<PAGE>
As filed via EDGAR with the Securities and Exchange Commission on May 14, 1999
Registration Nos. 33-84842
ICA No. 811-8798
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. ________ [ ]
Post-Effective Amendment No. 23 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 23 [x]
(Check appropriate box or boxes)
THE BEAR STEARNS FUNDS
(Exact Name of Registrant as Specified in Charter)
575 Lexington Avenue
New York, New York 10022
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 272-2000
copy to:
Stephen A. Bornstein, Esq. Jay G. Baris, Esq.
Bear, Stearns & Co. Inc. Kramer Levin Naftalis & Frankel LLP
575 Lexington Avenue 919 Third Avenue
New York, New York 10022 New York, New York 10022
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(1)
---
___ on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
___ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
___ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
THE BEAR STEARNS FUNDS
CROSS REFERENCE SHEET
Pursuant to Rule 485(a)
under the Securities Act of 1933
N-1A Item No. Location
- ------------- --------
Part A Prospectus Caption
- ------ ------------------
Item 1. Front and Back Cover Pages Front and Back Cover
Pages
Item 2. Risk/Return Summary: Risk/Return Summary
Investments, Risks and
Performance
Item 3. Risk/Return Summary: Fee Table Risk/Return Summary:
Fees and Expenses
Item 4. Investment Objectives, Principal Investments; Risk
Investment Strategies and Factors
Related Risks
Item 5. Management=s Discussion of Not Applicable
Fund's Performance
Item 6. Management, Organization and Management of the
Capital Structure Portfolios
Item 7. Shareholder Information How the Portfolios
Value their Shares;
Investing in the
Portfolios
Item 8. Distribution Arrangements Investing in the
Portfolios;
Distribution Fees and
Shareholder Servicing
Fees
Item 9. Financial Highlights Information Financial Highlights
i
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Statement of Additional
Part B Information Caption
- ------ -------------------
Item 10. Cover Page and Table of Contents Cover Page
Item 11. Fund History Table of Contents
Item 12. Description of the Fund and its Information About the
Investments and Risks Fund
Item 13. Management of the Fund Investment Objective
and Management
Policies; Appendix
Item 14. Control Persons and Principal Management of the Fund
Holders of Securities
Item 15. Investment Advisory and Other Information About the
Services Fund
Item 16. Brokerage Allocation and Other Management
Practices Arrangements;
Custodian, Transfer and
Dividend Disbursing
Agent, Counsel and
Independent Auditors
Item 17. Capital Stock and Other Portfolio Transactions
Securities
Item 18. Purchase, Redemption and Pricing Not Applicable
of Shares
Item 19. Taxation of the Fund Management of the Fund;
Purchase and Redemption
of Shares; Determi-
nation of Net Asset
Value
Item 20. Underwriters Dividends,
Distributions and Taxes
Item 21. Calculation of Performance Data Cover Page
Item 22. Financial Statements Performance Information
Part C
- ------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of the Registration Statement.
ii
<PAGE>
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 - 4 4 7 - 1 1 3 9
The Bear Stearns Funds
Equity Funds
. S&P STARS Portfolio
. The Insiders Select Fund
. Large Cap Value Portfolio
. Small Cap Value Portfolio
. Focus List Portfolio
. Balanced Portfolio
. International Equity Portfolio
Class A, B and C Shares
PROSPECTUS
_______, 1999
This Prospectus provides important information about each Portfolio that
you should know before investing. Please read it carefully and keep it for
future reference.
The Securities and Exchange Commission has not approved
any Portfolio's shares as an investment or determined
whether this Prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
<PAGE>
Each Portfolio described in this Prospectus is a series of The Bear Stearns
Funds, a registered open-end management investment company (the "Trust").
Table of Contents
RISK/RETURN SUMMARIES
S&P STARS Portfolio
The Insiders Select Fund
Large Cap Value Portfolio
Small Cap Value Portfolio
Focus List Portfolio
Balanced Portfolio
International Equity Portfolio
INVESTMENTS
RISK FACTORS
MANAGEMENT OF THE PORTFOLIOS
Investment Adviser
Portfolio Management Team
HOW THE PORTFOLIOS VALUE THEIR SHARES
INVESTING IN THE PORTFOLIOS
Investment Requirements
Choosing a Class of Shares
How the Trust Calculates Sales Charges
Sales Charge Reductions and Waivers
How to Buy Shares
How to Sell Shares
Exchanges
SHAREHOLDER SERVICES
DIVIDENDS, DISTRIBUTIONS AND TAXES
DISTRIBUTION FEES AND SHAREHOLDER SERVICING FEES
ADDITIONAL INFORMATION
FINANCIAL HIGHLIGHTS
It is important to keep in mind that mutual fund shares are:
. not deposits or obligations of any bank
. not insured by the FDIC
. subject to investment risk, including possible loss of the amount
invested
2
<PAGE>
S&P STARS PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
To provide investment results that exceed the total return of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Stock Index (the "S&P 500 Index").
Principal Strategies
To achieve the investment objective of the S&P STARS Portfolio (the "STARS
Portfolio"), Bear Stearns Asset Management Inc., each Portfolio's investment
adviser ("BSAM" or the "Adviser") uses the Standard & Poor's Stock Appreciation
Ranking System (or "STARS") to identify securities in the highest category (five
stars) for purchase and in the lowest category (one star) for short selling.
The Adviser believes that this approach will provide opportunities to achieve
performance that exceeds the S&P 500 Index's total return.
. Generally, the STARS Portfolio will invest at least 85% of its total assets in
U.S. common stocks and ADRs that, at their time of initial purchase, were
ranked five stars or, at their time of short sale, were ranked one star.
. Generally, the STARS Portfolio may invest up to 15% of its total assets in
U.S. common stocks and ADRs without regard to STARS ranking, if the Adviser
believes that such securities offer opportunities for capital appreciation.
In selecting investments, the Adviser analyzes the stocks ranked by STARS and
selects those it believes have the best potential for capital appreciation. The
Adviser focuses on companies that show the potential to achieve growth at a
reasonable price. The Adviser considers various factors including market
segment, industry, earnings history, price-to-earnings ratio and management.
The Adviser may select securities of companies with small, middle or large
market capitalizations.
STARS ranks the stocks of approximately 1,100 issuers analyzed by S&P's research
staff and evaluates the short-term (up to 12 months) appreciation potential of
the reviewed stocks, as shown below.
..... Buy e Expected to be among the best performers
over the next 12 months and to rise in price
.... Accumulate e Expected to be an above-average performer
... Hold e Expected to be an average performer
.. Avoid e Expected to be a below-average performer
. Sell e Expected to be a well-below-average
performer and to fall in price
3
<PAGE>
Short Sales
The STARS Portfolio may "sell short" securities that at their time of initial
sale were rated one star. In a short sale, the Adviser sells a security it has
borrowed, with the expectation that the security will decline in value. If the
Adviser correctly predicts the decline in value, the Adviser will repurchase the
security at a lower price and realize a gain for the STARS Portfolio. Short
selling is considered "leverage" and may involve substantial risk.
The STARS Portfolio may invest in put options on indices or securities to hedge
against unanticipated market decline, and may engage in other options
strategies.
STARS rankings represent the subjective determination of a periodically changing
pool of S&P analysts. Past performance of securities included in STARS cannot
be used to predict future results of the STARS Portfolio, which is managed
actively by the Adviser and the results of which should be expected to vary from
the performance of STARS. Neither the STARS Portfolio nor the Adviser and its
affiliates have any ongoing relationship with S&P regarding the STARS Portfolio
other than the right to use the S&P, Standard & Poor's and STARS trademarks for
a fee in connection with the management of mutual funds and access to STARS
through S&P's publicly available subscription service.
For a more detailed discussion of the STARS ranking system and its use by the
STARS Portfolio, please see the "Investments" section of this Prospectus,
beginning at page ___. The "Investments" section also discusses various
investments and techniques that the STARS Portfolio uses to achieve its
investment objective.
Principal Risks
The STARS Portfolio is subject to the following principal risks, more fully
described in "Risk Factors." Some or all of these risks may adversely affect the
STARS Portfolio's net asset value, yield and/or total return:
. The market value of portfolio securities may decline
. A particular strategy may not produce the intended result or may
not be executed effectively
. A company's earnings may not increase as expected
. Hedges created by using derivative instruments, including futures
or options contracts, may not respond to economic or market
conditions as expected
. Short sales involve leverage, which may increase potential losses
. The Adviser relies upon ratings by S&P, which may fail to rate a
security appropriately
The STARS Portfolio is a non-diversified mutual fund, which means that it
may invest a larger portion of its assets in a single issuer than if it were
diversified. This could make the STARS Portfolio more susceptible to the
uncertain performance of a particular issuer.
Who may want to invest in the STARS Portfolio
The STARS Portfolio may be appropriate for investors who:
. are investing for the long term
4
<PAGE>
. are willing to accept the price volatility associated with stocks
in exchange for their relatively higher return potential compared
to other asset classes
. want to add a growth component to diversify an income-oriented
portfolio
The STARS Portfolio may not be appropriate for investors who:
---
. want a diversified portfolio
. are investing for the short term or need current income
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
PERFORMANCE
The bar chart and table below show the risks of investing in the STARS Portfolio
by showing changes in the performance of its Class A shares as of December 31,
1998 from year to year since inception. The table shows how the STARS
Portfolio's average annual total return for one year and since the date of
inception compared to the S&P 500 Index, a broad-based unmanaged index that
represents the general performance of domestically traded common stocks of mid-
to large-size companies, and the Consumer Price Index, which measures changes in
consumer prices as determined by the U.S. Bureau of Labor Statistics. The
figures shown assume reinvestment of dividends and distributions. The returns
for Class B and C shares offered by this Prospectus will differ from the return
for the Class A shares shown on the bar chart, depending on the expenses of each
Class. The chart and the table do not reflect any sales charges that you may be
required to pay when you buy or sell your shares. If sales charges were
reflected, returns would be less than those shown.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1995: ___.__% (1)
1996: ___.__%
1997: ___.__%
1998: ___.__% (2)
(1) Commenced investment operations on April 3, 1995. Return is not annualized
(2) The STARS Portfolio's year-to-date return as of June 30, 1999 was ___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 19__) and the lowest quarterly return was YY% (for
the quarter ended _____19__).
5
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ended December 31, 1998) 1 Year Since
Inception
<S> <C> <C>
STARS Portfolio - Class A ___.__% ___.__%*
- --------------------------------------------------------------------------------------
STARS Portfolio - Class B ___.__% ___.__%**
- --------------------------------------------------------------------------------------
STARS Portfolio - Class C ___.__% ___.__%*
- --------------------------------------------------------------------------------------
S&P 500 Index ___.__% ___.__%
- --------------------------------------------------------------------------------------
Consumer Price Index ___.__% ___.__%
</TABLE>
* Class A and C shares commenced operations on April 3, 1995.
** Class B shares commenced operations on January 5, 1998.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the STARS Portfolio.
<TABLE>
<CAPTION>
Shareholder Fees (paid directly from your Class A Class B Class C
investment)*
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.50% None None
- ------------------------------------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None None None
- ------------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None None None
- ------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of offering price) None (1) 5.00% (2) 1.00%
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
(1) Although there is no initial sales charge for purchases of $1 million or
more of Class A shares, the Trust charges you a CDSC of 1% if you sell your
shares within one year of purchase.
(2) The Class B deferred sales charge declines over time. See "How the
Trust Calculates Sales Charges -- Class B Shares."
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the STARS Portfolio.
These STARS Portfolio pays these expenses are paid from the Fund's its assets.
6
<PAGE>
ANNUAL PORTFOLIO OPERATING EXPENSES
Class A Class B Class C
-------- -------- --------
Management Fees 0.75% 0.75% 0.75%
Distribution (12b-1) Fees 0.25% 0.75% 0.75%
Other Expenses (1) . % . % . %
------- ------- -------
Total Portfolio Operating Expenses __.__% __.__% __.__%
Fee Waiver and Expense Reimbursement ( . )% ( . )% ( . )%
------- ------- -------
Net Expenses (2) 1.50% 2.00% 2.00%
==== ==== ====
(1) Includes a shareholder servicing fee of 0.25%.
(2) The expenses shown are based on historical expenses of the STARS Portfolio
adjusted to reflect current expenses. The Adviser has agreed to waive its
fee and/or reimburse certain expenses until at least March 31, 2000 so that
the STARS Portfolio's net expenses do not exceed the amounts indicated
above.
Example
This Example illustrates the cost of investing in the STARS Portfolio over
various time periods. It is intended to help you compare the cost of investing
in the STARS Portfolio with the cost of investing in other mutual funds. The
Example assumes that:
. you invest $10,000 in the STARS Portfolio
. your investment returns 5% each year
. the STARS Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
If you sell your shares at the end of each period --
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
* This Example assumes that net portfolio operating expenses will equal 1.50%
for Class A and 2.00% for Class B and C shares until March 31, 2000 and
thereafter will equal __.___% for Class A, __.___% for Class B and __.___%
for Class C shares.
** Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used in the Example after year eight in
the case of Class B shares.
7
<PAGE>
THE INSIDERS SELECT FUND
RISK/RETURN SUMMARY
Investment Objective
Capital appreciation.
Principal Strategies
Under normal market conditions, the Adviser invests substantially all of The
Insiders Select Fund's assets in U.S. equity securities. The Insiders Select
Fund will invest at least 85% of its assets in the equity securities of U.S.
issuers that it believes provide opportunities for capital appreciation or gains
through short selling, without regard to market capitalization. The Adviser
nonetheless anticipates that the issuers principally will be mid- to-large
capitalization companies (market capitalizations exceeding $1 billion). The
Insiders Select Fund will invest in U.S. equity securities that the Adviser
believes will equal or exceed the performance of the Standard & Poor's MidCap
400 Stock Index (the "S&P MidCap 400 Index"). The median market capitalization
of stocks in the S&P MidCap 400 Index was about $1.6 billion as of March 31,
1999. The Insiders Select Fund may invest in stocks that are not included in
the S&P MidCap 400 Index.
In selecting investments for The Insiders Select Fund, the Adviser analyzes (i)
trading in a company's securities by corporate insiders, officers, directors and
significant stockholders, (ii) published company reports prepared by financial
analysts, including revisions to earnings predictions and (iii) a company's
corporate finance activities, including stock repurchase programs, dividend
policies and new securities issuance.
Insiders, analysts and the company each send signals that the Adviser analyzes
to produce valuable information about the prospects for individual companies.
While no one signal determines whether the Adviser will buy or sell a particular
security, the Adviser will not consider buying or selling a security unless
insider behavior sends an appropriate positive or negative signal. In its
analysis, the Adviser uses only data that is available to the public. The
Adviser obtains the data on insider trading activity from CDA/Investnet, which
compiles this information from publicly available SEC filings.
Although, under normal market conditions, The Insiders Select Fund will invest
substantially all of its assets in U.S. equity securities, it may invest up to
15% of its assets in money market instruments.
The Insiders Select Fund may "sell short" securities. In a short sale, the
Adviser sells a security it has borrowed, with the expectation that the security
will decline in value. If the Adviser correctly predicts the decline in value,
the Adviser will repurchase the security at a lower price and realize a gain for
The Insiders Select Fund. Short selling is considered "leverage" and involves
substantial risk.
The Insiders Select Fund may, but is not required to, use derivatives to reduce
risk and enhance return, including futures contracts on securities and indices
and related options, and options on securities and financial indices.
For a more detailed discussion of how the Adviser evaluates trading by corporate
insiders, reports by financial analysts and corporate financing activity, please
see the "Investments" section of this Prospectus, beginning at page ___. The
"Investments" section also discusses various investments and techniques that The
Insiders Select Fund uses to achieve its investment objective.
8
<PAGE>
Principal Risks
The Insiders Select Fund is subject to the following principal risks, more
fully described in "Risk Factors." Some or all of these risks may adversely
affect The Insiders Select Fund's net asset value, yield and/or total return:
. The market value of portfolio securities may decline
. A particular strategy may not produce the intended result or may be
not executed effectively
. A company's earnings may not increase as expected
. Short sales involve leverage, which may increase potential losses
. Hedges created by using derivative instruments, including futures
or options contracts, may not respond to economic or market
conditions as expected
The Insiders Select Fund is a non-diversified mutual fund, which means that
it may invest a larger portion of its assets in a single issuer than if it were
diversified. This could make The Insiders Select Fund more susceptible to the
uncertain performance of a particular issuer.
Who may want to invest in The Insiders Select Fund
The Insiders Select Fund may be appropriate for investors who:
. are investing for the long term
. are willing to accept the price volatility associated with stocks
in exchange for their relatively higher return potential compared
to other asset classes
. believe that insider buying patterns may be a good indicator of the
future direction of a company's stock price
The Insiders Select Fund may not be appropriate for investors who:
---
. want a diversified portfolio
. are investing for the short term or need current income
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
PERFORMANCE
The bar chart and table below show the risks of investing in The Insiders Select
Fund by showing changes in the performance of its Class A shares as of December
31, 1998 from year to year since inception. The table shows how The Insiders
Select Fund's average annual total return for one year and since the date of
inception compared to the S&P MidCap 400 Index, a broad-based unmanaged index
that represents the general performance of domestically traded common stocks of
mid-size companies. The figures shown assume reinvestment of dividends and
distributions. The returns for Class B and C shares offered by this Prospectus
will differ from the return for the Class A shares shown on the bar chart,
depending on the expenses of each Class. The chart and the table do not reflect
any sales charges that
9
<PAGE>
you may be required to pay when you buy or sell your shares. If sales charges
were reflected, returns would be less than those shown.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1995: ___.__% (1)
1996: ___.__%
1997: ___.__%
1998: ___.__% (2)
(1) Commenced investment operations on June 16, 1995. Return is not annualized
(2) The Insiders Select Fund's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 19__) and the lowest quarterly return was YY% (for
the quarter ended _____19__).
<TABLE>
Average Annual Total Returns
(for the periods ended December 31, 1998) 1 Year Since
Inception
<S> <C> <C>
Insiders Select Fund - Class A ___.__% ___.__%*
- --------------------------------------------------------------------------------------
Insiders Select Fund - Class B ___.__% ___.__%**
- --------------------------------------------------------------------------------------
Insiders Select Fund - Class C ___.__% ___.__%*
- --------------------------------------------------------------------------------------
S&P MidCap 400 Index ___.__% ___.__%
</TABLE>
* Class A and Class C shares commenced operations on June 16, 1995.
** Class B shares commenced operations on January 6, 1998.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of The Insiders Select Fund.
<TABLE>
Shareholder Fees (paid directly from your investment)* Class A Class B Class C
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.50% None None
- ------------------------------------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None None None
- ------------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None None None
- ------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge
(load) (as a percentage of offering price) None (1) 5.00% (2) 1.00%
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
(1) Although there is no initial sales charge for purchases of $1 million or
more of Class A shares, the Trust charges you a CDSC of 1% if you sell your
shares within one year of purchase.
(2) The Class B deferred sales charge declines over time. See "How the
Trust Calculates Sales Charges -- Class B Shares."
10
<PAGE>
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of The Insiders Select
Fund. These Insiders Select Fund pays these expenses are paid from the Fund's
its assets.
ANNUAL PORTFOLIO OPERATING EXPENSES
Class A Class B Class C
-------- -------- --------
Management Fees (1) 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.25% 0.75% 0.75%
Other Expenses (2) . % . % . %
------- ------- -------
Total Portfolio Operating Expenses __.__% __.__% __.__%
Fee Waiver and Expense Reimbursement ( . )% ( . )% ( . )%
------- ------- -------
Net Expenses (3) 1.65% 2.15% 2.15%
==== ==== ====
(1) The management fee may increase or decrease by 0.50% based on The Insiders
Select Fund's performance.
(2) Includes a shareholder servicing fee of 0.25%.
(3) The expenses shown are based on historical expenses of Insiders Select Fund
adjusted to reflect current expenses. The Adviser has agreed to waive its
fee and/or reimburse certain expenses until at least March 31, 2000 so that
The Insiders Select Fund's net expenses do not exceed the amounts indicated
above.
EXAMPLE
This Example illustrates the cost of investing in The Insiders Select Fund over
various time periods. It is intended to help you compare the cost of investing
in The Insiders Select Fund with the cost of investing in other mutual funds.
The Example assumes that:
. you invest $10,000 in The Insiders Select Fund
. your investment returns 5% each year
. The Insiders Select Fund's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
* This Example assumes that net portfolio operating expenses will equal
1.65% for Class A and 2.15% for Class B and C shares until March 31,
2000 and thereafter will equal __.___% for Class A, __.___% for Class B
and __.___% for Class C shares.
** Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used in the Example after year eight in
the case of Class B shares.
11
<PAGE>
LARGE CAP VALUE PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
Capital appreciation.
Principal Strategies
Under normal market conditions, the Large Cap Value Portfolio ("Large Cap
Portfolio") invests substantially all of its assets in equity securities of
companies with market capitalizations of $1 billion or more ("large companies")
and which the Adviser identifies as "value" securities.
Under normal market conditions, the Large Cap Portfolio will invest
substantially all of its assets in equity securities of large companies
. The Large Cap Portfolio will invest at least 85% of its total assets in
equity securities of large companies
. Within this 85% category, the Large Cap Portfolio may invest up to 10%
of its assets in equity securities of foreign issuers in the form of
U.S. dollar-denominated American Depositary Receipts ("ADRs") that are
listed on U.S. exchanges
. Although, under normal market conditions, the Large Cap Portfolio will
invest substantially all of its assets in large companies, it may invest up
to 15% of its total assets in money market instruments and other debt
obligations
Equity securities consist of common stocks, convertible securities and preferred
stocks. The convertible securities and preferred stocks in which the Large Cap
Portfolio may invest must be rated at least "investment grade" by a nationally
recognized statistical rating organization ("NRSRO") at the time of purchase.
The Adviser uses a "value" approach to investing. The Adviser looks for equity
securities that have relatively low price-to-book ratios, low price-to-earnings
ratios or higher-than-average dividend payments in relation to share price. To
determine whether a company's stock falls within the value classification, the
Adviser analyzes factors such as the company's price-to-book and price-to-
earnings ratios, earnings growth, dividend payout ratios, return on equity, and
beta (a measure of stock price volatility relative to the market).
In selecting investments, the Adviser also may consider, among other things, new
management and upcoming corporate restructuring, the general business cycle, the
company's position within a specific industry and the company's responsiveness
to changing conditions.
The Large Cap Portfolio may, but is not required to, use derivatives to
reduce risk and enhance return, including futures contracts on securities and
indices and related options, and options on securities and financial indices.
12
<PAGE>
Principal Risks
The Large Cap Portfolio is subject to the following principal risks, more
fully described in "Risk Factors." All or some of these risks may adversely
affect the Large Cap Portfolio's net asset value, yield and/or total return:
. The market value of portfolio securities declines
. In a falling market, value stocks may decline in price faster
than growth stocks
. In a rising market, value stocks may rise more slowly than
growth stocks
. A particular strategy may not produce the intended result or may
not be executed effectively
. A company's earnings may not increase as expected
. Hedges created by using derivative instruments, including futures
or options contracts, may not respond to economic or market
conditions as expected
Who may want to invest in the Large Cap Portfolio
The Large Cap Portfolio may be appropriate for investors who:
. are investing for the long term
. are willing to accept the price volatility associated with stocks
in exchange for their relatively higher return potential compared
to other asset classes
. want a core equity investment
The Large Cap Portfolio may not be appropriate for investors who:
---
. are investing for the short term or need current income
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
PERFORMANCE
The bar chart and table below show the risks of investing in the Large Cap
Portfolio by showing changes in the performance of its Class A shares as of
December 31, 1998 from year to year since inception. The table shows how the
Large Cap Portfolio's average annual total return for one year and since the
date of inception compared to the Standard & Poor's 500 Stock Index (the "S&P
500 Index"), a broad-based unmanaged index that represents the general
performance of domestically traded common stocks of mid-to large-size companies.
The figures shown assume reinvestment of dividends and distributions. The
returns for Class B and C shares offered by this Prospectus will differ from the
return for the Class A shares shown on the bar chart, depending on the expenses
of each Class. The chart and the table do not reflect any sales charges that
you may be required to pay when you buy or sell your shares. If sales charges
were reflected, returns would be less than those shown.
***Past performance is not necessarily an indication of future results.***
13
<PAGE>
Bar Chart
1995: ___.__% (1)
1996: ___.__%
1997: ___.__%
1998: ___.__% (2)
(1) Commenced investment operations on April 3, 1995. Return is not annualized.
(2) The Large Cap Portfolio's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 19__) and the lowest quarterly return was YY% (for
the quarter ended _____19 __).
<TABLE>
Average Annual Total Returns
(for the periods ended December 31, 1998) 1 Year Since
Inception
<S> <C> <C>
Large Cap Portfolio - Class A ___.__% ___.__%*
- --------------------------------------------------------------------------------------
Large Cap Portfolio - Class B ___.__% ___.__%**
- --------------------------------------------------------------------------------------
Large Cap Portfolio - Class C ___.__% ___.__%*
- --------------------------------------------------------------------------------------
S&P 500 Index ___.__% ___.__%
</TABLE>
* Class A and C shares commenced operations on April 3, 1995.
** Class B shares commenced operations on January 28, 1998.
14
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Large Cap Portfolio.
<TABLE>
Shareholder Fees (paid directly from your investment)* Class A Class B Class C
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.50% None None
- ------------------------------------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None None None
- ------------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None None None
- ------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of offering price) None (1) 5.00% (2) 1.00%
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
(1) Although there is no initial sales charge for purchases of $1 million or
more of Class A shares, the Trust charges you a CDSC of 1% if you sell your
shares within one year of purchase.
(2) The Class B deferred sales charge declines over time. See "How the
Trust Calculates Sales Charges -- Class B Shares."
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the Large Cap
Portfolio. These Large Cap Portfolio pays these expenses are paid from the
Fund's its assets.
ANNUAL PORTFOLIO OPERATING EXPENSES
Class A Class B Class C
-------- -------- --------
Management Fees 0.75% 0.75% 0.75%
Distribution (12b-1) Fees 0.25% 0.75% 0.75%
Other Expenses (1) . % . % . %
------- ------- -------
Total Portfolio Operating Expenses __.__% __.__% __.__%
Fee Waiver and Expense Reimbursement ( . )% ( . )% ( . )%
------- ------- -------
Net Expenses (2) 1.50% 2.00% 2.00%
==== ==== ====
(1) Includes a shareholder servicing fee of 0.25%.
(2) The expenses shown are based on historical expenses of the Large Cap
Portfolio adjusted to reflect current expenses. The Adviser has agreed to
waive its fee and/or reimburse certain expenses until at least March 31,
2000 so that the Large Cap Portfolio's net expenses do not exceed the
amounts indicated above.
15
<PAGE>
EXAMPLE
This Example illustrates the cost of investing in the Large Cap Portfolio over
various time periods. It is intended to help you compare the cost of investing
in the Large Cap Portfolio with the cost of investing in other mutual funds.
The Example assumes that:
. you invest $10,000 in the Large Cap Portfolio
. your investment returns 5% each year
. the Large Cap Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
* This Example assumes that net portfolio operating expenses will equal 1.50%
for Class A and 2.00% for Class B and C shares until March 31, 2000 and
thereafter will equal __.___% for Class A, __.___% for Class B and __.___%
for Class C shares.
** Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used in the Example after year eight in the
case of Class B shares.
16
<PAGE>
SMALL CAP VALUE PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
Capital appreciation.
Principal Strategies
Under normal market conditions, the Small Cap Value Portfolio ("Small Cap
Portfolio") invests substantially all of its assets in equity securities of
companies with market capitalizations of up to $1 billion ("small companies")
and which the Adviser identifies as value companies.
Under normal market conditions, the Small Cap Portfolio will invest
substantially all of its assets in equity securities of small companies
. The Small Cap Portfolio will invest at least 85% of its total assets in
equity securities of small companies
. Within this 85% category, the Small Cap Portfolio may invest up to 10%
of its assets in equity securities of foreign issuers in the form of
U.S. dollar-denominated ADRs that are listed on U.S. exchanges
. Although, under normal market conditions, the Small Cap Portfolio will
invest substantially all of its assets in small companies, it may invest up
to 15% of its total assets in money market instruments and other debt
obligations
Equity securities consist of common stocks, convertible securities and preferred
stocks. The convertible securities and preferred stocks in which the Small Cap
Portfolio may invest must be rated at least "investment grade" by an NRSRO at
the time of purchase.
The Adviser uses a "value" approach to investing. The Adviser looks for equity
securities of companies that have relatively low price-to-book ratios, low
price-to-earnings ratios or higher-than-average dividend payments in relation to
share price. To determine whether a company's stock falls within the value
classification, the Adviser analyzes factors such as the company's price-to-book
and price-to-earnings ratios, earnings growth, dividend payout ratios, return on
equity, and beta (a measure of stock price volatility relative to the market).
In selecting investments, the Adviser also may consider, among other things, new
management and upcoming corporate restructuring, the general business cycle, the
company's position within a specific industry and the company's responsiveness
to changing conditions.
The Small Cap Portfolio may, but is not required to, use derivatives to reduce
risk and enhance return, including futures contracts on securities and indices
and related options, and options on securities and financial indices.
17
<PAGE>
Principal Risks
The Small Cap Portfolio is subject to the following principal risks, more
fully described in "Risk Factors." All or some of these risks may adversely
affect the Small Cap Portfolio's net asset value, yield and/or total return:
. The market value of portfolio securities may decline
. In a falling market, value stocks may decline in price faster
than growth stocks
. In a rising market, value stocks may rise more slowly than
growth stocks
. A small company's stock may decline in value because it lacks
management experience, operating experience, financial resources
and product diversification that permit larger companies to adapt
to changing market conditions
. Small company stock may be subject to wider price swings or be less
liquid because it trades less frequently and in smaller volume than
large company stock. This lack of liquidity may depress prices of
these securities
. A particular strategy may not produce the intended result or may
not be executed effectively
. A company's earnings may not increase as expected
. Hedges created by using derivative instruments, including futures
or options contracts, may not respond to economic or market
conditions as expected
Who may want to invest in the Small Cap Portfolio
The Small Cap Portfolio may be appropriate for investors who:
. are investing for the long term
. are willing to accept the price volatility associated with smaller-
company stocks in exchange for their relatively higher return
potential compared to larger-company stocks
. want to add a small-cap growth component to diversify their
portfolio
The Small Cap Portfolio may not be appropriate for investors who:
---
. are investing for the short term or need current income
. desire to invest only in larger, more established companies
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
PERFORMANCE
The bar chart and table below show the risks of investing in the Small Cap
Portfolio by showing changes in the performance of the Small Cap Portfolio's
Class A shares as of December 31, 1998 from year to year since inception. The
table shows how the Small Cap Portfolio's average annual total return for one
year and since the date of inception compared to the Russell 2000 Index. The
figures shown assume reinvestment of dividends and distributions. The returns
for Class B and C shares offered by this
18
<PAGE>
Prospectus will differ from the return for the Class A shares shown on the bar
chart, depending on the expenses of each Class. The chart and the table do not
reflect any sales charges that you may be required to pay when you buy or sell
your shares. If sales charges were reflected, returns would be less than those
shown.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1995: ___.__% (1)
1996: ___.__%
1997: ___.__%
1998: ___.__% (2)
(1) Commenced investment operations on April 3, 1995. Return is not annualized.
(2) The Small Cap Portfolio's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 19__) and the lowest quarterly return was YY% (for
the quarter ended _____19 __).
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ended December 31, 1998) 1 Year Since
Inception
<S> <C> <C>
Small Cap Portfolio - Class A ___.__% ___.__%*
- --------------------------------------------------------------------------------------
Small Cap Portfolio - Class B ___.__% ___.__%**
- --------------------------------------------------------------------------------------
Small Cap Portfolio - Class C ___.__% ___.__%*
- --------------------------------------------------------------------------------------
Russell 2000 Index ___.__% ___.__%
</TABLE>
* Class A and C shares commenced operations on April 3, 1995.
** Class B shares commenced operations on January 21, 1998.
19
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Small Cap Portfolio.
<TABLE>
<CAPTION>
Shareholder Fees (paid directly from your investment)* Class A Class B Class C
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.50% None None
- ------------------------------------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None None None
- ------------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None None None
- ------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of offering price) None (1) 5.00% (2) 1.00%
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
(1) Although there is no initial sales charge for purchases of $1 million or
more of Class A shares, the Trust charges you a CDSC of 1% if you sell your
shares within one year of purchase.
(2) The Class B deferred sales charge declines over time. See "How the
Trust Calculates Sales Charges -- Class B Shares."
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the Small Cap
Portfolio. These Small Cap Portfolio pays these expenses are paid from the
Fund's its assets.
Annual Portfolio Operating Expenses
Class A Class B Class C
-------- -------- --------
Management Fees 0.75% 0.75% 0.75%
Distribution (12b-1) Fees 0.25% 0.75% 0.75%
Other Expenses (1) . % . % . %
------- ------- -------
Total Portfolio Operating Expenses __.__% __.__% __.__%
Fee Waiver and Expense Reimbursement ( . )% ( . )% ( . )%
------- ------- -------
Net Expenses (2) 1.50% 2.00% 2.00%
==== ==== ====
(1) Includes a shareholder servicing fee of 0.25%.
(2) The expenses shown are based on historical expenses of the Small Cap
Portfolio adjusted to reflect current expenses. The Adviser has agreed to
waive its fee and/or reimburse certain expenses until at least March 31,
2000 so that the Small Cap Portfolio's net expenses do not exceed the
amounts indicated above.
20
<PAGE>
EXAMPLE
This Example illustrates the cost of investing in the Small Cap Portfolio over
various time periods. It is intended to help you compare the cost of investing
in the Small Cap Portfolio with the cost of investing in other mutual funds.
The Example assumes that:
. you invest $10,000 in the Small Cap Portfolio
. your investment returns 5% each year
. the Small Cap Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
* This Example assumes that net portfolio operating expenses will equal
1.50% for Class A and 2.00% for Class B and C shares until March 31,
2000 and thereafter will equal __.___% for Class A, __.___% for Class B
and __.___% for Class C shares.
** Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used in the Example after year eight in
the case of Class B shares.
21
<PAGE>
THE FOCUS LIST PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
Capital appreciation.
Principal Strategies
Under normal market conditions, the Focus List Portfolio will invest at least
65% of its total assets in the common stocks of U.S. and foreign issuers that,
at the time of purchase, are included on the Bear Stearns Equity Focus List (the
"Focus List").
Under normal market conditions, the Focus List Portfolio may invest up to 35% of
its total assets in stocks that are not on the Focus List. The Adviser may
select non-Focus List securities, for example, when the Adviser determines that
Focus List stocks are illiquid, would cause the Focus List Portfolio to be
overweighted in a particular sector or overly concentrated in a particular
industry, or for any other reason.
Although, under normal market conditions, the Focus List Portfolio will invest
substantially all of its assets in equity securities, it may invest up to 10% of
its total assets in money market instruments.
The Focus List generally consists of 20 stocks. Using a rating system of "1"
through "5," the Bear Stearns Equity Research Department, consisting of over 80
analysts who cover more than 900 common stocks of U.S. and foreign companies,
assigns the following ratings: 1 (Buy), 2 (Attractive), 3 (Neutral), 4 (Avoid),
5 (Sell). Approximately 300 stocks are rated Buy or Attractive.
The Bear Stearns Research Department and the Research Stock Selection Committee
(comprised of senior Research personnel) will assign a Buy rating to stocks when
they believe the stock will significantly outperform the market over the next
three to six months because of a catalyst or near-term event that they expect
will trigger upward movement in the stock's price. These catalysts may include
a change in management, the introduction of a new product or a change in the
industry outlook. An Attractive rating means that an analyst has determined
that the stock has solid long-term growth prospects and is undervalued in
comparison to that of comparable companies.
The Focus List Portfolio may, but is not required to, use derivatives to reduce
risk and enhance return, including futures contracts on securities and indices
and related options, and options on securities and financial indices.
For a more detailed discussion of the Focus List stock evaluation system and its
use by the Focus List Portfolio, please see the "Investments" section of this
Prospectus, beginning at page ___. The "Investments" section also discusses
various investments and techniques that the Focus List Portfolio uses to achieve
its investment objective.
22
<PAGE>
Principal Risks
The Focus List Portfolio is subject to the following principal risks, more
fully described in "Risk Factors." Some or all of these risk factors may affect
the Focus List Portfolio's net asset value, yield and/or total return:
. The market value of portfolio securities may decline
. A particular strategy may not produce the intended result or may
not be executed effectively
. A company's earnings may not increase as expected
. The Focus List Portfolio may forgo other attractive investment
opportunities because the securities are not on the Focus List
. The Adviser may be prohibited from buying an attractive stock in
the Focus List for legal reasons, and thus miss an investment
opportunity
. Hedges created by using derivative instruments, including futures
or options contracts, may not respond to economic or market
conditions as expected
The Focus List Portfolio is a non-diversified mutual fund, which means that it
may invest a larger portion of its assets in a single issuer than if it were
diversified. This could make the Focus List Portfolio more susceptible to the
uncertain performance of a particular issuer.
Who may want to invest in the Focus List Portfolio
The Focus List Portfolio may be appropriate for investors who:
. are investing for the long term
. are willing to accept the price volatility associated with stocks
in exchange for their relatively higher return potential compared
to other asset classes
. are seeking an aggressive growth investment
The Focus List Portfolio may not be appropriate for investors who:
---
. want a diversified portfolio
. are investing for the short term or need current income
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
23
<PAGE>
PERFORMANCE
The bar chart and table below show the risks of investing in the Focus List
Portfolio by showing changes in the performance of its Class A shares as of
December 31, 1998 for one year. The table shows how the Focus List Portfolio's
average annual total return for one year and since the date of inception
compared to the ________________ Index, a broad-based unmanaged index
______________________ _____________________________. The figures shown assume
reinvestment of dividends and distributions. The returns for Class B and C
shares offered by this Prospectus will differ from the return for the Class A
shares shown on the bar chart, depending on the expenses of each Class. The
chart and the table do not reflect any sales charges that you may be required to
pay when you buy or sell your shares. If sales charges were reflected, returns
would be less than those shown.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1998: ___.__% (1)
(1) The Focus List Portfolio's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 1998) and the lowest quarterly return was YY% (for
the quarter ended _____1998).
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ended December 31, 1998) 1 Year Since
Inception
<S> <C> <C>
Focus List Portfolio - Class A ___.__% ___.__%
- -------------------------------------------------------------------------------------------
Focus List Portfolio - Class B ___.__% ___.__%
- -------------------------------------------------------------------------------------------
Focus List Portfolio - Class C ___.__% ___.__%
- -------------------------------------------------------------------------------------------
__________________ Index ___.__% ___.__%
</TABLE>
* Class A, B and C shares commenced operations on December 29, 1997.
24
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Focus List Portfolio.
<TABLE>
<CAPTION>
Shareholder Fees (paid directly from your investment)* Class A Class B Class C
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.50% None None
- ------------------------------------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None None None
- ------------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None None None
- ------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of offering price) None (1) 5.00% (2) 1.00%
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
(1) Although there is no initial sales charge for purchases of $1 million or
more of Class A shares, the Trust charges you a CDSC of 1% if you sell your
shares within one year of purchase.
(2) The Class B deferred sales charge declines over time. See "How the
Trust Calculates Sales Charges -- Class B Shares."
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the Focus List
Portfolio. These Focus List Portfolio pays these expenses are paid from the
Fund's its assets.
Annual Portfolio Operating Expenses
Class A Class B Class C
-------- -------- --------
Management Fees 0.65% 0.65% 0.65%
Distribution (12b-1) Fees 0.25% 0.75% 0.75%
Other Expenses (1) . % . % . %
------- ------- -------
Total Portfolio Operating Expenses __.__% __.__% __.__%
Fee Waiver and Expense Reimbursement ( . )% ( . )% ( . )%
------- ------- -------
Net Expenses (2) 1.40% 1.90% 1.90%
==== ==== ====
(1) Includes a shareholder servicing fee of 0.25%.
(2) The expenses shown are based on historical expenses of the Focus List
Portfolio adjusted to reflect current expenses. The Adviser has agreed to
waive its fee and/or reimburse certain expenses until at least March 31,
2000 so that the Focus List Portfolio's net expenses do not exceed the
amounts indicated above.
25
<PAGE>
Example
This Example illustrates the cost of investing in the Focus List Portfolio over
various time periods. It is intended to help you compare the cost of investing
in the Focus List Portfolio with the cost of investing in other mutual funds.
The Example assumes that:
. you invest $10,000 in the Focus List Portfolio
. your investment returns 5% each year
. the Focus List Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
* This Example assumes that net portfolio operating expenses will equal 1.40%
for Class A and 1.90% for Class B and C shares until March 31, 2000 and
thereafter will equal __.___% for Class A, __.___% for Class B and __.___%
for Class C shares.
** Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used in the Example after year eight in
the case of Class B shares.
26
<PAGE>
BALANCED PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
Long-term capital growth and current income.
Principal Strategies
The Balanced 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 percentage of the Balanced Portfolio invested in equity and fixed-income
securities will vary from time to time as the Adviser evaluates their relative
attractiveness based on market valuations, economic growth and inflation
forecasts. When allocating equity and fixed income investments, the Adviser
takes into account the Balanced Portfolio's intention to pay regular quarterly
dividends. The amount of quarterly dividends may fluctuate depending on
prevailing interest rates and how the Adviser allocates the Balanced Portfolio's
assets, among other things.
Equity Securities. Under normal market conditions, the Balanced Portfolio
invests between 40% and 60% of its total assets in equity securities. The
Adviser may invest in equity securities primarily to provide current income.
Income-producing equity securities include
. interests in real estate investment trusts ("REITs")
. convertible securities
. preferred stocks
. utility stocks
. interests in limited partnerships
Fixed Income Securities. Under normal market conditions, the Balanced Portfolio
invests between 40% and 60% of its total assets in fixed income securities. The
Balanced Portfolio invests at least 25% of its total assets in fixed-income
senior securities and the remainder of its assets in debt instruments, other
fixed-income securities and money market instruments. The Balanced Portfolio
will invest in debt instruments that have been rated "A" or higher by Moody's
Investors Service, Inc. ("Moody's") or S&P. Within this 25% category, the
Balanced Portfolio may invest up to 5% of its total assets in higher-risk,
below-investment-grade corporate debt securities rated no lower than "B" by an
NRSRO or considered to be comparable by the Adviser. The Adviser employs a
"top-down" approach to selecting investments for the Balanced Portfolio that
includes analysis of interest rate, sector and yield curve trends.
The Balanced Portfolio's fixed income investments include
. securities issued by the U.S. Government, its agencies,
instrumentalities or sponsored enterprises
. debt securities issued by companies
. mortgage-backed and asset-backed securities
. municipal securities
27
<PAGE>
. custodial receipts
. U.S. dollar-denominated securities issued by foreign governments
Money Market Instruments. Under normal market conditions, the Balanced
Portfolio may invest up to 20% of its total assets in money market instruments.
The Balanced Portfolio may, but is not required to, use derivatives to
reduce risk and enhance return, including futures contracts on securities and
indices and related options, and options on securities and financial indices.
Principal Risks
The Balanced Portfolio is subject to the following principal risks, more
fully described in "Risk Factors." All or some of these risks may adversely
affect the Balanced Portfolio's net asset value, yield and/or total return:
. The market value of portfolio securities may decline
. A particular strategy or the Adviser's allocation may not produce
the intended result or may not be executed effectively
. A company's earnings may not increase as expected
. The rate of inflation increases and interest rates may rise,
causing the Balanced Portfolio's debt securities to decline in
value
. An issuer's credit quality may be downgraded
. Below-investment-grade securities may decline in value due to
defaults or bankruptcies
. The Balanced Portfolio may have to reinvest interest or sale
proceeds at lower rates
. The average life of a mortgage-related security may change
. Hedges created by using derivative instruments, including futures
or options contracts, may not respond to economic or market
conditions as expected
Who may want to invest in the Balanced Portfolio
The Balanced Portfolio may be appropriate for investors who:
. may be investing in the market for the first time
. seek current income to meet expenses coupled with asset growth
potential
. are investing in a retirement plan such as an IRA and want the
potential for both investment growth and some capital preservation
. are setting up trust accounts, such as charitable remainder trusts,
that have payout requirements
The Balanced Portfolio may not be appropriate for investors who:
---
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
28
<PAGE>
. want an investment that focuses exclusively either on equity or
fixed income securities
. want to invest in a particular sector or in particular industries
PERFORMANCE
The bar chart and table below show the risks of investing in the Balanced
Portfolio by showing changes in the performance of its Class A shares as of
December 31, 1998 for one year. The table shows how the Balanced Portfolio's
average annual total return for one year and since the date of inception
compared to the S&P 500 Index, a broad-based unmanaged index that represents the
general performance of domestically traded common stocks of mid-to large-size
companies, and the Lipper Balanced Fund Index, a non-weighted index of the 30
largest funds within the Lipper balanced fund investment category. The figures
shown assume reinvestment of dividends and distributions. The returns for Class
B and C shares offered by this Prospectus will differ from the return for the
Class A shares shown on the bar chart, depending on the expenses of each Class.
The chart and the table do not reflect any sales charges that you may be
required to pay when you buy or sell your shares. If sales charges were
reflected, returns would be less than those shown.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1998: ___.__% (1)
(1) The Balanced Portfolio's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 1998) and the lowest quarterly return was YY% (for
the quarter ended _____1998).
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ended December 31, 1998) 1 Year Since
Inception
<S> <C> <C>
Balanced Portfolio - Class A ___.__% ___.__%
- ------------------------------------------------------------------------------------------
Balanced Portfolio - Class B ___.__% ___.__%
- ------------------------------------------------------------------------------------------
Balanced Portfolio - Class C ___.__% ___.__%
- ------------------------------------------------------------------------------------------
S&P 500 Index ___.__% ___.__%
- ------------------------------------------------------------------------------------------
Lipper Balanced Fund Index ___.__% ___.__%
</TABLE>
Class A, B and C shares commenced operations on December 29, 1997.
29
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Balanced Portfolio.
<TABLE>
<CAPTION>
Shareholder Fees (paid directly from your investment)* Class A Class B Class C
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.50% None None
- ------------------------------------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None None None
- ------------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None None None
- ------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of offering price) None (1) 5.00% (2) 1.00%
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
(1) Although there is no initial sales charge for purchases of $1 million or
more of Class A shares, the Trust charges you a CDSC of 1% if you sell your
shares within one year of purchase.
(2) The Class B deferred sales charge declines over time. See "How the
Trust Calculates Sales Charges -- Class B Shares."
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the Balanced
Portfolio. These Balanced Portfolio pays these expenses are paid from the
Fund's its assets.
Annual Portfolio Operating Expenses
Class A Class B Class C
-------- -------- --------
Management Fees 0.65% 0.65% 0.65%
Distribution (12b-1) Fees 0.25% 0.75% 0.75%
Other Expenses (1) . % . % . %
------- ------- -------
Total Portfolio Operating Expenses __.__% __.__% __.__%
Fee Waiver and Expense Reimbursement ( . )% ( . )% ( . )%
------- ------- -------
Net Expenses (2) 1.20% 1.70% 1.20%
==== ==== ====
(1) Includes a shareholder servicing fee of 0.25%.
(2) The expenses shown are based on historical expenses of the Balanced
Portfolio adjusted to reflect current expenses. The Adviser has agreed to
waive its fee and/or reimburse certain expenses until at least March 31,
2000 so that the Balanced Portfolio's net expenses do not exceed the
amounts indicated above.
30
<PAGE>
EXAMPLE
This Example illustrates the cost of investing in the Balanced Portfolio over
various time periods. It is intended to help you compare the cost of investing
in the Balanced Portfolio with the cost of investing in other mutual funds. The
Example assumes that:
. you invest $10,000 in the Balanced Portfolio
. your investment returns 5% each year
. the Balanced Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
* This Example assumes that net portfolio operating expenses will equal
1.20% for Class A, 1.70% for Class B and 1.20% for Class C shares until
March 31, 2000 and thereafter will equal __.___% for Class A, __.___%
for Class B and __.___% for Class C shares.
** Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used in the Example after year eight in
the case of Class B shares.
31
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
Long-term capital appreciation.
Principal Strategies
Under normal market conditions, the International Equity Portfolio (the
"International Portfolio") invests substantially all of its assets in equity
securities of foreign companies. The International Portfolio will invest at
least 65% of its total assets in the equity securities of companies that are
organized outside the United States or whose securities are principally traded
outside the United States, including common stock, preferred stock, depositary
receipts for stock, and other securities having the characteristics of stock
(such as an equity or ownership interest in a company).
Although, under normal market conditions, the International Portfolio will
invest substantially all of its assets in foreign equities, it may invest up to
35% of its total assets in debt obligations, which include fixed or floating-
rate bonds, notes, debentures, commercial paper, loan participations, Brady
Bonds, convertible securities and other debt securities issued or guaranteed by
governments, agencies or instrumentalities, central banks, commercial banks or
private issuers, including repurchase agreements with respect to obligations of
governments or central banks. These debt obligations may be unrated or rated in
the lowest categories by an NRSRO. See "Risk factors -- Risks of debt
securities -- below-investment-grade securities."
The International Portfolio's investments may be denominated in U.S. dollars,
foreign currencies or multinational currency units.
Under normal market conditions, the International Portfolio invests in the
securities of companies located in at least three countries outside of the
United States. The International Portfolio in the securities of issuers located
in Australia, Canada, Japan, New Zealand and the developed countries of Western
Europe.
In selecting investments for the International Portfolio, the Adviser primarily
evaluates whether a particular country's securities markets have higher-than-
average potential for capital appreciation. The Adviser will then seek out
companies with strong fundamental characteristics, including solid management,
sound balance sheets and the potential for positive earnings growth.
The International Portfolio also may invest in the securities of issuers located
in countries that are considered to be emerging or developing ("emerging
countries") by the World Bank, the International Finance Corporation, or the
United Nations and its authorities. These countries are located primarily in
Africa, Asia (ex-Japan), the Caribbean islands, Central and South America, the
Middle East and certain parts of Europe (Cyprus, the Czech Republic, Estonia,
Greece, Hungary, Poland, Portugal, Russia, Slovakia and Turkey).
A company is considered to be an emerging country issuer if any of the following
apply:
. its securities are principally traded in an emerging country
. it derives at least 50% of its total revenue from (a) providing goods or
services in emerging countries or (b) sales made in emerging countries
32
<PAGE>
. it maintains 50% or more of its assets in one or more emerging countries
. it is organized under the laws of, or has a principal office in, an
emerging country
The International Portfolio may, but is not required to, use derivatives to
reduce risk and enhance return, including futures contracts on securities and
indices and related options, and options on securities and financial indices.
Principal Risks
The International Portfolio is subject to the following principal risks,
more fully described in "Risk Factors." Some or all of these risks may
adversely affect the International Portfolio's net asset value, yield and/or
total return:
. Foreign securities may experience more volatility than their
domestic counterparts, in part because of higher political and
economic risks, lack of reliable information, fluctuations in
currency exchange rates, and the risks that a foreign government
may take over assets, restrict the ability to exchange currency or
restrict the delivery of securities
. Foreign securities issued in emerging countries generally
experience less liquidity and more volatility because the
securities markets in these countries have less trading volume and
fewer participants than established markets
. Inefficient settlement procedures in emerging countries may cause
the International Portfolio to miss investment opportunities or be
exposed to liability for failure to deliver securities
. The International Portfolio may experience losses from improper
trading activities in emerging countries that are subject to less
government regulation than in the United States
. The market value of portfolio securities may decline
. A particular strategy may not produce the intended result or may
not be executed effectively
. A company's earnings may not increase as expected
. Hedges created by using derivative instruments, including futures
or options contracts, may not respond to economic or market
conditions as expected
Who may want to invest in the International Portfolio
The International Portfolio may be appropriate for investors who:
. are investing for the long term
. are willing to accept the price volatility associated with foreign
stocks in exchange for their relatively higher return potential
. want to diversify an existing portfolio by adding an international
component
The International Portfolio may not be appropriate for investors who:
---
. are investing for the short term or need current income
. are not willing to accept the risks associated with foreign
securities markets or currency
33
<PAGE>
fluctuation
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
PERFORMANCE
The bar chart and table below show the risks of investing in the International
Portfolio by showing changes in the performance of its Class A shares as of
December 31, 1998 for one year. The table shows how the International
Portfolio's average annual total return for one year and since the date of
inception compared to the Morgan Stanley Capital International Europe,
Australasia, Far East Index (the "MSCI EAFE Index"), a broad-based unmanaged
index that represents the general performance of common stocks of issuers
located in developed countries in Europe and the Pacific Basin, weighted by each
component country's market capitalization. The figures shown assume
reinvestment of dividends and distributions. The returns for Class B and C
shares offered by this Prospectus will differ from the return for the Class A
shares shown on the bar chart, depending on the expenses of each Class. The
chart and the table do not reflect any sales charges that you may be required to
pay when you buy or sell your shares. If sales charges were reflected, returns
would be less than those shown.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1998: ___.__% (1)
(1) The International Portfolio's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 1998) and the lowest quarterly return was YY% (for
the quarter ended _____1998).
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ended December 31, 1998) 1 Year Since
Inception
<S> <C> <C>
International Portfolio - Class A ___.__% ___.__%
- ------------------------------------------------------------------------------------------
International Portfolio - Class B ___.__% ___.__%
- ------------------------------------------------------------------------------------------
International Portfolio - Class C ___.__% ___.__%
- ------------------------------------------------------------------------------------------
MSCI EAFE Index ___.__% ___.__%
Class A, B and C shares commenced operations on December 29, 1997.
</TABLE>
34
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the International Portfolio.
<TABLE>
<CAPTION>
Shareholder Fees (paid directly from your investment)* Class A Class B Class C
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.50% None None
- ------------------------------------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None None None
- ------------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None None None
- ------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of offering price) None (1) 5.00% (2) 1.00%
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
(1) Although there is no initial sales charge for purchases of $1 million or
more of Class A shares, the Trust charges you a CDSC of 1% if you sell your
shares within one year of purchase.
(2) The Class B deferred sales charge declines over time. See "How the
Trust Calculates Sales Charges -- Class B Shares."
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the International
Portfolio. These International Portfolio pays these expenses are paid from the
Fund's its assets.
ANNUAL PORTFOLIO OPERATING EXPENSES
Class A Class B Class C
-------- -------- --------
Management Fees 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.25% 0.75% 0.75%
Other Expenses (1) . % . % . %
------- ------- -------
Total Portfolio Operating Expenses __.__% __.__% __.__%
Fee Waiver and Expense Reimbursement ( . )% ( . )% ( . )%
------- ------- -------
Net Expenses (2) 1.75% 2.25% 2.25%
==== ==== ====
(1) Includes a shareholder servicing fee of 0.25%.
(2) The expenses shown are based on historical expenses of the International
Portfolio adjusted to reflect current expenses. The Adviser has agreed to
waive its fee and/or reimburse certain expenses until at least March 31,
2000 so that the International Portfolio's net expenses do not exceed the
amounts indicated above.
35
<PAGE>
EXAMPLE
This Example illustrates the cost of investing in the International Portfolio
over various time periods. It is intended to help you compare the cost of
investing in the International Portfolio with the cost of investing in other
mutual funds. The Example assumes that:
. you invest $10,000 in the International Portfolio
. your investment returns 5% each year
. the International Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class A $_______ $_______ $_______ $_______
Class B $_______ $_______ $_______ $_____**
Class C $_______ $_______ $_______ $_______
* This Example assumes that net portfolio operating expenses will equal
1.75% for Class A and 2.25% for Class B and C shares until March 31,
2000 and thereafter will equal __.___% for Class A and __.___% for
Class B and Class C shares.
** Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used in the Example after year eight in
the case of Class B shares.
36
<PAGE>
INVESTMENTS
Principal Investment Strategies -- Additional Information
STARS Portfolio
S&P introduced STARS in January 1987. Since 1993, on average, each STARS
category has consisted of approximately the number of stocks shown below.
Rankings may change frequently as S&P analysts evaluate developments affecting
individual securities and the markets.
STARS Category Number of Stocks
-------------- ----------------
Five star e 95
Four star e 385
Three star e 530
Two star e 90
One star e 10 to 23
To evaluate the performance of stocks in the various categories, and thus the
performance of its analysts, STARS initially gives equal weight by dollar amount
to each stock, does not rebalance the portfolio based on changes in values or
rankings and does not reflect dividends or transaction costs. STARS is only a
model; it does not reflect actual investment performance. While its performance
cannot be used to predict actual results, S&P believes it is useful in
evaluating its analysts. Investors should recognize that the pool of S&P
analysts changes and their past performance is not necessarily predictive of
future results either of the model or of the STARS Portfolio. From January 1,
1987 through March 31, 1999:
. The S&P 500 Index (measured on a total return basis, without
dividend reinvestment) increased by ____.___%. During this period,
the average dividend yield of securities included in the S&P 500
Index were ___.___% and the average dividend yield of five star
stocks were ___.___%.
. The ranked stocks experienced the following changes in value:
STARS Category Percentage change in value
-------------- --------------------------
Five stars e ________%
Four stars e ________%
Three stars e ________%
Two stars e ________%
One star e ________%
The STARS Portfolio believes that this information means only that,
historically, five star stocks have significantly outperformed lower-ranked
stocks and that one star stocks have significantly underperformed the higher-
ranked stocks. You should not use this information to predict whether past
results will occur in the future or the actual performance of a particular
category. STARS' performance has been more volatile than that of conventional
indices such as the Dow Jones Industrial Average and the S&P 500
37
<PAGE>
Index. In addition, the performances of five star and one star stocks have not
borne a consistent relationship to each other or to the performance of the S&P
500 Index, as shown below. The STARS Portfolio is managed actively. Its
performance will depend primarily on the Adviser's investment decisions. The
STARS Portfolio will incur transaction and other costs, including management and
distribution fees, that are not reflected in the information shown below.
Relative Performance Rankings (1 = highest performance)
---------------------------------------------------------
1994 1995 1996 1997 1998
---------------------------------------------------------
1 One star S&P 500 Five star Five
stocks Index stocks star
stocks
---------------------------------------------------------
2 S&P 500 Five star S&P 500 S&P 500
Index stocks Index Index
---------------------------------------------------------
3 Five star One star One star One star
stocks stocks stocks stocks
Downgrades and upgrades. The Adviser need not sell a security that STARS
has downgraded. Also, the Adviser need not terminate a "short" position if it
involves a one star security that STARS has upgraded. In addition, if STARS
downgrades a portfolio security to four stars, the Adviser may consider that
security to be rated five stars. In this event, the Adviser may purchase
additional shares of that security without regard to the 15% limitation.
Similarly, if STARS upgrades a security that the STARS Portfolio has sold short
to two stars, the Adviser may consider that security to be rated one star. In
this event, the Adviser may sell short additional shares of that security
without regard to the 15% limitation.
The Insiders Select Fund
Corporate Insiders. The Adviser believes that collecting, classifying and
analyzing legally required reports of corporate insider transactions provides
valuable investment management information, because these insiders are in the
best position to understand their companies' near-term prospects.
Corporate insiders deal in their company's stock for various reasons. Some
transactions are unrelated to the future of the company, such as the sale of
stock to buy a home or finance a child's college education, tax planning or
token purchases to signal confidence in the company. Other transactions,
however, are related directly to the insider's beliefs about the near-term price
expectations for the company's stock. An insider who exercises long-term
options early for small profits may believes that the stock soon will decline.
Insiders who exercise options, hold the stock, and buy in the open market
probably believe that the stock soon will rise. Clusters of insiders making
substantial buys or sells may indicate broad agreement within a firm as to the
direction of the stock.
Financial Analysts. Financial analysts employ a number of research tools to
learn more about the companies they follow, including visits to the company and
in-depth discussions with management. Successful analysts learn to interpret
management's words and actions. Management may use discussions with certain
analysts to signal its views to the market. The Adviser also believes that
revisions in analysts' earnings and ratings predictions may indicate a stock's
future returns.
Financing Decisions. A company must routinely decide whether to maintain or
change its dividend policy, buy its own stock in the open market or issue new
securities. From time to time the company may decide that its stock is
undervalued, providing an opportunity to buy back the stock in the open market.
By contrast, a company's decision to sell securities may indicate that the
company believes that its stock has reached a near-term high, a possible sell
signal.
38
<PAGE>
Focus List Portfolio
Bear Stearns publishes the Focus List, which is a list of stocks selected by the
Bear Stearns Focus List Committee. Current members of the Focus List Committee
are Kathryn Booth, Director of Global Research for Bear Stearns, and Elizabeth
Mackay, Chief Investment Strategist of Bear Stearns. The Committee monitors the
Focus List daily, and candidates are considered based on one or more of the
following criteria: market outlook, perception of the stock's sector, and the
stock's current valuation relative to the market and its industry. Domestic and
international stocks and ADRs rated Buy (1) or Attractive (2) are eligible for
inclusion on the Focus List.
Generally, the Adviser will purchase a security that has been added to the Focus
List and will sell a security when the security has been removed from the Focus
List. The Adviser determines how much of the Focus List Portfolio's assets to
allocate to each Focus List stock. The Adviser may make changes in the
allocation as investment and economic conditions change. Depending upon market
conditions and to the extent the Focus List Portfolio needs to hold cash
balances to satisfy shareholder redemption requests, the Adviser may not
immediately purchase a new Focus List stock and/or may continue to hold one or
more Focus List stocks that have been deleted from the Focus List. The Adviser
will not have access to the Focus List before Bear Stearns publishes it.
The Focus List Committee automatically removes from the Focus List stocks that
an analyst has downgraded below Attractive. However, the Focus List Committee
may delete stocks for other reasons. For example, it may delete a stock when
the stock has achieved its target price range, a catalyst fails to materialize
or have its expected effect, or new, more attractive opportunities.
The Focus List may include stocks of issuers for which Bear Stearns or an
affiliate performs banking services for which it receives fees, as well as
stocks in which Bear Stearns or an affiliate makes a market and may have a long
or short position. When Bear Stearns or an affiliate participates in a
distribution of stock, the Adviser may be prohibited from purchasing that stock
for the Focus List Portfolio. The activities of Bear Stearns or an affiliate may
limit the Focus List Committee's ability to include stocks on the Focus List or
the Focus List Portfolio's flexibility in purchasing and selling such stocks.
The Focus List is available to other clients of Bear Stearns and its affiliates,
including the Adviser.
39
<PAGE>
Investments and Techniques
This table summarizes some of the investments and techniques, described
below, that each Portfolio may use to achieve its investment objectives.
<TABLE>
<CAPTION>
Large Small Inter- Insiders Focus
Cap Cap national Balanced STARS Select List
Portfolio Portfolio Portfolio Portfolio Portfolio Fund Portfolio
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ADRs u u u u u u
- --------------------------------------------------------------------------------------------------
Asset-backed u
securities
- --------------------------------------------------------------------------------------------------
Brady bonds u
- --------------------------------------------------------------------------------------------------
Convertible u u u u u
securities
- --------------------------------------------------------------------------------------------------
Debt securities u u u u u u u
- --------------------------------------------------------------------------------------------------
Equity u u u u u u u
securities
- --------------------------------------------------------------------------------------------------
Futures u u u u u u u
contracts and
related options
- --------------------------------------------------------------------------------------------------
Mortgage-related u
securities
- --------------------------------------------------------------------------------------------------
REITs u
- --------------------------------------------------------------------------------------------------
Repurchase u
agreements
- --------------------------------------------------------------------------------------------------
Short sales u
- --------------------------------------------------------------------------------------------------
Short sales u u u u u u
against the box
- --------------------------------------------------------------------------------------------------
When-issued u u u u u u u
securities and
forward
commitments
</TABLE>
. ADRs are receipts for the foreign company shares held by a United
States depositary institution, entitling the holder to all
dividends and capital gains of the underlying shares. ADRs are
quoted in U.S. dollars and are traded on U.S. exchanges.
. Asset-backed securities have a structure that is similar to
mortgage-related securities (see below). The collateral for these
securities includes home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile
home loans, recreational vehicle loans and hospital account
receivables.
40
<PAGE>
. Brady bonds are debt securities issued in an exchange of
outstanding commercial bank loans to public and private entities in
emerging countries in connection with sovereign debt
restructurings, under a plan introduced by former U.S. Treasury
Secretary Nicholas Brady.
. Convertible securities are bonds, debentures, notes, preferred
stocks or other securities that may be converted into or exchanged
for common stock. Convertible securities are characterized by (1)
higher yields than common stocks, but lower yields than comparable
non-convertible securities, (2) less price fluctuation than the
underlying stock since they have fixed income characteristics, and
(3) potential for capital appreciation if the market price of the
underlying stock increases.
. Debt securities, including bills, bonds, and notes, represent money
borrowed that must be repaid, usually having a fixed amount, a
specific maturity date or dates, and a specific rate of interest
(or formula for determining the interest rate) or an original
purchase discount.
. Equity securities include foreign and domestic common or preferred
stocks, rights and warrants.
. Futures contracts and related options. Futures contracts involve
the right or obligation to deliver or receive assets or money
depending on the performance of one or more assets or an economic
index. To reduce the effects of leverage, liquid assets equal to
the contract commitment are set aside to cover the commitment. A
Portfolio may invest in futures in an effort to hedge against
market risk, or as a temporary substitute for buying or selling
securities, foreign currencies or for temporary cash management
purposes.
. Mortgage-related securities represent interests in pools of
mortgage loans made by lenders like savings and loan institutions,
mortgage bankers, commercial banks and others.
. 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.
. Repurchase agreements are a type of secured lending and typically
involve the acquisition of debt securities (including foreign
government securities) from a financial institution, such as a
bank, savings and loan association or broker-dealer, which then
agrees to repurchase the security at a specified resale price on an
agreed future date (ordinarily a week or less). The difference
between the purchase and resale prices generally reflects the
market interest rate for the term of the agreement.
. Short sales. In a short sale, a Portfolio sells a security it does
not own anticipating that the price will decline. To complete a
short sale, the Portfolio must borrow the security to make delivery
and must then replace the security borrowed by buying it at the
prevailing market price, which may be higher or lower than the
price at which the Portfolio sold the security short. Short sales
involve leverage, which may exaggerate a gain or loss.
41
<PAGE>
. Short sales against the box. A Portfolio may sell a security short
that it already owns. Although the Portfolio will avoid the
transaction costs of a market purchase to replace the borrowed
stock, it incurs borrowing costs and loses an opportunity to
realize a higher price if the security's price at the time of
replacement is higher than the price at which the Portfolio sold
the security short.
. When-issued securities and forward commitments. When-issued
transactions arise when securities are purchased with payment and
delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield. In a forward
commitment transaction, a buyer agrees to purchase securities for a
fixed price at a future date beyond customary settlement time. A
purchaser may enter into offsetting contracts for the forward sale
of other securities that it owns.
Other Investment Strategies
[***Each Portfolio may invest defensively or hedge investments to protect
against a downturn.***]
. Temporary Defensive Measures. From time to time, during unfavorable
market conditions, the Adviser may invest "defensively." This means
a Portfolio may make temporary investments that are not consistent
with its investment objective and principal strategies. Engaging in
temporary defensive measures may reduce the benefit from any
upswing in the market and may cause a Portfolio to fail to meet its
investment objective.
For temporary defensive purposes, each Portfolio may hold cash
(U.S. dollars) and may invest all of its assets in high-quality
fixed-income securities or U.S. or foreign money market
instruments.
For cash management, each Portfolio temporarily may hold cash (U.S.
dollars) and may invest all of its assets in high-quality U.S. or
foreign money market instruments.
For temporary defensive purposes or cash management, the
International Portfolio may hold foreign currencies or
multinational currency units.
. Portfolio Turnover. The Adviser may trade actively to achieve a
Portfolio's goals. Emerging country markets are especially volatile
and may result in more frequent trading. This may result in higher
capital gains distributions, which would increase your tax
liability. Frequent trading may also increase the Portfolio's
costs, lessening its performance over time.
. Securities Lending. Each Portfolio may lend a portion of its
securities to financial institutions, which will generates income
for the Portfolio. The Portfolios have appointed Custodial Trust
Company ("CTC"), an affiliate of the Adviser, as securities lending
agent, for which CTC receives a transaction fee.
The SAI describes each Portfolio's investment strategies in more detail.
42
<PAGE>
RISK FACTORS
As with all mutual funds, investing in the Portfolios involves certain risks.
There is no guarantee that a Portfolio will meet its investment objective. You
can lose money by investing in a Portfolio if you sell your shares after it
declines in value below your original cost. There is never any assurance that a
Portfolio will perform as it has in the past.
The Portfolios may use various investment techniques, some of which involve
greater amounts of risk than others. You will find a detailed discussion of
these investment techniques in the SAI. To reduce risk, the Portfolios are
subject to certain limitations and restrictions on their investments, which are
also described in the SAI.
Each Portfolio is subject to the following principal risks, except as noted.
General risks
. Market risk is the risk that the market value of a security may go
up or down, sometimes rapidly. These fluctuations may cause the
security to be worth less than it was at the time it was acquired.
Market risk may involve a single security, a particular sector, or
the entire economy.
. Manager risk is the risk that the portfolio managers' investment
strategy may not produce the intended results. Manager risk also
involves the possibility that the portfolio managers fail to
execute an investment strategy effectively.
. Year 2000 risk. Like allother mutual funds, a Portfolio could be
adversely affected if the computer systems used by itstheir service
providers, including shareholder servicing agents, are unable to
recognize dates after 1999.do not properly process and calculate
date-related information. This risk may become greater as it
relates to investments in foreign countries. Each Portfolio's
service providers have been actively updating their systems to be
able to process yYear 2000 data. However, There can be no
assurance, however, that these steps will be adequate to avoid a
temporary service disruption or other adverse impact on the
Portfolios. In addition, an issuer's failure to process accurately
Year 2000 data may cause that issuer's securities to decline in
value or delay the payment of interest to a Portfolio. The risk of
computer failure may be greater with respect to investments in
foreign countries, which may lack the expertise or resources to
adequately address the issue.
Risks of equity securities
. Equity risk is the risk that a security's value will fluctuate in
response to events affecting an issuer's profitability or
viability. Unlike debt securities, which have preference to a
company's earnings and cash flow in case of liquidation, equity
securities benefit from a company's earnings and cash flow only
after the company meets its other obligations. For example, a
company must pay interest on its bonds before it pays stock
dividends to shareholders, and bondholders have preference to the
company's assets in the event of bankruptcy.
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<PAGE>
Risks of hedging or leverage transactions
. Correlation risk. Futures and options contracts can be used in an
effort to hedge against risk. Generally, an effective hedge
generates an offset to gains or losses of other investments made by
a Portfolio. Correlation risk is the risk that a hedge created
using futures or options contracts (or any derivative, for that
matter) does not, in fact, respond to economic or market conditions
in the manner the portfolio manager expected. In such a case, the
futures or options contract hedge may not generate gains sufficient
to offset losses and may actually generate losses.
. Leverage risk is the risk associated with those techniques in which
a relatively small amount of money invested - through borrowing or
futures trading, for example - puts a much larger amount of money
at risk. Selling short securities or using derivatives for hedging
may involve leverage. If a portfolio manager does not execute the
strategy properly, or the market does not move as anticipated,
losses may substantially exceed the amount of the original
investment. A Portfolio's use of derivatives for asset substitution
may also involve leverage.
. Derivatives risk is the risk that the derivatives that a Portfolio
invests in do not achieve the intended result. If a hedge works
properly, the gains produced will offset losses on the securities
hedged. Hedging also may reduce gains because a Portfolio may forgo
"upside" potential.
Risks of foreign securities
. Foreign issuer risk. Compared to U.S. and Canadian companies, less
information is generally available to the public about foreign
companies. Foreign stock exchanges, brokers, and listed companies
may be subject to less regulation and supervision by foreign
governments or other agencies. Foreign issuers may not be subject
to the uniform accounting, auditing, and financial reporting
standards and practices used by U.S. issuers. In addition, foreign
securities markets may be less liquid, more volatile, and less
subject to governmental supervision than in the U.S. Investments in
foreign countries could be affected by factors not present in the
U.S., including expropriation, confiscation of property, and
difficulties in enforcing contracts. All of these factors can make
foreign investments, especially those in emerging countries, more
volatile than U.S. investments.
. Currency risk (International Portfolio only). Fluctuations in
exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates
may erode or reverse any gains produced by foreign currency-
denominated investments and may widen any losses. On January 1,
1999 participating nations in the European Economic and Monetary
Union introduced a single currency, the euro. This action may
present unique uncertainties for securities denominated in
currencies that will become components of the euro. Political and
economic risks, along with other factors, such as the introduction
of the euro, could adversely affect the value of athe International
Portfolio's securities.
. Emerging markets risk (International Portfolio only). Emerging
country economies often compare unfavorably with the United States
economy in growth of gross domestic product, rate of inflation,
capital reinvestment, resources, self-sufficiency and balance of
payments position. Certain emerging countries have experienced and
continue to experience high rates of inflation, sharply eroding the
value of their financial assets. An
44
<PAGE>
emergency may arise where trading of emerging country securities
may cease or may be severely limited or where an emerging country
governmental or corporate issuer defaults on its obligations.
The governments of certain emerging countries impose restrictions
or controls that may limit or preclude the International
Portfolio's investment in certain securities. The International
Portfolio may need governmental approval for the repatriation of
investment income, capital or sales proceeds. An emerging country
government may impose temporary restrictions on capital flows.
Risks of debt securities
. Interest rate risk. The value of a debt security typically changes
in the opposite direction from a change in interest rates. When
interest rates go up, the value of a debt security typically goes
down. When interest rates go down, the value of a debt security
typically goes up. Generally, the longer the maturity of a
security, the more sensitive it is to changes in interest rates.
. Inflation risk is the risk that inflation will erode the purchasing
power of the cash flows generated by debt securities. Fixed-rate
debt securities are more susceptible to this risk than floating-
rate debt securities.
. Reinvestment risk is the risk that when interest rates are
declining, a Portfolio will have to reinvest interest income or
prepayments on a security interest rates at lower interest rates.
declined so that the Fund must reinvest the income at a lower
interest rate. In a declining interest rate environment, lower
reinvestment rates and price gains resulting from lower interest
rates will offset each other to some extent.
. Credit (or default) risk is the risk that the issuer of a debt
security will be unable to make timely payments of interest or
principal. Credit risk is measured by NRSROs* such as S&P, Fitch,
or Moody's.
. Below-investment-grade securities ("junk bonds") may be more
susceptible to real or perceived adverse economic conditions, less
liquid, and more difficult to evaluate than higher-rated
securities. The market for these securities has relatively few
participants, mostly institutional investors, and low trading
volume. A Portfolio may have difficulty selling particular high
yield securities at a fair price and obtaining accurate valuations
in order to calculate its net asset value.
Risks of mortgage-related securities (Balanced Portfolio only)
. Prepayment risk. Prepayments of principal on mortgage-related
securities affect the average life of a pool of mortgage-related
securities. Mortgage prepayments are affected by t The level of
interest rates and other factors may affect the frequency of
mortgage prepayments. In periods of rising interest rates, the
prepayment rate tends to decrease, lengthening the average life of
a pool of mortgage-related securities. In periods of falling
interest rates, the prepayment rate tends to increase, shortening
the average life of a pool of mortgage-related securities.
Prepayment risk is the risk that, because prepayments generally
occur when interest rates are falling, a Portfolio may have to
reinvest the proceeds from prepayments at lower interest rates.
Risks of real estate securities (Balanced Portfolio only)
. Real estate risk is the risk that the value of a security will
fluctuate because of changes in,
45
<PAGE>
among other things, property values, rental property vacancies,
overbuilding, changes in local laws, increased property taxes and
operating expenses
. Regulatory risk. Certain REITs may fail to qualify for pass-through
of income under federal tax law, or to maintain their exemption
from federal securities laws registration requirements.
MANAGEMENT OF THE PORTFOLIOS
Investment Adviser
BSAM, a wholly owned subsidiary of The Bear Stearns Companies Inc., is the
investment adviser of the Portfolios. The Adviser 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 & Co. Inc., is a leading United States investment banking,
securities trading and brokerage firm serving United States and foreign
corporations, governments and institutional and individual investors. The
Adviser is a registered investment adviser and offers, either directly or
through affiliates, investment advisory and administrative services to open-end
and closed-end investment funds and other managed pooled investment vehicles
with net assets at ________ __, 1999 of over $X.X billion. The Adviser is also a
registered broker-dealer.
The Adviser supervises and assists in the overall management of the affairs of
the Trust, subject to oversight by the Trust's Board of Trustees.
For the fiscal year ended March 31, 1999, the Adviser received management fees
based on a percentage of the average daily net assets of each Portfolio, after
waivers, as shown in the following table.
STARS Portfolio e ____%
Insiders Select Fund e ____%
Large Cap Portfolio e ____%
Small Cap Portfolio e ____%
Focus List Portfolio e ____%
Balanced Portfolio e ____%
International Portfolio e ____%
Portfolio Management Team
The Adviser uses a team approach to manage each Portfolio. The members of
each team together are primarily responsible for the day-to-day management of
each Portfolio's investments. No single individual is responsible for managing
a Portfolio. Each team consists of portfolio managers, assistant portfolio
managers and analysts performing as a dynamic unit to manage the assets of each
Portfolio.
Investment Sub-Adviser -- International Portfolio
Marvin & Palmer Associates, Inc. (the "Sub-Adviser") serves as the sub-
investment-adviser to the International Portfolio, pursuant to an agreement with
the Adviser and subject to the overall supervision of the Adviser. The Sub-
Adviser, a registered investment adviser, was founded in 1986 and specializes in
global, non-United States and emerging market equity portfolio management for
institutional accounts. As of March 31, 1999, the Sub-Adviser managed over
$_____ billion in assets. The Sub-Adviser is located at 1201 North Market
Street, Suite 2300, Wilmington, Delaware 19801.
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<PAGE>
HOW THE PORTFOLIOS VALUE THEIR SHARES
[The net asset value (NAV), multiplied by the number of Portfolio shares you
own, gives you the value of your investment.]
Each Portfolio calculates its share price, called its net asset value ("NAV"),
each business day as of the close of the New York Stock Exchange, Inc. (the
"NYSE"), which is normally at 4:00 p.m. Eastern Time. You may buy, sell or
exchange shares on any business day at the NAV that is calculated after you
place your order. A business day is a day on which the NYSE is open for trading
or any day in which enough trading has occurred in the securities held by a
Portfolio to affect the NAV materially.
Portfolio securities that are listed primarily on foreign exchanges may trade on
weekends or on other days on which the Portfolios do not price their shares. In
this case, the NAV of a Portfolio's shares may change on days when you are not
able to buy or sell shares.
The Portfolios value their investments based on market value or, where market
quotations are not readily available, based on fair value as determined in good
faith by the Trust's Board of Trustees. The NAV for each Class is calculated by
adding up the total value of the relevant Portfolio's investments and other
assets, subtracting its liabilities, and then dividing that figure by the number
of outstanding shares of the Class.
NAV = Total Assets Less Liabilities
-----------------------------
Number of Shares Outstanding
You can request each Portfolio's current NAV by calling 1-800-447-1139.
INVESTING IN THE PORTFOLIOS
This section provides information to assist you in purchasing shares of the
Portfolios. It describes the minimum investment requirements for the Portfolios,
the expenses and sales charges applicable to each Class of shares and the
procedures to follow if you decide to buy shares. Please read the entire
Prospectus carefully before buying shares of a Portfolio.
Investment Requirements
Minimum Initial Investment:
. Non-Retirement Account: $1,000
. Retirement Account: $ 500
Minimum Subsequent Investment:
. Non-Retirement Account: $ 50
. Retirement Account: $ 25
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<PAGE>
Choosing a Class of Shares
Once you decide to buy shares of a Portfolio, you must determine which
Class of shares to buy. Each Portfolio offers Class A, B and C shares. Each
Class has its own cost structure and features that will affect the results of
your investment over time in different ways. Your financial adviser or account
representative can help you choose the Class of shares that best suits your
investment needs.
. Class A shares have a front-end sales charge, which is added to
the Class A NAV to determine the offering price per share.
. Class B and C shares do not have a front-end sales charge, which
means that your entire investment is available to work for you
right away. However, Class B and C shares have a contingent
deferred sales charge ("CDSC") that you must pay if you sell your
shares within a specified period of time. In addition, the annual
expenses of Class B and C shares are higher than the annual
expenses of Class A shares.
In deciding which Class is best, you may consider:
. how much you intend to invest
. the length of time you expect to hold your investment
Relative Advantages of Each Share Class
Investor Characteristics Advantages
Class A . Long-term investment . Lower expense structure
horizon and/or plans to and the amount of the initial
invest at least $250,000 sales charge decreases as
you invest more money
Class B . Long-term investment . No front-end sales charge
horizon and/or plans to and the full amount of your
invest less than $250,000 investment is put to work
or buy shares at regular right away, and converts to
intervals Class A shares after eight
years
Class C . Short-term investment . No front-end sales charge
horizon and the full amount of your
investment is put to work
right away, and the CDSC is
lower than that of Class B
shares and declines to zero
after one year
You should consult your financial adviser or account representative before
investing in a Portfolio.
You may be eligible to use the Right of Accumulation or Letter of Intent
privileges to reduce your Class A sales charges. See "Reduction of Class A Sales
Charges" below.
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<PAGE>
The following table summarizes the differences in the expense structures of the
three Classes of shares:
Class A Class B Class C
- ------------------------------------------------------------------------------
Front-End 5.50% None None
Sales Charge*
- ------------------------------------------------------------------------------
CDSC None ** 5% to 0%, 1%, if you
declining the sell shares
longer you hold within one year
your shares of purchase
- ------------------------------------------------------------------------------
Annual Lower than Higher than Higher than
Expenses Class B and C Class A shares Class A shares;
shares (Note: Class B same as Class B
shares convert shares
to Class A
shares 8 years
after purchase)***
- ------------------------------------------------------------------------------
* There are several ways that you can reduce these charges, as described
under "Sales Charge Reductions and Waivers."
** Although there is no initial sales charge for purchases of $1 million or
more of Class A shares, the Trust charges you a CDSC of 1% if you sell your
shares within one year of purchase.
*** Class B shares will not convert to Class A shares if the Adviser believes
that the Internal Revenue Service will consider the conversion to be a taxable
event. If Class B shares do not convert to Class A shares, they will continue
to be subject to higher expenses than Class A shares indefinitely.
[***In general, Class A shares are the most beneficial for the investor
who qualifies for a waiver or reductions of the front-end sales charges.***]
[***Class B and C shareholders pay no front-end sales charge. You invest
your entire purchase price immediately in shares of a Portfolio. Over time,
however, the expenses of Class B and C shares may exceed the cumulative expenses
of Class A shares due to their higher annual expenses.***]
How the Trust Calculates Sales Charges
Class A Shares
The public offering price for Class A shares is the NAV that the Trust
calculates after you place your order plus the applicable sales load, as
determined in the following table.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
TOTAL SALES LOAD
---------------------------------------
Amount of Investment As a % of offering
price per share As a % of NAV
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 5.50 5.82
$50,000 or more but less than $100,000 4.75 4.99
$100,000 or more but less than $250,000 3.75 3.90
$250,000 or more but less than $500,000 2.75 2.83
$500,000 or more but less than $1,000,000 2.00 2.04
$1,000,000 and above 0.00* 0.00
</TABLE>
* For purchases of $1,000,000 or more, you will pay a CDSC of 1% if you sell
your shares within one year.
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<PAGE>
Class B Shares
The public offering price for Class B shares is the NAV that the Trust
calculates after you place your order. You pay no initial sales charge on Class
B shares, but you will pay a CDSC if you sell your shares within six years of
purchase. The amount of the CDSC, if any, will vary depending on the number of
years from the time you buy until the time you sell your Class B shares. Class
B shares have higher annual expenses than Class A shares.
For the purpose of determining the number of years from the time of any
purchase, the Trust will aggregate all payments during a month and consider them
made on the first day of that month.
Year Since Purchase CDSC as a % of Dollar Amount Subject to CDSC
First 5%
-----------------------------------------------------------------------
Second 4%
-----------------------------------------------------------------------
Third 3%
-----------------------------------------------------------------------
Fourth 3%
-----------------------------------------------------------------------
Fifth 2%
-----------------------------------------------------------------------
Sixth 1%
-----------------------------------------------------------------------
Seventh 0%
-----------------------------------------------------------------------
Eighth* 0%
_________________
* Class B shares of a Portfolio will automatically convert into Class A shares
of the same Portfolio at the end of the calendar quarter that is eight years
after the initial purchase of the Class B shares. Class B shares acquired by
exchange will convert into Class A shares of the new Portfolio based on the date
of the initial purchase of the exchanged Portfolio. Class B shares acquired
through reinvestment of distributions will convert into Class A shares based on
the date of the initial purchase of the shares on which the distribution was
paid. The Trust does not consider conversion to Class A shares to be a purchase
or sale for federal income tax purposes. You should consult with your own tax
adviser.
Class C Shares
The public offering price for Class C shares is the NAV that the Trust
calculates after you place your order. You pay no initial sales charge at the
time of purchase. You will pay a CDSC of 1%, however, if you sell Class C
shares within the first year of purchase.
The Trust will calculate the CDSC on Class B and C shares in a manner that
results in the lowest possible charge. The Portfolios will apply the CDSC to
the lower of (1) the purchase price of the shares, or (2) the current market
value of the shares being sold. You will pay no CDSC when you sell shares you
have acquired through reinvestment of dividends or capital gain distributions.
Sales Charge Reductions and Waivers
Waiver of Class A Sales Charges
The following categories of investors may buy Class A shares without a front-
end sales charge:
. Bear Stearns, its affiliates and their officers, directors or
employees (including retired employees); any partnership of which
Bear Stearns is a general partner, any Trustee or officer of the
Trust and certain family members of any of the these individuals
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<PAGE>
. Employees or registered representatives of any broker-dealers with
whom the Distributor has entered into sales agreements ("Authorized
Dealers") and their spouses and minor children
. Trustees or directors of investment companies for which BSAM or an
affiliate acts as sponsor
. Any state, county or city, or any instrumentality, department,
authority or agency that is prohibited by law from paying a sales
load or commission in connection with the purchase of shares of a
Portfolio
. Institutional investment clients, including corporate-sponsored
pension and profit-sharing plans, other benefit plans and insurance
companies
. Pension funds, state and municipal governments or funds, Taft-
Hartley plans and qualified non-profit organizations, foundations
and endowments
. Trust institutions (including bank trust departments) investing on
their own behalf or on behalf of their clients
. Service providers to the Portfolios
. Accounts for which an Authorized Dealer or investment adviser
charges an asset management fee (including "wrap" fees)
. Current shareholders of other mutual funds not distributed by Bear,
Stearns & Co. Inc., the Portfolios' Distributor, that have paid a
sales charge, and that buy shares of a Portfolio within 60 days of
selling shares of the other mutual fund
To take advantage of the sales charge waiver, you must indicate your
eligibility on your Account Information Form. If you think you may be
eligible for a sales charge waiver, please contact your account
representative or call PFPC Inc., the Portfolios' Transfer Agent, at 1-
800-447-1139.
Reduction of Class A Sales Charges
You may reduce your Class A sales charge by taking advantage of the following
privileges:
. Right of Accumulation: Lets you add the value of all Class A shares
of the Portfolios that you currently own for purposes of
calculating the sales charge on future purchases of Class A shares.
You may count share purchases made by the following investors to
calculate the reduced sales charge: you, your spouse and your
children under the age of 21 (including shares in certain
retirement accounts), and a company that you, your spouse or your
children control; a trustee or other fiduciary account (including
an employee benefit plan); a trustee or other fiduciary that buys
shares concurrently for two or more employee benefit plans of a
single employer or of affiliated employers.
. Letter of Intent: Lets you buy Class A shares of any Portfolio over
a 13-month period at the same sales charge as if all shares had
been bought at once. You are not obligated to buy the full amount
of the shares. However, you must complete the intended purchase to
obtain the reduced sales load. To qualify for this plan, check the
"Letter of Intent" box on the Account Information Form at the time
you buy shares of any Portfolio.
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<PAGE>
Waiver of CDSC
The Trust will waive the CDSC of Class A, B and C shares under the following
circumstances:
. redemptions made within one year after the death or disability of a
shareholder
. redemptions by employees participating in eligible benefit plans
. redemptions as a result of a combination of any investment company
with a Portfolio by merger, acquisition of assets or otherwise
. a mandatory distribution under a tax-deferred retirement plan
. redemptions made through 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 you establish the automatic
withdrawal feature
If you believe you may qualify for a waiver of the CDSC, please contact your
account representative or the Transfer Agent.
[***When you buy shares, you must specify the class of shares. Otherwise, the
Trust will assume that you wish to buy Class A shares.***]
How to Buy Shares
You may buy shares of the Portfolios through your account representative by
check or by wire or through the Transfer Agent. If you place your order before
the close of regular trading on the NYSE (usually 4:00 p.m., Eastern time), you
will receive the NAV that the Trust calculates that day. Orders placed after
the close of trading on the NYSE will be priced at the next business day's NAV.
Purchase Procedures
Purchase Through the Distributor or Authorized Dealers
Method of Purchase Instructions
.In person . Visit your account representative.
. Specify the name of the Portfolio, Class of shares
and the number or dollar amount of shares that you
wish to buy.
.By telephone . Call your account representative.
. Specify the name of the Portfolio, Class of shares
and the number or dollar amount of shares that you
wish to buy.
.By mail . Mail your purchase request to your account
representative.
. Specify the name of the Portfolio, Class of
shares and the number or dollar amount of shares
that you wish to buy.
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<PAGE>
.By wire . Submit wiring instructions to your account
representative.
. Specify the name of the Portfolio, Class of shares
and number or dollar amount of shares that you wish
to buy.
Purchase Through the Transfer Agent
.By mail . Mail your purchase request to:
PFPC Inc.
Attention: The Bear Stearns Funds
[name of Portfolio]
P.O. Box 8960
Wilmington, Delaware 19899-8960
.By telephone . Call the Transfer Agent at 1-800-447-1139.
. Specify the name of the Portfolio, class of shares
and number or dollar amount of shares that you
wish to buy.
How To Sell Shares
. You may sell shares on any business day through the Distributor,
Authorized Dealers or the Transfer Agent. Please refer to the
instructions under "How to Buy Shares" for information on selling
your shares in person, by telephone, by mail or by wire.
. When the Trust receives your redemption requests in proper form, it
will sell your shares at the next determined net asset value.
. The Trust will send you payment proceeds generally within seven
days after it receives your redemption request.
Additional Information About Redemptions
. Waiting period. If you buy shares by check, the Trust will wait for
your check to clear (up to 15 days) before it accepts your request
to sell those shares.
. Wiring redemption proceeds. Upon request, the Trust will wire your
proceeds ($500 minimum) to your brokerage account or a designated
commercial bank account. There is a transaction fee of $7.50 for
this service. Please call your account representative for
information on how to wire funds to your brokerage account. If you
do not have a brokerage account, call the Transfer Agent to wire
funds to your bank account.
. Signature guarantees. If your redemption proceeds exceed $50,000,
or if you instruct the Trust to send the proceeds to someone other
than the record owner at the record address, or if you are a
corporation, partnership, trust or fiduciary, your signature must
be guaranteed by any eligible guarantor institution. Call the
Transfer Agent at 1-800-447-1139 for information about obtaining a
signature guarantee.
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<PAGE>
. Telephone policies. You may authorize the Transfer Agent to accept
telephone instructions. If you do, the Transfer Agent will accept
instructions from people who it believes are authorized to act on
your behalf. The Transfer Agent will use reasonable procedures
(such as requesting personal identification) to ensure that the
caller is properly authorized. Neither the Portfolio nor the
Transfer Agent will be liable for losses for following instructions
reasonably believed to be genuine.
. Redemption by mail may cause a delay. During times of extreme
economic or market conditions, you may experience difficulty in
contacting your account representative by telephone to request a
redemption of shares. If this occurs, please consider using the
other redemption procedures described in this Prospectus.
Alternative procedures may take longer to sell your shares.
. Automatic redemption; redemption in kind. If the value of your
account falls below $750 (for reasons other than changes in market
conditions), the Trust may automatically liquidate your account and
send you the proceeds. The Trust will send you a notice at least 60
days before doing this. The Trust also reserves the right to redeem
your shares "in kind." For example, if you sell a large number of
shares and the Portfolio is unable to sell securities to raise
cash, the Trust may send you a combination of cash and a share of
actual portfolio securities. Call the Transfer Agent for details.
. Suspension of the Right of Redemption. A Portfolio may suspend your
right to redeem your shares under any of the following
circumstances:
. during non-routine closings of the NYSE
. when the Securities and Exchange Commission ("SEC") determines that
(a) trading on the NYSE is restricted or (b) an emergency prevents
the sale or valuation of the Portfolio's securities
. when the SEC orders a suspension to protect the Portfolio's
shareholders
Exchanges
You may exchange shares of one Portfolio for shares of the same class of
another Portfolio described in this Prospectus or the same class of another
Portfolio of the Trust, usually without paying any additional sales charges.
(You may obtain more information about other Portfolios of the Trust by calling
the Transfer Agent at 1-800-447-1139.) You may pay a sales charge if the
Portfolio you are exchanging did not impose an initial sales charge. You will
not have to pay an additional sales charge if the Portfolio you are exchanging
was acquired in any of the following ways:
. by a previous exchange from shares bought with a sales charge
. through reinvestment of dividends in distribution paid with respect
to either of the above categories
The Trust does not currently charge a fee for exchanges, although it may change
this policy in the future.
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<PAGE>
Exchange procedures. To exchange your shares, you must give exchange
instructions to your account representative or the Transfer Agent in writing or
by telephone.
Exchange policies. When exchanging your shares, please keep in mind:
. An exchange of shares may create tax liability for you. You may
have a gain or loss on the transaction, since the shares you are
exchanging will be treated like a sale.
. When the market is very active, telephone exchanges may be
difficult to complete. You may have to submit exchange requests to
your account representative or the Transfer Agent in writing, which
will cause a delay.
. The shares you exchange must have a value of at least $250 (except
in the case of certain retirement plans). If you are establishing a
new account, you must exchange the minimum dollar amount needed to
open that account.
. Before you exchange your shares, you must review a copy of the
current prospectus of the Portfolio that you would like to buy.
. You may qualify for a reduced sales charge. See the SAI for
details, or call your account representative.
. The Trust may reject your exchange request. The Trust may modify or
terminate the exchange option at any time, upon 60 days' notice.
SHAREHOLDER SERVICES
The Trust offers several additional shareholder services. If you would like
to take advantage of any of these services, please call your account
representative or the Transfer Agent at 1-800-447-1139 to obtain the appropriate
forms. These services may be changed or terminated at any time with 60 days'
notice.
. Automatic investment plan. You may buy shares of a Portfolio at
regular intervals by direct transfer of funds from your bank. You
may invest a set amount ($250 for the initial purchase; minimum
subsequent investments of $50/$25 for retirement accounts) monthly,
bi-monthly, quarterly or annually and you can terminate the program
at any time.
. Directed distribution option. You may automatically reinvest your
dividends and capital gain distributions in the same class of
shares of another Portfolio or the Money Market Portfolio of The
RBB Fund, Inc. You may buy Class A shares without a sales charge at
the current NAV. However, if you buy Class B or Class C shares,
they may be subject to a CDSC when you sell them. You may not use
this service to establish a new account.
. Systematic withdrawal plan. You may withdraw a set amount ($25
minimum) monthly, bi-monthly, quarterly or annually, as long as you
must have an account balance of at least $5,000. You or the
Transfer Agent may terminate the arrangement at any time. If you
plan to buy new shares when you participate in a systematic plan,
you may have to pay an additional sales charge.
. Reinstatement privilege. If you sell your Class A shares, you may
repurchase them (or Class A shares of any other Portfolio) within
60 days without paying an additional sales charge.
55
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
[***If you buy shares of a Portfolio shortly before it declares a dividend or
a distribution, a portion of your investment in the Portfolio may be returned to
you in the form of a taxable distribution.***]
Distributions
The Portfolios pass along your share of their investment earnings in the form
of dividends. Dividend distributions are the net dividends or interest earned
on investments after expenses. As with any investment, you should consider the
tax consequences of an investment in a Portfolio.
Ordinarily, each Portfolio declares and pays dividends from its net investment
income annually. The Portfolios will distribute short-term capital gains, as
necessary, and normally will pay any long-term capital gains once a year.
You can receive dividends or distributions in one of the following ways:
. Reinvestment. You can automatically reinvest your dividends and
distributions in additional shares of your Portfolio. If you do not
indicate another choice on your Account Application, you will
receive your distributions this way.
. Cash. The Trust will send you a check no later than seven days
after the payable date.
. Partial reinvestment. The Trust will automatically reinvest your
dividends in additional shares of your Portfolio and pay your
capital gain distributions to you in cash. Or, the Trust will
automatically reinvest your capital gain distributions and send you
your dividends in cash.
. Directed dividends. You can automatically reinvest your dividends
and distributions in the same class of shares of another Portfolio.
See the description of this option in the "Shareholder Services"
section above.
. Direct deposit. In most cases, you can automatically transfer
dividends and distributions to your bank checking or savings
account. Under normal circumstances, the Transfer Agent will
transfer the funds within seven days of the payment date. To
receive dividends and distributions this way, the name on your bank
account must be the same as the registration on your Portfolio
account.
You may choose your distribution method on your original Account Application.
If you would like to change the option you selected, please call your account
executive or the Transfer Agent at 1-800-447-1139.
Taxes
Each Portfolio intends to continue to qualify as a regulated investment company,
which means that it pays no federal income tax on the earnings or capital gains
it distributes to its shareholders. It is important for you to be aware of the
following information about the tax treatment of your investment.
. Ordinary dividends from a Portfolio are taxable as ordinary income;
dividends from a Portfolio's long-term capital gains are taxable as
capital gain.
56
<PAGE>
. Dividends are treated in the same manner for federal income tax
purposes whether you receive them in the form of cash or additional
shares. They may also be subject to state and local taxes.
. Dividends from the Portfolios that are attributable to interest on
certain U.S. Government obligations may be exempt from certain
state and local income taxes. The extent to which ordinary
dividends are attributable to these U.S. Government obligations
will be provided on the tax statements you receive from a
Portfolio.
. Certain dividends paid to you in January will be taxable as if they
had been paid to you the previous December.
. The Trust will mail you tax statements every January showing the
amounts and tax status of distributions you received.
. When you sell (redeem) or exchange shares of a Portfolio, you must
recognize any gain or loss.
. Because your tax treatment depends on your purchase price and tax
position, you should keep your regular account statements for use
in determining your tax.
. You should review the more detailed discussion of federal income
tax considerations in the SAI.
The Trust provides this tax information for your general information. You
should consult your own tax adviser about the tax consequences of investing in a
Portfolio.
DISTRIBUTION FEES AND SHAREHOLDER SERVICING FEES
Distribution Fees
The Trust has adopted a distribution plan in accordance with Rule 12b-1 under
the Investment Company Act of 1940 for each Class of shares. Under the
distribution plan, each Portfolio pays the Distributor a fee for the sale and
distribution of its shares. The plan provides that each Portfolio's Class A
shares pays 0.25% of its average daily net assets and each Portfolio's Class B
and C shares each pays 0.75% of its average daily net assets.
Keep in mind that:
. Each Portfolio pays distribution fees on an ongoing basis. Over
time, these fees will increase the cost of your investment and may
cost you more than paying a higher front-end or back-end sales
charges.
. The Distributor will waive its distribution fees to the extent that
a Portfolio would exceed the limitations imposed by the National
Association of Securities Dealers on asset-based sales charges.
57
<PAGE>
Shareholder Servicing Fees
The Trust has adopted a shareholder servicing plan for the Class A, B and C
shares of each Portfolio. The shareholder servicing plan allows the Portfolios
or the Distributor to pay shareholder servicing agents up to 0.25% of the
average annual daily net assets of the Class of shares for personal shareholder
services and for maintaining shareholder accounts. Shareholder servicing agents
are financial institutions that may include Authorized Dealers, fiduciaries, and
financial institutions that sponsor "mutual fund supermarkets," "no-transaction
fee" programs or similar programs.
ADDITIONAL INFORMATION
Performance
Financial publications, such as Business Week, Forbes, Money or SmartMoney, may
compare a Portfolio's performance to the performance of various indexes and
investments for which reliable performance data is available. These
publications may also compare a Portfolio's performance to averages, performance
rankings, or other information prepared by recognized mutual fund statistical
services, such as Lipper Inc.
Shareholder Communications
The Trust may eliminate duplicate mailings of Portfolio materials to
shareholders who reside at the same address.
58
<PAGE>
Financial Highlights - STARS Portfolio
The financial highlights table is intended to help you understand the
financial performance of the STARS Portfolio since its inception. This
information reflects financial results for a single share of the STARS
Portfolio. The total returns in the table represent the rate at which an
investor would have gained on an investment in the STARS Portfolio (assuming
reinvestment of all dividends and distributions). This information has been
audited by _____________, whose report, along with the STARS Portfolio's
financial statements, are included in the STARS Portfolio's annual report, which
is available by calling the Trust at 1-800-____-_____.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DISTRI-
NET NET BUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P STARS Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. $16.13 $(0.13) $6.69 $ - $(2.72) $19.97
For the fiscal year ended March 31, 1997.. 14.92 (0.09) 2.63 - (1.33) 16.13
For the period April 3, 1995* through
March 31, 1996............................ 12.00 - 3.31 - (0.39) 14.92
Class B
For the fiscal year ended March 31, 1999..
For the period January 5, 1998* through
March 31, 1998............................ 17.37 (0.04) 2.53 - - 19.86
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 16.06 (0.22) 6.65 - (2.64) 19.85
For the fiscal year ended March 31, 1997.. 14.86 (0.17) 2.62 - (1.25) 16.06
For the period April 3, 1995* through
March 31, 1996............................ 12.00 (0.06) 3.28 - (0.36) 14.86
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
NET RATIO OF RATIO OF NET REFLECTED IN
ASSETS, EXPENSES TO INVESTMENT EXPENSE RATIOS AND NET
TOTAL END OF AVERAGE INCOME/(LOSS) INVESTMENT INCOME/(LOSS)
INVESTMENT PERIOD NET TO AVERAGE DUE TO WAIVERS AND
RETURN(3) (000'S omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P STARS Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 43.53% $109,591 1.50%(6) (0.83)%(6) 0.38%
For the fiscal year ended March 31, 1997.. 16.87 67,491 1.50(6) (0.59)(6) 0.70
For the period April 3, 1995* through
March 31, 1996............................ 27.68 45,049 1.50(4)(6) (0.01)(4)(6) 0.89(4)
Class B
For the fiscal year ended March 31, 1999..
For the period January 5, 1998* through
March 31, 1998............................ 14.34 5,800 2.00(4) (1.47)(4) 0.53(4)
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 42.80 63,330 2.00(6) (1.32)(7) 0.38
For the fiscal year ended March 31, 1997.. 16.33 37,622 2.00(6) (1.09)(7) 0.70
For the period April 3, 1995* through
March 31, 1996............................ 26.91 28,081 2.00(4)(7) (0.45)(4)(6) 0.92(4)
<CAPTION>
- -------------------------------------------------------------------
AVERAGE
COMMISSION
PORTFOLIO RATE
TURNOVER PER
RATE SHARE(5)
- -------------------------------------------------------------------
<S> <C> <C>
S&P STARS Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 172.78%(7) $0.0541(7)
For the fiscal year ended March 31, 1997.. 220.00(7) 0.0595(7)
For the period April 3, 1995* through
March 31, 1996............................ 295.97(7) 0.0603(7)
Class B
For the fiscal year ended March 31, 1999..
For the period January 5, 1998* through
March 31, 1998............................ 172.78(7) 0.0541(7)
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 172.78(7) 0.0541(7)
For the fiscal year ended March 31, 1997.. 220.00(7) 0.0595(7)
For the period April 3, 1995* through
March 31, 1996............................ 295.97(7) 0.0603(7)
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchase and sales of investments subject to such commissions during each
period.
(6) Includes S&P STARS' share of S&P STARS Master Series' expenses for the
period prior to June 25, 1997.
(7) Portfolio turnover rate and average commission rate per share are related
to S&P STARS Master Series for the period prior to June 25, 1997.
59
<PAGE>
Financial Highlights - Insiders Select Fund
The financial highlights table is intended to help you understand the
financial performance of The Insiders Select Fund since its inception. This
information reflects financial results for a single share of The Insiders Select
Fund. The total returns in the table represent the rate at which an investor
would have gained on an investment in The Insiders Select Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by _____________________, whose report, along with The Insiders Select
Fund 's financial statements, are included in The Insiders Select Fund's annual
report, which is available by calling the Trust at 1-800-____-_____.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DISTRI-
NET NET BUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Insiders Select Fund
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 14.58 - 6.30 - (3.00) 17.88
For the fiscal year ended March 31, 1997.. 14.00 0.02 2.48 (0.01) (1.91) 14.58
For the period June 16, 1995* through
March 31, 1996............................ 12.00 0.03 1.98 (0.01) - 14.00
Class B
For the fiscal year ended March 31, 1999..
For the period January 6, 1998* through
March 31, 1998............................ 15.72 0.01 1.96 - - 17.69
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 14.48 (0.07) 6.21 - (2.94) 17.68
For the fiscal year ended March 31, 1997.. 13.96 (0.06) 2.47 - (1.89) 14.48
For the period June 16, 1995* through
March 31, 1996............................ 12.00 (0.01) 1.97 - - 13.96
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
NET RATIO OF RATIO OF NET REFLECTED IN
ASSETS, EXPENSES TO INVESTMENT EXPENSE RATIOS AND NET
TOTAL END OF AVERAGE INCOME/(LOSS) INVESTMENT INCOME/(LOSS)
INVESTMENT PERIOD NET TO AVERAGE DUE TO WAIVERS AND
RETURN(3) (000'S omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Insiders Select Fund
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 46.02 21,912 1.65 0.03 1.09
For the fiscal year ended March 31, 1997.. 18.31 13,860 1.65 0.11 1.82
For the period June 16, 1995* through
March 31, 1996............................ 16.75 12,132 1.65(4) 0.38(4) 1.87(4)
Class B
For the fiscal year ended March 31, 1999..
For the period January 6, 1998* through
March 31, 1998............................ 12.53 2,253 2.15(4) (0.95)(4) 1.82(4)
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 45.17 12,297 2.15 (0.46) 1.10
For the fiscal year ended March 31, 1997.. 17.69 9,519 2.15 (0.38) 1.81
For the period June 16, 1995* through
March 31, 1996............................ 16.33 9,928 2.15(4) (0.12)(4) 1.92(4)
<CAPTION>
- -------------------------------------------------------------------
AVERAGE
COMMISSION
PORTFOLIO RATE
TURNOVER PER
RATE SHARE(5)
- -------------------------------------------------------------------
<S> <C> <C>
The Insiders Select Fund
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 115.64 0.0389
For the fiscal year ended March 31, 1997.. 128.42 0.0264
For the period June 16, 1995* through
March 31, 1996............................ 93.45 0.0294
Class B
For the fiscal year ended March 31, 1999..
For the period January 6, 1998* through
March 31, 1998............................ 115.64 0.0389
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 115.64 0.0389
For the fiscal year ended March 31, 1997.. 128.42 0.0264
For the period June 16, 1995* through
March 31, 1996............................ 93.45 0.0294
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchase and sales of investments subject to such commissions during each
period.
(6) Includes S&P STARS' share of S&P STARS Master Series' expenses for the
period prior to June 25, 1997.
(7) Portfolio turnover rate and average commission rate per share are related
to S&P STARS Master Series for the period prior to June 25, 1997.
60
<PAGE>
Financial Highlights - Large Cap Portfolio
The financial highlights table is intended to help you understand the
financial performance of the Large Cap Portfolio since its inception. This
information reflects financial results for a single share of the Large Cap
Portfolio. The total returns in the table represent the rate at which an
investor would have gained or lost on an investment in the Large Cap Portfolio
(assuming reinvestment of all dividends and distributions). This information
has been audited by ____________________, whose report, along with the Large
Cap Portfolio's financial statements, are included in the Large Cap Portfolio's
annual report, which is available by calling the Trust at 1-800-____-_____.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DISTRI-
NET NET BUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Value Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 17.17 0.05 7.15 (0.02) (3.52) 20.83
For the fiscal year ended March 31, 1997.. 15.13 0.04 2.28 (0.10) (0.18) 17.17
For the period April 3, 1995* through
March 31, 1996............................ 12.00 0.06 3.10 (0.02) (0.01) 15.13
Class B
For the fiscal year ended March 31, 1999..
For the period January 28, 1998* through
March 31, 1998............................ 18.17 (0.01) 2.50 - - 20.66
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 17.11 (0.03) 7.10 - (3.52) 20.66
For the fiscal year ended March 31, 1997.. 15.08 (0.02) 2.25 (0.02) (0.18) 17.11
For the period April 3, 1995* through
March 31, 1996............................ 12.00 (0.01) 3.10 - (0.01) 15.08
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
NET RATIO OF RATIO OF NET REFLECTED IN
ASSETS, EXPENSES TO INVESTMENT EXPENSE RATIOS AND NET
TOTAL END OF AVERAGE INCOME/(LOSS) INVESTMENT INCOME/(LOSS)
INVESTMENT PERIOD NET TO AVERAGE DUE TO WAIVERS AND
RETURN(3) (000'S omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Large Cap Value Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 44.59 8,358 1.50 0.32 1.73
For the fiscal year ended March 31, 1997.. 15.44 4,987 1.50 0.43 1.58
For the period April 3, 1995* through
March 31, 1996............................ 26.35 3,616 1.50(4) 0.46(4) 4.34(4)
Class B
For the fiscal year ended March 31, 1999..
For the period January 28, 1998* through
March 31, 1998............................ 13.70 446 2.00(4) (0.73)(4) 1.05(4)
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 43.94 4,987 2.00 (0.19) 1.73
For the fiscal year ended March 31, 1997.. 14.87 2,986 2.00 (0.08) 1.61
For the period April 3, 1995* through
March 31, 1996............................ 25.71 3,520 2.00(4) (0.06)(4) 4.39(4)
<CAPTION>
- -------------------------------------------------------------------
AVERAGE
COMMISSION
PORTFOLIO RATE
TURNOVER PER
RATE SHARE(5)
- -------------------------------------------------------------------
<S> <C> <C>
Large Cap Value Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 61.75 0.0581
For the fiscal year ended March 31, 1997.. 136.67 0.0593
For the period April 3, 1995* through
March 31, 1996............................ 45.28 0.0596
Class B
For the fiscal year ended March 31, 1999..
For the period January 28, 1998* through
March 31, 1998............................ 61.75 0.0581
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 61.75 0.0581
For the fiscal year ended March 31, 1997.. 136.67 0.0593
For the period April 3, 1995* through
March 31, 1996............................ 45.28 0.0596
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchase and sales of investments subject to such commissions during each
period.
(6) Includes S&P STARS' share of S&P STARS Master Series' expenses for the
period prior to June 25, 1997.
(7) Portfolio turnover rate and average commission rate per share are related
to S&P STARS Master Series for the period prior to June 25, 1997.
61
<PAGE>
Financial Highlights - Small Cap Portfolio
The financial highlights table is intended to help you understand the financial
performance of the Small Cap Portfolio since its inception. This information
reflects financial results for a single share of the Small Cap Portfolio. The
total returns in the table represent the rate at which an investor would have
gained on an investment in the Small Cap Portfolio (assuming reinvestment of all
dividends and distributions). This information has been audited by
________________, whose report, along with the Small Cap Portfolio's financial
statements, are included in the Small Cap Portfolio's annual report, which is
available by calling the Trust at 1-800-____-_____.
<TABLE>
<CAPTION>
Financial Highlights (continued)
- -----------------------------------------------------------------------------------------------------------------
NET NET DISTRIBUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME/ GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Value Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. $17.48 $(0.14) $8.06 $- $(1.75) $23.65
For the fiscal year ended March 31, 1997.. 15.87 (0.10) 1.95 - (0.24) 17.48
For the period April 3, 1995* through
March 31, 1996............................ 12.00 (0.07) 4.17 - (0.23) 15.87
Class B
For the fiscal year ended March 31, 1999..
For the period January 21, 1998* through
March 31, 1998............................ 19.95 - 3.53 - - 23.48
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 17.38 (0.24) 8.00 - (1.66) 23.48
For the fiscal year ended March 31, 1997.. 15.79 (0.18) 1.93 - (0.16) 17.38
For the period April 3, 1995* through
March 31, 1996............................ 12.00 (0.10) 4.11 - (0.22) 15.79
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
REFLECTED IN
RATIO OF RATIO OF NET EXPENSE RATIOS AND
NET ASSETS, EXPENSES TO INVESTMENT NET INVESTMENT
TOTAL END OF AVERAGE INCOME/(LOSS) INCOME/(LOSS) DUE
INVESTMENT PERIOD NET TO AVERAGE TO WAIVERS AND
RETURN(3) (000's omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Small Cap Value Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 46.86% $25,111 1.50% (0.71)% 0.76%
For the fiscal year ended March 31, 1997.. 11.71 13,143 1.50 (0.81) 1.00
For the period April 3, 1995* through
March 31, 1996............................ 34.36 6,474 1.50(4) (0.66)(4) 2.32(4)
Class B
For the fiscal year ended March 31, 1999..
For the period January 21, 1998* through
March 31, 1998............................ 17.69 901 2.00(4) (1.49)(4) 1.31(4)
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 46.10 18,082 2.00 (1.21) 0.76
For the fiscal year ended March 31, 1997.. 11.12 11,071 2.00 (1.31) 0.99
For the period April 3, 1995* through
March 31, 1996............................ 33.59 6,753 2.00(4) (1.09)(4) 2.39(4)
<CAPTION>
- ---------------------------------------------------------------
AVERAGE
PORTFOLIO COMMISSION
TURNOVER RATE PER
RATE SHARE(5)
- ---------------------------------------------------------------
<S> <C> <C>
Small Cap Value Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 90.39% $0.0557
For the fiscal year ended March 31, 1997.. 56.88 0.0550
For the period April 3, 1995* through
March 31, 1996............................ 40.79 0.0572
Class B
For the fiscal year ended March 31, 1999..
For the period January 21, 1998* through
March 31, 1998............................ 90.39 0.0557
Class C
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 90.39 0.0557
For the fiscal year ended March 31, 1997.. 56.88 0.0550
For the period April 3, 1995* through
March 31, 1996............................ 40.79 0.0572
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchases and sales of investments subject to such commissions during each
period.
62
<PAGE>
Financial Highlights - Focus List Portfolio
The financial highlights table is intended to help you understand the
financial performance of the Focus List Portfolio since its inception. This
information reflects financial results for a single share of the Focus List
Portfolio. The total returns in the table represent the rate at which an
investor would have gained on an investment in the Focus List Portfolio
(assuming reinvestment of all dividends and distributions). This information
has been audited by ____________________, whose report, along with the Focus
List Portfolio's financial statements, are included in the Focus List
Portfolio's annual report, which is available by calling the Trust at 1-800-
____-_____.
<TABLE>
<CAPTION>
Financial Highlights (continued)
- -----------------------------------------------------------------------------------------------------------------
NET NET DISTRIBUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME/ GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Focus List Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.00 (0.01) 1.41 - - 13.40
Class B
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.00 (0.01) 1.39 - - 13.38
Class C
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.00 (0.01) 1.39 - - 13.38
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
REFLECTED IN
RATIO OF RATIO OF NET EXPENSE RATIOS AND
NET ASSETS, EXPENSES TO INVESTMENT NET INVESTMENT
TOTAL END OF AVERAGE INCOME/(LOSS) INCOME/(LOSS) DUE
INVESTMENT PERIOD NET TO AVERAGE TO WAIVERS AND
RETURN(3) (000's omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Focus List Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 11.67 3,201 1.40(4) (0.30)(4) 5.01(4)
Class B
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 11.50 2,399 1.90(4) (0.78)(4) 5.27(4)
Class C
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 11.50 1,687 1.90(4) (0.62)(4) 5.52(4)
<CAPTION>
- ---------------------------------------------------------------
AVERAGE
PORTFOLIO COMMISSION
TURNOVER RATE PER
RATE SHARE(5)
- ---------------------------------------------------------------
<S> <C> <C>
Focus List Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 28.91 0.0600
Class B
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 28.91 0.0600
Class C
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 28.91 0.0600
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchases and sales of investments subject to such commissions during each
period.
63
<PAGE>
Financial Highlights - Balanced Portfolio
The financial highlights table is intended to help you understand the
financial performance of the Balanced Portfolio since its inception. This
information reflects financial results for a single share of the Balanced
Portfolio. The total returns in the table represent the rate at which an
investor would have gained on an investment in the Balanced Portfolio (assuming
reinvestment of all dividends and distributions). This information has been
audited by _____________________, whose report, along with the Balanced
Portfolio's financial statements, are included in the Balanced Portfolio's
annual report, which is available by calling the Trust at 1-800-____-_____.
<TABLE>
<CAPTION>
Financial Highlights (continued)
- -----------------------------------------------------------------------------------------------------------------
NET NET DISTRIBUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME/ GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balanced Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.00 0.06 0.91 (0.04) - 12.93
Class B
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.00 0.05 0.90 (0.03) - 12.92
Class C
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.00 0.05 0.90 (0.03) - 12.92
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
REFLECTED IN
RATIO OF RATIO OF NET EXPENSE RATIOS AND
NET ASSETS, EXPENSES TO INVESTMENT NET INVESTMENT
TOTAL END OF AVERAGE INCOME/(LOSS) INCOME/(LOSS) DUE
INVESTMENT PERIOD NET TO AVERAGE TO WAIVERS AND
RETURN(3) (000's omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balanced Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 8.04 3,852 1.20(4) 2.47(4) 3.25(4)
Class B
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 7.92 1,044 1.70(4) 1.96(4) 3.30(4)
Class C
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 7.92 858 1.70(4) 1.95(4) 3.33(4)
<CAPTION>
- ---------------------------------------------------------------
AVERAGE
PORTFOLIO COMMISSION
TURNOVER RATE PER
RATE SHARE(5)
- ---------------------------------------------------------------
<S> <C> <C>
Balanced Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.72 0.0543
Class B
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.72 0.0543
Class C
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.72 0.0543
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchases and sales of investments subject to such commissions during each
period.
64
<PAGE>
Financial Highlights - International Portfolio
The financial highlights table is intended to help you understand the
financial performance of the International Portfolio since its inception. This
information reflects financial results for a single share of the International
Portfolio. The total returns in the table represent the rate at which an
investor would have gained on an investment in the International Portfolio
(assuming reinvestment of all dividends and distributions). This information
has been audited by ____________________, whose report, along with the
International Portfolio's financial statements, are included in the
International Portfolio's annual report, which is available by calling the Trust
at 1-800-____-_____.
<TABLE>
<CAPTION>
Financial Highlights (continued)
- -----------------------------------------------------------------------------------------------------------------
NET NET DISTRIBUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME/ GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
International Equity Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.00 0.01 1.76 - - 13.77
Class B
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.00 - 1.75 - - 13.75
Class C
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 12.00 - 1.75 - - 13.75
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
REFLECTED IN
RATIO OF RATIO OF NET EXPENSE RATIOS AND
NET ASSETS, EXPENSES TO INVESTMENT NET INVESTMENT
TOTAL END OF AVERAGE INCOME/(LOSS) INCOME/(LOSS) DUE
INVESTMENT PERIOD NET TO AVERAGE TO WAIVERS AND
RETURN(3) (000's omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
International Equity Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 14.75 3,765 1.75(4) 0.53(4) 4.06(4)
Class B
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 14.58 2,137 2.25(4) (0.06)(4) 4.04(4)
Class C
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 14.58 2,173 2.25(4) (0.06)(4) 4.04(4)
<CAPTION>
- ---------------------------------------------------------------
AVERAGE
PORTFOLIO COMMISSION
TURNOVER RATE PER
RATE SHARE(5)
- ---------------------------------------------------------------
<S> <C> <C>
International Equity Portfolio
Class A
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 3.26 0.0683
Class B
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 3.26 0.0683
Class C
For the fiscal year ended March 31, 1999..
For the period December 29, 1997*
through March 31, 1998.................... 3.26 0.0683
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchases and sales of investments subject to such commissions during each
period.
65
<PAGE>
Statement of Additional Information. The Statement of Additional Information
("SAI") provides a more complete discussion of several of the matters contained
in this Prospectus and is incorporated by reference, which means that it is
legally a part of this Prospectus as if it were included here.
Annual and Semi-Annual Reports. The annual and semi-annual reports to
shareholders contain additional information about each Portfolio's investments,
including a discussion of the market conditions and investment strategies that
significantly affected a Portfolio's performance during its last fiscal year.
. To obtain a free copy of the SAI and the current annual or semi-
annual reports or to make any other inquiries about a Portfolio,
you may call or write:
PFPC Inc.
Attention: The Bear Stearns Funds
P.O. Box 8960
Wilmington, Delaware 19899-8960
Telephone: 1-800-447-1139 or 1-800-766-4111
. You may obtain copies of the SAI or financial reports
. for free by calling or writing broker-dealers or other
financial intermediaries that sell a Portfolio's shares
. for a fee by calling or writing the Public Reference Room of
the Securities Exchange Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549-6009 (1-800-SEC-0330)
. for free by visiting the SEC's Worldwide Web site at
http://www.sec.gov.
------------------
You may also obtain a copy of a Portfolio's prospectus from the Bear Stearns
Worldwide Web site at http://www.bearstearns.com.
--------------------------
Investment Company Act File No. 811-8798
66
<PAGE>
The S&P STARS Portfolio
Bear Stearns The Insiders Select Fund
Funds Large Cap Value Portfolio
Small Cap Value Portfolio
575 Lexington Avenue Focus List Portfolio
New York, NY 10022 Balanced Portfolio
1-800-766-4111 International Equity Portfolio
Distributor
- -----------
Bear, Stearns & Co. Inc.
575 Lexington Avenue
New York, NY 10022
Investment Adviser
- ------------------
Bear Stearns Asset Management Inc.
575 Lexington Avenue
New York, NY 10022
Sub-Investment Adviser (International Portfolio)
- ------------------------------------------------
Marvin & Palmer Associates, Inc.
1201 North Market Street, Suite 2300
Wilmington, DE 19801
Administrator
- -------------
Bear Stearns Funds Management Inc.
575 Lexington Avenue
New York, NY 10022
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 LLP
919 Third Avenue
New York, NY 10022
Independent Auditors
- --------------------
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
<PAGE>
THE BEAR STEARNS FUNDS
575 LEXINGTON AVENUE NEW YORK, NY 10022 1-800 447 1139
The Bear Stearns Funds
Equity Funds
. S&P STARS Portfolio
. The Insiders Select Fund
. Large Cap Value Portfolio
. Small Cap Value Portfolio
. Focus List Portfolio
. Balanced Portfolio
. International Equity Portfolio
Class Y Shares
PROSPECTUS
_______, 1999
This Prospectus provides important information about each Portfolio that you
should know before investing. Please read it carefully and keep it for future
reference.
The Securities and Exchange Commission has not approved
any Portfolio's shares as an investment or determined
whether this Prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
<PAGE>
Each Portfolio described in this Prospectus is a series of The Bear Stearns
Funds, a registered open-end management investment company (the "Trust").
Table of Contents
RISK/RETURN SUMMARIES
S&P STARS Portfolio
The Insiders Select Fund
Large Cap Value Portfolio
Small Cap Value Portfolio
Focus List Portfolio
Balanced Portfolio
International Equity Portfolio
INVESTMENTS
RISK FACTORS
MANAGEMENT OF THE PORTFOLIOS
INVESTMENT ADVISER
PORTFOLIO MANAGEMENT TEAM
HOW THE PORTFOLIOS VALUE THEIR SHARES
INVESTING IN THE PORTFOLIOS
Investment Requirements
How to Buy Shares
How to Sell Shares
DIVIDENDS, DISTRIBUTIONS AND TAXES
ADDITIONAL INFORMATION
FINANCIAL HIGHLIGHTS
It is important to keep in mind that mutual fund shares are:
. not deposits or obligations of any bank
. not insured by the FDIC
. subject to investment risk, including possible loss of the amount
invested
2
<PAGE>
S&P STARS PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
To provide investment results that exceed the total return of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Stock Index (the "S&P 500 Index").
Principal Strategies
To achieve the investment objective of the S&P STARS Portfolio (the "STARS
Portfolio"), Bear Stearns Asset Management Inc., each Portfolio's investment
adviser ("BSAM" or the "Adviser") uses the Standard & Poor's Stock Appreciation
Ranking System (or "STARS") to identify securities in the highest category (five
stars) for purchase and in the lowest category (one star) for short selling.
The Adviser believes that this approach will provide opportunities to achieve
performance that exceeds the S&P 500 Index's total return.
. Generally, the STARS Portfolio will invest at least 85% of its total assets in
U.S. common stocks and ADRs that, at their time of initial purchase, were
ranked five stars or, at their time of short sale, were ranked one star.
. Generally, the STARS Portfolio may invest up to 15% of its total assets in
U.S. common stocks and ADRs without regard to STARS ranking, if the Adviser
believes that such securities offer opportunities for capital appreciation.
In selecting investments, the Adviser analyzes the stocks ranked by STARS and
selects those it believes have the best potential for capital appreciation. The
Adviser focuses on companies that show the potential to achieve growth at a
reasonable price. The Adviser considers various factors including market
segment, industry, earnings history, price-to-earnings ratio and management.
The Adviser may select securities of companies with small, middle or large
market capitalizations.
STARS ranks the stocks of approximately 1,100 issuers analyzed by S&P's research
staff and evaluates the short-term (up to 12 months) appreciation potential of
the reviewed stocks, as shown below.
uuuuu Buy e Expected to be among the best performers over the
next 12 months and to rise in price
uuuu Accumulate e Expected to be an above-average performer
uuu Hold e Expected to be an average performer
uu Avoid e Expected to be a below-average performer
u Sell e Expected to be a well-below-average performer and
to fall in price
Short Sales
The STARS Portfolio may "sell short" securities that at their time of initial
sale were rated one star. In a short sale, the Adviser sells a security it has
borrowed, with the expectation that the security will decline in
3
<PAGE>
value. If the Adviser correctly predicts the decline in value, the Adviser will
repurchase the security at a lower price and realize a gain for the STARS
Portfolio. Short selling is considered "leverage" and may involve substantial
risk.
The STARS Portfolio may invest in put options on indices or securities to hedge
against unanticipated market decline, and may engage in other options
strategies.
STARS rankings represent the subjective determination of a periodically changing
pool of S&P analysts. Past performance of securities included in STARS cannot
be used to predict future results of the STARS Portfolio, which is managed
actively by the Adviser and the results of which should be expected to vary from
the performance of STARS. Neither the STARS Portfolio nor the Adviser and its
affiliates have any ongoing relationship with S&P regarding the STARS Portfolio
other than the right to use the S&P, Standard & Poor's and STARS trademarks for
a fee in connection with the management of mutual funds and access to STARS
through S&P's publicly available subscription service.
For a more detailed discussion of the STARS ranking system and its use by the
STARS Portfolio, please see the "Investments" section of this Prospectus,
beginning at page ___. The "Investments" section also discusses various
investments and techniques that the STARS Portfolio uses to achieve its
investment objective.
Principal Risks
The STARS Portfolio is subject to the following principal risks, more fully
described in "Risk Factors." Some or all of these risks may adversely affect the
STARS Portfolio's net asset value, yield and/or total return:
. The market value of portfolio securities may decline
. A particular strategy may not produce the intended result or may not be
executed effectively
. A company's earnings may not increase as expected
. Hedges created by using derivative instruments, including futures or
options contracts, may not respond to economic or market conditions as
expected
. Short sales involve leverage, which may increase potential losses
. The Adviser relies upon ratings by S&P, which may fail to rate a security
appropriately
The STARS Portfolio is a non-diversified mutual fund, which means that it may
invest a larger portion of its assets in a single issuer than if it were
diversified. This could make the STARS Portfolio more susceptible to the
uncertain performance of a particular issuer.
Who may want to invest in the STARS Portfolio
The STARS Portfolio may be appropriate for investors who:
. are investing for the long term
. are willing to accept the price volatility associated with stocks in
exchange for their relatively higher return potential compared to other
asset classes
. want to add a growth component to diversify an income-oriented portfolio
4
<PAGE>
The STARS Portfolio may not be appropriate for investors who:
---
. want a diversified portfolio
. are investing for the short term or need current income
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
PERFORMANCE
The bar chart and table below show the risks of investing in the STARS Portfolio
by showing changes in the performance of its Class Y shares as of December 31,
1998 from year to year since inception. The table shows how the STARS
Portfolio's average annual total return for one year and since the date of
inception compared to the S&P 500 Index, a broad-based unmanaged index that
represents the general performance of domestically traded common stocks of mid-
to large-size companies, and the Consumer Price Index, which measures changes in
consumer prices as determined by the U.S. Bureau of Labor Statistics. The
figures shown assume reinvestment of dividends and distributions.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1995: ___.__% (1)
1996: ___.__%
1997: ___.__%
1998: ___.__% (2)
(1) Commenced investment operations on August 7, 1995. Return is not annualized
(2) The STARS Portfolio's year-to-date return as of June 30, 1999 was ___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 19__) and the lowest quarterly return was YY% (for
the quarter ended _____19__).
Average Annual Total Returns
(for the periods ended December 31, 1998) Since Inception*
1 Year
STARS Portfolio Class Y
___.__% ___.__%
S&P 500 Index
___.__% ___.__%
- ------------------------------------------------------------------------------
Consumer Price Index
___.__% ___.__%
* Class Y shares commenced operations on August 7, 1995.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the STARS Portfolio.
Shareholder Fees (paid directly from your investment)* Class Y
5
<PAGE>
Maximum sales charge (load) imposed on purchases (as a percentage of
offering price) None
- ------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None
- ------------------------------------------------------------------------------
Redemption fees and exchange fees None
Maximum deferred sales charge (load) (as a percentage of offering price) None
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the STARS Portfolio.
The STARS Portfolio pays these expenses from its assets.
6
<PAGE>
ANNUAL PORTFOLIO OPERATING EXPENSES
Class Y
--------
Management Fees 0.75%
Distribution (12b-1) Fees 0.00%
Other Expenses . %
-------
Total Portfolio Operating Expenses __.__%
Fee Waiver And Expense Reimbursement ( . )%
------
Net Expenses (2) 1.00%
======
(2) The expenses shown are based on historical expenses of the STARS Portfolio
adjusted to reflect current expenses. The Adviser has agreed to waive its
fee and/or reimburse certain expenses until at least March 31, 2000 so that
the STARS Portfolio's net expenses do not exceed the amount indicated above.
EXAMPLE
THIS EXAMPLE ILLUSTRATES THE COST OF INVESTING IN THE STARS PORTFOLIO OVER
VARIOUS TIME PERIODS. IT IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING
IN THE STARS PORTFOLIO WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE
EXAMPLE ASSUMES THAT:
. you invest $10,000 in the STARS Portfolio
. your investment returns 5% each year
. the STARS Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
</TABLE>
* This Example assumes that net portfolio operating expenses will equal 1.00%
March 31, 2000 and thereafter will equal __.___%.
7
<PAGE>
THE INSIDERS SELECT FUND
RISK/RETURN SUMMARY
Investment Objective
Capital appreciation.
Principal Strategies
Under normal market conditions, the Adviser invests substantially all of The
Insiders Select Fund's assets in U.S. equity securities. The Insiders Select
Fund will invest at least 85% of its assets in the equity securities of U.S.
issuers that it believes provide opportunities for capital appreciation or gains
through short selling, without regard to market capitalization. The Adviser
nonetheless anticipates that the issuers principally will be mid- to-large
capitalization companies (market capitalizations exceeding $1 billion). The
Insiders Select Fund will invest in U.S. equity securities that the Adviser
believes will equal or exceed the performance of the Standard & Poor's MidCap
400 Stock Index (the "S&P MidCap 400 Index"). The median market capitalization
of stocks in the S&P MidCap 400 Index was about $1.6 billion as of March 31,
1999. The Insiders Select Fund may invest in stocks that are not included in
the S&P MidCap 400 Index.
In selecting investments for The Insiders Select Fund, the Adviser analyzes (i)
trading in a company's securities by corporate insiders, officers, directors and
significant stockholders, (ii) published company reports prepared by financial
analysts, including revisions to earnings predictions and (iii) a company's
corporate finance activities, including stock repurchase programs, dividend
policies and new securities issuance.
Insiders, analysts and the company each send signals that the Adviser analyzes
to produce valuable information about the prospects for individual companies.
While no one signal determines whether the Adviser will buy or sell a particular
security, the Adviser will not consider buying or selling a security unless
insider behavior sends an appropriate positive or negative signal. In its
analysis, the Adviser uses only data that is available to the public. The
Adviser obtains the data on insider trading activity from CDA/Investnet, which
compiles this information from publicly available SEC filings.
Although, under normal market conditions, The Insiders Select Fund will invest
substantially all of its assets in U.S. equity securities, it may invest up to
15% of its assets in money market instruments.
The Insiders Select Fund may "sell short" securities. In a short sale, the
Adviser sells a security it has borrowed, with the expectation that the security
will decline in value. If the Adviser correctly predicts the decline in value,
the Adviser will repurchase the security at a lower price and realize a gain for
The Insiders Select Fund. Short selling is considered "leverage" and involves
substantial risk.
The Insiders Select Fund may, but is not required to, use derivatives to reduce
risk and enhance return, including futures contracts on securities and indices
and related options, and options on securities and financial indices.
For a more detailed discussion of how the Adviser evaluates trading by corporate
insiders, reports by financial analysts and corporate financing activity, please
see the "Investments" section of this Prospectus, beginning at page ___. The
"Investments" section also discusses various investments and techniques that The
Insiders Select Fund uses to achieve its investment objective.
8
<PAGE>
Principal Risks
The Insiders Select Fund is subject to the following principal risks, more fully
described in "Risk Factors." Some or all of these risks may adversely affect
The Insiders Select Fund's net asset value, yield and/or total return:
. The market value of portfolio securities may decline
. A particular strategy may not produce the intended result or may be not
executed effectively
. A company's earnings may not increase as expected
. Short sales involve leverage, which may increase potential losses
. Hedges created by using derivative instruments, including futures or
options contracts, may not respond to economic or market conditions as
expected
The Insiders Select Fund is a non-diversified mutual fund, which means that it
may invest a larger portion of its assets in a single issuer than if it were
diversified. This could make The Insiders Select Fund more susceptible to the
uncertain performance of a particular issuer.
Who may want to invest in The Insiders Select Fund
The Insiders Select Fund may be appropriate for investors who:
. are investing for the long term
. are willing to accept the price volatility associated with stocks in
exchange for their relatively higher return potential compared to other
asset classes
. believe that insider buying patterns may be a good indicator of the
future direction of a company's stock price
The Insiders Select Fund may not be appropriate for investors who:
---
. want a diversified portfolio
. are investing for the short term or need current income
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
PERFORMANCE
The bar chart and table below show the risks of investing in The Insiders Select
Fund by showing changes in the performance of its Class Y shares as of December
31, 1998 from year to year since inception. The table shows how The Insiders
Select Fund's average annual total return for one year and since the date of
inception compared to the S&P MidCap 400 Index, a broad-based unmanaged index
that represents the general performance of domestically traded common stocks of
mid-size companies. The figures shown assume reinvestment of dividends and
distributions.
***Past performance is not necessarily an indication of future results.***
9
<PAGE>
Bar Chart
1995: ___.__% (1)
1996: ___.__%
1997: ___.__%
1998: ___.__% (2)
(1) Commenced investment operations on June 20, 1995. Return is not annualized
(2) The Insiders Select Fund's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 19__) and the lowest quarterly return was YY% (for
the quarter ended _____19__).
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Returns
(for the periods ended December 31, 1998) Since Inception*
1 Year
Insiders Select Fund Class Y
___.__% ___.__%
S&P MidCap 400 Index
___.__% ___.__%
</TABLE>
* Class Y shares commenced operations on June 20, 1995.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of The Insiders Select Fund.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Fees (paid directly from your investment)* Class Y
- -----------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases (as a percentage of offering
price) None
- -----------------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None
- -----------------------------------------------------------------------------------------
Redemption fees and exchange fees None
- -----------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of offering price) None
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
10
<PAGE>
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of The Insiders Select
Fund. The Insiders Select Fund pays these expenses from its assets.
ANNUAL PORTFOLIO OPERATING EXPENSES
Class Y
--------
Management Fees (1) 1.00%
Distribution (12b-1) Fees 0.00%
Other Expenses . %
--------
Total Portfolio Operating Expenses __.__%
Fee Waiver And Expense Reimbursement ( . )%
----------
Net Expenses (2) 1.15%
==========
(1) The management fee may increase or decrease by up to 0.50% based on The
Insiders Select Fund's performance.
(2) The expenses shown are based on historical expenses of The Insiders Select
Fund adjusted to reflect current expenses. The Adviser has agreed to waive
its fee and/or reimburse certain expenses until at least March 31, 2000 so
that The Insiders Select Fund's net expenses do not exceed the amount
indicated above.
EXAMPLE
THIS EXAMPLE ILLUSTRATES THE COST OF INVESTING IN THE INSIDERS SELECT FUND OVER
VARIOUS TIME PERIODS. IT IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING
IN THE INSIDERS SELECT FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.
THE EXAMPLE ASSUMES THAT:
. you invest $10,000 in The Insiders Select Fund
. your investment returns 5% each year
. The Insiders Select Fund's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
</TABLE>
* This Example assumes that net portfolio operating expenses will equal 1.15%
until March 31, 2000 and thereafter will equal __.___%.
11
<PAGE>
LARGE CAP VALUE PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
Capital appreciation.
Principal Strategies
Under normal market conditions, the Large Cap Value Portfolio ("Large Cap
Portfolio") invests substantially all of its assets in equity securities of
companies with market capitalizations of $1 billion or more ("large companies")
and which the Adviser identifies as "value" securities.
Under normal market conditions, the Large Cap Portfolio will invest
substantially all of its assets in equity securities of large companies
. The Large Cap Portfolio will invest at least 85% of its total assets in
equity securities of large companies
. Within this 85% category, the Large Cap Portfolio may invest up to
10% of its assets in equity securities of foreign issuers in the form
of U.S. dollar-denominated American Depositary Receipts ("ADRs") that
are listed on U.S. exchanges
. Although, under normal market conditions, the Large Cap Portfolio will invest
substantially all of its assets in large companies, it may invest up to 15%
of its total assets in money market instruments and other debt obligations
Equity securities consist of common stocks, convertible securities and preferred
stocks. The convertible securities and preferred stocks in which the Large Cap
Portfolio may invest must be rated at least "investment grade" by a nationally
recognized statistical rating organization ("NRSRO") at the time of purchase.
The Adviser uses a "value" approach to investing. The Adviser looks for equity
securities that have relatively low price-to-book ratios, low price-to-earnings
ratios or higher-than-average dividend payments in relation to share price. To
determine whether a company's stock falls within the value classification, the
Adviser analyzes factors such as the company's price-to-book and price-to-
earnings ratios, earnings growth, dividend payout ratios, return on equity, and
beta (a measure of stock price volatility relative to the market).
In selecting investments, the Adviser also may consider, among other things, new
management and upcoming corporate restructuring, the general business cycle, the
company's position within a specific industry and the company's responsiveness
to changing conditions.
The Large Cap Portfolio may, but is not required to, use derivatives to reduce
risk and enhance return, including futures contracts on securities and indices
and related options, and options on securities and financial indices.
12
<PAGE>
Principal Risks
The Large Cap Portfolio is subject to the following principal risks, more fully
described in "Risk Factors." All or some of these risks may adversely affect
the Large Cap Portfolio's net asset value, yield and/or total return:
. The market value of portfolio securities declines
. In a falling market, value stocks may decline in price faster than
growth stocks
. In a rising market, value stocks may rise more slowly than growth
stocks
. A particular strategy may not produce the intended result or may not be
executed effectively
. A company's earnings may not increase as expected
. Hedges created by using derivative instruments, including futures or
options contracts, may not respond to economic or market conditions as
expected
Who may want to invest in the Large Cap Portfolio
The Large Cap Portfolio may be appropriate for investors who:
. are investing for the long term
. are willing to accept the price volatility associated with stocks in
exchange for their relatively higher return potential compared to other
asset classes
. want a core equity investment
The Large Cap Portfolio may not be appropriate for investors who:
---
. are investing for the short term or need current income
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
PERFORMANCE
The bar chart and table below show the risks of investing in the Large Cap
Portfolio by showing changes in the performance of its Class Y shares as of
December 31, 1998 from year to year since inception. The table shows how the
Large Cap Portfolio's average annual total return for one year and since the
date of inception compared to the Standard & Poor's 500 Stock Index (the "S&P
500 Index"), a broad-based unmanaged index that represents the general
performance of domestically traded common stocks of mid-to large-size companies.
The figures shown assume reinvestment of dividends and distributions.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1995: ___.__% (1)
1996: ___.__%
13
<PAGE>
1997: ___.__%
1998: ___.__% (2)
(1) Class Y shares commenced operations on September 11, 1995. Return is not
annualized.
(2) The Large Cap Portfolio's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 19__) and the lowest quarterly return was YY% (for
the quarter ended _____19 __).
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ended December 31, 1998) Since Inception*
<S> <C> <C>
1 Year
Large Cap Portfolio Class Y
___.__% ___.__%
S&P 500 Index
___.__% ___.__%
</TABLE>
* Class Y shares commenced operations on September 11, 1995.
14
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Large Cap Portfolio.
<TABLE>
<CAPTION>
Shareholder Fees (paid directly from your investment)*
<S> <C>
Class Y
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) None
Sales charge imposed on reinvested dividends None
- --------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None
Maximum deferred sales charge (load) (as a percentage of offering price) None
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the Large Cap
Portfolio. The Large Cap Portfolio pays these expenses from its assets.
ANNUAL PORTFOLIO OPERATING EXPENSES
Class Y
-------
Management Fees 0.75%
Distribution (12b-1) Fees 0.00%
Other Expenses . %
-------
Total Portfolio Operating Expenses __.__%
Fee Waiver And Expense Reimbursement ( . )%
-------
Net Expenses (2) 1.00%
=======
(1) The expenses shown are based on historical expenses of the Large Cap
Portfolio adjusted to reflect current expenses. The Adviser has agreed to
waive its fee and/or reimburse certain expenses until at least March 31,
2000 so that the Large Cap Portfolio's net expenses do not exceed the amount
indicated above.
15
<PAGE>
EXAMPLE
THIS EXAMPLE ILLUSTRATES THE COST OF INVESTING IN THE LARGE CAP PORTFOLIO OVER
VARIOUS TIME PERIODS. IT IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING
IN THE LARGE CAP PORTFOLIO WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.
THE EXAMPLE ASSUMES THAT:
. you invest $10,000 in the Large Cap Portfolio
. your investment returns 5% each year
. the Large Cap Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
</TABLE>
* This Example assumes that net portfolio operating expenses will equal 1.00%
until March 31, 2000 and thereafter will equal __.___%.
16
<PAGE>
SMALL CAP VALUE PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
Capital appreciation.
Principal Strategies
Under normal market conditions, the Small Cap Value Portfolio ("Small Cap
Portfolio") invests substantially all of its assets in equity securities of
companies with market capitalizations of up to $1 billion ("small companies")
and which the Adviser identifies as value companies.
Under normal market conditions, the Small Cap Portfolio will invest
substantially all of its assets in equity securities of small companies
. The Small Cap Portfolio will invest at least 85% of its total assets in equity
securities of small companies
. Within this 85% category, the Small Cap Portfolio may invest up to 10% of
its assets in equity securities of foreign issuers in the form of U.S.
dollar-denominated ADRs that are listed on U.S. exchanges
. Although, under normal market conditions, the Small Cap Portfolio will invest
substantially all of its assets in small companies, it may invest up to 15% of
its total assets in money market instruments and other debt obligations
Equity securities consist of common stocks, convertible securities and preferred
stocks. The convertible securities and preferred stocks in which the Small Cap
Portfolio may invest must be rated at least "investment grade" by an NRSRO at
the time of purchase.
The Adviser uses a "value" approach to investing. The Adviser looks for equity
securities of companies that have relatively low price-to-book ratios, low
price-to-earnings ratios or higher-than-average dividend payments in relation to
share price. To determine whether a company's stock falls within the value
classification, the Adviser analyzes factors such as the company's price-to-book
and price-to-earnings ratios, earnings growth, dividend payout ratios, return on
equity, and beta (a measure of stock price volatility relative to the market).
In selecting investments, the Adviser also may consider, among other things, new
management and upcoming corporate restructuring, the general business cycle, the
company's position within a specific industry and the company's responsiveness
to changing conditions.
The Small Cap Portfolio may, but is not required to, use derivatives to reduce
risk and enhance return, including futures contracts on securities and indices
and related options, and options on securities and financial indices.
17
<PAGE>
Principal Risks
The Small Cap Portfolio is subject to the following principal risks, more fully
described in "Risk Factors." All or some of these risks may adversely affect
the Small Cap Portfolio's net asset value, yield and/or total return:
. The market value of portfolio securities may decline
. In a falling market, value stocks may decline in price faster than
growth stocks
. In a rising market, value stocks may rise more slowly than growth
stocks
. A small company's stock may decline in value because it lacks
management experience, operating experience, financial resources and
product diversification that permit larger companies to adapt to
changing market conditions
. Small company stock may be subject to wider price swings or be less
liquid because it trades less frequently and in smaller volume than
large company stock. This lack of liquidity may depress prices of
these securities
. A particular strategy may not produce the intended result or may not
be executed effectively
. A company's earnings may not increase as expected
. Hedges created by using derivative instruments, including futures or
options contracts, may not respond to economic or market conditions as
expected
Who may want to invest in the Small Cap Portfolio
The Small Cap Portfolio may be appropriate for investors who:
. are investing for the long term
. are willing to accept the price volatility associated with smaller-
company stocks in exchange for their relatively higher return
potential compared to larger-company stocks
. want to add a small-cap growth component to diversify their portfolio
The Small Cap Portfolio may not be appropriate for investors who:
---
. are investing for the short term or need current income
. desire to invest only in larger, more established companies
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
PERFORMANCE
The bar chart and table below show the risks of investing in the Small Cap
Portfolio by showing changes in the performance of the Small Cap Portfolio's
Class Y shares as of December 31, 1998 from year to year since inception. The
table shows how the Small Cap Portfolio's average annual total return for one
year and since the date of inception compared to the Russell 2000 Index. The
figures shown assume reinvestment of dividends and distributions.
18
<PAGE>
***Past performance is not necessarily an indication of future results.***
Bar Chart
1995: ___.__% (1)
1996: ___.__%
1997: ___.__%
1998: ___.__% (2)
(1) Class Y shares commenced operations on June 22, 1995. Return is not
annualized.
(2) The Small Cap Portfolio's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 19__) and the lowest quarterly return was YY% (for
the quarter ended _____19 __).
<TABLE>
<CAPTION>
Average Annual Total Returns Since Inception*
(for the periods ended December 31, 1998)
<S> <C> <C>
1 Year
Small Cap Portfolio Class Y
___.__% ___.__%
Russell 2000 Index
___.__% ___.__%
</TABLE>
* Class Y shares commenced operations on June 22, 1995.
19
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Small Cap Portfolio.
<TABLE>
<CAPTION>
Shareholder Fees (paid directly from your investment)*
<S> <C>
Class Y
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) None
- --------------------------------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None
- --------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None
- --------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of offering price) None
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the Small Cap
Portfolio. The Small Cap Portfolio pays these expenses from its assets.
ANNUAL PORTFOLIO OPERATING EXPENSES
Class Y
---------
Management Fees 0.75%
Distribution (12b-1) Fees 0.00%
Other Expenses . %
---------
Total Portfolio Operating Expenses __.__%
Fee Waiver And Expense Reimbursement ( . )%
---------
NET EXPENSES (1) 1.00%
=========
(1) The expenses shown are based on historical expenses of the Small Cap
Portfolio adjusted to reflect current expenses. The Adviser has agreed to
waive its fee and/or reimburse certain expenses until at least March 31,
2000 so that the Small Cap Portfolio's net expenses do not exceed the amount
indicated above.
20
<PAGE>
EXAMPLE
THIS EXAMPLE ILLUSTRATES THE COST OF INVESTING IN THE SMALL CAP PORTFOLIO OVER
VARIOUS TIME PERIODS. IT IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING
IN THE SMALL CAP PORTFOLIO WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.
THE EXAMPLE ASSUMES THAT:
. you invest $10,000 in the Small Cap Portfolio
. your investment returns 5% each year
. the Small Cap Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
</TABLE>
* This Example assumes that net portfolio operating expenses will equal 1.00%
until March 31, 2000 and thereafter will equal __.___%.
21
<PAGE>
THE FOCUS LIST PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
Capital appreciation.
Principal Strategies
Under normal market conditions, the Focus List Portfolio will invest at least
65% of its total assets in the common stocks of U.S. and foreign issuers that,
at the time of purchase, are included on the Bear Stearns Equity Focus List (the
"Focus List").
Under normal market conditions, the Focus List Portfolio may invest up to 35% of
its total assets in stocks that are not on the Focus List. The Adviser may
select non-Focus List securities, for example, when the Adviser determines that
Focus List stocks are illiquid, would cause the Focus List Portfolio to be
overweighted in a particular sector or overly concentrated in a particular
industry, or for any other reason.
Although, under normal market conditions, the Focus List Portfolio will invest
substantially all of its assets in equity securities, it may invest up to 10% of
its total assets in money market instruments.
The Focus List generally consists of 20 stocks. Using a rating system of "1"
through "5," the Bear Stearns Equity Research Department, consisting of over 80
analysts who cover more than 900 common stocks of U.S. and foreign companies,
assigns the following ratings: 1 (Buy), 2 (Attractive), 3 (Neutral), 4 (Avoid),
5 (Sell). Approximately 300 stocks are rated Buy or Attractive.
The Bear Stearns Research Department and the Research Stock Selection Committee
(comprised of senior Research personnel) will assign a Buy rating to stocks when
they believe the stock will significantly outperform the market over the next
three to six months because of a catalyst or near-term event that they expect
will trigger upward movement in the stock's price. These catalysts may include
a change in management, the introduction of a new product or a change in the
industry outlook. An Attractive rating means that an analyst has determined
that the stock has solid long-term growth prospects and is undervalued in
comparison to that of comparable companies.
The Focus List Portfolio may, but is not required to, use derivatives to reduce
risk and enhance return, including futures contracts on securities and indices
and related options, and options on securities and financial indices.
For a more detailed discussion of the Focus List stock evaluation system and its
use by the Focus List Portfolio, please see the "Investments" section of this
Prospectus, beginning at page ___. The "Investments" section also discusses
various investments and techniques that the Focus List Portfolio uses to achieve
its investment objective.
22
<PAGE>
Principal Risks
The Focus List Portfolio is subject to the following principal risks, more fully
described in "Risk Factors." Some or all of these risk factors may affect the
Focus List Portfolio's net asset value, yield and/or total return:
. The market value of portfolio securities may decline
. A particular strategy may not produce the intended result or may
not be executed effectively
. A company's earnings may not increase as expected
. The Focus List Portfolio may forgo other attractive investment
opportunities because the securities are not on the Focus List
. The Adviser may be prohibited from buying an attractive stock in the
Focus List for legal reasons, and thus miss an investment opportunity
. Hedges created by using derivative instruments, including futures or
options contracts, may not respond to economic or market conditions
as expected
The Focus List Portfolio is a non-diversified mutual fund, which means that it
may invest a larger portion of its assets in a single issuer than if it were
diversified. This could make the Focus List Portfolio more susceptible to the
uncertain performance of a particular issuer.
Who may want to invest in the Focus List Portfolio
The Focus List Portfolio may be appropriate for investors who:
. are investing for the long term
. are willing to accept the price volatility associated with stocks in
exchange for their relatively higher return potential compared to
other asset classes
. are seeking an aggressive growth investment
The Focus List Portfolio may not be appropriate for investors who:
---
. want a diversified portfolio
. are investing for the short term or need current income
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
23
<PAGE>
PERFORMANCE
Class Y shares of the Focus List Portfolio have not yet commenced operations.
The bar chart and table below show the risks of investing in the Focus List
Portfolio by showing changes in the performance of its Class A shares as of
December 31, 1998 for one year. The table shows how the Focus List Portfolio's
average annual total return for one year and since the date of inception
compared to the ________________ Index, a broad-based unmanaged index
______________________ _____________________________. The figures shown assume
reinvestment of dividends and distributions. The returns for Class Y shares
offered by this Prospectus will differ from the return for the Class A shares
shown on the bar chart, depending the expenses of Class Y shares.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1998: ___.__% (1)
(1) The Focus List Portfolio's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 1998) and the lowest quarterly return was YY% (for
the quarter ended _____1998).
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Returns
(for the periods ended December 31, 1998) Since Inception*
1 Year
Focus List Portfolio Class A ___.__% ___.__%
__________________ Index ___.__% ___.__%
</TABLE>
* Class A shares commenced operations on December 29, 1997.
24
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Focus List Portfolio.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Fees (paid directly from your investment)*
Class Y
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) None
Sales charge imposed on reinvested dividends None
- --------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None
Maximum deferred sales charge (load) (as a percentage of offering price) None
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the Focus List
Portfolio. The Focus List Portfolio pays these expenses from its assets.
ANNUAL PORTFOLIO OPERATING EXPENSES
Class Y
---------
Management Fees 0.65%
Distribution (12b-1) Fees 0.00%
Other Expenses . %
---------
Total Portfolio Operating Expenses __.__%
Fee Waiver And Expense Reimbursement ( . )%
---------
Net Expenses (1) 0.90%
=========
(1) The expenses shown are based on estimated expenses of Class Y shares of the
Focus List Portfolio for the fiscal year ending March 31, 2000. The Adviser
has agreed to waive its fee and/or reimburse certain expenses until at least
March 31, 2000 so that the Focus List Portfolio's net expenses do not exceed
the amount indicated above.
25
<PAGE>
EXAMPLE
THIS EXAMPLE ILLUSTRATES THE COST OF INVESTING IN THE FOCUS LIST PORTFOLIO OVER
VARIOUS TIME PERIODS. IT IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING
IN THE FOCUS LIST PORTFOLIO WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.
THE EXAMPLE ASSUMES THAT:
. you invest $10,000 in the Focus List Portfolio
. your investment returns 5% each year
. the Focus List Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class Y $______ $_______ $_______ $_______
</TABLE>
* This Example assumes that net portfolio operating expenses will equal 0.90%
until March 31, 2000 and thereafter will equal __.___%.
26
<PAGE>
BALANCED PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
Long-term capital growth and current income.
Principal Strategies
The Balanced 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 percentage of the Balanced Portfolio invested in equity and fixed-income
securities will vary from time to time as the Adviser evaluates their relative
attractiveness based on market valuations, economic growth and inflation
forecasts. When allocating equity and fixed income investments, the Adviser
takes into account the Balanced Portfolio's intention to pay regular quarterly
dividends. The amount of quarterly dividends may fluctuate depending on
prevailing interest rates and how the Adviser allocates the Balanced Portfolio's
assets, among other things.
Equity Securities. Under normal market conditions, the Balanced Portfolio
invests between 40% and 60% of its total assets in equity securities. The
Adviser may invest in equity securities primarily to provide current income.
Income-producing equity securities include
. interests in real estate investment trusts ("REITs")
. convertible securities
. preferred stocks
. utility stocks
. interests in limited partnerships
Fixed Income Securities. Under normal market conditions, the Balanced Portfolio
invests between 40% and 60% of its total assets in fixed income securities. The
Balanced Portfolio invests at least 25% of its total assets in fixed-income
senior securities and the remainder of its assets in debt instruments, other
fixed-income securities and money market instruments. The Balanced Portfolio
will invest in debt instruments that have been rated "A" or higher by Moody's
Investors Service, Inc. ("Moody's") or S&P. Within this 25% category, the
Balanced Portfolio may invest up to 5% of its total assets in higher-risk,
below-investment-grade corporate debt securities rated no lower than "B" by an
NRSRO or considered to be comparable by the Adviser. The Adviser employs a
"top-down" approach to selecting investments for the Balanced Portfolio that
includes analysis of interest rate, sector and yield curve trends.
The Balanced Portfolio's fixed income investments include
. securities issued by the U.S. Government, its agencies,
instrumentalities or sponsored enterprises
. debt securities issued by companies
. mortgage-backed and asset-backed securities
. municipal securities
27
<PAGE>
. custodial receipts
. U.S. dollar-denominated securities issued by foreign governments
Money Market Instruments. Under normal market conditions, the Balanced
Portfolio may invest up to 20% of its total assets in money market instruments.
The Balanced Portfolio may, but is not required to, use derivatives to reduce
risk and enhance return, including futures contracts on securities and indices
and related options, and options on securities and financial indices.
Principal Risks
The Balanced Portfolio is subject to the following principal risks, more fully
described in "Risk Factors." All or some of these risks may adversely affect the
Balanced Portfolio's net asset value, yield and/or total return:
. The market value of portfolio securities may decline
. A particular strategy or the Adviser's allocation may not produce the
intended result or may not be executed effectively
. A company's earnings may not increase as expected
. The rate of inflation increases and interest rates may rise,
causing the Balanced Portfolio's debt securities to decline in value
. An issuer's credit quality may be downgraded
. Below-investment-grade securities may decline in value due to
defaults or bankruptcies
. The Balanced Portfolio may have to reinvest interest or sale
proceeds at lower rates
. The average life of a mortgage-related security may change
. Hedges created by using derivative instruments, including futures or
options contracts, may not respond to economic or market conditions
as expected
Who may want to invest in the Balanced Portfolio
The Balanced Portfolio may be appropriate for investors who:
. may be investing in the market for the first time
. seek current income to meet expenses coupled with asset growth
potential
. are investing in a retirement plan such as an IRA and want the
potential for both investment growth and some capital preservation
. are setting up trust accounts, such as charitable remainder trusts,
that have payout requirements
The Balanced Portfolio may not be appropriate for investors who:
---
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
28
<PAGE>
. want an investment that focuses exclusively either on equity or fixed
income securities
. want to invest in a particular sector or in particular industries
PERFORMANCE
The bar chart and table below show the risks of investing in the Balanced
Portfolio by showing changes in the performance of its Class Y shares as of
December 31, 1998 for one year. The table shows how the Balanced Portfolio's
average annual total return for one year and since the date of inception
compared to the S&P 500 Index, a broad-based unmanaged index that represents the
general performance of domestically traded common stocks of mid-to large-size
companies, and the Lipper Balanced Fund Index, a non-weighted index of the 30
largest funds within the Lipper balanced fund investment category. The figures
shown assume reinvestment of dividends and distributions.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1998: ___.__% (1)
(1) The Balanced Portfolio's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 1998) and the lowest quarterly return was YY% (for
the quarter ended _____1998).
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Returns
(for the periods ended December 31, 1998) Since Inception*
1 Year
Balanced Portfolio Class Y ___.__% ___.__%
- ------------------------------------------------------------------------------------------------
S&P 500 Index ___.__% ___.__%
- ------------------------------------------------------------------------------------------------
Lipper Balanced Fund Index ___.__% ___.__%
</TABLE>
* Class Y shares commenced operations on January 6, 1998.
29
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Balanced Portfolio.
<TABLE>
<CAPTION>
Shareholder Fees (paid directly from your investment)*
Class Y
<S> <C>
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) None
Sales charge imposed on reinvested dividends None
- --------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None
- --------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of offering price) None
</TABLE>
* A broker or agent may charge additional fees on the purchase, sale or
exchange of Portfolio shares.
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the Balanced
Portfolio. The Balanced Portfolio pays these expenses from its assets.
ANNUAL PORTFOLIO OPERATING EXPENSES
Class Y
---------
Management Fees 0.65%
Distribution (12b-1) Fees 0.00%
Other Expenses . %
---------
Total Portfolio Operating Expenses __.__%
Fee Waiver And Expense Reimbursement ( . )%
---------
Net Expenses (1) 0.70%
=========
(2) The expenses shown are based on historical expenses of the Balanced
Portfolio adjusted to reflect current expenses. The Adviser has agreed to
waive its fee and/or reimburse certain expenses until at least March 31,
2000 so that the Balanced Portfolio's net expenses do not exceed the amount
indicated above.
30
<PAGE>
EXAMPLE
THIS EXAMPLE ILLUSTRATES THE COST OF INVESTING IN THE BALANCED PORTFOLIO OVER
VARIOUS TIME PERIODS. IT IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING
IN THE BALANCED PORTFOLIO WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE
EXAMPLE ASSUMES THAT:
. you invest $10,000 in the Balanced Portfolio
. your investment returns 5% each year
. the Balanced Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
* This Example assumes that net portfolio operating expenses will equal 0.70%
March 31, 2000 and thereafter will equal __.___%.
</TABLE>
31
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
Long-term capital appreciation.
Principal Strategies
Under normal market conditions, the International Equity Portfolio (the
"International Portfolio") invests substantially all of its assets in equity
securities of foreign companies. The International Portfolio will invest at
least 65% of its total assets in the equity securities of companies that are
organized outside the United States or whose securities are principally traded
outside the United States, including common stock, preferred stock, depositary
receipts for stock, and other securities having the characteristics of stock
(such as an equity or ownership interest in a company).
Although, under normal market conditions, the International Portfolio will
invest substantially all of its assets in foreign equities, it may invest up to
35% of its total assets in debt obligations, which include fixed or floating-
rate bonds, notes, debentures, commercial paper, loan participations, Brady
Bonds, convertible securities and other debt securities issued or guaranteed by
governments, agencies or instrumentalities, central banks, commercial banks or
private issuers, including repurchase agreements with respect to obligations of
governments or central banks. These debt obligations may be unrated or rated in
the lowest categories by an NRSRO. See "Risk factors -- Risks of debt
securities -- below-investment-grade securities."
The International Portfolio's investments may be denominated in U.S. dollars,
foreign currencies or multinational currency units.
Under normal market conditions, the International Portfolio invests in the
securities of companies located in at least three countries outside of the
United States. The International Portfolio in the securities of issuers located
in Australia, Canada, Japan, New Zealand and the developed countries of Western
Europe.
In selecting investments for the International Portfolio, the Adviser primarily
evaluates whether a particular country's securities markets have higher-than-
average potential for capital appreciation. The Adviser will then seek out
companies with strong fundamental characteristics, including solid management,
sound balance sheets and the potential for positive earnings growth.
The International Portfolio also may invest in the securities of issuers located
in countries that are considered to be emerging or developing ("emerging
countries") by the World Bank, the International Finance Corporation, or the
United Nations and its authorities. These countries are located primarily in
Africa, Asia (ex-Japan), the Caribbean islands, Central and South America, the
Middle East and certain parts of Europe (Cyprus, the Czech Republic, Estonia,
Greece, Hungary, Poland, Portugal, Russia, Slovakia and Turkey).
A company is considered to be an emerging country issuer if any of the following
apply:
. its securities are principally traded in an emerging country
. it derives at least 50% of its total revenue from (a) providing goods or
services in emerging countries or (b) sales made in emerging countries
32
<PAGE>
. it maintains 50% or more of its assets in one or more emerging countries
. it is organized under the laws of, or has a principal office in, an
emerging country
The International Portfolio may, but is not required to, use derivatives to
reduce risk and enhance return, including futures contracts on securities and
indices and related options, and options on securities and financial indices.
Principal Risks
The International Portfolio is subject to the following principal risks, more
fully described in "Risk Factors." Some or all of these risks may adversely
affect the International Portfolio's net asset value, yield and/or total return:
. Foreign securities may experience more volatility than their domestic
counterparts, in part because of higher political and economic risks, lack
of reliable information, fluctuations in currency exchange rates, and the
risks that a foreign government may take over assets, restrict the ability
to exchange currency or restrict the delivery of securities
. Foreign securities issued in emerging countries generally experience less
liquidity and more volatility because the securities markets in these
countries have less trading volume and fewer participants than established
markets
. Inefficient settlement procedures in emerging countries may cause the
International Portfolio to miss investment opportunities or be exposed to
liability for failure to deliver securities
. The International Portfolio may experience losses from improper trading
activities in emerging countries that are subject to less government
regulation than in the United States
. The market value of portfolio securities may decline
. A particular strategy may not produce the intended result or may not be
executed effectively
. A company's earnings may not increase as expected
. Hedges created by using derivative instruments, including futures or
options contracts, may not respond to economic or market conditions as
expected
Who may want to invest in the International Portfolio
The International Portfolio may be appropriate for investors who:
. are investing for the long term
. are willing to accept the price volatility associated with foreign stocks
in exchange for their relatively higher return potential
. want to diversify an existing portfolio by adding an international
component
The International Portfolio may not be appropriate for investors who:
---
. are investing for the short term or need current income
. are not willing to accept the risks associated with foreign securities
markets or currency
33
<PAGE>
fluctuation
. are not willing to take any risk that they may lose money on their
investment
. seek stability of the value of their investment
. want to invest in a particular sector or in particular industries
PERFORMANCE
Class Y shares of the International Portfolio have not yet commenced operations.
The bar chart and table below show the risks of investing in the International
Portfolio by showing changes in the performance of its Class A shares as of
December 31, 1998 for one year. The table shows how the International
Portfolio's average annual total return for one year and since the date of
inception compared to the Morgan Stanley Capital International Europe,
Australasia, Far East Index (the "MSCI EAFE Index"), a broad-based unmanaged
index that represents the general performance of common stocks of issuers
located in developed countries in Europe and the Pacific Basin, weighted by each
component country's market capitalization. The figures shown assume
reinvestment of dividends and distributions. The returns for Class Y shares
offered by this Prospectus will differ from the return for the Class A shares
shown on the bar chart, depending on the expenses of the Class Y shares.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1998: ___.__% (1)
(1) The International Portfolio's year-to-date return as of June 30, 1999 was
___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 1998) and the lowest quarterly return was YY% (for
the quarter ended _____1998).
Average Annual Total Returns
(for the periods ended December 31, 1998) 1 Year Since Inception*
International Portfolio - Class A ___.__% ___.__%
MSCI EAFE Index ___.__% ___.__%
* Class A shares commenced operations on December 29, 1997.
34
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the International Portfolio.
<TABLE>
<CAPTION>
Shareholder Fees (paid directly from your investment)* Class Y
<S> <C>
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) None
- --------------------------------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None
- --------------------------------------------------------------------------------------------------------
Redemption fees and exchange fees None
- --------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of offering price) None
* A broker or agent may charge additional fees on the purchase, sale or exchange of Portfolio shares.
</TABLE>
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the International
Portfolio. These International Portfolio pays these expenses are paid from the
Fund's its assets.
Annual Portfolio Operating Expenses
Class A
-----------
Management Fees 1.00%
Distribution (12b-1) Fees 0.00%
Other Expenses (1) . %
----------
Total Portfolio Operating Expenses __.__%
Fee Waiver and Expense Reimbursement ( . )%
----------
Net Expenses (2) 1.25%
====
(1) The expenses shown are based on estimated expenses of the International
Portfolio for the fiscal year ending March 31, 2000. The Adviser has
agreed to waive its fee and/or reimburse certain expenses until at least
March 31, 2000 so that the International Portfolio's net expenses do not
exceed the amount indicated above.
35
<PAGE>
Example
This Example illustrates the cost of investing in the International Portfolio
over various time periods. It is intended to help you compare the cost of
investing in the International Portfolio with the cost of investing in other
mutual funds. The Example assumes that:
. you invest $10,000 in the International Portfolio
. your investment returns 5% each year
. the International Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
If you do not sell your shares at the end of each period --
---
1 Year 3 Years 5 Years 10 Years
Class Y $_______ $_______ $_______ $_______
* This Example assumes that net portfolio operating expenses will equal 1.25%
until March 31, 2000 and thereafter will equal __.___%.
36
<PAGE>
INVESTMENTS
Principal Investment Strategies -- Additional Information
STARS Portfolio
S&P introduced STARS in January 1987. Since 1993, on average, each STARS
category has consisted of approximately the number of stocks shown below.
Rankings may change frequently as S&P analysts evaluate developments affecting
individual securities and the markets.
STARS Category Number of Stocks
- ---------------- ----------------
Five star e 95
Four star e 385
Three star e 530
Two star e 90
One star e 10 to 23
To evaluate the performance of stocks in the various categories, and thus the
performance of its analysts, STARS initially gives equal weight by dollar amount
to each stock, does not rebalance the portfolio based on changes in values or
rankings and does not reflect dividends or transaction costs. STARS is only a
model; it does not reflect actual investment performance. While its performance
cannot be used to predict actual results, S&P believes it is useful in
evaluating its analysts. Investors should recognize that the pool of S&P
analysts changes and their past performance is not necessarily predictive of
future results either of the model or of the STARS Portfolio. From January 1,
1987 through March 31, 1999:
. The S&P 500 Index (measured on a total return basis, without divident
reinvestment) increased by ____.___%. During this period, the average
dividend yield of securities included in the S&P 500 Index were ___.___%
and the average dividend yield of five star stocks were ___.___%.
. The ranked stocks experienced the following changes in value:
STARS Category Percentage change in value
- ---------------- ---------------------------
Five stars e ________%
Four stars e ________%
Three stars e ________%
Two stars e ________%
One star e ________%
The STARS Portfolio believes that this information means only that,
historically, five star stocks have significantly outperformed lower-ranked
stocks and that one star stocks have significantly underperformed the higher-
ranked stocks. You should not use this information to predict whether past
results will occur in the future or the actual performance of a particular
category. STARS' performance has been more volatile than that of conventional
indices such as the Dow Jones Industrial Average and the S&P 500 Index.
37
<PAGE>
In addition, the performances of five star and one star stocks have not borne a
consistent relationship to each other or to the performance of the S&P 500
Index, as shown below. The STARS Portfolio is managed actively. Its performance
will depend primarily on the Adviser's investment decisions. The STARS Portfolio
will incur transaction and other costs, including management and distribution
fees, that are not reflected in the information shown below.
<TABLE>
<CAPTION>
Relative Performance Rankings (1 = highest performance)
- ---------------------------------------------------------------------------------
1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 One star stocks S&P 500 Index Five star stocks Five star stocks
- ---------------------------------------------------------------------------------
2 S&P 500 Index Five star stocks S&P 500 Index S&P 500 Index
- ---------------------------------------------------------------------------------
3 Five star stocks One star stocks One star stocks One star stocks
</TABLE>
Downgrades and upgrades. The Adviser need not sell a security that STARS has
downgraded. Also, the Adviser need not terminate a "short" position if it
involves a one star security that STARS has upgraded. In addition, if STARS
downgrades a portfolio security to four stars, the Adviser may consider that
security to be rated five stars. In this event, the Adviser may purchase
additional shares of that security without regard to the 15% limitation.
Similarly, if STARS upgrades a security that the STARS Portfolio has sold short
to two stars, the Adviser may consider that security to be rated one star. In
this event, the Adviser may sell short additional shares of that security
without regard to the 15% limitation.
The Insiders Select Fund
Corporate Insiders. The Adviser believes that collecting, classifying and
analyzing legally required reports of corporate insider transactions provides
valuable investment management information, because these insiders are in the
best position to understand their companies' near-term prospects.
Corporate insiders deal in their company's stock for various reasons. Some
transactions are unrelated to the future of the company, such as the sale of
stock to buy a home or finance a child's college education, tax planning or
token purchases to signal confidence in the company. Other transactions,
however, are related directly to the insider's beliefs about the near-term price
expectations for the company's stock. An insider who exercises long-term
options early for small profits may believes that the stock soon will decline.
Insiders who exercise options, hold the stock, and buy in the open market
probably believe that the stock soon will rise. Clusters of insiders making
substantial buys or sells may indicate broad agreement within a firm as to the
direction of the stock.
Financial Analysts. Financial analysts employ a number of research tools to
learn more about the companies they follow, including visits to the company and
in-depth discussions with management. Successful analysts learn to interpret
management's words and actions. Management may use discussions with certain
analysts to signal its views to the market. The Adviser also believes that
revisions in analysts' earnings and ratings predictions may indicate a stock's
future returns.
Financing Decisions. A company must routinely decide whether to maintain or
change its dividend policy, buy its own stock in the open market or issue new
securities. From time to time the company may decide that its stock is
undervalued, providing an opportunity to buy back the stock in the open market.
By contrast, a company's decision to sell securities may indicate that the
company believes that its stock has reached a near-term high, a possible sell
signal.
38
<PAGE>
Focus List Portfolio
Bear Stearns publishes the Focus List, which is a list of stocks selected by the
Bear Stearns Focus List Committee. Current members of the Focus List Committee
are Kathryn Booth, Director of Global Research for Bear Stearns, and Elizabeth
Mackay, Chief Investment Strategist of Bear Stearns. The Committee monitors the
Focus List daily, and candidates are considered based on one or more of the
following criteria: market outlook, perception of the stock's sector, and the
stock's current valuation relative to the market and its industry. Domestic and
international stocks and ADRs rated Buy (1) or Attractive (2) are eligible for
inclusion on the Focus List.
Generally, the Adviser will purchase a security that has been added to the Focus
List and will sell a security when the security has been removed from the Focus
List. The Adviser determines how much of the Focus List Portfolio's assets to
allocate to each Focus List stock. The Adviser may make changes in the
allocation as investment and economic conditions change. Depending upon market
conditions and to the extent the Focus List Portfolio needs to hold cash
balances to satisfy shareholder redemption requests, the Adviser may not
immediately purchase a new Focus List stock and/or may continue to hold one or
more Focus List stocks that have been deleted from the Focus List. The Adviser
will not have access to the Focus List before Bear Stearns publishes it.
The Focus List Committee automatically removes from the Focus List stocks that
an analyst has downgraded below Attractive. However, the Focus List Committee
may delete stocks for other reasons. For example, it may delete a stock when
the stock has achieved its target price range, a catalyst fails to materialize
or have its expected effect, or new, more attractive opportunities.
The Focus List may include stocks of issuers for which Bear Stearns or an
affiliate performs banking services for which it receives fees, as well as
stocks in which Bear Stearns or an affiliate makes a market and may have a long
or short position. When Bear Stearns or an affiliate participates in a
distribution of stock, the Adviser may be prohibited from purchasing that stock
for the Focus List Portfolio. The activities of Bear Stearns or an affiliate may
limit the Focus List Committee's ability to include stocks on the Focus List or
the Focus List Portfolio's flexibility in purchasing and selling such stocks.
The Focus List is available to other clients of Bear Stearns and its affiliates,
including the Adviser.
39
<PAGE>
Investments and Techniques
This table summarizes some of the investments and techniques, described below,
that each Portfolio may use to achieve its investment objectives.
<TABLE>
<CAPTION>
Large Small Insiders Focus
Cap Cap International Balanced STARS Select List
Portfolio Portfolio Portfolio Portfolio Portfolio Fund Portfolio
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ADRs u u u u u u u
- --------------------------------------------------------------------------------------------------------
Asset-backed u
securities
- --------------------------------------------------------------------------------------------------------
Brady bonds u u
- --------------------------------------------------------------------------------------------------------
Convertible u u u u u
securities
- --------------------------------------------------------------------------------------------------------
Debt securities u u u u u u u
- --------------------------------------------------------------------------------------------------------
Equity u u u u u u u
securities
- --------------------------------------------------------------------------------------------------------
Futures u u u u u u u
contracts and
related options
- --------------------------------------------------------------------------------------------------------
Mortgage-related u
securities
- --------------------------------------------------------------------------------------------------------
REITs u
- --------------------------------------------------------------------------------------------------------
Repurchase u u u u u u u
agreements
- --------------------------------------------------------------------------------------------------------
Short sales u
- --------------------------------------------------------------------------------------------------------
Short sales u u u u u u u
against the box
- --------------------------------------------------------------------------------------------------------
When-issued u u u u u u u
securities and
forward
commitments
- --------------------------------------------------------------------------------------------------------
</TABLE>
. ADRs are receipts for the foreign company shares held by a United States
depositary institution, entitling the holder to all dividends and capital
gains of the underlying shares. ADRs are quoted in U.S. dollars and are
traded on U.S. exchanges.
. Asset-backed securities have a structure that is similar to mortgage-
related securities (see below). The collateral for these securities
includes home equity loans, automobile and credit card receivables, boat
loans, computer leases, airplane leases, mobile home loans, recreational
vehicle loans and hospital account receivables.
40
<PAGE>
. Brady bonds are debt securities issued in an exchange of outstanding
commercial bank loans to public and private entities in emerging countries
in connection with sovereign debt restructurings, under a plan introduced
by former U.S. Treasury Secretary Nicholas Brady.
. Convertible securities are bonds, debentures, notes, preferred stocks or
other securities may be converted into or exchanged for common stock.
Convertible securities are characterized by (1) higher yields than common
stocks, but lower yields than comparable non-convertible securities, (2)
less price fluctuation than the underlying stock since they have fixed
income characteristics, and (3) potential for capital appreciation if the
market price of the underlying stock increases.
. Debt securities, including bills, bonds, and notes, represent money
borrowed that must be repaid, usually having a fixed amount, a specific
maturity date or dates, and a specific rate of interest (or formula for
determining the interest rate) or an original purchase discount.
. Equity securities include foreign and domestic common or preferred stocks,
rights and warrants.
. Futures contracts and related options. Futures contracts involve the right
or obligation to deliver or receive assets or money depending on the
performance of one or more assets or an economic index. To reduce the
effects of leverage, liquid assets equal to the contract commitment are set
aside to cover the commitment. A Portfolio may invest in futures in an
effort to hedge against market risk, or as a temporary substitute for
buying or selling securities, foreign currencies or for temporary cash
management purposes.
. Mortgage-related securities represent interests in pools of mortgage loans
made by lenders like savings and loan institutions, mortgage bankers,
commercial banks and others.
. 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.
. Repurchase agreements are a type of secured lending and typically involve
the acquisition of debt securities (including foreign government
securities) from a financial institution, such as a bank, savings and loan
association or broker-dealer, which then agrees to repurchase the security
at a specified resale price on an agreed future date (ordinarily a week or
less). The difference between the purchase and resale prices generally
reflects the market interest rate for the term of the agreement.
. Short sales. In a short sale, a Portfolio sells a security it does not own
anticipating that the price will decline. To complete a short sale, the
Portfolio must borrow the security to make delivery and must then replace
the security borrowed by buying it at the prevailing market price, which
may be higher or lower than the price at which the Portfolio sold the
security short. Short sales involve leverage, which may exaggerate a gain
or loss.
41
<PAGE>
. Short sales against the box. A Portfolio may sell a security short that it
already owns. Although the Portfolio will avoid the transaction costs of a
market purchase to replace the borrowed stock, it incurs borrowing costs
and loses an opportunity to realize a higher price if the security's price
at the time of replacement is higher than the price at which the Portfolio
sold the security short.
. When-issued securities and forward commitments. When-issued transactions
arise when securities are purchased with payment and delivery taking place
in the future in order to secure what is considered to be an advantageous
price and yield. In a forward commitment transaction, a buyer agrees to
purchase securities for a fixed price at a future date beyond customary
settlement time. A purchaser may enter into offsetting contracts for the
forward sale of other securities that it owns.
Other Investment Strategies
[***Each Portfolio may invest defensively or hedge investments to protect
against a downturn.***]
. Temporary Defensive Measures. From time to time, during unfavorable market
conditions, the Adviser may invest "defensively." This means a Portfolio
may make temporary investments that are not consistent with its investment
objective and principal strategies. Engaging in temporary defensive
measures may reduce the benefit from any upswing in the market and may
cause a Portfolio to fail to meet its investment objective.
For temporary defensive purposes, each Portfolio may hold cash (U.S.
dollars) and may invest all of its assets in high-quality fixed-income
securities or U.S. or foreign money market instruments.
For cash management, each Portfolio temporarily may hold cash (U.S.
dollars) and may invest all of its assets in high-quality U.S. or foreign
money market instruments.
For temporary defensive purposes or cash management, the International
Portfolio may hold foreign currencies or multinational currency units.
. Portfolio Turnover. The Adviser may trade actively to achieve a Portfolio's
goals. Emerging country markets are especially volatile and may result in
more frequent trading. This may result in higher capital gains
distributions, which would increase your tax liability. Frequent trading
may also increase the Portfolio's costs, lessening its performance over
time.
. Securities Lending. Each Portfolio may lend a portion of its securities to
financial institutions, which will generates income for the Portfolio. The
Portfolios have appointed Custodial Trust Company ("CTC"), an affiliate of
the Adviser, as securities lending agent, for which CTC receives a
transaction fee.
The SAI describes each Portfolio's investment strategies in more detail.
42
<PAGE>
RISK FACTORS
As with all mutual funds, investing in the Portfolios involves certain risks.
There is no guarantee that a Portfolio will meet its investment objective. You
can lose money by investing in a Portfolio if you sell your shares after it
declines in value below your original cost. There is never any assurance that a
Portfolio will perform as it has in the past.
The Portfolios may use various investment techniques, some of which involve
greater amounts of risk than others. You will find a detailed discussion of
these investment techniques in the SAI. To reduce risk, the Portfolios are
subject to certain limitations and restrictions on their investments, which are
also described in the SAI.
Each Portfolio is subject to the following principal risks, except as noted.
General risks
. Market risk is the risk that the market value of a security may go up or
down, sometimes rapidly. These fluctuations may cause the security to be
worth less than it was at the time it was acquired. Market risk may involve
a single security, a particular sector, or the entire economy.
. Manager risk is the risk that the portfolio managers' investment strategy
may not produce the intended results. Manager risk also involves the
possibility that the portfolio managers fail to execute an investment
strategy effectively.
. Year 2000 risk. Like allother mutual funds, a Portfolio could be adversely
affected if the computer systems used by itstheir service providers,
including shareholder servicing agents, are unable to recognize dates after
1999.do not properly process and calculate date-related information. This
risk may become greater as it relates to investments in foreign countries.
Each Portfolio's service providers have been actively updating their
systems to be able to process yYear 2000 data. However, There can be no
assurance, however, that these steps will be adequate to avoid a temporary
service disruption or other adverse impact on the Portfolios. In addition,
an issuer's failure to process accurately Year 2000 data may cause that
issuer's securities to decline in value or delay the payment of interest to
a Portfolio. The risk of computer failure may be greater with respect to
investments in foreign countries, which may lack the expertise or resources
to adequately address the issue.
Risks of equity securities
. Equity risk is the risk that a security's value will fluctuate in response
to events affecting an issuer's profitability or viability. Unlike debt
securities, which have preference to a company's earnings and cash flow in
case of liquidation, equity securities benefit from a company's earnings
and cash flow only after the company meets its other obligations. For
example, a company must pay interest on its bonds before it pays stock
dividends to shareholders, and bondholders have preference to the company's
assets in the event of bankruptcy.
43
<PAGE>
Risks of hedging or leverage transactions
. Correlation risk. Futures and options contracts can be used in an effort to
hedge against risk. Generally, an effective hedge generates an offset to
gains or losses of other investments made by a Portfolio. Correlation risk
is the risk that a hedge created using futures or options contracts (or any
derivative, for that matter) does not, in fact, respond to economic or
market conditions in the manner the portfolio manager expected. In such a
case, the futures or options contract hedge may not generate gains
sufficient to offset losses and may actually generate losses.
. Leverage risk is the risk associated with those techniques in which a
relatively small amount of money invested - through borrowing or futures
trading, for example - puts a much larger amount of money at risk. Selling
short securities or using derivatives for hedging may involve leverage. If
a portfolio manager does not execute the strategy properly, or the market
does not move as anticipated, losses may substantially exceed the amount of
the original investment. A Portfolio's use of derivatives for asset
substitution may also involve leverage.
. Derivatives risk is the risk that the derivatives that a Portfolio invests
in do not achieve the intended result. If a hedge works properly, the gains
produced will offset losses on the securities hedged. Hedging also may
reduce gains because a Portfolio may forgo "upside" potential.
Risks of foreign securities
. Foreign issuer risk. Compared to U.S. and Canadian companies, less
information is generally available to the public about foreign companies.
Foreign stock exchanges, brokers, and listed companies may be subject to
less regulation and supervision by foreign governments or other agencies.
Foreign issuers may not be subject to the uniform accounting, auditing, and
financial reporting standards and practices used by U.S. issuers. In
addition, foreign securities markets may be less liquid, more volatile, and
less subject to governmental supervision than in the U.S. Investments in
foreign countries could be affected by factors not present in the U.S.,
including expropriation, confiscation of property, and difficulties in
enforcing contracts. All of these factors can make foreign investments,
especially those in emerging countries, more volatile than U.S.
investments.
. Currency risk (International Portfolio only). Fluctuations in exchange
rates between the U.S. dollar and foreign currencies may negatively affect
an investment. Adverse changes in exchange rates may erode or reverse any
gains produced by foreign currency-denominated investments and may widen
any losses. On January 1, 1999 participating nations in the European
Economic and Monetary Union introduced a single currency, the euro. This
action may present unique uncertainties for securities denominated in
currencies that will become components of the euro. Political and economic
risks, along with other factors, such as the introduction of the euro,
could adversely affect the value of athe International Portfolio's
securities.
. Emerging markets risk (International Portfolio only). Emerging country
economies often compare unfavorably with the United States economy in
growth of gross domestic product, rate of inflation, capital reinvestment,
resources, self-sufficiency and balance of payments position. Certain
emerging countries have experienced and continue to experience high rates
of inflation, sharply eroding the value of their financial assets. An
44
<PAGE>
emergency may arise where trading of emerging country securities may cease
or may be severely limited or where an emerging country governmental or
corporate issuer defaults on its obligations.
The governments of certain emerging countries impose restrictions or
controls that may limit or preclude the International Portfolio's
investment in certain securities. The International Portfolio may need
governmental approval for the repatriation of investment income, capital or
sales proceeds. An emerging country government may impose temporary
restrictions on capital flows.
Risks of debt securities
. Interest rate risk. The value of a debt security typically changes in the
opposite direction from a change in interest rates. When interest rates go
up, the value of a debt security typically goes down. When interest rates
go down, the value of a debt security typically goes up. Generally, the
longer the maturity of a security, the more sensitive it is to changes in
interest rates.
. Inflation risk is the risk that inflation will erode the purchasing power
of the cash flows generated by debt securities. Fixed-rate debt securities
are more susceptible to this risk than floating-rate debt securities.
. Reinvestment risk is the risk that when interest rates are declining, a
Portfolio will have to reinvest interest income or prepayments on a
security interest rates at lower interest rates. declined so that the Fund
must reinvest the income at a lower interest rate. In a declining interest
rate environment, lower reinvestment rates and price gains resulting from
lower interest rates will offset each other to some extent.
. Credit (or default) risk is the risk that the issuer of a debt security
will be unable to make timely payments of interest or principal. Credit
risk is measured by NRSROs* such as S&P, Fitch, or Moody's.
. Below-investment-grade securities ("junk bonds") may be more susceptible to
real or perceived adverse economic conditions, less liquid, and more
difficult to evaluate than higher-rated securities. The market for these
securities has relatively few participants, mostly institutional investors,
and low trading volume. A Portfolio may have difficulty selling particular
high yield securities at a fair price and obtaining accurate valuations in
order to calculate its net asset value.
Risks of mortgage-related securities (Balanced Portfolio only)
. Prepayment risk. Prepayments of principal on mortgage-related securities
affect the average life of a pool of mortgage-related securities. Mortgage
prepayments are affected by t The level of interest rates and other factors
may affect the frequency of mortgage prepayments. In periods of rising
interest rates, the prepayment rate tends to decrease, lengthening the
average life of a pool of mortgage-related securities. In periods of
falling interest rates, the prepayment rate tends to increase, shortening
the average life of a pool of mortgage-related securities. Prepayment risk
is the risk that, because prepayments generally occur when interest rates
are falling, a Portfolio may have to reinvest the proceeds from prepayments
at lower interest rates.
Risks of real estate securities (Balanced Portfolio only)
. Real estate risk is the risk that the value of a security will fluctuate
because of changes in,
45
<PAGE>
among other things, property values, rental property vacancies,
overbuilding, changes in local laws, increased property taxes and operating
expenses
. Regulatory risk. Certain REITs may fail to qualify for pass-through of
income under federal tax law, or to maintain their exemption from federal
securities laws registration requirements.
MANAGEMENT OF THE PORTFOLIOS
Investment Adviser
BSAM, a wholly owned subsidiary of The Bear Stearns Companies Inc., is the
investment adviser of the Portfolios. The Adviser 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 & Co. Inc., is a leading United States investment banking,
securities trading and brokerage firm serving United States and foreign
corporations, governments and institutional and individual investors. The
Adviser is a registered investment adviser and offers, either directly or
through affiliates, investment advisory and administrative services to open-end
and closed-end investment funds and other managed pooled investment vehicles
with net assets at ________ __, 1999 of over $X.X billion. The Adviser is also
a registered broker-dealer.
The Adviser supervises and assists in the overall management of the affairs of
the Trust, subject to oversight by the Trust's Board of Trustees.
For the fiscal year ended March 31, 1999, the Adviser received management fees
based on a percentage of the average daily net assets of each Portfolio, after
waivers, as shown in the following table.
STARS Portfolio e ____%
Insiders Select Fund e ____%
Large Cap Portfolio e ____%
Small Cap Portfolio e ____%
Focus List Portfolio e ____%
Balanced Portfolio e ____%
International Portfolio e ____%
Portfolio Management Team
The Adviser uses a team approach to manage each Portfolio. The members of each
team together are primarily responsible for the day-to-day management of each
Portfolio's investments. No single individual is responsible for managing a
Portfolio. Each team consists of portfolio managers, assistant portfolio
managers and analysts performing as a dynamic unit to manage the assets of each
Portfolio.
Investment Sub-Adviser -- International Portfolio
Marvin & Palmer Associates, Inc. (the "Sub-Adviser") serves as the sub-
investment-adviser to the International Portfolio, pursuant to an agreement with
the Adviser and subject to the overall supervision of the Adviser. The Sub-
Adviser, a registered investment adviser, was founded in 1986 and specializes in
global, non-United States and emerging market equity portfolio management for
institutional accounts. As of March 31, 1999, the Sub-Adviser managed over
$_____ billion in assets. The Sub-Adviser is located at 1201 North Market
Street, Suite 2300, Wilmington, Delaware 19801.
46
<PAGE>
HOW THE PORTFOLIOS VALUE THEIR SHARES
[The net asset value (NAV), multiplied by the number of Portfolio shares you
own, gives you the value of your investment.]
Each Portfolio calculates its share price, called its net asset value ("NAV"),
each business day as of the close of the New York Stock Exchange, Inc. (the
"NYSE"), which is normally at 4:00 p.m. Eastern Time. You may buy, sell or
exchange shares on any business day at the NAV that is calculated after you
place your order. A business day is a day on which the NYSE is open for trading
or any day in which enough trading has occurred in the securities held by a
Portfolio to affect the NAV materially.
Portfolio securities that are listed primarily on foreign exchanges may trade on
weekends or on other days on which the Portfolios do not price their shares. In
this case, the NAV of a Portfolio's shares may change on days when you are not
able to buy or sell shares.
The Portfolios value their investments based on market value or, where market
quotations are not readily available, based on fair value as determined in good
faith by the Trust's Board of Trustees. The NAV for each Class is calculated by
adding up the total value of the relevant Portfolio's investments and other
assets, subtracting its liabilities, and then dividing that figure by the number
of outstanding shares of the Class.
NAV = Total Assets Less Liabilities
-----------------------------
Number of Shares Outstanding
You can request each Portfolio's current NAV by calling 1-800-447-1139.
INVESTING IN THE PORTFOLIOS
This section provides information to assist you in buying and selling shares of
the Portfolios. Please read the entire Prospectus carefully before buying Class
Y shares of a Portfolio.
How to Buy Shares
The minimum initial investment is $3,000,000; there is no minimum for subsequent
investments. You may buy Class Y shares of a Portfolio through your account
representative at a broker-dealer with whom the Distributor has entered into a
sales agreement (an "Authorized Dealer") or the Transfer Agent by wire only.
To buy Class Y shares of a Portfolio by Federal Reserve wire, call the Transfer
Agent at 1-800-447-1139 or call your account representative.
If you do not wire Federal Funds, you must have the wire converted into Federal
Funds, which usually takes one business day after receipt of a bank wire. The
Transfer Agent will not process your investment until it receives Federal Funds.
The following procedure will help assure prompt receipt of your Federal Funds
wire:
A. Call the Transfer Agent at 1-800-447-1139 and provide the following
information:
Your name
Address
47
<PAGE>
Telephone number
Taxpayer ID number
The amount being wired
The identity of the bank wiring funds
The Transfer Agent will then provide you with a Portfolio account number.
(If you already have an account, you must also notify the Portfolio before
wiring funds.)
B. Instruct your bank to wire the specified amount to the Portfolio as
follows:
PNC Bank, N.A.
ABA #031000053
Credit Account Number: #86-1030-3398
From: [your name]
Account Number: [your Portfolio account number]
For Purchase of ______________________ Portfolio
Amount: [amount to be invested]
You may open an account when placing an initial order by telephone, provided you
then submit an Account Information Form by mail. An Account Information Form is
included with this Prospectus. The Transfer Agent will not process your
investment until it receives a fully completed and signed Account Information
Form.
The Trust and the Transfer Agent each reserve the right to reject any purchase
order for any reason.
How To Sell Shares
. You may sell shares on any business day through the Distributor, Authorized
Dealers or the Transfer Agent.
. When the Trust receives your redemption requests in proper form, it will
sell your shares atthe next determined net asset value.
. The Trust will wire payment proceeds generally within seven days after it
receives your redemption request.
Redemption Procedures
Redemption Through the Distributor or Authorized Dealers
Method of Redemption Instructions
. In person . Visit your account representative.
. Specify the name of the Portfolio, Class of
shares and the number or dollar amount of shares
that you wish to sell.
. By telephone . Call your account executive.
. Specify the name of the Portfolio and the dollar
amount of shares that you wish to sell.
48
<PAGE>
. By mail . Mail your redemption request to your account
representative.
. Specify the name of the Portfolio and the dollar
amount of shares that you wish to sell.
. By wire . Submit wiring instructions to your account
representative.
. Specify the name of the Portfolio and dollar
amount of shares that you wish to sell.
Redemption Through the Transfer Agent
.By mail . Mail your redemption request to:
PFPC Inc.
Attention: The Bear Stearns Funds
[Name of the Portfolio]
P.O. Box 8960
Wilmington, Delaware 19899-8960
. By telephone . Call the Transfer Agent at 1-800-447-1139.
. Specify the name of the Portfolio and dollar
amount of shares that you wish to sell.
Additional Information About Redemptions
. Wiring redemption proceeds. Upon request, the Trust will wire your proceeds
($500 minimum) to your brokerage account or a designated commercial bank
account. There is a transaction fee of $7.50 for this service. Please call
your account representative for information on how to wire funds to your
brokerage account. Or, if you do not have a brokerage account, call the
Transfer Agent to wire funds to your bank account.
. Signature guarantees. If your redemption proceeds exceed $50,000, or if you
instruct the Trust to send the proceeds to someone other than the record
owner at the record address, or if you are a corporation, partnership,
trust or fiduciary, your signature must be guaranteed by any eligible
guarantor institution. Call the Transfer Agent at 1-800-447-1139 for
information about obtaining a signature guarantee.
. Telephone policies. You may authorize the Transfer Agent to accept
telephone instructions. If you do, the Transfer Agent will accept
instructions from people who it believes are authorized to act on your
behalf. The Transfer Agent will use reasonable procedures (such as
requesting personal identification) to ensure that the caller is properly
authorized. Neither the Portfolio nor the Transfer Agent will be liable for
losses for following instructions reasonably believed to be genuine.
. Redemption by mail may cause a delay. During times of extreme economic or
market conditions, you may experience difficulty in contacting your account
representative by telephone to request a redemption of shares. If this
occurs, please consider using the other redemption procedures described in
this Prospectus. Alternative procedures may take longer to sell your
shares.
49
<PAGE>
. Automatic redemption; redemption in kind. If the value of your account
falls below $500,000 (for reasons other than changes in market conditions),
the Trust may automatically liquidate your account and send you the
proceeds. The Trust will send you a notice at least 60 days before doing
this. The Trust also reserves the right to redeem your shares "in kind."
For example, if you sell a large number of shares and the Portfolio is
unable to sell securities to raise cash, the Trust may send you a
combination of cash and a share of actual portfolio securities. Call the
Transfer Agent for details.
. Suspension of the Right of Redemption. A Portfolio may suspend your right
to redeem your shares under any of the following circumstances:
. during non-routine closings of the NYSE
. when the Securities and Exchange Commission ("SEC") determines that (a)
trading on the NYSE is restricted or (b) an emergency prevents the sale
or valuation of the Portfolio's securities
. when the SEC orders a suspension to protect the Portfolio's shareholders
DIVIDENDS, DISTRIBUTIONS AND TAXES
[***If you buy shares of a Portfolio shortly before it declares a dividend or a
distribution, a portion of your investment in the Portfolio may be returned to
you in the form of a taxable distribution.***]
Distributions
The Portfolios pass along your share of their investment earnings in the form of
dividends. Dividend distributions are the net dividends or interest earned on
investments after expenses. As with any investment, you should consider the tax
consequences of an investment in a Portfolio.
Ordinarily, each Portfolio declares and pays dividends from its net investment
income annually. The Portfolios will distribute short-term capital gains, as
necessary, and normally will pay any long-term capital gains once a year.
You can receive dividends or distributions in one of the following ways:
. Reinvestment. You can automatically reinvest your dividends and
distributions in additional shares of your Portfolio. If you do not
indicate another choice on your Account Application, you will receive your
distributions this way.
. Cash. The Trust will send you a check no later than seven days after the
payable date.
. Partial reinvestment. The Trust will automatically reinvest your dividends
in additional shares of your Portfolio and pay your capital gain
distributions to you in cash. Or, the Trust will automatically reinvest
your capital gain distributions and send you your dividends in cash.
. Directed dividends. You can automatically reinvest your dividends and
distributions in the same class of shares of another Portfolio. See the
description of this option in the "Shareholder Services" section above.
. Direct deposit. In most cases, you can automatically transfer dividends and
distributions to your bank checking or savings account. Under normal
circumstances, the Transfer Agent will transfer the funds within seven days
of the payment date. To receive dividends and
50
<PAGE>
distributions this way, the name on your bank account must be the same as
the registration on your Portfolio account.
You may choose your distribution method on your original Account Application.
If you would like to change the option you selected, please call your account
executive or the Transfer Agent at 1-800-447-1139.
Taxes
Each Portfolio intends to continue to qualify as a regulated investment company,
which means that it pays no federal income tax on the earnings or capital gains
it distributes to its shareholders. It is important for you to be aware of the
following information about the tax treatment of your investment.
. Ordinary dividends from a Portfolio are taxable as ordinary income;
dividends from a Portfolio's long-term capital gains are taxable as capital
gain.
. Dividends are treated in the same manner for federal income tax purposes
whether you receive them in the form of cash or additional shares. They may
also be subject to state and local taxes.
. Dividends from the Portfolios that are attributable to interest on certain
U.S. Government obligations may be exempt from certain state and local
income taxes. The extent to which ordinary dividends are attributable to
these U.S. Government obligations will be provided on the tax statements
you receive from a Portfolio.
. Certain dividends paid to you in January will be taxable as if they had
been paid to you the previous December.
. The Trust will mail you tax statements every January showing the amounts
and tax status of distributions you received.
. When you sell (redeem) or exchange shares of a Portfolio, you must
recognize any gain or loss.
. Because your tax treatment depends on your purchase price and tax position,
you should keep your regular account statements for use in determining your
tax.
. You should review the more detailed discussion of federal income tax
considerations in the SAI.
The Trust provides this tax information for your general information. You
should consult your own tax adviser about the tax consequences of investing in a
Portfolio.
ADDITIONAL INFORMATION
Performance
Financial publications, such as Business Week, Forbes, Money or SmartMoney, may
compare a Portfolio's performance to the performance of various indexes and
investments for which reliable performance data is available. These
publications may also compare a Portfolio's performance to averages, performance
rankings, or other information prepared by recognized mutual fund statistical
services, such as Lipper Inc.
Shareholder Communications
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The Trust may eliminate duplicate mailings of Portfolio materials to
shareholders who reside at the same address.
52
<PAGE>
Financial Highlights - STARS Portfolio
The financial highlights table is intended to help you understand the financial
performance of the STARS Portfolio since its inception. This information
reflects financial results for a single share of the STARS Portfolio. The total
returns in the table represent the rate at which an investor would have gained
on an investment in the STARS Portfolio (assuming reinvestment of all dividends
and distributions). This information has been audited by _____________________,
whose report, along with the STARS Portfolio's financial statements, are
included in the STARS Portfolio's annual report, which is available by calling
the Trust at 1-800-____-_____.
Class Y shares of the Focus List Portfolio and the International Portfolio have
not yet commenced operations.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DISTRI-
NET NET BUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P STARS Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. $16.23 $(0.05) $6.74 $- $(2.81) $20.11
For the fiscal year ended March 31, 1997.. 14.97 (0.02) 2.66 - (1.38) 16.23
For the period August 7, 1995* through
March 31, 1996............................ 14.13 0.07 1.20 (0.03) (0.40) 14.97
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
NET RATIO OF RATIO OF NET REFLECTED IN
ASSETS, EXPENSES TO INVESTMENT EXPENSE RATIOS AND NET
TOTAL END OF AVERAGE INCOME/(LOSS) INVESTMENT INCOME/(LOSS)
INVESTMENT PERIOD NET TO AVERAGE DUE TO WAIVERS AND
RETURN(3) (000'S omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P STARS Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 44.22% $35,652 1.00%(6) (0.32)%(6) 0.38%
For the fiscal year ended March 31, 1997.. 17.48 14,763 1.00(6) (0.10)(6) 0.70
For the period August 7, 1995* through
March 31, 1996............................ 9.09 8,779 1.00(4)(6) 0.82(4)(6) 0.99(4)
<CAPTION>
- ----------------------------------------------------------------
AVERAGE
COMMISSION
PORTFOLIO RATE
TURNOVER PER
RATE SHARE(5)
- ----------------------------------------------------------------
<S> <C> <C>
S&P STARS Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 172.78%(7) $0.0541(7)
For the fiscal year ended March 31, 1997.. 220.00(7) 0.0595(7)
For the period August 7, 1995* through
March 31, 1996............................ 295.97(7) 0.0603(7)
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchase and sales of investments subject to such commissions during each
period.
(6) Includes S&P STARS' share of S&P STARS Master Series' expenses for the
period prior to June 25, 1997.
(7) Portfolio turnover rate and average commission rate per share are related
to S&P STARS Master Series for the period prior to June 25, 1997.
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Financial Highlights - Insiders Select Fund
The financial highlights table is intended to help you understand the financial
performance of The Insiders Select Fund since its inception. This information
reflects financial results for a single share of The Insiders Select Fund. The
total returns in the table represent the rate at which an investor would have
gained on an investment in The Insiders Select Fund (assuming reinvestment of
all dividends and distributions). This information has been audited by _____
_____________, whose report, along with The Insiders Select Fund 's financial
statements, are included in The Insiders Select Fund's annual report, which is
available by calling the Trust at 1-800-____-_____.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DISTRI-
NET NET BUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Insiders Select Fund
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 14.66 0.07 6.36 - (3.00) 18.09
For the fiscal year ended March 31, 1997.. 14.02 0.08 2.49 (0.02) (1.91) 14.66
For the period June 20, 1995* through
March 31, 1996............................ 12.12 0.07 1.87 (0.04) - 14.02
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
NET RATIO OF RATIO OF NET REFLECTED IN
ASSETS, EXPENSES TO INVESTMENT EXPENSE RATIOS AND NET
TOTAL END OF AVERAGE INCOME/(LOSS) INVESTMENT INCOME/(LOSS)
INVESTMENT PERIOD NET TO AVERAGE DUE TO WAIVERS AND
RETURN(3) (000'S omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Insiders Select Fund
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 46.68 1,265 1.15 0.55 1.07
For the fiscal year ended March 31, 1997.. 18.81 1,557 1.15 0.60 1.81
For the period June 20, 1995* through
March 31, 1996............................ 15.98 1,293 1.15(4) 0.97(4) 2.04(4)
<CAPTION>
- ---------------------------------------------------------------------
AVERAGE
COMMISSION
PORTFOLIO RATE
TURNOVER PER
RATE SHARE(5)
- ---------------------------------------------------------------------
<S> <C> <C>
The Insiders Select Fund
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 115.64 0.0389
For the fiscal year ended March 31, 1997.. 128.42 0.0264
For the period June 20, 1995* through
March 31, 1996............................ 93.45 0.0294
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchase and sales of investments subject to such commissions during each
period.
(6) Includes S&P STARS' share of S&P STARS Master Series' expenses for the
period prior to June 25, 1997.
(7) Portfolio turnover rate and average commission rate per share are related
to S&P STARS Master Series for the period prior to June 25, 1997.
54
<PAGE>
Financial Highlights - Large Cap Portfolio
The financial highlights table is intended to help you understand the financial
performance of the Large Cap Portfolio since its inception. This information
reflects financial results for a single share of the Large Cap Portfolio. The
total returns in the table represent the rate at which an investor would have
gained or lost on an investment in the Large Cap Portfolio (assuming
reinvestment of all dividends and distributions). This information has been
audited by _________________________, whose report, along with the Large Cap
Portfolio's financial statements, are included in the Large Cap Portfolio's
annual report, which is available by calling the Trust at 1-800-____-_____.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DISTRI-
NET NET BUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Value Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 17.18 0.26 7.05 (0.13) (3.52) 20.84
For the fiscal year ended March 31, 1997.. 15.12 0.23 2.17 (0.16) (0.18) 17.18
For the period September 11, 1995*
through March 31, 1996.................... 13.98 0.07 1.16 (0.08) (0.01) 15.12
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
NET RATIO OF RATIO OF NET REFLECTED IN
ASSETS, EXPENSES TO INVESTMENT EXPENSE RATIOS AND NET
TOTAL END OF AVERAGE INCOME/(LOSS) INVESTMENT INCOME/(LOSS)
INVESTMENT PERIOD NET TO AVERAGE DUE TO WAIVERS AND
RETURN(3) (000'S omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Large Cap Value Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 45.27 7,263 1.00 0.83 1.76
For the fiscal year ended March 31, 1997.. 16.04 6,109 1.00 1.00 1.50
For the period September 11, 1995*
through March 31, 1996.................... 8.75 3,413 1.00(4) 0.76(4) 4.41(4)
<CAPTION>
- ----------------------------------------------------------------
AVERAGE
COMMISSION
PORTFOLIO RATE
TURNOVER PER
RATE SHARE(5)
- ----------------------------------------------------------------
<S> <C> <C>
Large Cap Value Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 61.75 0.0581
For the fiscal year ended March 31, 1997.. 136.67 0.0593
For the period September 11, 1995*
through March 31, 1996.................... 45.28 0.0596
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchase and sales of investments subject to such commissions during each
period.
(6) Includes S&P STARS' share of S&P STARS Master Series' expenses for the
period prior to June 25, 1997.
(7) Portfolio turnover rate and average commission rate per share are related
to S&P STARS Master Series for the period prior to June 25, 1997.
55
<PAGE>
Financial Highlights - Small Cap Portfolio
The financial highlights table is intended to help you understand the financial
performance of the Small Cap Portfolio since its inception. This information
reflects financial results for a single share of the Small Cap Portfolio. The
total returns in the table represent the rate at which an investor would have
gained on an investment in the Small Cap Portfolio (assuming reinvestment of all
dividends and distributions). This information has been audited by ___________
__________, whose report, along with the Small Cap Portfolio's financial
statements, are included in the Small Cap Portfolio's annual report, which is
available by calling the Trust at 1-800-____-_____.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DISTRI-
NET NET BUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Value Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 17.47 (0.04) 8.06 - (1.84) 23.65
For the fiscal year ended March 31, 1997.. 15.85 (0.05) 1.97 - (0.30) 17.47
For the period June 22, 1995* through
March 31, 1996............................ 13.09 - 3.05 - (0.29) 15.85
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
NET RATIO OF RATIO OF NET REFLECTED IN
ASSETS, EXPENSES TO INVESTMENT EXPENSE RATIOS AND NET
TOTAL END OF AVERAGE INCOME/(LOSS) INVESTMENT INCOME/(LOSS)
INVESTMENT PERIOD NET TO AVERAGE DUE TO WAIVERS AND
RETURN(3) (000'S omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Small Cap Value Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 47.54 31,141 1.00 (0.21) 0.77
For the fiscal year ended March 31, 1997.. 12.19 16,724 1.00 (0.31) 1.00
For the period June 22, 1995* through
March 31, 1996............................ 23.52 8,989 1.00(4) - 2.45(4)
<CAPTION>
- ----------------------------------------------------------------
AVERAGE
COMMISSION
PORTFOLIO RATE
TURNOVER PER
RATE SHARE(5)
- ----------------------------------------------------------------
<S> <C> <C>
Small Cap Value Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the fiscal year ended March 31, 1998.. 90.39 0.0557
For the fiscal year ended March 31, 1997.. 56.88 0.0550
For the period June 22, 1995* through
March 31, 1996............................ 40.79 0.0572
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchase and sales of investments subject to such commissions during each
period.
(6) Includes S&P STARS' share of S&P STARS Master Series' expenses for the
period prior to June 25, 1997.
(7) Portfolio turnover rate and average commission rate per share are related
to S&P STARS Master Series for the period prior to June 25, 1997.
56
<PAGE>
Financial Highlights - Balanced Portfolio
The financial highlights table is intended to help you understand the financial
performance of the Balanced Portfolio since its inception. This information
reflects financial results for a single share of the Balanced Portfolio. The
total returns in the table represent the rate at which an investor would have
gained on an investment in the Balanced Portfolio (assuming reinvestment of all
dividends and distributions). This information has been audited by ___________
__________, whose report, along with the Balanced Portfolio's financial
statements, are included in the Balanced Portfolio's annual report, which is
available by calling the Trust at 1-800-____-_____.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DISTRI-
NET NET BUTIONS NET
ASSET NET REALIZED AND DIVIDENDS FROM NET ASSET
VALUE, INVESTMENT UNREALIZED FROM NET REALIZED VALUE,
BEGINNING INCOME GAIN ON INVESTMENT CAPITAL END OF
OF PERIOD (LOSS)**(1) INVESTMENTS**(2) INCOME GAINS PERIOD
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balanced Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the period January 6, 1998* through
March 31, 1998............................ 12.05 0.06 0.88 (0.04) - 12.95
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE)
NET RATIO OF RATIO OF NET REFLECTED IN
ASSETS, EXPENSES TO INVESTMENT EXPENSE RATIOS AND NET
TOTAL END OF AVERAGE INCOME/(LOSS) INVESTMENT INCOME/(LOSS)
INVESTMENT PERIOD NET TO AVERAGE DUE TO WAIVERS AND
RETURN(3) (000'S omitted) ASSETS(1) NET ASSETS(1) REIMBURSEMENTS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balanced Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the period January 6, 1998* through
March 31, 1998............................7.80 5,685 0.70(4) 2.98(4) 3.12(4)
<CAPTION>
- ----------------------------------------------------------------
AVERAGE
COMMISSION
PORTFOLIO RATE
TURNOVER PER
RATE SHARE(5)
- ----------------------------------------------------------------
<S> <C> <C>
Balanced Portfolio
Class Y
For the fiscal year ended March 31, 1999..
For the period January 6, 1998* through
March 31, 1998............................712.72 0.0543
</TABLE>
- -----
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses on
investments during the respective periods because of the timing of sales
and repurchases of Portfolio shares in relation to fluctuating net asset
values during the respective periods.
(3) Total investment return does not consider the effects of sales charges or
contingent deferred sales charges. Total investment return is calculated
assuming a purchase of shares on the first day and a sale of shares on the
last day of each period reported and includes reinvestment of dividends and
distributions, if any. Total investment return is not annualized.
(4) Annualized.
(5) Represents average commission rate per share charged to the Portfolios on
purchase and sales of investments subject to such commissions during each
period.
(6) Includes S&P STARS' share of S&P STARS Master Series' expenses for the
period prior to June 25, 1997.
(7) Portfolio turnover rate and average commission rate per share are related
to S&P STARS Master Series for the period prior to June 25, 1997.
57
<PAGE>
Statement of Additional Information. The Statement of Additional Information
("SAI") provides a more complete discussion of several of the matters contained
in this Prospectus and is incorporated by reference, which means that it is
legally a part of this Prospectus as if it were included here.
Annual and Semi-Annual Reports. The annual and semi-annual reports to
shareholders contain additional information about each Portfolio's investments,
including a discussion of the market conditions and investment strategies that
significantly affected a Portfolio's performance during its last fiscal year.
. To obtain a free copy of the SAI and the current annual or semi-annual
reports or to make any other inquiries about a Portfolio, you may call or
write:
PFPC Inc.
Attention: The Bear Stearns Funds
P.O. Box 8960
Wilmington, Delaware 19899-8960
Telephone: 1-800-447-1139 or 1-800-766-4111
. You may obtain copies of the SAI or financial reports
. for free by calling or writing broker-dealers or other financial
intermediaries that sell a Portfolio's shares
. for a fee by calling or writing the Public Reference Room of the
Securities Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549-6009 (1-800-SEC-0330)
. for free by visiting the SEC's Worldwide Web site at http://www.sec.gov.
------------------
You may also obtain a copy of a Portfolio's prospectus from the Bear Stearns
Worldwide Web site at http://www.bearstearns.com.
--------------------------
Investment Company Act File No. 811-8798
58
<PAGE>
The . S&P STARS Portfolio
Bear Stearns . The Insiders Select Fund
Funds . Large Cap Value Portfolio
. Small Cap Value Portfolio
575 Lexington Avenue . Focus List Portfolio
New York, NY 10022 . Balanced Portfolio
1-800-766-4111 . International Equity Portfolio
Distributor
- -----------
Bear, Stearns & Co. Inc.
575 Lexington Avenue
New York, NY 10022
Investment Adviser
- ------------------
Bear Stearns Asset Management Inc.
575 Lexington Avenue
New York, NY 10022
Sub-Investment Adviser (International Portfolio)
- ------------------------------------------------
Marvin & Palmer Associates, Inc.
1201 North Market Street, Suite 2300
Wilmington, DE 19801
Administrator
- -------------
Bear Stearns Funds Management Inc.
575 Lexington Avenue
New York, NY 10022
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 LLP
919 Third Avenue
New York, NY 10022
Independent Auditors
- --------------------
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
<PAGE>
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 - 4 4 7 - 1 1 3 9
The Bear Stearns Funds
Prime Money Market Portfolio
Class Y Shares
PROSPECTUS
_______, 1999
This Prospectus provides important information about the Portfolio that you
should know before investing. Please read it carefully and keep it for future
reference.
The Securities and Exchange Commission has not approved
the Portfolio's shares as an investment or determined
whether this Prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
<PAGE>
The Portfolio described in this Prospectus is a series of The Bear Stearns
Funds, a registered open-end management investment company (the "Trust").
Table of Contents
RISK/RETURN SUMMARY
INVESTMENTS
RISK FACTORS
MANAGEMENT OF THE PORTFOLIO
HOW THE PORTFOLIO VALUES ITS SHARES
INVESTING IN THE PORTFOLIO
How to Buy Shares
How to Sell Shares
DIVIDENDS, DISTRIBUTIONS AND TAXES
ADDITIONAL INFORMATION
FINANCIAL HIGHLIGHTS
It is important to keep in mind that mutual fund shares are:
. not deposits or obligations of any bank
. not insured by the FDIC
. subject to investment risk, including possible loss of the amount
invested
2
<PAGE>
PRIME MONEY MARKET PORTFOLIO
RISK/RETURN SUMMARY
Investment Objective
Liquidity and current income consistent with stability of principal.
Principal Strategies
In pursuing its investment objective, the Prime Money Market Portfolio (the
"Portfolio") will invest in a broad range of U.S. dollar-denominated short-term
instruments, including
. U.S. Government obligations
. Commercial paper, notes, certificates of deposit, bankers acceptances
. Repurchase agreements
. Floating and variable rate securities
. Time deposits and instruments issued or backed by U.S. or foreign banks or
savings institutions with total assets of at least $1 billion at the time of
purchase
. Foreign securities
Important Characteristics of the Portfolio:
Quality: The Portfolio will invest in securities rated by at least two
nationally recognized statistical rating organizations ("NRSROs"), including
Standard & Poor's and Moody's, or by one NRSRO, if only that NRSRO has rated the
security at the time that the Portfolio acquires it. For a discussion of the
ratings categories of various NRSROs, see the Appendix to the Statement of
Additional Information (the "SAI").
The Portfolio will limit its portfolio investments to
. securities that are rated at the time of acquisition in one of an NRSRO's two
highest short-term rating categories
. securities of issuers whose other short-term debt securities are so rated
. unrated securities that are deemed comparable by Bear Stearns Asset
Management Inc., the Portfolio's investment adviser ("BSAM" or the "Adviser")
The Board of Trustees has established policies to ensure that the Portfolio
invests in high quality, liquid instruments.
Maturity: The Portfolio has a weighted average maturity of 90 days or less.
The Portfolio may acquire individual investments with remaining maturities
ranging from one day to 397 days. Floating and variable rate instruments are
considered to be within the maturity range described above, despite having
nominal remaining maturities greater than 397 days, because of their floating
rate or reset features. For a description of floating and variable rate
securities, see "Investments" in this Prospectus.
3
<PAGE>
Principal Risks
The Portfolio is subject to the following principal risks, more fully described
in "Risk Factors." All or some of these risks may adversely affect the
Portfolio's net asset value, yield and/or total return:
. An agency or instrumentality may default on its obligation and the U. S.
Government may not provide financial support
. Short-term interest rates may decline, causing the Portfolio to invest assets
at lower rates
. The rate of inflation may increase more quickly than the returns for money
market funds
. The market value of floating or variable rate securities may fall to the
extent that the Portfolio's share price declines below $1.00 due to changing
interest rate relationships among securities maturing at different times
. Rapidly rising short-term interest rates may cause the Portfolio's securities
to decline in value and cause the Portfolio's share price to decline below
$1.00
. Foreign securities may experience more volatility than their domestic
counterparts, in part because of higher political and economic risks, lack of
reliable information, and the risks that a foreign government may take over
assets
An investment in the Portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the Portfolio seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing in
the Portfolio.
Who may want to invest in the Portfolio
The Portfolio may be appropriate for investors who:
. need current income
. are seeking preservation of capital
. are willing to accept lower potential returns in return for safety
. are not willing to take any risk that they may lose money on their
investment
The Portfolio may not be appropriate for investors who:
---
. want potential growth over time
4
<PAGE>
PERFORMANCE
The bar chart and table below show the risks of investing in the Portfolio by
showing changes in the performance of its Class Y Shares as of December 31, 1998
from year to year since inception. The table shows how the Portfolio's average
annual total return for one year and since the date of inception. The figures
shown assume reinvestment of dividends and distributions.
***Past performance is not necessarily an indication of future results.***
Bar Chart
1997: ___.__% (1)
1998: ___.__% (2)
(1) Commenced investment operations on July 14, 1997. Return is not annualized.
(2) The Portfolio's year-to-date return as of June 30, 1999 was ___.__%.
During the period shown in the bar chart, the highest quarterly return was XX%
(for the quarter ended ____ 19__) and the lowest quarterly return was YY% (for
the quarter ended _____19 __).
- --------------------------------------------------------------------------------
Average Annual Total Returns Since
(for the periods ended December 31, 1998) 1 Year Inception*
- --------------------------------------------------------------------------------
Class Y ___.__% ___.__%
- --------------------------------------------------------------------------------
* Class Y shares commenced operations on July 14, 1997.
The "seven-day yield" is an annualized figure -- the amount you would earn if
you kept your investment in the Portfolio and the Portfolio continued to earn
the same net interest income throughout the year. The Portfolio's seven-day
yield as of December 31, 1998 was ___.___%. For the Portfolio's current seven-
day yield, call at 800-____-_____.
The "seven-day effective yield" (also an annualized figure) assumes that
dividends are reinvested and compounded. The Portfolio's seven-day effective
yield as of December 31, 1998 was ___.__%.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Portfolio.
- -------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment) Class Y
- -------------------------------------------------------------------------------
Maximum sales charge (load) imposed on None
purchases (as a percentage of offering price)
- -------------------------------------------------------------------------------
Sales charge imposed on reinvested dividends None
- -------------------------------------------------------------------------------
Redemption fees None
- -------------------------------------------------------------------------------
Maximum deferred sales charge
(load) (as a percentage of offering price) None
- -------------------------------------------------------------------------------
5
<PAGE>
The Annual Portfolio Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the Portfolio. The
Portfolio pays these expenses from its assets.
ANNUAL PORTFOLIO OPERATING EXPENSES
- -------------------------------------------------------------------------------
Class Y
-------
- -------------------------------------------------------------------------------
Management Fees 0.20%
Distribution (12b-1) Fees 0.00%
Other Expenses 0. %
-----
Total Portfolio Operating Expenses 0.__%
Fee Waiver and Expense Reimbursement (0.__)%
-----
Net Expenses (1) 0.20%
=====
- -------------------------------------------------------------------------------
(1) The expenses shown are based on historical expenses of the Portfolio
adjusted to reflect current expenses. The Adviser has agreed to waive its
fee and/or reimburse certain expenses until at least March 31, 2000 so that
the Portfolio's net expenses do not exceed the amount indicated above.
Example
This Example illustrates the cost of investing in the Portfolio over various
time periods. It is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that:
. you invest $10,000 in the Portfolio
. your investment returns 5% each year
. the Portfolio's operating expenses remain the same*
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
If you sell your shares at the end of each period --
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class Y $_______ $_______ $_______ $_______
- --------------------------------------------------------------------------------
If you do not sell your shares at the end of each period --
---
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class Y $_______ $_______ $_______ $_______
- --------------------------------------------------------------------------------
* This Example assumes that net portfolio operating expenses will equal 0.20%
until March 31, 2000 and thereafter will equal __.____%.
6
<PAGE>
INVESTMENTS
The Portfolio may invest in the following instruments to achieve its investment
objective.
. Floating and variable rate securities. The interest rate offered by a
floating rate security adjusts whenever a specified interest rate
(such as a bank's prime lending rate) changes. The interest rate
offered by a variable rate security adjusts (resets) on particular
dates (such as the last day of a month or calendar quarter). Upon
adjustment, the market value of a floating or variable rate security
can reasonably be expected to equal its amortized cost. Some of these
securities may be illiquid.
. Repurchase agreements are a type of secured lending and typically
involve the acquisition of debt securities from a financial
institution, such as a bank, savings and loan association or broker-
dealer, which then agrees to repurchase the security at a specified
resale price on an specified future date (ordinarily a week or less).
The difference between the purchase and resale prices generally
reflects the market interest rate for the term of the agreement.
. Reverse repurchase agreements. The Portfolio may borrow funds for
temporary purposes by entering into reverse repurchase agreements in
which the Portfolio would sell securities to financial institutions
and agree to repurchase them at an agreed upon date and price. The
Portfolio may enter into reverse repurchase agreements to avoid
selling securities during unfavorable market conditions. Reverse
repurchase agreements involve the risk that the market value of the
securities that the Portfolio sold may decline below the price of the
securities the Portfolio must repurchase.
. Treasury STRIPS. The principal and interest components of U.S.
Treasury bonds may be separated and traded independently under the
federal Separate Trading of Registered Interest and Principal of
Securities ("STRIPS") program. The resulting securities pay no
interest and are sold at a discount to face value. The interest
component of STRIPS may be more volatile than that of U.S. Treasury
bills with comparable maturities.
. U.S. Government obligations are notes and bonds issued or guaranteed
by the U.S. Government (including Treasury STRIPS, described above),
its agencies or instrumentalities. Some are direct obligations of the
U.S. Treasury; others are obligations only of the U.S. agency or
instrumentality.
. When-issued securities and forward commitments. When-issued
transactions arise when securities are purchased with payment and
delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield. In a forward
commitment transaction, a buyer agrees to purchase securities for a
fixed price at a future date beyond customary settlement time. A
purchaser may enter into offsetting contracts for the forward sale of
other securities that it owns.
7
<PAGE>
Other Investment Strategies
[***The Portfolio may invest defensively to protect against a downturn.***]
. Temporary Defensive Measures. From time to time, during unfavorable
market conditions, the Adviser may invest "defensively." This means
the Portfolio may make temporary investments that are not consistent
with its investment objective and principal strategies. Engaging in
temporary defensive measures may reduce the benefit from any upswing
in the market and may cause the Portfolio to fail to meet its
investment objective. For temporary defensive purposes and for cash
management, the Portfolio may hold cash (U.S. dollars).
. Portfolio Turnover. The Adviser may trade actively to achieve the
Portfolio's goals. This may result in higher capital gains
distributions, which would increase your tax liability. Frequent
trading may also increase the Portfolio's costs, lessening its
performance over time.
The SAI describes the Portfolio's investment strategies in more detail.
RISK FACTORS
As with all mutual funds, investing in the Portfolio involves certain risks.
There is no guarantee that the Portfolio will meet its investment objective.
There is never any assurance that the Portfolio will perform as it has in the
past.
The Portfolio may use various investment techniques, some of which involve
greater amounts of risk than others. You will find a detailed discussion of
these investment techniques in the SAI. To reduce risk, the Portfolio are
subject to certain limitations and restrictions on its investments, which are
also described in the SAI.
The Portfolio is subject to the following principal risks.
General risks
. Market risk is the risk that the market value of a security may go up
or down, sometimes rapidly. These fluctuations may cause the security
to be worth less than it was at the time it was acquired. Market risk
may involve a single security, a particular sector, or the entire
economy.
. Manager risk is the risk that the portfolio managers' investment
strategy may not produce the intended results. Manager risk also
involves the possibility that the portfolio managers fail to execute
an investment strategy effectively.
. $1.00 Net Asset Value Risk. In order to maintain a $1.00 per share
net asset value, the Portfolio could reduce the number of its
outstanding shares. The Portfolio could do this if there were a
default on, or significant decline in value of, an investment held by
the Portfolio. If this happened, you would own fewer shares.
8
<PAGE>
. Year 2000 risk. Like all mutual funds, the Portfolio could be
adversely affected if the computer systems used by its service
providers, including shareholder servicing agents, are unable to
recognize dates after 1999. The risk of such a computer failure may
be greater as it relates to investments in foreign countries. The
Portfolio's service providers have been actively updating their
systems to be able to process Year 2000 data. There can be no
assurance, however, that these steps will be adequate to avoid a
temporary service disruption or other adverse impact on the
Portfolio. In addition, an issuer's failure to process accurately
Year 2000 data may cause that issuer's securities to decline in value
or delay the payment of interest to the Portfolio.
Risks of debt securities
. Income risk. Declines in the general level of short-term interest
rates obligate the Portfolio to make new investments in securities
that offer less interest than older securities.
. Inflation risk is the risk that inflation will erode the purchasing
power of the cash flows generated by the Portfolio's debt securities.
Fixed-rate debt securities are more susceptible to this risk than
floating-rate debt securities.
. Adjustable rate security risk. The market price of an adjustable rate
security may fall for various reasons, including the following:
. the relationship among interest rates across a range of maturities
(often referred to as the "yield curve") changes
. investors demand higher risk premiums
. investors believe that interest rates will rise
. the supply of securities associated with the relevant benchmark
interest rate or index exceeds the demand
For example, an adjustable rate security's market price will decline
if one or more of these factors causes the interest rate of newly-
issued adjustable rate securities to be set at a higher level than
that paid by the older security. For instance, the market price of an
outstanding adjustable rate note that pays 3.00% below a bank's prime
lending rate will decline if comparable newly-issued adjustable rate
notes offer 2.00% below the bank's prime rate.
Risks of foreign securities
. Foreign issuer risk. Compared to U.S. and Canadian companies, less
information is generally available to the public about foreign
companies. Foreign stock exchanges, brokers, and listed companies may
be subject to less regulation and supervision by foreign governments
or other agencies. Foreign issuers may not be subject to the uniform
accounting, auditing, and financial reporting standards and practices
used by U.S. issuers. In addition, foreign securities markets may be
less liquid, more volatile, and less subject to governmental
supervision than in the U.S. Investments in foreign countries could
be affected by factors not present in the U.S., including
expropriation, confiscation of property, and difficulties in
enforcing contracts. All of these factors can make foreign
investments more volatile than U.S. investments.
9
<PAGE>
MANAGEMENT OF THE PORTFOLIO
Investment Adviser
BSAM, a wholly owned subsidiary of The Bear Stearns Companies Inc., is the
investment adviser of the Portfolio. The Adviser 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 & Co. Inc., is a leading United States investment banking,
securities trading and brokerage firm serving United States and foreign
corporations, governments and institutional and individual investors. The
Adviser is a registered investment adviser and offers, either directly or
through affiliates, investment advisory and administrative services to open-end
and closed-end investment funds and other managed pooled investment vehicles
with net assets at ________ __, 1999 of over $X.X billion. The Adviser is also
a registered broker-dealer.
The Adviser supervises and assists in the overall management of the affairs of
the Trust, subject to oversight by the Trust's Board of Trustees.
For the fiscal year ended March 31, 1999, the Adviser received management fees
based on a percentage of the average daily net assets of the Portfolio in the
amount of . .
---- ----
HOW THE PORTFOLIO VALUES ITS SHARES
[The net asset value (NAV), multiplied by the number of Portfolio shares you
own, gives you the value of your investment.]
The Portfolio calculates its share price, called its net asset value ("NAV"),
each business day at 3:00 p.m. Eastern Time. You may buy or sell shares on any
business day at the NAV that is calculated after you place your order. A
business day is a day on which the New York Stock Exchange, Inc. and the Federal
Reserve Bank of New York is open.
Portfolio securities that are listed primarily on foreign exchanges may trade on
weekends or on other days on which the Portfolio does not price its shares. In
this case, the Portfolio's NAV may change on days when you are not able to buy
or sell shares.
The Portfolio seeks to maintain a $1.00 NAV, although there is no guarantee that
it will be able to do so. The Portfolio uses the "Amortized Cost Method" to
value securities. You can read about this method in the SAI.
INVESTING IN THE PORTFOLIO
This section provides information to assist you in buying and selling shares of
the Portfolio. Please read the entire Prospectus carefully before buying shares
of the Portfolio.
How to Buy Shares
The minimum initial investment is $3,000,000; there is no minimum for subsequent
investments. You may buy shares of the Portfolio through your account
representative at a broker-dealer with whom the Distributor has entered into a
sales agreement (an "Authorized Dealer") or the Transfer Agent by wire only.
10
<PAGE>
To buy shares of the Portfolio by Federal Reserve wire, call the Transfer Agent
at 1-800-447-1139 or call your account representative.
If you do not wire Federal Funds, you must have the wire converted into Federal
Funds, which usually takes one business day after receipt of a bank wire. The
Transfer Agent will not process your investment until it receives Federal Funds.
The following procedure will help assure prompt receipt of your Federal Funds
wire:
A. Call the Transfer Agent at 1-800-447-1139 and provide the following
information:
Your name
Address
Telephone number
Taxpayer ID number
The amount being wired
The identity of the bank wiring funds
The Transfer Agent will then provide you with a Portfolio account number.
(If you already have an account, you must also notify the Portfolio before
wiring funds.)
B. Instruct your bank to wire the specified amount to the Portfolio as
follows:
PNC Bank, N.A.
ABA #031000053
Credit Account Number: #86-1030-3398
From: [your name]
Account Number: [your Portfolio account number]
For Purchase of Prime Money Market Portfolio
Amount: [amount to be invested]
You may open an account when placing an initial order by telephone, provided you
then submit an Account Information Form by mail. An Account Information Form is
included with this Prospectus. The Transfer Agent will not process your
investment until it receives a fully completed and signed gAccount Information
Form.
The Trust and the Transfer Agent each reserve the right to reject any purchase
order for any reason.
How To Sell Shares
. You may sell shares on any business day through the Distributor,
Authorized Dealers or the Transfer Agent.
. When the Trust receives your redemption requests in proper form, it
will sell your shares at the next determined net asset value.
. The Trust will wire payment proceeds generally within seven days
after it receives your redemption request.
11
<PAGE>
Redemption Procedures
Redemption Through.the Distributor or Authorized Dealers
Method of Redemption Instructions
. In person . Visit your account representative.
. Specify the name of the Portfolio, Class of
shares and the number or dollar amount of shares
that you wish to sell.
. By telephone . Call your account executive.
. Specify the name of the Portfolio and the dollar
amount of shares that you wish to sell.
. By mail . Mail your redemption request to your account
representative.
. Specify the name of the Portfolio and the dollar
amount of shares that you wish to sell.
. By wire . Submit wiring instructions to your account
representative.
. Specify the name of the Portfolio and dollar
amount of shares that you wish to sell.
Redemption Through the Transfer Agent
. By mail . Mail your redemption request to:
PFPC Inc.
Attention: The Bear Stearns Funds
Prime Money Market Portfolio
P.O. Box 8960
Wilmington, Delaware 19899-8960
. By telephone . Call the Transfer Agent at 1-800-447-1139.
. Specify the name of the Portfolio and dollar
amount of shares that you wish to sell.
12
<PAGE>
Additional Information About Redemptions
. Wiring redemption proceeds. Upon request, the Trust will wire your
proceeds ($500 minimum) to your brokerage account or a designated
commercial bank account. There is a transaction fee of $7.50 for this
service. Please call your account representative for information on
how to wire funds to your brokerage account. Or, if you do not have a
brokerage account, call the Transfer Agent to wire funds to your bank
account.
. Signature guarantees. If your redemption proceeds exceed $50,000, or
if you instruct the Trust to send the proceeds to someone other than
the record owner at the record address, or if you are a corporation,
partnership, trust or fiduciary, your signature must be guaranteed by
any eligible guarantor institution. Call the Transfer Agent at 1-800-
447-1139 for information about obtaining a signature guarantee.
. Telephone policies. You may authorize the Transfer Agent to accept
telephone instructions. If you do, the Transfer Agent will accept
instructions from people who it believes are authorized to act on
your behalf. The Transfer Agent will use reasonable procedures (such
as requesting personal identification) to ensure that the caller is
properly authorized. Neither the Portfolio nor the Transfer Agent
will be liable for losses for following instructions reasonably
believed to be genuine.
. Redemption by mail may cause a delay. During times of extreme
economic or market conditions, you may experience difficulty in
contacting your account representative by telephone to request a
redemption of shares. If this occurs, please consider using the other
redemption procedures described in this Prospectus. Alternative
procedures may take longer to sell your shares.
. Automatic redemption; redemption in kind. If the value of your
account falls below $500,000 (for reasons other than changes in
market conditions), the Trust may automatically liquidate your
account and send you the proceeds. The Trust will send you a notice
at least 60 days before doing this. The Trust also reserves the right
to redeem your shares "in kind." For example, if you sell a large
number of shares and the Portfolio is unable to sell securities to
raise cash, the Trust may send you a combination of cash and a share
of actual portfolio securities. Call the Transfer Agent for details.
. Suspension of the Right of Redemption. The Portfolio may suspend your
right to redeem your shares under any of the following circumstances:
. during non-routine closings of the NYSE
. when the Securities and Exchange Commission ("SEC") determines that
(a) trading on the NYSE is restricted or (b) an emergency prevents
the sale or valuation of the Portfolio's securities
. when the SEC orders a suspension to protect the Portfolio's
shareholders
13
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions
The Portfolio passes along your share of its investment earnings in the form of
dividends. Dividend distributions are the net dividends or interest earned on
investments after expenses. As with any investment, you should consider the tax
consequences of an investment in the Portfolio.
Ordinarily, the Portfolio declares dividends from its net investment income
daily and pays them monthly. The Portfolio will distribute short-term capital
gains, as necessary, and normally will pay any long-term capital gains once a
year.
You can receive dividends or distributions in one of the following ways:
. Reinvestment. You can automatically reinvest your dividends and
distributions in additional shares of the Portfolio. If you do not
indicate another choice on your Account Application, you will receive
your distributions this way.
. Cash. The Trust will wire funds to you no later than seven days after
the payable date.
. Partial reinvestment. The Trust will automatically reinvest your
dividends in additional shares of the Portfolio and pay your capital
gain distributions to you in cash. Or, the Trust will automatically
reinvest your capital gain distributions and send you your dividends
in cash.
. Direct deposit. In most cases, you can automatically transfer
dividends and distributions to your bank checking or savings account.
Under normal circumstances, the Transfer Agent will transfer the
funds within seven days of the payment date. To receive dividends and
distributions this way, the name on your bank account must be the
same as the registration on your Portfolio account.
You may choose your distribution method on your original Account Application.
If you would like to change the option you selected, please call your account
representative or the Transfer Agent at 1-800-447-1139.
14
<PAGE>
Taxes
The Portfolio intends to continue to qualify as a regulated investment company,
which means that it pays no federal income tax on the earnings or capital gains
it distributes to its shareholders. It is important for you to be aware of the
following information about the tax treatment of your investment.
. Ordinary dividends from the Portfolio are taxable as ordinary income;
dividends from the Portfolio's long-term capital gains are taxable as
capital gain.
. Dividends are treated in the same manner for federal income tax
purposes whether you receive them in the form of cash or additional
shares. They may also be subject to state and local taxes.
. Dividends from the Portfolio that are attributable to interest on
certain U.S. Government obligations may be exempt from certain state
and local income taxes. The extent to which ordinary dividends are
attributable to these U.S. Government obligations will be provided on
the tax statements you receive from the Portfolio.
. Certain dividends paid to you in January will be taxable as if they
had been paid to you the previous December.
. The Trust will mail you tax statements every January showing the
amounts and tax status of distributions you received.
. When you sell (redeem) shares of the Portfolio, you must recognize
any gain or loss. However, as long as the Portfolio's NAV per share
does not deviate from $1.00, there will be no gain or loss.
. Because your tax treatment depends on your purchase price and tax
position, you should keep your regular account statements for use in
determining your tax.
. You should review the more detailed discussion of federal income tax
considerations in the SAI.
The Trust provides this tax information for your general information. You
should consult your own tax adviser about the tax consequences of investing in
the Portfolio.
ADDITIONAL INFORMATION
Performance
Financial publications, such as Business Week, Forbes, Money or SmartMoney, may
compare the Portfolio's performance to the performance of various indexes and
investments for which reliable performance data is available. These
publications may also compare the Portfolio's performance to averages,
performance rankings, or other information prepared by recognized mutual fund
statistical services, such as Lipper Inc.
Shareholder Communications
The Trust may eliminate duplicate mailings of Portfolio materials to
shareholders who reside at the same address.
15
<PAGE>
Financial Highlights - Prime Money Market Portfolio
The financial highlights table is intended to help you understand the financial
performance of the Portfolio since its inception. This information reflects
financial results for a single share of the Portfolio. The total returns in the
table represent the rate at which an investor would have gained or lost on an
investment in the Portfolio (assuming reinvestment of all dividends and
distributions). This information has been audited by ,
-----------------------
whose report, along with the Portfolio's financial statements, are included in
the Portfolio's annual report, which is available by calling the Trust at 1-800-
____-_____.
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD
YEAR ENDED JULY 14, 1997*
MARCH 31, 1999 THROUGH MARCH 31, 1998
--------------- ----------------------
<S> <C>
Per Share Operating Performance
Net asset value, beginning of period......................... $ 1.00
Net investment income(1)..................................... 0.0399
--------------
Net increase in net assets resulting from operations......... 0.0399
--------------
Dividends to shareholders from net investment income......... (0.0399)
--------------
Net asset value, end of period............................... $ 1.00
==============
Total investment return(2)(3)................................ 5.72%
==============
Ratios/Supplemental Data
Net assets, end of period (000's omitted).................... $121,460
Ratio of expenses to average net assets(1)(3)(4)............. 0.13%
Ratio of net investment income to average net assets(1)(3)... 5.58%
Decrease reflected in above expense ratio and net investment
income due to waivers and related reimbursements(3)......... . 0.52%
</TABLE>
- -----
* Commencement of investment operations.
(1) Reflects waivers and related reimbursements.
(2) Total investment return is calculated assuming a purchase of shares on the
first day and a sale of shares on the last day of each period reported and
includes reinvestment of dividends.
(3) Annualized.
(4) Without the waiver of advisory fee and related reimbursement of certain
operating expenses, the annualized ratio of expenses to average net assets
for Prime Money Market Portfolio would have been 0.65% for the period July
14, 1997 through March 31, 1998.
Further information about performance is contained in the Portfolio's Statement
of Additional Information and Annual Report, which may be obtained without
charge by writing to the address or calling one of the telephone numbers listed
under General Information.
16
<PAGE>
Statement of Additional Information. The Statement of Additional Information
("SAI") provides a more complete discussion of several of the matters contained
in this Prospectus and is incorporated by reference, which means that it is
legally a part of this Prospectus as if it were included here.
Annual and Semi-Annual Reports. The annual and semi-annual reports to
shareholders contain additional information about the Portfolio's investments,
including a discussion of the market conditions and investment strategies that
significantly affected the Portfolio's performance during its last fiscal year.
. To obtain a free copy of the SAI and the current annual or semi-
annual reports or to make any other inquiries about the Portfolio,
you may call or write:
PFPC Inc.
Attention: The Bear Stearns Funds
P.O. Box 8960
Wilmington, Delaware 19899-8960
Telephone: 1-800-447-1139 or 1-800-766-4111
. You may obtain copies of the SAI or financial reports
. for free by calling or writing broker-dealers or other financial
intermediaries that sell the Portfolio's shares
. for a fee by calling or writing the Public Reference Room of the
Securities Exchange Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549-6009 (1-800-SEC-0330)
. for free by visiting the SEC's Worldwide Web site at
http://www.sec.gov.
------------------
You may also obtain a copy of the Portfolio's prospectus from the Bear Stearns
Worldwide Web site at http://www.bearstearns.com.
--------------------------
Investment Company Act File No. 811-8798
17
<PAGE>
The Prime Money Market Portfolio
Bear Stearns
Funds
575 Lexington Avenue
New York, NY 10022
1-800-766-4111
Distributor
- -----------
Bear, Stearns & Co. Inc.
575 Lexington Avenue
New York, NY 10022
Investment Adviser
- ------------------
Bear Stearns Asset Management Inc.
575 Lexington Avenue
New York, NY 10022
Administrator
- -------------
Bear Stearns Funds Management Inc.
575 Lexington Avenue
New York, NY 10022
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 LLP
919 Third Avenue
New York, NY 10022
Independent Auditors
- --------------------
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
<PAGE>
Registrant's statement of additional information is incorporated by reference
to post-effective amendment No. 22 to Registrant's registration statement on
Form N-1A, filed with the SEC on May 14, 1999.
<PAGE>
THE BEAR STEARNS FUNDS
PART C. OTHER INFORMATION
Item 23. Exhibits
--------
(a) Exhibits:
EX-99.B1(a) Agreement and Declaration of Trust is incorporated by
reference to Exhibit (1)(a) of Post-Effective Amendment
No. 7 to the Registration Statement on Form N-1A filed
electronically on November 9, 1995, accession number
0000950130-95-002359.
EX-99.B1(b) Amendment to Agreement and Declaration of Trust is
incorporated by reference to Exhibit (1)(b) of Post-
Effective Amendment No. 7 to the Registration Statement
on Form N-1A filed electronically on November 9, 1995,
accession number 0000950130-95-002359.
EX-99.B2 By-Laws are incorporated by reference to Exhibit (2) of
Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A filed electronically on November
9, 1995, accession number 0000950130-95-002359.
EX-99.B3 None.
EX-99.B4(a) Investment Advisory Agreement between the Registrant and
Bear Stearns Asset Management Inc. ("BSAM")(formerly
known as Bear Stearns Funds Management Inc.), with
respect to Large Cap Value Portfolio, Small Cap Value
Portfolio and Income Portfolio, is incorporated by
reference to Exhibit (5)(a) of Post-Effective Amendment
No. 7 to the Registration Statement on Form N-1A filed
electronically on November 9, 1995, accession number
0000950130-95-002359.
Ex-99.B4(b) Investment Advisory Agreement between the Registrant and
BSAM with respect to The Insiders Select Fund, is
incorporated by reference to Exhibit 4(b) of Post-
Effective Amendment No. 22 to the Registration Statement
on Form N-1A filed electronically on May 14, 1999.
C-1
<PAGE>
Ex-99.B4(c) Investment Advisory Agreement between Registrant and
BSAM, with respect to Focus List Portfolio, is
incorporated by reference to Exhibit 4(c) of Post-
Effective Amendment No. 22 to the Registration Statement
on Form N-1A filed electronically on May 14, 1999.
Ex-99.B4(d) Investment Advisory Agreement between Registrant and
BSAM, with respect to S&P STARS Portfolio, is
incorporated by reference to Exhibit 4(d) of Post-
Effective Amendment No. 22 to the Registration Statement
on Form N-1A filed electronically on May 14, 1999.
EX-99.B4(e) Investment Advisory Agreement between the Registrant and
BSAM, with respect to Prime Money Market Portfolio, is
incorporated by reference to Exhibit 4(e) of Post-
Effective Amendment No. 22 to the Registration Statement
on Form N-1A filed electronically on May 14, 1999.
EX-99.B4(f) Investment Advisory Agreement between the Registrant and
BSAM, with respect to Balanced Portfolio, High Yield
Total Return Portfolio and International Equity
Portfolio, is incorporated by reference to Exhibit 4(f)
of Post-Effective Amendment No. 22 to the Registration
Statement on Form N-1A filed electronically on May 14,
1999.
EX-99.B4(g) Sub-Investment Advisory Agreement between BSAM and Marvin
& Palmer Associates, Inc., with respect to International
Equity Portfolio is incorporated by reference to Exhibit
5 (d) of Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A filed electronically
on July 28, 1998, accession number 0000922423-98-000722.
EX-99.B5(a) Distribution Agreement between the Registrant and Bear,
Stearns & Co. Inc., with revised Schedule I as of
September 8, 1997, is incorporated by reference to
Exhibit 6 (a) of Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A filed electronically
on July
C-2
<PAGE>
28, 1998, accession number 0000922423-98-000722.
EX-99.B5(b) Dealer Agreement is incorporated by reference to Exhibit
5(b) of Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A filed electronically
on May 14, 1999.
EX-99.B6 None.
EX-99.B7 Custody Agreements between the Registrant and Custodial
Trust Company are incorporated by reference to Exhibit
(8) of Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A filed electronically on November
9, 1995, accession number 0000950130-95-002359.
EX-99.B8(a) Administration Agreement between the Registrant and BSAM
is incorporated by reference to Exhibit (5)(b) of Post-
Effective Amendment No. 7 to the Registration Statement
on Form N-1A filed electronically on November 9, 1995,
accession number 0000950130-95-002359.
EX-99.B8(b) Administrative Services Agreement, as amended, between
the Registrant and PFPC Inc. is incorporated by reference
to Exhibit (5)(c) of Post-Effective Amendment No. 7 to
the Registration Statement on Form N-1A filed
electronically on November 9, 1995, accession number
0000950130-95-002359.
EX-99.B9 Opinion of Kramer Levin Naftalis & Frankel LLP as to the
legality of the securities registered is incorporated by
reference to Exhibit (10) of Post-Effective Amendment No.
20 to the Registration Statement on Form N-1A filed
electronically on July 28, 1998, accession number
0000922423-98-000722.
EX-99.B10(a) Consent of Kramer Levin Naftalis & Frankel LLP is filed
herewith.
EX-99.B10(b) Consent of Deloitte & Touche LLP is filed herewith.
EX-99.B11 None.
EX-99.B12 None.
C-3
<PAGE>
Ex-99.B13(a) Amended and Restated Distribution Plan for Class A, B and
C shares of S&P STARS Portfolio, Large Cap Value
Portfolio, Small Cap Value Portfolio, Total Return Bond
Portfolio, The Insiders Select Fund, Focus List
Portfolio, Balanced Portfolio, High Yield Total Return
Portfolio and International Equity Portfolio is
incorporated by reference to Exhibit 13(a) of Post-
Effective Amendment No. 22 to the Registration Statement
on Form N-1A filed electronically on May 14, 1999.
Ex-99.B13(b) Shareholder Servicing Plan for Class A, B and C shares of
S&P STARS Portfolio, Large Cap Value Portfolio, Small Cap
Value Portfolio, Total Return Bond Portfolio, The
Insiders Select Fund, Focus List Portfolio, Balanced
Portfolio, High Yield Total Return Portfolio and
International Equity Portfolio, is incorporated by
reference to Exhibit 13(b) of Post-Effective Amendment
No. 22 to the Registration Statement on Form N-1A filed
electronically on May 14, 1999.
EX-99.B14 Financial Data Schedules are filed herewith as Exhibit
27.
EX-99.B15 Rule 18f-3 Plan, as revised, is incorporated by reference
to Exhibit 15 of Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A filed electronically
on May 14, 1999.
Other Exhibits:
EX-99.A Certificate of Corporate Secretary is incorporated by
reference to Other Exhibit (a)yof Post-Effective
Amendment No. 7 to the Registration Statement on Form N-
1A filed electronically on November 9, 1995, accession
number 0000950130-95-002359.
EX-99.B Powers of Attorney of Michael Minikes, Peter M. Bren,
Alan J. Dixon, John R. McKernan, Jr. and M.B. Oglesby,
Jr. is incorporated by reference to post effective
amendment No. 22 to the registration statement on Form
N-1A filed on May 14, 1999.
C-4
<PAGE>
Item 24. Persons Controlled by or Under Common Control with
--------------------------------------------------
the Fund
--------
Not Applicable
Item 25. Indemnification
---------------
Reference is made to Article VIII of the Registrant's Declaration of Trust
(filed as Exhibit 1(a) to Registrant's Post-Effective Amendment No. 7 filed
electronically on November 9, 1995, accession number 0000950130-95-002359 and
incorporated herein by reference). The application of these provisions is
limited by Article 10 of the Registrant's By-Laws (filed as Exhibit 2 to
Registrant's Post-Effective Amendment No. 7 filed electronically on November 9,
1995, accession number 0000950130-95-002359 and incorporated herein by
reference) and by the following undertaking set forth in the rules promulgated
by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in such Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a trustee, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act
and will be governed by the final adjudication of such issue.
Reference also is made to the Distribution Agreement previously filed as
Exhibit 6(a) to Registrant's Post-Effective Amendment No. 7 filed electronically
on November 9, 1995, accession number 0000950130-95-002359 and incorporated
herein by reference.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
C-5
<PAGE>
Registrant is fulfilling the requirement of this Item 26 to provide a list
of the officers and directors of Bear Stearns Asset Management Inc. (BSAM), the
investment adviser of the Registrant, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by BSAM or those of its officers and directors during the past two years, by
incorporating by reference the information contained in the Form ADV filed with
the SEC pursuant to the Investment Advisers Act of 1940 by BSAM (SEC File No.
801-29862).
Item 27. Principal Underwriters
----------------------
(a) Bear, Stearns & Co. Inc. ("Bear Stearns") acts as principal
underwriter or depositor for the following investment companies:
. Bear Stearns Investment Trust -- Emerging Markets Debt Portfolio
. Managed Securities Plus Fund, Inc.
(b) Set forth below is a list of each executive officer and director of
Bear Stearns. All Directors and Executive Officers are also Senior Managing
Directors. The principal business address of each such person is 245 Park
Avenue, New York, New York 10167, except as set forth below.
Positions and Positions and
Offices with Offices with
Name Bear Stearns Registrant
- --------------- ------------ -----------
Directors
- ---------
Alan C. Greenberg Chairman of the Board/
Chairman of the Executive Committee
E. John Rosenwald Jr. Vice Chairman
Michael L. Tarnopol Vice Chairman
James E. Cayne President/Chief Executive Officer
Mark E. Lehman Vice Chairman
Alan D. Schwartz Executive Vice President
William J. Montgoris Chief Operating Officer
Warren J. Spector Executive Vice President
Michael Minikes Treasurer Chairman/Trustee
Samuel L. Molinaro Jr. Chief Financial Officer/
Senior Vice President - Finance
Denis A. Bovin
Peter D. Cherasia
Ralph R. Cioffi
Barry J. Cohen
Wendy L. de Monchaux
Bruce E. Geismar
Richard Harriton
Daniel L. Keating
C-6
<PAGE>
John Knight
David A. Liebowitz
Bruce M. Lisman
Roland N. Livney
Jeffrey Mayer
Gary M. McLoughlin
Donald R. Mullen Jr.
Fares D. Noujaim
Craig M. Overlander
Stephen E. Raphael
Richard B. Sachs
David M. Solomon
Robert M. Steinberg
Donald W. Tang
Michael J. Urfirer
Eli Wachtel
Michael Winchell
Uzi Zucker
John H. Slade Director Emeritus
Positions and Positions and
Offices with Offices with
Name Bear Stearns Registrant
- ------------------ ------------ ----------
Executive Officers
- ------------------
Alan C. Greenberg Chairman of the Board/
Chairman of the Executive Committee
James E. Cayne Chief Executive
Officer/President
William J. Montgoris Chief Operating Officer
Mark E. Lehman Executive Vice President/
General Counsel/Chief Legal Officer
Alan D. Schwartz Executive Vice
President
Warren J. Spector Executive Vice
President
Kenneth L. Edlow Secretary
Michael Minikes Treasurer Chairman/Trustee
Michael J. Abatemarco1 Controller/Assistant
Secretary
Samuel L. Molinaro, Jr. Chief Financial Officer/
Senior Vice President -
Finance
Frederick B. Casey Assistant Treasurer
Stephen A. Bornstein Assistant Secretary Secretary
_______________
1 Michael J. Abatemarco's principal business address is 1 Metrotech Center
North, Brooklyn, New York 11201-3859.
C-7
<PAGE>
Item 28. Location of Accounts and Records
--------------------------------
1. Bear Stearns Funds Management Inc.
575 Lexington Avenue
New York, New York 10022
(records relating to operations of the Company)
2. The Bear Stearns Funds
575 Lexington Avenue
New York, New York 10022
(records relating to the Company)
3. Bear Stearns Asset Management Inc.
575 Lexington Avenue
New York, New York 10022
(advisory records)
4. Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540
(records of the Company and BSAM)
5. PFPC Inc.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, Delaware 19809
(certain accounting, financial and shareholder records)
6. Marvin & Palmer Associates
1201 North Market Street
Suite 2300
Wilmington, Delaware 19801-2545
(records relating to its function as sub-investment adviser for the
International Equity Portfolio)
Item 29. Management Services
-------------------
Not Applicable
Item 30. Undertakings
------------
Registrant hereby undertakes
(1) to call a meeting of shareholders for the purpose of voting upon the
question of removal of a trustee or trustees when requested in writing to do so
by the holders of at least 10% of the Registrant's outstanding shares of
beneficial interest and in connection with such meeting to comply with the
provisions of Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications; and
(2) to furnish each person to whom a prospectus is delivered with a copy
of its most current annual report to shareholders, upon request and without
charge.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
postAeffective amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 14th day of May, 1999.
THE BEAR STEARNS FUNDS
(Registrant)
By: /s/ Doni L. Fordyce
-------------------------
Doni L. Fordyce
President
Pursuant to the requirements of the Securities Act of 1933, this
postAeffective amendment to the registration statement has been signed below by
the following persons in the capacities and on the dates indicated.
/s/ Doni L. Fordyce
- -------------------------- President (Principal
Doni L. Fordyce Executive Officer)
/s/ Frank J. Maresca
- -------------------------- Vice President and
Frank J. Maresca Treasurer (Principal
Financial and
Accounting Officer)
*
- -------------------------- Trustee
Peter M. Bren
*
- -------------------------- Trustee
Alan J. Dixon
*
- -------------------------- Trustee
John R. McKernan, Jr.
*
- --------------------------- Trustee
M.B. Oglesby, Jr.
*
- --------------------------- Trustee
Michael Minikes
By: /s/ Frank J. Maresca
------------------------
Frank J. Maresca,
Attorney-in-Fact
C-9
<PAGE>
THE BEAR STEARNS FUNDS
INDEX TO EXHIBITS
EX-99.B10(a) Consent of Kramer Levin Naftalis & Frankel LLP
EX-99.B10(b) Consent of Deloitte & Touche LLP
EX-99.B14 Financial Data Schedules
C-10
<PAGE>
[LETTERHEAD OF KRAMER LEVIN NAFTALIS & FRANKEL LLP]
Exhibit 99.B10(a)
May 14, 1999
The Bear Stearns Funds
575 Lexington Avenue
New York, New York 10022
Re: The Bear Stearns Funds
Registration No. 33-84842
Post-Effective Amendment
to Registration Statement on Form N-1A
--------------------------------------
Gentlemen:
We consent to the reference to our Firm as counsel in Post-Effective
Amendment No. 23 to the Registration Statement on Form N-1A.
Very truly yours,
/s/Kramer Levin Naftalis & Frankel LLP
<PAGE>
Exhibit 99.B10(b)
CONSENT OF INDEPENDENT AUDITORS
The Bear Stearns Funds:
We consent to the reference to us in this Post-Effective Amendment No. 23 to
Registration Statement No. 33-84842 under the caption "Custodians, Transfer
Agent and Dividend Disbursing Agent, Counsel and Independent Auditors" appearing
in the Statement of Additional Information, which is a part of such Registration
Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
May 13, 1999
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<TOTAL-LIABILITIES> 1138001
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56100797
<SHARES-COMMON-STOCK> 776108
<SHARES-COMMON-PRIOR> 770225
<ACCUMULATED-NII-CURRENT> (206760)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2723011
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2100962)
<NET-ASSETS> 56516086
<DIVIDEND-INCOME> 180071
<INTEREST-INCOME> 122836
<OTHER-INCOME> 0
<EXPENSES-NET> 509667
<NET-INVESTMENT-INCOME> (260760)
<REALIZED-GAINS-CURRENT> (552114)
<APPREC-INCREASE-CURRENT> (21660357)
<NET-CHANGE-FROM-OPS> (22419231)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 92490
<NUMBER-OF-SHARES-REDEEMED> 86607
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (18719045)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3275125
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 266779
<INTEREST-EXPENSE> 47
<GROSS-EXPENSE> 712591
<AVERAGE-NET-ASSETS> 16976200
<PER-SHARE-NAV-BEGIN> 23.48
<PER-SHARE-NII> (.13)
<PER-SHARE-GAIN-APPREC> (6.61)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.74
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 024
<NAME> SMALL CAP VALUE PORTFOLIO-CLASS Y
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 56421822
<INVESTMENTS-AT-VALUE> 54320860
<RECEIVABLES> 3282123
<ASSETS-OTHER> 51104
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57654087
<PAYABLE-FOR-SECURITIES> 668853
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 469148
<TOTAL-LIABILITIES> 1138001
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56100797
<SHARES-COMMON-STOCK> 1368269
<SHARES-COMMON-PRIOR> 1316521
<ACCUMULATED-NII-CURRENT> (206760)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2723011
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2100962)
<NET-ASSETS> 56516086
<DIVIDEND-INCOME> 180071
<INTEREST-INCOME> 122836
<OTHER-INCOME> 0
<EXPENSES-NET> 509667
<NET-INVESTMENT-INCOME> (260760)
<REALIZED-GAINS-CURRENT> (552114)
<APPREC-INCREASE-CURRENT> (21660357)
<NET-CHANGE-FROM-OPS> (22419231)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 194705
<NUMBER-OF-SHARES-REDEEMED> 142957
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (18719045)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3275125
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 266779
<INTEREST-EXPENSE> 47
<GROSS-EXPENSE> 712591
<AVERAGE-NET-ASSETS> 28361339
<PER-SHARE-NAV-BEGIN> 23.65
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (6.68)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.95
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> INCOME PORTFOLIO-CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 11754451
<INVESTMENTS-AT-VALUE> 11997685
<RECEIVABLES> 505651
<ASSETS-OTHER> 41039
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12544375
<PAYABLE-FOR-SECURITIES> 334311
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100571
<TOTAL-LIABILITIES> 434882
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11675010
<SHARES-COMMON-STOCK> 430108
<SHARES-COMMON-PRIOR> 236507
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 191249
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 243234
<NET-ASSETS> 12109493
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 326894
<OTHER-INCOME> 0
<EXPENSES-NET> 36134
<NET-INVESTMENT-INCOME> 290760
<REALIZED-GAINS-CURRENT> 17843
<APPREC-INCREASE-CURRENT> 262497
<NET-CHANGE-FROM-OPS> 571100
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (290778)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 391690
<NUMBER-OF-SHARES-REDEEMED> 202610
<SHARES-REINVESTED> 4521
<NET-CHANGE-IN-ASSETS> 3423385
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 173424
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22046
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 196241
<AVERAGE-NET-ASSETS> 3693427
<PER-SHARE-NAV-BEGIN> 12.37
<PER-SHARE-NII> .37
<PER-SHARE-GAIN-APPREC> .31
<PER-SHARE-DIVIDEND> (.37)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.68
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> INCOME PORTFOLIO-CLASS B
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 11754451
<INVESTMENTS-AT-VALUE> 11997685
<RECEIVABLES> 505651
<ASSETS-OTHER> 41039
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12544375
<PAYABLE-FOR-SECURITIES> 334311
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100571
<TOTAL-LIABILITIES> 434882
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11675010
<SHARES-COMMON-STOCK> 28411
<SHARES-COMMON-PRIOR> 1443
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 191249
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 243234
<NET-ASSETS> 12109493
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 326894
<OTHER-INCOME> 0
<EXPENSES-NET> 36134
<NET-INVESTMENT-INCOME> 290760
<REALIZED-GAINS-CURRENT> 17843
<APPREC-INCREASE-CURRENT> 262497
<NET-CHANGE-FROM-OPS> 571100
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (290778)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26809
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 159
<NET-CHANGE-IN-ASSETS> 3423385
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 173424
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22046
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 196241
<AVERAGE-NET-ASSETS> 128783
<PER-SHARE-NAV-BEGIN> 12.37
<PER-SHARE-NII> .33
<PER-SHARE-GAIN-APPREC> .31
<PER-SHARE-DIVIDEND> (.33)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.68
<EXPENSE-RATIO> 1.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 033
<NAME> INCOME PORTFOLIO-CLASS C
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 11754451
<INVESTMENTS-AT-VALUE> 11997685
<RECEIVABLES> 505651
<ASSETS-OTHER> 41039
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12544375
<PAYABLE-FOR-SECURITIES> 334311
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100571
<TOTAL-LIABILITIES> 434882
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11675010
<SHARES-COMMON-STOCK> 132833
<SHARES-COMMON-PRIOR> 113394
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 191249
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 243234
<NET-ASSETS> 12109493
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 326894
<OTHER-INCOME> 0
<EXPENSES-NET> 36134
<NET-INVESTMENT-INCOME> 290760
<REALIZED-GAINS-CURRENT> 17843
<APPREC-INCREASE-CURRENT> 262497
<NET-CHANGE-FROM-OPS> 571100
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (290778)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27470
<NUMBER-OF-SHARES-REDEEMED> 10457
<SHARES-REINVESTED> 2426
<NET-CHANGE-IN-ASSETS> 3423385
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 173424
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22046
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 196241
<AVERAGE-NET-ASSETS> 1462177
<PER-SHARE-NAV-BEGIN> 12.37
<PER-SHARE-NII> .33
<PER-SHARE-GAIN-APPREC> .31
<PER-SHARE-DIVIDEND> (.33)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.68
<EXPENSE-RATIO> 1.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 034
<NAME> INCOME PORTFOLIO-CLASS Y
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 11754451
<INVESTMENTS-AT-VALUE> 11997685
<RECEIVABLES> 505651
<ASSETS-OTHER> 41039
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12544375
<PAYABLE-FOR-SECURITIES> 334311
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100571
<TOTAL-LIABILITIES> 434882
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11675010
<SHARES-COMMON-STOCK> 363486
<SHARES-COMMON-PRIOR> 350666
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 191249
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 243234
<NET-ASSETS> 12109493
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 326894
<OTHER-INCOME> 0
<EXPENSES-NET> 36134
<NET-INVESTMENT-INCOME> 290760
<REALIZED-GAINS-CURRENT> 17843
<APPREC-INCREASE-CURRENT> 262497
<NET-CHANGE-FROM-OPS> 571100
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (290778)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10199
<NUMBER-OF-SHARES-REDEEMED> 4254
<SHARES-REINVESTED> 6875
<NET-CHANGE-IN-ASSETS> 3423385
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 173424
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22046
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 196241
<AVERAGE-NET-ASSETS> 4459884
<PER-SHARE-NAV-BEGIN> 12.37
<PER-SHARE-NII> .39
<PER-SHARE-GAIN-APPREC> .31
<PER-SHARE-DIVIDEND> (.39)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.68
<EXPENSE-RATIO> .45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 041
<NAME> INSIDERS SELECT FUND-CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 44976631
<INVESTMENTS-AT-VALUE> 43387970
<RECEIVABLES> 2160789
<ASSETS-OTHER> 94422
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45643181
<PAYABLE-FOR-SECURITIES> 1268958
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 292107
<TOTAL-LIABILITIES> 1561065
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43059310
<SHARES-COMMON-STOCK> 1604973
<SHARES-COMMON-PRIOR> 1225788
<ACCUMULATED-NII-CURRENT> 15236
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2596231
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1588661)
<NET-ASSETS> 44082116
<DIVIDEND-INCOME> 286430
<INTEREST-INCOME> 141282
<OTHER-INCOME> 0
<EXPENSES-NET> 413006
<NET-INVESTMENT-INCOME> 15236
<REALIZED-GAINS-CURRENT> 73407
<APPREC-INCREASE-CURRENT> (8821368)
<NET-CHANGE-FROM-OPS> (8732731)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 628076
<NUMBER-OF-SHARES-REDEEMED> 248891
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6354827
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2522830
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 238957
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 657796
<AVERAGE-NET-ASSETS> 24283575
<PER-SHARE-NAV-BEGIN> 17.88
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (3.04)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.86
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 042
<NAME> INSIDERS SELECT FUND-CLASS B
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 44976631
<INVESTMENTS-AT-VALUE> 43387970
<RECEIVABLES> 2160789
<ASSETS-OTHER> 94422
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45643181
<PAYABLE-FOR-SECURITIES> 1268958
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 292107
<TOTAL-LIABILITIES> 1561065
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43059310
<SHARES-COMMON-STOCK> 479037
<SHARES-COMMON-PRIOR> 127400
<ACCUMULATED-NII-CURRENT> 15236
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2596231
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1588661)
<NET-ASSETS> 44082116
<DIVIDEND-INCOME> 286430
<INTEREST-INCOME> 141282
<OTHER-INCOME> 0
<EXPENSES-NET> 413006
<NET-INVESTMENT-INCOME> 15236
<REALIZED-GAINS-CURRENT> 73407
<APPREC-INCREASE-CURRENT> (8821368)
<NET-CHANGE-FROM-OPS> (8732731)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 387245
<NUMBER-OF-SHARES-REDEEMED> 35608
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6354827
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2522830
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 238957
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 657796
<AVERAGE-NET-ASSETS> 5412265
<PER-SHARE-NAV-BEGIN> 17.69
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (3.00)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.67
<EXPENSE-RATIO> 2.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 043
<NAME> INSIDERS SELECT FUND-CLASS C
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 44976631
<INVESTMENTS-AT-VALUE> 43387970
<RECEIVABLES> 2160789
<ASSETS-OTHER> 94422
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45643181
<PAYABLE-FOR-SECURITIES> 1268958
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 292107
<TOTAL-LIABILITIES> 1561065
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43059310
<SHARES-COMMON-STOCK> 834156
<SHARES-COMMON-PRIOR> 695398
<ACCUMULATED-NII-CURRENT> 15236
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2596231
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1588661)
<NET-ASSETS> 44082116
<DIVIDEND-INCOME> 286430
<INTEREST-INCOME> 141282
<OTHER-INCOME> 0
<EXPENSES-NET> 413006
<NET-INVESTMENT-INCOME> 15236
<REALIZED-GAINS-CURRENT> 73407
<APPREC-INCREASE-CURRENT> (8821368)
<NET-CHANGE-FROM-OPS> (8732731)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 221617
<NUMBER-OF-SHARES-REDEEMED> 82859
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6354827
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2522830
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 238957
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 657796
<AVERAGE-NET-ASSETS> 13509387
<PER-SHARE-NAV-BEGIN> 17.68
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (3.00)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.66
<EXPENSE-RATIO> 2.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 044
<NAME> INSIDERS SELECT FUND-CLASS Y
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 44976631
<INVESTMENTS-AT-VALUE> 43387970
<RECEIVABLES> 2160789
<ASSETS-OTHER> 94422
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45643181
<PAYABLE-FOR-SECURITIES> 1268958
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 292107
<TOTAL-LIABILITIES> 1561065
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43059310
<SHARES-COMMON-STOCK> 64610
<SHARES-COMMON-PRIOR> 69939
<ACCUMULATED-NII-CURRENT> 15236
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2596231
<OVERDISTRIBUTION-GAINS> 0
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<PAGE>
<ARTICLE> 6
<SERIES>
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<NAME> BALANCED PORTFOLIO-CLASS B
<S> <C>
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 083
<NAME> BALANCED PORTFOLIO-CLASS C
<S> <C>
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<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 15762219
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<ACCUM-APPREC-OR-DEPREC> (263135)
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<NET-INVESTMENT-INCOME> 206282
<REALIZED-GAINS-CURRENT> 16941
<APPREC-INCREASE-CURRENT> (869443)
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<NUMBER-OF-SHARES-SOLD> 5430
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<SHARES-REINVESTED> 803
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 084
<NAME> BALANCED PORTFOLIO-CLASS Y
<S> <C>
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<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 15762219
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 091
<NAME> INTERNATIONAL EQUITY PORTFOLIO-CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 9785313
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<NET-INVESTMENT-INCOME> 8587
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<NUMBER-OF-SHARES-SOLD> 2329812
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<NET-CHANGE-IN-ASSETS> 1669007
<ACCUMULATED-NII-PRIOR> 2461
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<GROSS-EXPENSE> 226624
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<PER-SHARE-NAV-BEGIN> 13.77
<PER-SHARE-NII> .02
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 092
<NAME> INTERNATIONAL EQUITY PORTFOLIO-CLASS B
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 9785313
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<SHARES-COMMON-PRIOR> 155378
<ACCUMULATED-NII-CURRENT> 11048
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<ACCUMULATED-NET-GAINS> (320020)
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 093
<NAME> INTERNATIONAL EQUITY PORTFOLIO-CLASS C
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 9785313
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<SHARES-COMMON-STOCK> 177779
<SHARES-COMMON-PRIOR> 158014
<ACCUMULATED-NII-CURRENT> 11048
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (320020)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 293964
<NET-ASSETS> 9743563
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<INTEREST-INCOME> 30895
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<NET-INVESTMENT-INCOME> 8587
<REALIZED-GAINS-CURRENT> (202910)
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<GROSS-EXPENSE> 226624
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<PER-SHARE-NAV-BEGIN> 13.75
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 101
<NAME> HIGH YIELD TOTAL RETURN PORTFOLIO-CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 75411178
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<SHARES-COMMON-PRIOR> 1437735
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 352826
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<ACCUM-APPREC-OR-DEPREC> (6705513)
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<NUMBER-OF-SHARES-REDEEMED> 853088
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 102
<NAME> HIGH YIELD TOTAL RETURN PORTFOLIO-CLASS B
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 103
<NAME> HIGH YIELD TOTAL RETURN PORTFOLIO-CLASS C
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
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<NAME> EMERGING MARKETS DEBT PORTFOLIO-CLASS A
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<NAME> EMERGING MARKETS DEBT PORTFOLIO-CLASS B
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<NAME> EMERGING MARKETS DEBT PORTFOLIO-CLASS C
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