segregated account with the
Portfolio's custodian until three days prior to the settlement date, cash or
liquid assets in an amount sufficient to meet the purchase price.
Alternatively, the Portfolio may enter into offsetting contracts for the
forward sale of other securities that it owns. The purchase of securities on a
when-issued or forward commitment basis involves a risk of loss if the value
of the security to be purchased declines prior to the settlement date.
Although the Portfolio would generally purchase securities on a when-issued or
forward commitment basis with the intention of acquiring securities for its
portfolio, the Portfolio may dispose of when-issued securities or forward
commitments prior to settlement if its Adviser deems it appropriate to do so.
Under normal conditions, the Portfolio will not invest more than 33 1/3% of
its total assets in when-issued securities or forward commitments.

REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements with dealers in U.S.
Government securities and member banks of the Federal Reserve System which
furnish collateral at least equal in value or market price to the amount of
their repurchase obligation. The Portfolio may also enter into repurchase
agreements involving certain foreign government securities. If the other party
or "seller" defaults, the Portfolio might suffer a loss to the extent that the
proceeds from the sale of the underlying securities and other collateral held
by the Portfolio in connection with the related repurchase agreement are less
than the repurchase price. In addition, in the event of bankruptcy of the
seller or failure of the seller to repurchase the securities as agreed, the
Portfolio could suffer losses, including loss of interest on or principal of
the security and costs associated with delay and enforcement of the repurchase
agreement. Under normal conditions, the Portfolio may not invest more than 20%
of its total assets in repurchase agreements.

LENDING OF PORTFOLIO SECURITIES
The Portfolio may seek to increase its income by lending portfolio securities.
Under present regulatory policies, such loans may be made to institutions,
such as certain broker-dealers, and are required to be secured continuously by
collateral in cash, cash equivalents, or U.S. Government securities maintained
on a current basis in an amount at least equal to the market value of the
securities loaned. Cash collateral may be invested in cash equivalents. The
Portfolio may experience a loss or delay in the recovery of its securities if
the institution with which it has engaged in a portfolio loan transaction
breaches its agreement with the Portfolio. Under normal conditions, the value
of the securities loaned may not exceed 33 1/3% of the value of the total
assets of the Portfolio.

7
<PAGE>

rolls depends upon BSAM's ability to predict correctly interest rates and
mortgage prepayments. There is no assurance that mortgage dollar rolls can be
successfully employed. For financial reporting and tax purposes, the Portfolio
treats mortgage dollar rolls as two separate transactions; one involving the
purchase of a security and a separate transaction involving a sale. The
Portfolio does not currently intend to enter into mortgage dollar rolls that
are accounted for as a financing. Under normal conditions, the Portfolio will
not invest more than 20% of its total assets in mortgage dollar rolls.

TEMPORARY STRATEGIES
The Portfolio may, for temporary defensive purposes, invest 100% of its total
assets in U.S. Government securities, repurchase agreements collateralized by
U.S. Government securities, commercial paper rated at least A-1 by Standard &
Poor's or P-1 by Moody's, certificates of deposit, bankers' acceptances,
repurchase agreements, non-convertible preferred stocks, non-convertible
corporate bonds with a remaining maturity of less than one year or, subject to
certain tax restrictions, foreign currencies. When the Portfolio's assets are
invested in such instruments, the Portfolio may not be achieving its
investment objective.

PORTFOLIO TURNOVER
Under normal conditions the portfolio turnover rate for the Portfolio
generally will not exceed 30% in any one year. However, the portfolio turnover
rate may exceed this rate when BSAM believes the anticipated benefits of
short-term investments outweigh any increase in transaction costs or increase
in short-term gains. Higher portfolio turnover rates are likely to result in
comparatively greater brokerage commissions or transaction costs. Short-term
gains realized from portfolio transactions are taxable to shareholders as
ordinary shares.

MISCELLANEOUS TECHNIQUES
In addition to the techniques and investments described above, the Portfolio
may engage in the following techniques and investments: (i) foreign
securities; (ii) structured securities; (iii) foreign currency exchange
contracts; (iv) currency swaps, mortgage swaps, index swaps and interest rate
swaps, caps, floors and collars; (v) zero coupon bonds; (vi) variable and
floating rate securities; (vii) custodial receipts; (viii) municipal
securities; (ix) inverse floating rate securities; and (x) warrants and stock
purchase rights. No more than 5% of the Portfolio's total assets will be
committed to any one of the above techniques and investments.

CERTAIN FUNDAMENTAL POLICIES

Certain of the Portfolio's investment policies are fundamental policies that
can be changed only by shareholder vote.

The Portfolio may (i) borrow money to the extent permitted under the 1940 Act;
(ii) invest up to 5% of the value of its total obligations in the obligations
of any issuer, except that up to 25% of the value of the Portfolio's total
assets may be invested, and U.S. Government securities may be purchased,
without regard to any such limitation; and (iii) invest up to 25% of the value
of its total assets in securities of issuers in a single industry, provided
that there is no such limitation in investments in securities issued or
guaranteed by the U.S. Government, its agencies or sponsored enterprises. This
paragraph describes fundamental policies which cannot be changed as to the
Portfolio without approval by the holders of a majority (as defined in the
1940 Act) of the Portfolio's outstanding voting shares. See "Investment
Objective and Management Policies--Investment Restrictions" in the Statement
of Additional Information.

CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES

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

8
<PAGE>

Risk Factors

NET ASSET VALUE FLUCTUATIONS

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

EQUITY SECURITIES

Investors should be aware that equity securities fluctuate in value, often
based on factors unrelated to the value of the issuer of the securities, and
that fluctuations can be pronounced. Changes in the value of the equity
securities in the Portfolio's portfolio will result in changes in the value of
the Portfolio's shares and thus the Portfolio's yield and total return to
investors. The Portfolio intends to invest between 40% and 60% of its total
assets in equity securities, even during times of significant market decline,
when other Funds might take a more defensive position by investing a greater
amount of their assets in money market instruments or cash that are less
likely to decline when market conditions are adverse for equities.

FIXED-INCOME SECURITIES

Investors should be aware that fixed-income securities fluctuate in value
based on changes in prevailing interest rates. As interest rates go up, the
value of a fixed-income security typically goes down, and vice versa.
Generally, fixed-income securities with longer maturities are more sensitive
to changes in interest rates.

Many fixed-income securities, including certain U.S. corporate fixed-income
securities in which the Portfolio may invest, contain call or buy-back
features which permit the issuer of the security to call or repurchase it.
Such securities may present risks based on payment expectations. If an issuer
exercises such a "call option" and redeems the security, the Portfolio may
have to replace the called security with a lower yielding security, resulting
in a decreased rate of return for the Portfolio.

SIMULTANEOUS INVESTMENTS

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

Management of the Portfolio

BOARD OF TRUSTEES

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

INVESTMENT ADVISER AND ADMINISTRATOR

The Portfolio's investment adviser is BSAM, a wholly-owned subsidiary of The
Bear Stearns Companies Inc., which is located at 575 Lexington Avenue, New
York, New York 10022. The Bear Stearns Companies Inc. is a holding company
which, through its subsidiaries including its principal subsidiary, Bear
Stearns, is a leading United States investment banking, securities trading and
brokerage firm serving United States and foreign corporations, governments and
institutional and individual investors. BSAM is a registered investment
adviser and offers, either directly or through affiliates, investment advisory
services to open-end and closed-end investment funds and other managed pooled
investment vehicles with net assets at October 31, 1997 of $7.7 billion.

BSAM supervises and assists in the overall management of the Portfolio's
affairs under an investment advisory agreement between BSAM and the Fund (the
"Investment Advisory Agreement"), subject to the overall authority of the
Fund's Board of Trustees in accordance with Massachusetts law.

9
<PAGE>

Lawrence M. Fields serves as the Senior Portfolio Manager of the Portfolio and
Heather J. Perlmutter serves as the co-Portfolio Manager. Mr. Fields has been
with Bear, Stearns & Co. Inc., in its Asset Management division since 1985. As
part of the division's equity investment team, he is responsible for the
management of balanced portfolios. From 1970 to 1985, Mr. Fields was with the
New York Life Insurance Company, where he spent the last four years as
Investment Vice President and Equity Portfolio Manager. Mr. Fields received
his B.S. in Accounting from Ohio State University, and his M.B.A. in Finance
from New York University Graduate School of Business. Ms. Perlmutter has been
with Bear, Stearns & Co. Inc. since 1990, and is currently managing balanced
portfolios. She began her tenure at Bear, Stearns as a Sales Associate in the
Corporate Calling Group, and moved to Bear, Stearns & Co. Inc.'s Asset
Management division in 1993. She began her career as a Sales Assistant in the
Corporate Coverage Division of Morgan Stanley & Co. Inc. Ms. Perlmutter
received her B.A. in Communication from Rutgers University.

Under the terms of the Investment Advisory Agreement, the Portfolio has agreed
to pay BSAM a monthly fee at the annual rate of 0.65% of the Portfolio's
average daily net assets.

The Portfolio's administrator is BSFM, a wholly-owned subsidiary of The Bear
Stearns Companies Inc., which is located at 245 Park Avenue, New York, New
York 10167. BSFM offers administrative services to open-end and closed-end
investment funds and other managed pool investment vehicles with net assets at
October 31, 1997 of $3.0 billion.

Under the terms of an administration agreement with the Fund, BSFM generally
supervises all aspects of the operation of the Portfolio, subject to the
overall authority of the Fund's Board of Trustees in accordance with
Massachusetts law. For providing administrative services to the Portfolio, the
Fund has agreed to pay BSFM a monthly fee at the annual rate of 0.15 of 1% of
the Portfolio's average daily net assets. Under the terms of an administrative
services agreement with the Fund, PFPC Inc., the Portfolio's transfer agent,
provides certain administrative services to the Portfolio. For providing these
services, the Fund has agreed to pay PFPC Inc. a monthly fee equal to an
annual rate of 0.10 of 1% of the Portfolio's average daily net assets up to
$200 million, 0.075 of 1% of the next $200 million, 0.05 of 1% of the next
$200 million and 0.03 of 1% of net assets above $600 million, subject to a
minimum monthly fee of $12,500 for the Portfolio.

From time to time, BSFM may waive receipt of its fees and/or voluntarily
assume certain Portfolio expenses, which would have the effect of lowering the
Portfolio's expense ratio and increasing yield to investors at the time such
amounts are waived or assumed, as the case may be. The Portfolio will not pay
BSFM at a later time for any amounts it may waive, nor will the Portfolio
reimburse BSFM for any amounts it may assume. From time to time, PFPC Inc. may
voluntarily waive a portion of its fee.

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

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

DISTRIBUTOR

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

CUSTODIAN AND TRANSFER AGENT

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

DISTRIBUTION PLAN--CLASS A, B AND C SHARES

10
<PAGE>

Distribution Plan compensate Bear Stearns for distributing Portfolio shares.
Bear Stearns may pay third parties that sell Portfolio shares such amount as
it may determine.

The Portfolio understands that these third parties may also charge fees for
their clients who are beneficial owners of Portfolio shares in connection with
their client accounts. These fees would be in addition to any amounts which
may be received by them from Bear Stearns under the Distribution Plan.

SHAREHOLDER SERVICING PLAN--CLASS A, B AND C SHARES

The Fund has adopted a shareholder servicing plan on behalf of the Portfolio's
Class A, B and C shares (the "Shareholder Servicing Plan"). In accordance with
the Shareholder Servicing Plan, the Fund may enter into shareholder service
agreements under which the Portfolio pays fees of up to 0.25% of the average
daily net assets of Class A, B or C shares for fees incurred in connection
with the personal service and maintenance of accounts holding Portfolio shares
for responding to inquiries of, and furnishing assistance to, shareholders
regarding ownership of the shares or their accounts or similar services not
otherwise provided on behalf of the Portfolio.

EXPENSE LIMITATION

BSAM has undertaken (until such time as it gives investors at least 60 days'
notice to the contrary) that, if in any fiscal year, certain expenses,
including the investment advisory fee, exceed 1.20% of Class A's average daily
net assets, 1.70% of Class B's average daily net assets and 1.70% of Class C's
average daily net assets for the fiscal year, BSAM may waive a portion of its
investment advisory fee or bear other expenses to the extent of the excess
expense.

Prior Performance of Related Accounts

Set forth in the following table is the performance history of a composite of
institutional private accounts with investment objectives, policies,
strategies and risks substantially similar to those of the Portfolio. The
accounts constituting the composite were managed during the periods indicated
by a division of Bear, Stearns & Co. Inc. ("Bear Stearns") which was then
known as Bear Stearns Asset Management (the "Division"). Bear Stearns recently
reorganized its asset management operations so that the Division was
consolidated with the Adviser. Prior to such consolidation, the Division
rendered advisory services to separate accounts while the Adviser rendered
advisory services to registered investment companies. During all periods
reflected in the table below, both the Division and the Adviser were commonly
managed and shared portfolio management personnel, including the portfolio
managers of the Portfolio who have been and are responsible for managing the
accounts reflected in the composite. Therefore, the Adviser believes that the
performance data reflected below are illustrative of the past performance of
the Adviser in managing a composite set of accounts substantially similar to
the Portfolio. For that reason, this performance history may be relevant to
potential investors in the Portfolio. Investors should note, however, that
prior to January 1, 1997, the portfolio managers of the Portfolio reported to
a Director of Equities who is no longer an employee of the Adviser or any of
its affiliates.

The data does not represent the past performance of the Portfolio and
prospective investors should not consider these performance figures as
indicative of the future performance of the Portfolio or of the Adviser.

11
<PAGE>

substantially similar to those of the Portfolio. The composite, however,
excludes certain accounts with similar investment objectives which, in the
opinion of the Adviser, were not managed in a manner similar to the manner in
which the Portfolio will be managed as a result of asset size, investment
restrictions or other variables. Securities transactions are accounted for on
the trade date and accrual accounting is utilized. Cash and equivalents are
included in performance returns. For additional information regarding the
composite performance data, please see the Statement of Additional
Information.

The institutional private accounts that are included in the composite are not
subject to the same types of expenses to which the Portfolio is subject nor to
the diversification requirements, specific tax restrictions and investment
limitations imposed on the Portfolio by the Investment Company Act or
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Consequently, the performance results for the composites could have been
adversely affected if the institutional private accounts included in the
composites had been regulated as investment companies under the federal
securities laws.

The investment results of the composites presented below are unaudited and are
not intended to predict or suggest the returns that might be experienced by
the Portfolio or an individual investor investing in the Portfolio. Investors
should also be aware that the use of a methodology different from that used
below to calculate performance could result in different performance data.

Balanced Composite Performance Summary

AS OF OCTOBER 31, 1997

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
LIPPER BALANCED INVESTMENT ADVISER'S
TIME PERIOD FUNDS INDEX BALANCED COMPOSITE
- --------------------------------------------------------------------------------
<S> <C> <C>
1/1/97 to 10/31/97......................... 16.17% 16.66%
1996....................................... 13.01 12.77
1995....................................... 24.89 31.04
1994....................................... -2.05 -0.39
1993....................................... 11.95 9.84
1992....................................... 7.46 7.81
1991....................................... 25.83 22.97
4/1/90 to 12/31/90......................... 3.07 4.62
</TABLE>

AVERAGE ANNUAL TOTAL RETURN:

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
LIPPER BALANCED INVESTMENT ADVISER'S
TIME PERIOD(/1/) FUNDS INDEX BALANCED COMPOSITE
- --------------------------------------------------------------------------------
<S> <C> <C>
1 Year..................................... 21.90% 20.31%
5 Years.................................... 17.37 19.65
Since Inception (4/1/90)................... 13.15 13.52
</TABLE>
- ------
(1) Returns for periods of less than one year are annualized.

How to Buy Shares

GENERAL

The minimum initial investment is $1,000, or $500 if the investment is for
Keogh Plans, IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant.
Subsequent investments ordinarily must be at least $50 or $25 for retirement
plans. Share certificates are issued only upon written request. No
certificates are issued for fractional shares. The Portfolio reserves the
right to reject any purchase order. The Portfolio reserves the right to vary
the initial and subsequent investment minimum requirements at any time.
Investments by employees of Bear Stearns and its affiliates are not subject to
minimum investment requirements.

12
<PAGE>

Purchases of the Portfolio's shares also may be made directly through the
Transfer Agent. When purchasing the Portfolio's shares, investors must specify
which class is being purchased. If you do not specify in your instructions to
the Fund which class of shares you wish to purchase, the Fund will assume that
your instructions apply to Class A shares.

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

CHOOSING A CLASS OF SHARES

Determining which class of shares best suits your investment needs depends on
several factors. Each class of shares has its own operating costs and sales
charges that will affect the results of your investment over time. Perhaps the
most significant factors are how much you intend to invest and the length of
time you expect to hold your investment. If your goals change over time, you
should review your investment to determine whether a particular class of
shares best suits your needs.

In general, Class A shares are the most beneficial for the investor who
qualifies for a waiver or certain reductions of the front end sales charges as
described herein under "How to Buy Shares--Class A Shares." Class B and Class
C shareholders may pay a CDSC upon redemption. Investors who expect to redeem
during the eight year CDSC period applicable to Class B shares or the one year
CDSC period applicable to Class C shares should consider the cost of the
applicable CDSC plus the aggregate annual distribution and service fees
applicable to Class B and Class C shares, as compared with the cost of the
front end sales charge plus the aggregate annual distribution and service fees
applicable to Class A shares. Because Class B and Class C shareholders pay no
front end sales charge, the entire purchase price is immediately invested in
shares of the Portfolio. Over time, however, the cumulative distribution and
service fees applicable to Class B and Class C shares will approach and may
exceed the 5.50% maximum front end sales charge plus the distribution and
service fees applicable to Class A shares.

The factors below assume the expenses that apply to each class of shares as
described in this prospectus. In addition, they assume an annual rate of
return of approximately 5%. The actual amount of return may be higher or
lower, depending on the actual investment returns over time. This discussion
is not intended to be investment advice or recommendations, because each
investor's goals, needs and circumstances are unique.

MAXIMUM PURCHASE AMOUNT

There is a maximum purchase limitation of up to $500,000 in the aggregate on
purchases of Class B shares and a maximum purchase limitation of up to $1
million in the aggregate on purchases of Class C shares. Investors who
purchase $1 million or more may only purchase Class A shares (as the sales
charge is waived for purchases in excess of $1 million). However, if you
purchase over $1 million of Class A shares, and do not maintain your
investment for at least one year from the date of purchase, you will be
charged a CDSC of 1%.

LENGTH OF INVESTMENT

Knowing the approximate time you plan to hold your investment can help you
select the class of shares that is most appropriate for you. Generally, the
amount of sales charge you pay over time will depend on the amount you invest.
If you plan to invest a large amount over time, the reduced sales charges
available for larger purchases of Class A shares may, over time, offset the
effect of paying an initial sales charge on your investment (the initial sales
charge of Class A shares effectively reduces the amount of your investment),
compared to the higher expenses on Class B or Class C shares, which do not
have an initial sales charge. Your entire investment in Class B shares is
available to work for you from the time you make your initial investment but
the higher expenses will cause your Class B shares (until conversion to Class
A shares) to have a higher expense ratio and to pay lower dividends, to the
extent dividends are paid, than Class A shares. If you prefer not to pay an
initial sales charge on an investment you might consider purchasing Class B
shares.

13
<PAGE>

With respect to the Portfolio, if you plan to invest less than $250,000 for a
period of approximately eight years or less, you should probably consider
Class C shares as the appropriate choice even though the class expenses are
higher, because there is no initial sales charge and no CDSC after one year.
If you plan to invest less than $250,000 for a period of between nine and
twelve years, Class B shares may be the appropriate choice. If you plan to
hold your investment for more than twelve years, then Class A shares may be
the appropriate choice, because the effect of the higher class expenses of
Class B and C shares might be greater than the effect of the initial sales
charge on the Class A shares.

With respect to the Portfolio, if you plan to invest more than $250,000 but
less than $500,000 for a period of five years or less, then you should
probably consider investing Class C shares. If you plan to hold your
investment for approximately six years or more you may find Class A shares
more advantageous because the annual total expenses on Class B and C shares
will have a greater impact on your investment over the longer term, then the
reduced front end sales charge available for larger purchases of Class A
shares.

With respect to the Portfolio, if you plan to invest more than $500,000 but
less than $1,000,000 for a period of four years or less, then you should
probably consider investing in Class C shares. If you plan to hold your
investment for approximately five years or more, you may find Class A shares
more advantageous.

For investors who invest $1 million or more, Class A shares will be the most
advantageous choice, no matter how long you intend to hold your shares.

PAYMENTS TO BROKERS

Your broker may be entitled to receive different compensation for selling
shares of one class of shares than for selling another class. The purpose of
both the CDSC and the asset-based sales charge is to compensate Bear Stearns
and the brokers who sell the shares.

CONSULT YOUR FINANCIAL ADVISER

You should consult your financial adviser to assist you in determining which
class of shares is most appropriate for you.

PURCHASE PROCEDURES

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

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

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

Shareholders may not purchase shares of the Fund with a check issued by a
third party and endorsed over to the Fund.

14
<PAGE>

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

NET ASSET VALUE

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

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

CLASS A SHARES

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

<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
TOTAL SALES LOAD
------------------------------
AS A % OF AS A % OF DEALER CONCESSIONS
OFFERING PRICE NET ASSET VALUE AS A %
AMOUNT OF TRANSACTION PER SHARE PER SHARE OF OFFERING PRICE*
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000............ 5.50% 5.82% 5.25%
$50,000 to less than
$100,000..................... 4.75 4.99 4.25
$100,000 to less than
$250,000..................... 3.75 3.90 3.25
$250,000 to less than
$500,000..................... 2.75 2.83 2.50
$500,000 to less than
$1,000,000................... 2.00 2.04 1.75
$1,000,000 and above......... 0.00* 0.00 1.25
</TABLE>
- ------
* There is no initial sales charge on purchases of $1,000,000 or more of Class
A shares. However, if an investor purchases Class A shares without an
initial sales charge as part of an investment of at least $1,000,000 and
redeems those shares within one year after purchase, a CDSC of 1% will be
imposed at the time of redemption. The terms contained in the section of the
Portfolio's Prospectus entitled "How to Redeem Shares--Contingent Deferred
Sales Charge" are applicable to the Class A shares subject to a CDSC. Letter
of Intent and Right of Accumulation apply to such purchases of Class A
shares.

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

<PAGE>

The Bear Stearns Funds

Account Information Form

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

1 ACCOUNT TYPE (Please print; indicate only one registration type)
[_] Individual [_] Joint Tenant

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

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

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

(1) Use only the Social Security number or Taxpayer Identification Number
of the first listed joint tenant.
(2) For joint registrations, the account registrants will be joint tenants
with right of survivorship and not tenants in common unless tenants in
common or community property registration are requested.

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

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

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

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

___ ___ / ___ ___ / ___ ___ ___ ___ ___ - ___ ___ - ___ ___ ___ ___
MINOR'S DATE OF BIRTH MINOR'S SOCIAL SECURITY NUMBER (REQUIRED TO
OPEN ACCOUNT)
================================================================================
[_] Corporation [_] Partnership [_] Trust* [_] Other

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

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

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

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

2 MAILING ADDRESS

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

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

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

3 INVESTMENT INFORMATION

METHOD OF INVESTMENT

[_] I have enclosed a check for a minimum initial investments of $1,000 per
Portfolio.
[_] I have enclosed a check for a minimum subsequent investment of $50 per
Portfolio or completed the Systematic Investment Plan information in
Section 13.
[_] I purchased _____________________ shares of ____________________________

_______________________________________________ through my broker on

____/____/____. Confirm # _______________.

PLEASE MAKE MY INVESTMENT IN THE FUNDS DESIGNATED BELOW:

- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C BEAR STEARNS FUNDS INVESTMENT AMOUNT
- --------------------------------------------------------------------------------
[_] [_] [_] S&P STARS PORTFOLIO $
----------------
[_] [_] [_] LARGE CAP VALUE PORTFOLIO $
----------------
[_] [_] [_] SMALL CAP VALUE PORTFOLIO $
----------------
[_] [_] [_] TOTAL RETURN BOND PORTFOLIO $
----------------
[_] [_] [_] THE INSIDERS SELECT FUND $
----------------
[_] [_] [_] EMERGING MARKETS DEBT PORTFOLIO $
----------------
[_] [_] [_] FOCUS LIST PORTFOLIO $
----------------
[_] [_] [_] BALANCED PORTFOLIO $
----------------
[_] [_] [_] HIGH YIELD TOTAL RETURN
PORTFOLIO $
----------------
[_] [_] [_] INTERNATIONAL EQUITY PORTFOLIO $
----------------
[_] [_] [_] MONEY MARKET PORTFOLIO $
----------------
TOTAL INVESTMENT AMOUNT $
================

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

NOT PART OF THE PROSPECTUS
<PAGE>

4 REDUCED SALES CHARGE (AVAILABLE FOR CLASS A SHARES ONLY)

METHOD OF INVESTMENT

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

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

-----------------------------------------------------------------------------
PORTFOLIO ACCOUNT NUMBER OR SOCIAL SECURITY NUMBER

LETTER OF INTENT

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

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

NET ASSET VALUE PURCHASE

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

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

5 DISTRIBUTION OPTIONS

DIVIDENDS AND CAPITAL GAINS MAY BE REINVESTED OR PAID BY CHECK. IF NO OPTIONS
ARE SELECTED BELOW, BOTH DIVIDENDS AND CAPITAL GAINS WILL BE REINVESTED IN
ADDITIONAL PORTFOLIO SHARES.

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

CAPITAL GAINS [_] Pay by check. [_] Reinvest.

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

[_] Please reinvest dividends and capital gains from the __________________

___________________ to the __________________________.
(NAME OF PORTFOLIO) (NAME OF PORTFOLIO)

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

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

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

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

================================================================================
OPTIONAL FEATURES

6 AUTOMATIC WITHDRAWAL PLAN

[_] Portfolio Name ________________________________ [_] Amount ___________

[_] Startup month __________________________

Frequency option: [_] Monthly [_] Every other month [_] Quarterly
[_] Semiannually [_] Annually
. A minimum account value of $5,000 in a single account is required to
establish an automatic withdrawal plan.
. Payments will be made on or near the 25th of the month.
. Shareholders holding share certificates are not eligible for the
Automatic Withdrawal Plan.

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

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

[_] Special payee as specified below:

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

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

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

7 TELEPHONE EXCHANGE PRIVILEGE

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

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

NOT PART OF THE PROSPECTUS
<PAGE>

8 TELEPHONE REDEMPTION PRIVILEGE

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

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

9 BANK OF RECORD (FOR TELEPHONE REDEMPTIONS AND/OR SYSTEMATIC INVESTMENT PLANS)

PLEASE ATTACH A VOIDED CHECK (FOR ELECTRONIC CREDIT TO YOUR CHECKING
ACCOUNT) IN THE SPACE PROVIDED IN SECTION 13.

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

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

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

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

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

10 SIGNATURE AND TAXPAYER CERTIFICATION

The undersigned warrants that I(we) have full authority and, if a natural
person, I(we) am(are) of legal age to purchase shares pursuant to this
Account Information Form, and have received a current prospectus for the Bear
Stearns Fund(s) in which I(we) am(are) investing. THE UNDERSIGNED
ACKNOWLEDGES THAT THE TELEPHONE EXCHANGE PRIVILEGE IS AUTOMATIC AND THAT
I(WE) MAY BEAR THE RISK OF LOSS IN EVENT OF FRAUDULENT USE OF THE PRIVILEGE.
If I(we) do not want the Telephone Exchange Privilege, I(we) have so
indicated on this Account Information Form.

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

Under penalty of perjury, I certify that:

(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because (a) I am exempt from
backup withholding or (b) I have not been notified by the IRS that I am
subject to 31% backup withholding as a result of a failure to report all
interest or dividends or (c) the IRS has notified me that I am no longer
subject to backup withholding.

Certification Instructions -- You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup withholding
because of underreporting of interest or dividends on your tax return. MUTUAL
FUND SHARES ARE NOT DEPOSITS OF, OR GUARANTEED BY, ANY DEPOSITORY
INSTITUTION, NOR ARE THEY INSURED BY THE FDIC. INVESTMENT IN THE FUNDS
INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.

[_] Exempt from backup withholding

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

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

11 FOR AUTHORIZED DEALER USE ONLY (Please Print)

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

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

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

-----------------------------------------------------------------------------
REPRESENTATIVE'S NAME REP. NUMBER

( )
--------------------------------------------------- ------------------------
BRANCH ADDRESS TELEPHONE NUMBER

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

12 ADDITIONAL ACCOUNT STATEMENTS (Please Print)

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

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

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

---------------------------------------------- ---------------------------
CITY, STATE, ZIP CODEE CITY, STATE, ZIP CODES

NOT PART OF THE PROSPECTUS
<PAGE>

13 SYSTEMATIC INVESTMENT PLAN

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

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

[_] Monthly [_] Every alternate month

[_] Quarterly [-] Other _________________________________

$ ______________ into the _________________________________________
$100 MINIMUM

Portfolio __________________________ Start Month.

$ ______________ into the _________________________________________
$100 MINIMUM

Portfolio __________________________ Start Month.

$ ______________ into the _________________________________________
$100 MINIMUM

Portfolio __________________________ Start Month.

IF YOU ARE APPLYING FOR THE TELEPHONE REDEMPTION PRIVILEGE OR SYSTEMATIC
INVESTMENT PLAN, PLEASE TAPE YOUR VOIDED CHECK ON TOP OF OUR SAMPLE BELOW.

================================================================================

John Smith 000
123 First Avenue
Anytown, USA 12345

V O I D
____________________________________________________________ $[_]

_____________________________________________________________________________

____________________________________________ _________________________

================================================================================

SERVICE ASSISTANCE
Our knowledgeable Client Services Representatives are
available to assist you between 8:00 a.m. and 6:00 p.m.
Eastern Time at:
1-800-447-1139

MAILING OR FAX INSTRUCTIONS
Mail your completed Account Information and check to:
THE BEAR STEARNS FUNDS
C/O PFPC INC.
P.O. BOX 8960
WILMINGTON, DE 19899-8960
FAX: 302-791-1777
If applications will be faxed, please call and notify Client
Services at 1-800-447-1139 before placing an order.

NOT PART OF THE PROSPECTUS

<PAGE>

its eligibility for an exemption to Bear Stearns along with its Account
Information Form. Such purchaser agrees to notify Bear Stearns if, at any time
of any additional purchases, it is no longer eligible for an exemption. Bear
Stearns reserves the right to request certification or additional information
from a purchaser in order to verify that such purchase is eligible for an
exemption. Bear Stearns reserves the right to limit the participation of its
employees in Class A shares of the Portfolio. Dividends and distributions
reinvested in Class A shares of the Portfolio will be made at the net asset
value per share on the reinvestment date.

Class A shares of the Portfolio also may be purchased at net asset value, with
the proceeds from the redemption of shares of an investment company sold with
a sales charge or commission and not distributed by Bear Stearns. This
includes shares of a mutual fund which were subject to a contingent deferred
sales charge upon redemption. The purchase must be made within 60 days of the
redemption, and Bear Stearns must be notified by the investor in writing, or
by the investor's investment professional, at the time the purchase is made.
However, if such investor redeems those shares within one year after purchase,
a CDSC of 1% will be imposed at the time of redemption. Bear Stearns will
offer to pay Authorized Dealers an amount up to 1.25% of the net asset value
of shares purchased by the dealers' clients or customers in this manner.

In addition, Class A Shares of the Portfolio may be purchased at net asset
value by the following customers of a broker that operates a master account
for purchasing and redeeming, and otherwise providing shareholder services in
respect of Fund shares pursuant to agreements with the Fund or Bear Stearns:
(i) investment advisers and financial planners who place trades for their own
accounts or for the accounts of their clients and who charge a management,
consulting or other fee, (ii) clients of such investment advisers and
financial planners if such clients place trades through accounts linked to
master accounts of such investment advisers or financial planners on the books
and records of such broker and (iii) retirement and deferred compensation
plans, and trusts used to fund such plans, including, but not limited to,
plans or trusts defined in Section 401(a), 403(b) or 457 of the Internal
Revenue Code of 1986, as amended (the "Code"), and "rabbi trusts," provided,
in each case, the purchase transaction is effected through such broker. The
broker may charge a fee for transactions in Portfolio shares.

CLASS B SHARES

The public offering price for Class B shares is the next determined net asset
value per share of that class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class B shares made
within six years of purchase. See "How to Redeem Shares". The amount of the
CDSC, if any, will vary depending on the number of years from the time of
purchase until the time of redemption of Class B shares. For the purpose of
determining the number of years from the time of any purchase, all payments
during a month will be aggregated and deemed to have been made on the first
day of that month. In processing redemptions of Class B shares, the Portfolio
will first redeem shares not subject to any CDSC, and then shares held longest
during the eight-year period, resulting in the shareholder paying the lowest
possible CDSC. The amount of the CDSC charged upon redemption is as follows:

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
CDSC AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CDSC
- --------------------------------------------------------------------------------
<S> <C>
First................................................... 5%
Second.................................................. 4%
Third................................................... 3%
Fourth.................................................. 3%
Fifth................................................... 2%
Sixth................................................... 1%
Seventh................................................. 0%
Eighth*................................................. 0%
</TABLE>
- ------
* As discussed below, Class B shares automatically convert to Class A shares
after the eighth year following purchase.

<PAGE>

on which the distribution was paid. The conversion of Class B shares to Class
A shares will not occur at any time the Portfolio is advised that such
conversions may constitute taxable events for federal tax purposes, which the
Portfolio believes is unlikely. If conversions do not occur as a result of
possible taxability, Class B shares would continue to be subject to higher
expenses than Class A shares for an indeterminate period.

The purpose of the conversion feature is to allow the holders of Class B
shares the ability to not bear the burden of distribution related expenses
when the shares have been outstanding for a duration sufficient for Bear
Stearns to have obtained compensation for distribution related expenses
incurred in connection with Class B shares.

CLASS C SHARES

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

RIGHT OF ACCUMULATION--CLASS A SHARES

Investors in Class A shares may qualify for a reduced sales charge. Pursuant
to the Right of Accumulation, certain investors are permitted to purchase
Class A shares of the Portfolio at the sales charge applicable to the total of
(a) the dollar amount then being purchased plus (b) the current public
offering price of all Class A shares of the Portfolio, shares of the Fund's
other portfolios and shares of certain other funds sponsored or advised by
Bear Stearns, including the Emerging Markets Debt Portfolio of Bear Stearns
Investment Trust, then held by the investor. The following purchases of Class
A shares may be aggregated for the purposes of determining the amount of
purchase and the corresponding sales load: (a) individual purchases on behalf
of a single purchaser, the purchaser's spouse and their children under the age
of 21 years including shares purchased in connection with a retirement account
exclusively for the benefit of such individual(s), such as an IRA, and
purchases made by a company controlled by such individual(s); (b) individual
purchases by a trustee or other fiduciary account, including an employee
benefit plan (such as employer-sponsored pension, profit-sharing and stock
bonus plans, including plans under Section 401(k) of the Code, and medical,
life and disability insurance trusts); or (c) individual purchases by a
trustee or other fiduciary purchasing shares concurrently for two or more
employee benefit plans of a single employer or of employers affiliated with
each other. Subsequent purchases made under the conditions set forth above
will be subject to the minimum subsequent investment of $50 and will be
entitled to the Right of Accumulation.

LETTER OF INTENT--CLASS A SHARES

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

SYSTEMATIC INVESTMENT PLAN

<PAGE>

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

Shareholder Services

EXCHANGE PRIVILEGE

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

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

The Transfer Agent may use security procedures to confirm that telephone
instructions are genuine. If the Transfer Agent does not use reasonable
procedures, it may be liable for losses due to unauthorized transactions, but
otherwise neither the Transfer Agent nor the Portfolio will be liable for
losses or expenses arising out of telephone instructions reasonably believed
to be genuine.

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

Before any exchange, the investor must obtain and should review a copy of the
current prospectus of the portfolio or fund into which the exchange is being
made. Prospectuses may be obtained free of

18
<PAGE>

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

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

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

REDIRECTED DISTRIBUTION OPTION

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

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

How to Redeem Shares

GENERAL

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

19
<PAGE>

transmitted until the check used for investment has cleared, which may take up
to 15 days. The Fund will reject requests to redeem shares by telephone or
wire for a period of 15 days after receipt by the Transfer Agent of the
purchase check against which such redemption is requested. This procedure does
not apply to shares purchased by wire payment.

The Fund reserves the right to redeem investor accounts at its option

upon not
less than 60 days' written notice if the account's net asset value is $750 or
less, for reasons other than market conditions, and remains so during the
notice period. Shareholders who have redeemed Class A shares may reinstate
their Portfolio account without a sales charge up to the dollar amount
redeemed by purchasing Class A shares of the same Portfolio or of any other
Bear Stearns Fund within 60 days of the redemption. Shareholders should obtain
and read the applicable prospectuses of such other funds and consider their
objectives, policies and applicable fees before investing in any of such
funds. To take advantage of this reinstatement privilege, shareholders must
notify their Bear Stearns account executive, Authorized Dealer or the Transfer
Agent at the time the privilege is exercised.

CONTINGENT DEFERRED SALES CHARGE--CLASS A SHARES

A CDSC of 1% payable to Bear Stearns is imposed on any redemption of Class A
shares within one year of the date of purchase by any investor that purchased
Class A shares as part of an investment of at least $1,000,000. A CDSC of 1%
is also imposed on any redemption of Class A shares within one year of the
date of purchase by any investor that purchased the shares with the proceeds
from the redemption of shares of an investment company sold with a sales
charge or commission and not distributed by Bear Stearns. No CDSC will be
imposed to the extent that the net asset value of the Class A shares redeemed
does not exceed (i) the current net asset value of Class A shares acquired
through reinvestment of dividends or capital gain distributions, plus (ii)
increase in the net asset value of an investor's Class A shares above the
dollar amount of all such investor's payments for the purchase of Class A
shares held by the investor at the time of redemption. See the Statement of
Additional Information for more information.

CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES

A CDSC of up to 5% payable to Bear Stearns is imposed on any redemption of
Class B shares within six years of the date of purchase. No CDSC will be
imposed to the extent that the net asset value of the Class B shares redeemed
does not exceed (i) the current net asset value of Class B shares acquired
through reinvestment of dividends or capital gain distributions, plus (ii)
increases in the net asset value of an investor's Class B shares above the
dollar amount of all such investor's payments for the purchase of Class B
shares held by the investor at the time of redemption.

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

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

For example, assume an investor purchased 100 shares of the Portfolio at $10
per share for a cost of $1,000. Subsequently, the shareholder acquired 5
additional shares through dividend reinvestment. During the first year after
the purchase the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the net asset value had appreciated to
$12 per share, the value of the investor's shares would be $1,260 (105 shares
at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 5% for a total CDSC of $12.00.

CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES

20
<PAGE>

of an investor's Class C shares above the dollar amount of all such investor's
payments for the purchase of Class C shares held by the investor at the time
of redemption.

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

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

WAIVER OF CDSC--CLASS A, B AND C SHARES

The CDSC applicable to Class A, B and C shares will be waived in connection
with (a) redemptions made within one year after the death or disability, as
defined in section 72(m)(7) of the Code, of the shareholder, (b) redemptions
by employees participating in eligible benefit plans, (c) redemptions as a
result of a combination of any investment company with a Portfolio by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70 1/2 in the case
of an IRA or Keogh plan or custodial account pursuant to section 403(b) of the
Code, and (e) to the extent that shares redeemed have been withdrawn from the
Automatic Withdrawal Plan, up to a maximum amount of 12% per year from a
shareholder account based on the value of the account at the time the
automatic withdrawal is established. If the Fund's Trustees determine to
discontinue the waiver of the CDSC, the disclosure in the Portfolios'
prospectus will be revised appropriately. Any Portfolio shares subject to a
CDSC which were purchased prior to the termination of such waiver will have
the CDSC waived as provided in the Portfolio's prospectus at the time of the
purchase of such shares.

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

PROCEDURES

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

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

21
<PAGE>

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

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

If the proceeds of the redemption would exceed $25,000, or if the proceeds are
not to be paid to the record owner at the record address, or if the
shareholder is a corporation, partnership, trust or fiduciary, signature(s)
must be guaranteed by any eligible guarantor institution. A signature
guarantee is designed to protect the shareholders and the Portfolio against
fraudulent transactions by unauthorized persons. In certain instances, such as
transfer of ownership or when the registered shareholder(s) requests that
redemption proceeds be sent to a different name or address than the registered
name and address of record on the shareholder account, the Fund will require
that the shareholder's signature be guaranteed. When a signature guarantee is
required, each signature must be guaranteed. A signature guarantee may be
obtained from a domestic bank or trust company, broker, dealer, clearing
agency or savings association who are participants in a medallion program
recognized by the Securities Transfer Association. The three recognized
medallion programs are Securities Transfer Agent Medallion Program (STAMP),
Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc.
Medallion Signature Program (MSP). Signature Guarantees which are not a part
of these programs will not be accepted. The institution providing the
guarantee must see a signature ink stamp or medallion which states
"Signature(s) Guaranteed" and be signed in the name of the guarantor by an
authorized person with that person's title and the date. The Fund may reject a
signature guarantee if the guarantor is not a member of or participant in a
signature guarantee program. Please note that a notary public stamp or seal is
not acceptable. The Fund reserves the right to amend or discontinue its
signature guarantee policy at any time and, with regard to a particular
redemption transaction, to require a signature guarantee at its discretion.
Redemption requests by corporate and fiduciary shareholders must be
accompanied by appropriate documentation establishing the authority of the
person seeking to act on behalf of the account. Investors may obtain from the
Fund or the Transfer Agent forms of resolutions and other documentation which
have been prepared in advance to assist compliance with the Portfolio's
procedures. Any questions with respect to signature-guarantees should be
directed to the Transfer Agent by calling 1-800-447-1139.

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

AUTOMATIC WITHDRAWAL

Automatic Withdrawal permits investors to request withdrawal of a specified
dollar amount (minimum of $25) on either a monthly or quarterly basis if the
investor has a $5,000 minimum account. An application for Automatic Withdrawal
can be obtained from Bear Stearns or the Transfer Agent. Automatic Withdrawal
may be ended at any time by the investor, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through
Automatic Withdrawal. Purchases of additional shares concurrent with
withdrawals generally are undesirable.

Dividends, Distributions and Taxes

<PAGE>

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

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

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

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

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

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

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

<PAGE>

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

Management of the Fund intends to have the Portfolio qualify as a "regulated
investment company" under the Code and, thereafter, to continue to so qualify
if such qualification is in the best interests of its shareholders. Such
qualification relieves the Portfolio of any liability for Federal income tax
to the extent its earnings are distributed in accordance with applicable
provisions of the Code. In addition, the Portfolio is subject to a non-
deductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable investment income and capital gains.

The Portfolio anticipates that there will be high portfolio turnover rate,
which may result in the Portfolio losing its qualification as a regulated
investment company. In this event, the Portfolio would be subject to federal
income tax on its net income at regular corporate rates (without a deduction
for distributions to shareholders). When distributed, such income would then
be taxable to shareholders as ordinary income to the extent of the Portfolio's
earnings and profits. Although Management intends to have the Portfolio
qualify as a regulated investment company, there can be no assurance that it
will achieve this goal.

Each investor should consult its tax adviser regarding specific questions as
to federal, state or local taxes.

Performance Information

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

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

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

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

<PAGE>

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

General Information

The Fund was organized as an unincorporated business trust under the laws of
The Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust (the "Trust Agreement") dated September 29, 1994. The Fund commenced
operations on or about April 3, 1995 in connection with the offer of shares of
certain of its other portfolios. The Fund is authorized to issue an unlimited
number of shares of beneficial interest, par value $0.001 per share. The
Portfolio's shares are classified into four classes--Class A, B, C and Y. Each
share has one vote and shareholders will vote in the aggregate and not by
class, except as otherwise required by law.

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

To date, the Fund's Board has authorized the creation of 10 portfolios of
shares. All consideration received by the Fund for shares of one of the
portfolios and all assets in which such consideration is invested will belong
to that portfolio (subject only to the rights of creditors of the Fund) and
will be subject to the liabilities related thereto. The assets attributable
to, and the expenses of, one portfolio (and as to classes within a portfolio)
are treated separately from those of the other portfolios (and classes). The
Fund has the ability to create, from time to time, new portfolios of shares
without shareholder approval.

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

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

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

<PAGE>

THE
BEAR STEARNS
FUNDS

575 Lexington Avenue
New York, NY 10022
1-800-766-4111

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

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

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

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

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

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

BSF-P-010-02

<PAGE>
Rule 497(c)
Registration No. 33-84842

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

PROSPECTUS

Balanced Portfolio

CLASS Y SHARES

The Bear Stearns Funds (the "Fund") is an open-end management investment
company, known as a mutual fund. The Fund permits you to invest in separate
portfolios. By this Prospectus, the Fund offers Class Y shares of the Balanced
Portfolio, a diversified portfolio (the "Portfolio"). The Portfolio's
investment objective is long-term capital growth and current income. The
Portfolio seeks to achieve this objective by investing between 40% and 60% of
its total assets in equity securities and at least 25% in fixed-income senior
securities.

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

BEAR STEARNS FUNDS MANAGEMENT INC. ("BSFM"), a wholly-owned subsidiary of The
Bear Stearns Companies Inc., is the Administrator of the Portfolio.

BEAR, STEARNS & CO. INC. ("Bear Stearns"), an affiliate of BSAM, serves as the
Portfolio's distributor. Bear Stearns is also referred to herein as the
"Distributor."

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

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

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

DECEMBER 24, 1997
<PAGE>

Table of Contents

<TABLE>
<CAPTION>
PAGE
<S> <C>
Background and Expense Information......................................... 3
Description of the Portfolio............................................... 4
Risk Factors............................................................... 8
Management of the Portfolio................................................ 8
Prior Performance of Related Accounts...................................... 10
How to Buy Shares.......................................................... 11
Shareholder Services....................................................... 12
How to Redeem Shares....................................................... 14
Dividends, Distributions and Taxes......................................... 15
Performance Information.................................................... 17
General Information........................................................ 17
</TABLE>

2
<PAGE>

Background and Expense Information

The Portfolio currently offers four classes of shares, only one of which,
Class Y, is offered by this Prospectus. Each class represents an equal, pro
rata, interest in the Portfolio. The Portfolio's other classes have different
services and/or distribution fees and expenses from Class Y, which would
affect performance of those classes of shares. Investors may obtain
information concerning the Portfolio's other class by calling Bear Stearns at
1-800- 766-4111.

EXPENSE SUMMARY

A summary of estimated expenses investors will incur when investing in the
Class Y Shares of the Portfolio offered pursuant to this Prospectus is set
forth below.

<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).................................................................. None
Maximum Deferred Sales Charge Imposed on Redemptions (as a percentage of
the amount subject to charge)........................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AFTER FEE WAIVERS AND EXPENSE
REIMBURSEMENT)
Advisory Fees (after fee waivers)*...................................... 0%
12b-1 Fees.............................................................. 0%
Other Expenses (after expense reimbursement)*........................... 0.70%
Total Portfolio Operating Expenses (after fee waiver and expense
reimbursement)*......................................................... 0.70%
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 YEAR................................................................. $ 7
3 YEARS................................................................ $ 22
</TABLE>

- ------
*Other Expenses are based on estimated amounts for the current fiscal year.
BSAM has undertaken to waive its investment advisory fee and assume certain
expenses of the Portfolio other than brokerage commissions, extraordinary
items, interest and taxes to the extent Total Portfolio Operating Expenses
exceed 0.70% for Class Y Shares. Without such waiver and expense
reimbursement, (which may be discontinued at any time upon notice to
shareholders), Advisory Fees would be 0.65%, Other Expenses are estimated to
be 1.19%, and Total Portfolio Operating Expenses would be 1.84%.

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

<PAGE>

Description of the Portfolio

GENERAL

INVESTMENT OBJECTIVE

MANAGEMENT POLICIES

INVESTMENT INSTRUMENTS AND STRATEGIES

<PAGE>

("Standard & Poor's") or Baa or better by Moody's Investors Service, Inc.
("Moody's"), or if unrated by such rating organizations, determined to be of
comparable quality by BSAM. Convertible debt securities are equity investments
for purposes of the Portfolio's investment policies. Under normal conditions,
the Portfolio will not invest more than 20% of its total assets in convertible
securities.

U.S. GOVERNMENT SECURITIES
The Portfolio may invest in U.S. Government securities. Generally, these
securities include U.S. Treasury obligations and obligations issued or
guaranteed by U.S. Government agencies, instrumentalities or sponsored
enterprises. U.S. Government securities also include Treasury receipts and
other stripped U.S. Government securities, where the interest and principal
components of stripped U.S. Government securities are traded independently.
The Portfolio may also invest in zero coupon U.S. Treasury securities and in
zero coupon securities issued by financial institutions, which represent a
proportionate interest in underlying U.S. Treasury securities. A zero coupon
security pays no interest to its holder during its life and its value consists
of the difference between its face value at maturity and its cost. The market
prices of zero coupon securities generally are more volatile than the market
prices of securities that pay interest periodically. Under normal conditions,
the Portfolio will not invest more than 60% of its total assets in U.S.
Government securities.

<PAGE>

illiquid securities. Under normal conditions, the Portfolio will not invest
more than 10% of its total assets in asset-backed securities.

CORPORATE DEBT OBLIGATIONS
The Portfolio may invest in corporate debt obligations rated BBB or higher by
Standard & Poor's or Baa or higher by Moody's. Corporate debt obligations are
subject to the risk of an issuer's inability to meet principal and interest
payments on the obligations. Under normal conditions, the Portfolio will not
invest more than 60% of its total assets in corporate debt obligations.

CASH EQUIVALENTS
The Portfolio may invest in short-term securities readily convertible to cash,
including U.S. Treasury bills, certificates of deposit and commercial paper
rated A-1 by Standard & Poor's or P-1 by Moody's. Under normal conditions, the
Portfolio will not invest more than 20% of its total assets in cash
equivalents.

INVESTMENT STRATEGIES

<PAGE>

MORTGAGE DOLLAR ROLLS
The Portfolio may enter into mortgage "dollar rolls" in which the Portfolio
sells securities for delivery in the current month and simultaneously
contracts with the same counterparty to repurchase substantially similar (same
type, coupon and maturity) but not identical securities on a specified future
date. During the roll period, the Portfolio loses the right to receive
principal and interest paid on the securities sold. The Portfolio would
benefit, however, to the extent of any difference between the price received
for the securities sold and the lower forward price for the future purchase or
fee income plus the interest earned on the cash proceeds of the securities
sold until the settlement date for the forward purchase. Unless such benefits
exceed the income, capital appreciation and gain or loss due to mortgage
prepayments that would have been realized on the securities sold as part of
the mortgage dollar roll, the use of this technique will diminish the
investment performance of the Portfolio. The Portfolio will hold and maintain
in a segregated account until the settlement date cash or liquid assets in an
amount equal to the forward purchase price. Successful use of mortgage dollar
rolls depends upon BSAM's ability to predict correctly interest rates and
mortgage prepayments. There is no assurance that mortgage dollar rolls can be
successfully employed. For financial reporting and tax purposes, the Portfolio
treats mortgage dollar rolls as two separate transactions; one involving the
purchase of a security and a separate transaction involving a sale. The
Portfolio does not currently intend to enter into mortgage dollar rolls that
are accounted for as a financing. Under normal conditions, the Portfolio will
not invest more than 20% of its total assets in mortgage dollar rolls.

TEMPORARY STRATEGIES

The Portfolio may, for temporary defensive purposes, invest 100% of its total
assets in U.S. Government securities, repurchase agreements collateralized by
U.S. Government securities, commercial paper rated at least A-1 by Standard &
Poor's or P-1 by Moody's, certificates of deposit, bankers' acceptances,
repurchase agreements, non-convertible preferred stocks, non-convertible
corporate bonds with a remaining maturity of less than one year or, subject to
certain tax restrictions, foreign currencies. When the Portfolio's assets are
invested in such instruments, the Portfolio may not be achieving its
investment objective.

CERTAIN FUNDAMENTAL POLICIES

Certain of the Portfolio's investment policies are fundamental policies that
can be changed only by shareholder vote.

<PAGE>

CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES

Risk Factors

NET ASSET VALUE FLUCTUATIONS

EQUITY SECURITIES

Investors should be aware that equity securities fluctuate in value, often
based on factors unrelated to the value of the issuer of the securities, and
that fluctuations can be pronounced. Changes in the value of the equity
securities in the Portfolio's portfolio will result in changes in the value of
the Portfolio's shares and thus the Portfolio's yield and total return to
investors. The Portfolio intends to invest between 40% and 60% of its total
assets in equity securities, even during times of significant market decline,
when other funds might take a more defensive position by investing a greater
amount of their assets in money market instruments or cash that are less
likely to decline when market conditions are adverse for equities.

FIXED-INCOME SECURITIES

Investors should be aware that fixed-income securities fluctuate in value
based on changes in prevailing interest rates. As interest rates go up, the
value of a fixed-income security typically goes down and vice versa.
Generally, fixed-income securities with longer maturities are more sensitive
to changes in interest rates.

SIMULTANEOUS INVESTMENTS

Management of the Portfolio

BOARD OF TRUSTEES

<PAGE>

INVESTMENT ADVISER AND ADMINISTRATOR

Lawrence M. Fields serves as the Senior Portfolio Manager of the Portfolio and
Heather J. Perlmutter serves as the co-Portfolio Manager. Mr. Fields has been
with Bear, Stearns & Co. Inc., in its Asset Management division since 1985. As
part of the division's equity investment team, he is responsible for the
management of balanced portfolios. From 1970 to 1985, Mr. Fields was with the
New York Life Insurance Company, where he spent the last four years as
Investment Vice President and Equity Portfolio Manager. Mr. Fields received
his B.S. in Accounting from Ohio State University, and his M.B.A. in Finance
from New York University Graduate School of Business. Ms. Perlmutter has been
with Bear, Stearns & Co. Inc. since 1990, and is currently managing balanced
portfolios. She began her tenure at Bear Stearns as a Sales Associate in the
Corporate Calling Group, and moved to Bear, Stearns & Co. Inc.'s Asset
Management division in 1993. She began her career as a Sales Assistant in the
Corporate Coverage Division of Morgan Stanley & Co. Inc. Ms. Perlmutter
received her B.A. in Communication from Rutgers University.

Under the terms of the Investment Advisory Agreement, the Portfolio has agreed
to pay BSAM a monthly fee at the annual rate of 0.65% of the Portfolio's
average daily net assets.

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

DISTRIBUTOR

Bear Stearns, located at 245 Park Avenue, New York, New York 10167, serves as
the Portfolio's principal underwriter and distributor of the Portfolio's
shares pursuant to an agreement which is

<PAGE>

renewable annually. Bear Stearns is entitled to receive the sales load
described under "How to Buy Shares" and payments under the Portfolio's
Distribution Plan described below.

CUSTODIAN AND TRANSFER AGENT

EXPENSE LIMITATION

BSAM has undertaken (until such time as it gives investors at least 60 days'
notice to the contrary) that, if in any fiscal year, certain expenses,
including the investment advisory fee, exceed 0.70% of Class Y's average daily
net assets for the fiscal year, BSAM may waive a portion of its investment
advisory fee or bear other expenses to the extent of the excess expense.

Prior Performance of Related Accounts

Set forth in the following table is the performance history of a composite of
institutional private accounts with investment objectives, policies,
strategies and risks substantially similar to those of the Portfolio. The
accounts constituting the composite were managed during the periods indicated
by a division of Bear, Stearns & Co. Inc. ("Bear Stearns") which was then
known as Bear Stearns Asset Management (the "Division"). Bear Stearns recently
reorganized its asset management operations so that the Division was
consolidated with the Adviser which then changed its name to Bear Stearns
Asset Management Inc. Prior to such consolidation, the Division rendered
advisory services to separate accounts while the Adviser rendered advisory
services to registered investment companies. During all periods reflected in
the table below, both the Division and the Adviser were commonly managed and
shared portfolio management personnel, including the portfolio managers of the
Portfolio who have been and are responsible for managing the accounts
reflected in the composite. Therefore, the Adviser believes that the
performance data reflected below are illustrative of the past performance of
the Adviser in managing a composite set of accounts substantially similar to
the Portfolio. For that reason, this performance history may be relevant to
potential investors in the Portfolio. Investors should note, however, that
prior to January 1, 1997, the portfolio managers of the Portfolio reported to
a Director of Equities who is no longer an employee of the Adviser or any of
its affiliates.

The composite performance data shown below were calculated in accordance with
the standards of the Association for Investment Management and Research
("AIMR" (1)), retroactively applied to all time periods. All returns presented
were calculated on a total return basis and include all dividends and
interest, accrued income and realized and unrealized gains and losses. All
returns reflect the deduction of all fees and expenses paid by the accounts
including, investment advisory fees, brokerage commissions and execution costs
but does not reflect the imposition of federal or state income taxes or
custodial fees, if any. The composite includes all actual, fee-paying,
discretionary
accounts managed by the Division that have investment objectives, policies,
strategies and risks substantially similar to those of the Portfolio. The
composite, however, excludes certain accounts with similar investment
objectives which, in the opinion of the Adviser, were not managed in a manner
similar to the manner in which the Portfolio will be managed as a result of
asset size, investment restrictions or other variables. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. Cash and equivalents are included in performance returns. For
additional information regarding the composite performance data, please see
the Statement of Additional Information.
- --------
(1) AIMR is a non-profit membership and education organization with more than
60,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers. These AIMR
performance presentation standards are intended to (i) promote full and
fair presentations by investment advisers of their performance results,
and (ii) ensure uniformity in reporting so that performance results of
investment advisers are directly comparable. Note however that the SEC
mandated calculation of performance differs from that mandated by AIMR.

<PAGE>

Balanced Composite Performance Summary

AS OF OCTOBER 31, 1997

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
LIPPER BALANCED INVESTMENT ADVISER'S
TIME PERIOD FUNDS INDEX BALANCED COMPOSITE
- --------------------------------------------------------------------------------
<S> <C> <C>
1/1/97 to 10/31/97......................... 16.17% 16.66%
1996....................................... 13.01 12.71
1995....................................... 24.89 31.04
1994....................................... -2.05 -0.39
1993....................................... 11.95 9.84
1992....................................... 7.46 7.81
1991....................................... 25.83 22.97
4/1/90 to 12/31/90......................... 3.07 4.62
</TABLE>

AVERAGE ANNUAL TOTAL RETURN:

How to Buy Shares

GENERAL

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