The
Bear Stearns
Funds
- Prime Money
- Market Portfolio
Semi-Annual Report
September 30, 2000
BEAR
STEARNS
<PAGE>
PRIME MONEY MARKET PORTFOLIO
LETTER TO SHAREHOLDERS
November 11, 2000
Dear Shareholders:
We are pleased to present you with the semi-annual report for the Prime Money
Market Portfolio (the "Portfolio") for the six months ended September 30, 2000.
As of September 30, 2000, the Portfolio's 7-day average yield was 6.51% and the
7-day effective yield was 6.71%. Based on information compiled by iMoneyNet,
Inc., the Portfolio's total return of 6.15% for the 12 months ended September
30, 2000, exceeded the average total return for tier-one institutional money
market funds by 23 basis points.(1) The Portfolio is now in its fourth year of
operation and had total current assets of more than $1 billion as of September
30, 2000.
Continuing its pattern of rate increases in 1999 and the first quarter of 2000,
the Federal Reserve Board's Open Market Committee ("FOMC") voted to increase the
targeted Fed Funds rate an additional 50 basis points at its May 16, 2000
meeting to a level of 6.50%. In addition to the rate increase, the inflation
bias was maintained. During Chairman Greenspan's tenure, the FOMC has usually
left rates unchanged at its next meeting immediately following a move of more
than 25 basis points. This pattern continued and the FOMC, while maintaining its
inflationary bias, left the targeted Fed Funds rate at 6.50% at its June
meeting.
There is little doubt that the 150 basis-point increase in the targeted Fed
Funds rate since June 1999 has started to work its way through the economy.
These rate increases, combined with high energy prices and a weakening stock
market, have begun to put the consumer in a more defensive mood. A variety of
economic indicators, both in the U.S. and abroad, are pointing toward slower
growth in the third quarter. As a result, the FOMC left rates unchanged at both
its August 22, 2000 and October 3, 2000 meetings. While stating that aggregate
demand was starting to fall more in line with supply, the FOMC's inflationary
bias continues to remain in effect.
With energy prices remaining at stubbornly high levels, thereby keeping the
specter of inflation alive, the key to eliminating the FOMC's inflationary bias
and ultimately lowering interest rates is worker productivity. While
unemployment remains at historically low levels and qualified workers remain in
short supply, it is essential that productivity remain high to offset increasing
wage pressures. Mr. Greenspan has hinted recently that he believes worker
productivity can continue at a high level, implying that this balance may be
maintained.
Supporting the likelihood that the FOMC may lower rates in the near future is
increasing concern that the U.S. economy may be headed for a hard landing. As
world economic growth slows, the strains on the global financial system are
increasing. In response, Fed Funds futures contracts have started to price in
the probability of a 25 basis-point cut in the targeted Fed Funds rate in the
first quarter of 2001.
Anticipating a decline in rates, we began to lengthen the maturity of the
Portfolio gradually over the last month. Although the FOMC will need to see more
evidence of a significant slowdown in the economy before it moves to lower
rates, we cannot ignore the sentiment of the market in managing the Portfolio.
We appreciate your continued support. Please feel free to call us at
1-800-766-4111 with any questions or concerns you may have.
Sincerely,
/s/ Doni L. Fordyce
Doni L. Fordyce
President and Trustee
The Bear Stearns Funds
----------
(1) The average and effective yields represent past performance, which is not a
guarantee of future results. Yields are net of management fees and
expenses. As of September 30, 2000, there were 189 funds that had 12-month
returns in the taxable First-Tier Institutional Only category, and
throughout all periods, some or all of the funds, including the Portfolio,
reported fee waivers from time to time. Without such waivers, the reported
yields would have been lower.
Bear Stearns Asset Management Inc. has waived a portion of its advisory fee and
agreed to reimburse a portion of the Portfolio's operating expenses, as
necessary, to maintain the expense limitation as set forth in the notes to the
financial statements. Total returns and net yields shown include fee waivers and
expense reimbursements, if any; total returns and net yields would have been
lower had there been no assumption of fees and expenses in excess of expense
limitations.
<PAGE>
<TABLE>
<CAPTION>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(unaudited)
---------------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000's) RATE(s) DATE(s) VALUE
---------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSITS-- 29.02%
BANKS - DOMESTIC - 1.64%
<C> <S> <C> <C> <C>
$ 8,000 Bank of America N.A. [A-1+, P-1] ............... 6.300% 10/16/00 $ 7,999,672
10,000 Citibank N.A. [A-1+, P-1] ...................... 6.870 12/15/00 10,000,876
--------------
18,000,548
--------------
BANKS - EURO - FRANCE - 1.00%
11,000 Credit Agricole Indosuez [A-1+, P-1] ........... 6.570 - 6.870 12/15/00 - 12/20/00 11,000,464
--------------
BANKS - EURO - GERMANY - 6.38%
23,000 Bayerische Landesbank [A-1+, P-1] .............. 6.600 - 6.730 11/24/00 - 02/26/01 23,001,556
13,000 Commerzbank AG [A-1+, P-1] ..................... 6.710 - 6.850 02/28/01 - 05/09/01 13,004,512
18,000 Landesbank Hessen-Thueringen
Girozentrale [A-1+, P-1] .................. 7.010 - 7.080 11/20/00 - 12/21/00 18,001,865
16,000 Norddeutsche Landesbank
Girozentrale [A-1+, P-1] .................. 6.720 - 7.050 11/06/00 - 03/19/01 16,003,711
--------------
70,011,644
--------------
BANKS - EURO - NETHERLANDS - 3.19%
35,000 ING Bank NV [A-1+, P-1] ........................ 6.630 - 6.930 10/03/00 - 02/21/01 35,001,911
--------------
BANKS - EURO - UNITED KINGDOM - 1.73%
14,000 Abbey National Bank plc [A-1+, P-1] ............ 6.460 - 6.700 12/28/00 - 03/12/01 13,999,103
5,000 Barclay's Bank [A-1+, P-1] .................... 7.050 03/26/01 5,005,218
--------------
19,004,321
--------------
BANKS - YANKEE - AUSTRALIA - 0.46%
5,000 Westpac Banking Corp. [A-1+, P-1] .............. 6.190 10/20/00 4,998,768
--------------
BANKS - YANKEE - CANADA - 2.37%
3,000 Bank of Montreal [A-1+, P-1] ................... 6.620 11/02/00 3,000,037
8,000 Bank of Nova Scotia [A-1, P-1] ................. 6.710 02/22/01 7,986,067
15,000 Canadian Imperial Bank of Commerce [A-1+, P-1].. 6.670 - 6.730 10/23/00 - 11/22/00 15,000,549
--------------
25,986,653
--------------
BANKS - YANKEE - FRANCE - 0.46%
5,000 Societe Generale [A-1+, P-1] .................... 6.810 04/17/01 4,998,226
--------------
BANKS - YANKEE - GERMANY - 3.46%
10,000 Bayerische Hypo-und Vereinsbank [A-1, P-1]....... 6.630 11/07/00 10,000,319
5,000 Bayerische Landesbank N.Y. [A-1+, P-1] .......... 6.610 12/11/00 4,999,965
5,000 Commerzbank AG [A-1+, P-1] ...................... 6.620 11/07/00 5,000,101
18,000 Deutsche Bank N.Y. [A-1+, P-1] .................. 6.630 - 6.730 02/22/01 - 03/16/01 17,982,288
--------------
37,982,673
--------------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(unaudited)
---------------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000's) RATE(s) DATE(s) VALUE
---------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSITS (continued)
BANKS - YANKEE - NETHERLANDS - 2.55%
$ 28,000 Rabobank Nederland N.V. [A-1+, P-1] ............. 6.510 - 7.030% 12/01/00 - 02/14/01 $ 27,998,321
--------------
BANKS - YANKEE - SWEDEN - 3.01%
33,000 Svenska Handelbanken [A-1, P-1] ................. 6.620 - 7.120 11/06/00 - 05/04/01 32,983,533
--------------
BANKS - YANKEE - SWITZERLAND - 2.77%
8,000 Credit Suisse First Boston N.Y. [A-1+, P-1] ..... 6.680 10/23/00 8,000,211
22,350 UBS AG [A-1+, P-1] .............................. 6.220 - 7.200 12/06/00 - 06/22/01 22,342,075
--------------
30,342,286
--------------
Total Certificates of Deposits
(cost - $318,309,348) ........................ 318,309,348
--------------
COMMERCIAL PAPER-- 40.31%
ASSET-BACKED CREDIT CARD - 1.35%
14,800 Citibank Credit Card Master Trust, Dakota Certificates
[A-1+, P-1] .................................. 6.520 - 6.540 10/03/00 - 10/24/00 14,760,324
--------------
CHEMICALS - DIVERSIFIED - 3.37%
10,000 Dow Chemical Company [A-1, P-1] ................. 6.550 10/04/00 9,994,542
27,000 E.I. DuPont de Nemours [A-1+, P-1] .............. 6.700 10/02/00 26,994,975
--------------
36,989,517
--------------
COMMERCIAL FINANCE - 11.45%
16,500 DaimlerChrysler NA Holdings Corp. [A-1, P-1] .... 6.480 - 6.500 10/25/00 - 12/13/00 16,345,682
38,600 General Electric Capital Corp. [A-1+, P-1] ...... 6.470 - 6.530 10/18/00 - 01/19/01 38,142,971
14,200 General Motors Acceptance Corp. [A-1, P-1] ...... 6.520 - 6.550 10/16/00 - 01/31/01 14,045,048
22,000 Pitney Bowes Credit Corp. [A-1+, P-1] ........... 6.720 10/02/00 21,995,893
35,000 UBS Finance [A-1+, P-1] ......................... 6.570 - 6.680 10/02/00 - 10/04/00 34,988,077
--------------
125,517,671
--------------
CORPORATE LOAN CONDUIT - 4.68%
29,500 Centric Capital Corp. [A-1+, P-1] ............... 6.500 - 6.550 10/26/00 - 11/30/00 29,306,105
6,199 Greenwich Funding Corp. [A-1+, P-1] ............. 6.490 12/11/00 6,119,655
16,000 Wood Street Funding Corp. [A-1, P-1] ............ 6.520 - 6.550 10/17/00 - 10/27/00 15,937,841
--------------
51,363,601
--------------
DIVERSIFIED RECEIVABLES CONDUIT - 7.88%
16,000 Alpine Securitization Corp. [A-1+, P-1] ......... 6.490 - 6.570 10/19/00 - 11/30/00 15,887,187
24,175 Barton Capital Corp. [A-1+, P-1] ................ 6.500 - 6.570 10/02/00 - 11/17/00 24,112,315
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(unaudited)
---------------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000's) RATE(s) DATE(s) VALUE
---------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (continued)
DIVERSIFIED RECEIVABLES CONDUIT (CONTINUED)
$ 13,000 Enterprise Funding Corp. [A-1+, P-1] ............ 6.520 - 6.530% 10/06/00 - 10/17/00 $ 12,978,256
6,000 Sheffield Receivables Corp. [A-1+, P-1] ......... 6.530 10/25/00 5,973,880
6,000 Triple-A Funding Corp. [A-1, P-1] ............... 6.510 10/02/00 5,998,915
21,481 Windmill Funding Corp. [A-1+, P-1] .............. 6.510 - 6.570 10/06/00 - 10/23/00 21,420,671
--------------
86,371,224
--------------
INSURANCE - 0.54%
6,000 AllState Corp. [A-1, P-1] ....................... 6.490 10/30/00 5,968,632
--------------
INVESTMENT STRUCTURE - 2.60%
29,000 Sigma Finance Inc. [A-1+, P-1] .................. 6.490 - 6.790 10/02/00 - 03/06/01 28,554,846
--------------
MEDICAL - DRUGS - 3.65%
40,000 American Home Products [A-1, P-1] ............... 6.700 10/02/00 39,992,556
--------------
RETAIL - DEPARTMENT STORES - 1.10%
12,065 Wal-Mart Stores Inc. [A-1+, P-1] ................ 6.610 10/03/00 12,060,620
--------------
SECURITIES DEALERS - 2.62%
6,000 Credit Suisse First Boston Inc. [A-1+, P-1] ..... 6.490 11/21/00 5,944,835
18,000 Goldman Sachs Group Inc. [A-1+, P-1] ............ 6.490 - 6.550 10/27/00 - 02/05/01 17,796,442
5,000 Morgan Stanley Dean Witter Discover & Co. (LOC)
[A-1+, P-1] ....................... 6.650 10/02/00 5,000,000
--------------
28,741,277
--------------
TELECOMMUNICATIONS - 1.07%
12,030 SBC Communications Corp. [A-1+, P-1] ............ 6.450 - 6.480 12/06/00 - 03/12/01 11,744,266
--------------
Total Commercial Paper
(cost - $442,064,534) ............. 442,064,534
--------------
CORPORATE OBLIGATIONS-- 12.28%
BANKS - DOMESTIC - 8.62%
10,000 American Express Centurion
Bank N.A.* [A-1, P-1] ...................... 6.590 - 6.670 10/02/00 - 10/11/00 10,000,000
16,000 Bank of America N.A.* [A-1+, P-1] ............... 6.630 - 6.684 10/02/00 - 12/06/00 16,003,651
6,000 Bank of America N.A. [A-1+, P-1] ................ 7.250 02/16/01 6,004,808
16,000 Bank One N.A. [A-1, P-1] ........................ 6.680 - 7.100 02/05/01 - 04/25/01 16,000,000
5,000 Bayerische Landesbank N.Y.* [A-1+, P-1] ......... 6.546 10/16/00 4,999,645
5,000 First Union N.B.* [A-1, P-1] .................... 6.680 10/02/00 5,000,000
5,000 Fleet National Bank* [A-1, P-1] ................. 6.890 10/02/00 5,002,154
5,000 J.P. Morgan & Co., Inc.* [A-1+, P-1] ............ 6.590 10/06/00 5,000,000
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(unaudited)
---------------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000's) RATE(s) DATE(s) VALUE
---------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (continued)
BANKS - DOMESTIC (CONTINUED)
$ 5,000 Key Bank N.A.* [A-1, P-1] ...................... 6.750% 10/02/00 $ 5,000,000
10,000 LaSalle National Bank [A-1+, P-1] ............... 6.700 01/23/01 10,000,000
6,600 Wachovia Bank N.A.* [A-1+, P-1] ................. 6.573 10/18/00 6,598,288
5,000 Westdeutsche Landesbank Girozentrale* [A-1+, P-1] 6.542 10/23/00 4,998,845
--------------
94,607,391
--------------
COMMERCIAL FINANCE - 1.83%
14,000 General Motors Acceptance Corp.* [A-1, P-1] ..... 6.910 - 7.110 10/02/00 - 11/09/00 14,021,427
6,000 Toyota Motor Credit Corp.* [A-1+, P-1] .......... 6.810 10/02/00 6,004,080
--------------
20,025,507
--------------
INVESTMENT STRUCTURE - 0.46%
5,000 Sigma Finance Inc.* [A-1+, P-1] ................. 6.609 10/02/00 5,000,000
--------------
SECURITIES DEALERS - 0.91%
10,000 Merrill Lynch* [A-1+, P-1] ...................... 6.824 - 7.030 10/12/00 - 11/07/00 10,011,074
--------------
TELECOMMUNICATIONS - 0.46%
5,000 SBC Communications Corp.* [A-1+, P-1] ......... 6.630 11/15/00 5,000,000
--------------
Total Corporate Obligations
(cost - $134,643,972) ............. 134,643,972
--------------
SHARES
------
INVESTMENT COMPANY-- 0.05%
568,864 AIM Prime Short-Term Investment Company Prime
Portfolio (I) [AAAm, Aaa] (cost - $568,864) ... 6.630 -- 568,864
--------------
PRINCIPAL
AMOUNT
(000's)
-------
TIME DEPOSITS-- 11.12%
$ 37,000 Firstar Bank [A-1,P-1] .......................... 6.656 10/02/00 37,000,000
40,000 Wachovia Bank [A-1+,P-1] ........................ 6.625 10/02/00 40,000,000
45,000 Wells Fargo Bank [A-1+,P-1] ..................... 6.719 10/02/00 45,000,000
--------------
Total Time Deposits
(cost - $122,000,000) 122,000,000
--------------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
(unaudited)
---------------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST/
AMOUNT DISCOUNT MATURITY
(000's) RATE(s) DATE(s) VALUE
---------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT**-- 6.92%
$ 75,837 ABN-AMRO Inc. (cost - $75,837,000) .............. 6.650% 10/02/00 $ 75,837,000
--------------
Total Investments-- 99.70%
(cost - $1,093,423,718)*** ........ 1,093,423,718
Cash and other assets in excess
of liabilities-- 0.30% ....................... 3,335,234
--------------
Net Assets-- 100.00% ............................. $1,096,758,952
==============
----------
<FN>
* Variable Rate Obligations - The rate shown is the rate as of September 30,
2000 and the maturity date shown is the date the interest rate resets.
** See notes to financial statements for description of underlying collateral.
*** The cost of investments for federal income tax purposes is substantially
the same as for financial reporting purposes.
(I) Money market fund; interest rate reflects SEC seven-day yield at September
30, 2000.
LOC Letter of Credit.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITES
SEPTEMBER 30, 2000
(unaudited)
ASSETS
<S> <C>
Investments, at amortized cost which approximates market value
(identified and tax cost - $1,093,423,718) ................ $ 1,093,423,718
Cash ......................................................... 466
Interest receivable .......................................... 9,050,513
Deferred organization expenses and other assets .............. 52,169
---------------
Total assets ............................................ 1,102,526,866
---------------
LIABILITIES
Dividends payable ............................................ 5,494,730
Advisory fee payable ......................................... 74,758
Administration fee payable ................................... 43,165
Custodian fee payable ........................................ 16,062
Accrued expenses ............................................. 139,199
---------------
Total liabilities ....................................... 5,767,914
---------------
NET ASSETS
Capital stock, $0.001 par value (unlimited shares
of beneficial interest authorized) ....................... 1,096,795
Paid-in capital .............................................. 1,095,698,345
Accumulated net realized loss from investments ............... (36,188)
---------------
Net assets .............................................. $ 1,096,758,952
===============
CLASS Y
Net assets ................................................... $ 1,096,758,952
---------------
Shares of beneficial interest outstanding .................... 1,096,795,140
---------------
Net asset value, offering and redemption price per share ..... $ 1.00
===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
(unaudited)
INVESTMENT INCOME
<S> <C>
Interest .................................................... $ 32,035,994
------------
EXPENSES
Advisory fees ............................................... 978,788
Administration fees ......................................... 244,697
Accounting fees ............................................. 158,858
Custodian fees and expenses ................................. 62,875
Federal and state registration fees ......................... 57,796
Legal and auditing fees ..................................... 27,073
Transfer agent fees and expenses ............................ 16,160
Amortization of organization expenses ....................... 6,563
Reports and notices to shareholders ......................... 5,528
Insurance expenses .......................................... 4,862
Trustees' fees and expenses ................................. 4,262
Other ....................................................... 14,712
------------
Total expenses before waivers and related reimbursements 1,582,174
Less: waivers and related reimbursements ............... (603,348)
------------
Total expenses after waivers and related reimbursements 978,826
------------
Net investment income ....................................... 31,057,168
------------
NET REALIZED LOSS ON INVESTMENTS ............................ (366)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $ 31,056,802
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE
SIX MONTHS FOR THE
ENDED FISCAL
SEPTEMBER 30, 2000 YEAR ENDED
(unaudited) MARCH 31, 2000
----------- --------------
INCREASE IN NET ASSETS FROM
OPERATIONS
<S> <C> <C>
Net investment income ...................................... $ 31,057,168 $ 31,658,609
Net realized loss on investments ........................... (366) (214)
--------------- ---------------
Net increase in net assets resulting from operations ....... 31,056,802 31,658,395
--------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income ...................................... (31,057,168) (31,658,609)
--------------- ---------------
SHARES OF BENEFICIAL INTEREST*
Net proceeds from the sale of shares ....................... 2,720,836,058 2,681,516,787
Cost of shares repurchased ................................. (2,564,464,614)
Shares issued in reinvestment of dividends ................. 26,480,896 25,342,284
--------------- ---------------
Net increase in net assets derived from shares of beneficial
interest transactions ................................... 182,852,340 527,706,436
--------------- ---------------
Total increase in net assets .................................... 182,851,974 527,706,222
NET ASSETS
Beginning of period ........................................ 913,906,978 386,200,756
--------------- ---------------
End of period .............................................. $ 1,096,758,952 $ 913,906,978
=============== ===============
<FN>
----------
* Share transactions at net asset value of $1.00 per share.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for each share
outstanding, total investment return, ratios to average net assets and other
supplemental data for each period indicated. This information has been derived
from information provided in the financial statements.
FOR THE
SIX MONTHS FOR THE FISCAL YEARS FOR THE PERIOD
ENDED ENDED MARCH 31, JULY 14, 1997*
SEPTEMBER 30, 2000 ---------------------- THROUGH
(unaudited) 2000 1999 MARCH 31, 1998
----------- ---- ---- --------------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C>
Net asset value, beginning of period ...... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
Net investment income (1) ................. 0.0318 0.0526 0.0524 0.0399
--------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations ........................ 0.0318 0.0526 0.0524 0.0399
--------------- ------------- ------------- -------------
Dividends to shareholders
from net investment income ............. (0.0318) (0.0526 (0.0524 (0.0399)
--------------- ------------- ------------- -------------
Net asset value, end of period ............ $ 1.0000 $ 1.0000$ 1.0000$ 1.0000
=============== ============= ============= =============
Total investment return (2) ............... 6.52% 5.39% 5.37% 5.72%
=============== ============= ============= =============
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).. $ 1,096,759 $ 913,907 $ 386,201 $ 121,460
Ratio of expenses to average net assets (1) 0.20%(3) 0.20% 0.20% 0.13%(3)
Ratio of net investment income
to average net assets (1) .............. 6.36%(3) 5.36% 5.24% 5.58%(3)
Increase/(decrease) reflected in above
expense ratio and net investment
income due to waivers and related
reimbursements ......................... 0.12%(3) 0.17% 0.25% 0.52%(3)
<FN>
----------
* 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 the last day of each period reported
and includes reinvestment of dividends. Total investment return is not
annualized.
(3) Annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS - (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Bear Stearns Funds (the "Fund") was organized as a Massachusetts business
trust on September 29, 1994 and is registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as an open-end management investment
company. The Fund consists of eleven separate portfolios: seven diversified
portfolios, Large Cap Value Portfolio, Small Cap Value Portfolio, Income
Portfolio, International Equity Portfolio, Balanced Portfolio, High Yield Total
Return Portfolio and Prime Money Market Portfolio (the "Portfolio"), and four
non-diversified portfolios, The Insiders Select Fund, S&P STARS Portfolio, Focus
List Portfolio and Emerging Markets Debt Portfolio. Each portfolio is treated as
a separate entity for certain matters under the Investment Company Act, and for
other purposes, and a shareholder of one portfolio is not deemed to be a
shareholder of any other portfolio. As of the date hereof, the Portfolio offers
one class of shares, which have been designated as Class Y shares.
ORGANIZATIONAL MATTERS - Prior to commencing investment operations on July 14,
1997, the Portfolio did not have any transactions other than those relating to
organizational matters and the sale of one Class Y share to Bear, Stearns & Co.
Inc. ("Bear Stearns" or the "Distributor"). Costs of $56,500 which were incurred
by the Portfolio in connection with the organization, registration with the
Commission and initial public offering of its shares, have been deferred and are
being amortized using the straight-line method over the period of benefit not
exceeding sixty months, beginning with the commencement of investment operations
of the Portfolio. In the event that the Portfolio is liquidated prior to the end
of the sixty-month period, the Distributor or the transferee of the Distributor
shall bear the unamortized deferred organization expenses.
MANAGEMENT ESTIMATES - The preparation of financial statements in accordance
with accounting principles generally accepted in the United States of America,
requires management to make certain estimates and assumptions that may affect
the reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
PORTFOLIO VALUATION - Portfolio securities are valued under the amortized cost
method, which approximates current market value. Securities are valued at cost
when purchased and thereafter a constant proportionate amortization of any
discount or premium is recorded until maturity of the security. Regular review
and monitoring of the valuations are performed in an attempt to avoid dilution
or other unfair results to shareholders. The Portfolio seeks to maintain a net
asset value of $1.00 per share, although there is no assurance that it will be
able to do so on a continuing basis.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME - Investment transactions are
recorded on the trade date (the date on which the order to buy or sell is
executed). Realized gains and losses are calculated on the identified cost basis
for both financial reporting and income tax purposes. Interest income and
expenses are recorded on the accrual basis.
U.S. FEDERAL TAX STATUS - The Portfolio intends to distribute substantially all
of its taxable income and to comply with the other requirements of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing during each calendar year substantially all of its
ordinary income and capital gains, if any, the Portfolio intends not to be
subject to a U.S. federal excise tax.
13
<PAGE>
At March 31, 2000, the Portfolio had gross capital loss carryforwards of $35,822
of which $34,543 will expire in 2007 and $1,279 will expire in 2008, available
as a reduction, to the extent provided in regulations of any future net capital
gains realized before the end of fiscal year 2008. To the extent that the loss
is used to offset future capital gains, it is probable that the gains so offset
will not be distributed to shareholders.
DIVIDENDS AND DISTRIBUTIONS - Dividends from net investment income are declared
daily and paid monthly. Any net realized capital gains are distributed at least
annually. Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
REPURCHASE AGREEMENTS - The Portfolio may purchase securities from financial
institutions subject to the seller's agreement to repurchase and the Portfolio's
agreement to resell the securities at par. The investment adviser only enters
into repurchase agreements with financial institutions that are primary dealers
and deemed to be creditworthy by the investment adviser. Securities purchased
subject to repurchase agreements are maintained with a custodian of the
Portfolio and must have, at all times, an aggregate market value greater than or
equal to the repurchase price plus accrued interest. If the value of the
underlying securities falls below 102% of the value of the repurchase price plus
accrued interest, the Portfolio will require the seller to deposit additional
collateral by the next Portfolio business day. In the event that the seller
under the agreement defaults on its repurchase obligation or fails to deposit
sufficient collateral, the Portfolio has the contractual right, subject to the
requirements of applicable bankruptcy and insolvency laws, to sell the
underlying securities and may claim any resulting loss from the seller.
TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
For the six months ended September 30, 2000, Bear Stearns Asset Management Inc.
("BSAM" or the "Adviser"), a wholly-owned subsidiary of The Bear Stearns
Companies Inc., served as adviser pursuant to an advisory agreement with the
Portfolio. Under the terms of the Investment Advisory Agreement, the Adviser is
entitled to receive from the Portfolio a monthly fee equal to an annual rate of
0.20% of the Portfolio's average daily net assets.
For the six months ended September 30, 2000, Bear Stearns Funds Management Inc.
("BSFM" or the "Administrator") served as administrator to the Portfolio
pursuant to an Administration Agreement. The Administrator is entitled to
receive from the Portfolio a monthly fee equal to 0.05% of the Portfolio's
average daily net assets. Under the terms of an Administrative Services
Agreement with the Portfolio, PFPC Worldwide Inc. ("PFPC") provides certain fund
accounting and administrative services to the Portfolio. For providing these
services, PFPC is entitled to receive from the Portfolio a monthly fee equal to
an annual rate of 0.075% of the Portfolio's average daily net assets up to $150
million, 0.04% of the next $150 million, 0.02% of the next $300 million and
0.0125% of net assets above $600 million.
For the six months ended September 30, 2000, the Adviser has undertaken to limit
the Portfolio's operating expenses to a maximum annual level of no more than
0.20% of its average daily net assets. As necessary, this limitation is effected
by waivers by the Adviser of its advisory fees and reimbursements of expenses
exceeding the advisory fee. For the six months ended September 30, 2000, the
Adviser waived advisory fees of $592,101. In addition, the Adviser reimbursed
$11,247, in order to maintain the expense limitation.
Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns Companies
Inc., and an affiliate of BSAM, BSFM and Bear Stearns, serves as custodian to
the Portfolio.
14
<PAGE>
SHARES OF BENEFICIAL INTEREST
The Portfolio currently offers Class Y shares. There is no sales charge or
contingent deferred sales charge on Class Y shares, which are offered primarily
to institutional investors.
At September 30, 2000, there was an unlimited amount of $0.001 par value shares
of beneficial interest authorized for the Portfolio, of which Bear Stearns and
its affiliates owned 164,884,723 of Class Y shares or 15% of the shares
outstanding.
COLLATERAL FOR REPURCHASE AGREEMENT
Listed below is the collateral associated with the repurchase agreement with
ABN-AMRO Inc. outstanding at September 30, 2000:
<TABLE>
<CAPTION>
PRINCIPAL ACCRUED
ISSUER AMOUNT MATURITY DATE(S) INTEREST RATE(S) MARKET VALUE INTEREST TOTAL VALUE
------ ------ ---------------- ---------------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Fannie Mae ......................... $10,000,000 06/15/01 5.900 $ 9,934,830 $ 166,038 $10,100,868
Federal Farm Credit Bank............ 8,000,000 11/10/02 7.125 7,995,763 207,554 8,203,317
Federal Home Loan Bank.............. 37,895,000 12/01/00 - 08/15/22 0.000 - 6.965 18,811,124 293,231 19,104,355
Freddie Mac ........................ 48,923,000 03/01/01 - 11/19/08 0.000 - 6.900 38,753,925 338,137 39,092,062
U.S. Treasury Notes ................ 838,000 04/30/02 6.375 840,925 21,920 862,845
----------- ---------- -----------
$76,336,567 $1,026,880 $77,363,447
=========== ========== ===========
</TABLE>
CREDIT FACILITY
The Fund has entered into a demand promissory note arrangement with The Chase
Manhattan Bank (the "Bank") to provide an uncommitted credit facility to the
Fund (on behalf of the Portfolio). The credit facility bears interest at the
greater of (i) the rate otherwise in effect for such loan plus 2%, or (ii) that
rate of interest from time to time announced by the Bank at its principal office
as its prime commercial lending rate plus 2%, with such interest to be payable
on demand and upon payment in full of such principal. The Portfolio as a
fundamental policy is permitted to borrow in an amount up to 33 1/3% of the
value of the Portfolio's assets. However, the Portfolio intends to borrow, if
any, money only for temporary or emergency (not leveraging) purposes and only in
amounts not to exceed 15% of its net assets.
Loans are payable on demand or upon termination of this credit facility or, for
money market loans, on the last day of the interest period and, in any event,
not later than 14 days from the date the loan is advanced. The maximum amount
outstanding under the credit facility for the Portfolio was $121,000 with an
average loan balance of $1,075 with an average interest rate of 6.82% during the
six months ended September 30, 2000. The Portfolio had no amounts outstanding
under the credit facility at September 30, 2000.
15
<PAGE>
THE BEAR STEARNS FUNDS
PRIME MONEY MARKET PORTFOLIO
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS - (UNAUDITED)
On April 17, 2000, a special meeting of shareholders of The Bear Stearns Funds
(the "Fund") was held and the following matters relating to the Portfolio were
voted upon:
(1) Election of seven Trustees to serve on the Board of the Fund until their
successors are duly elected and qualified.
TRUSTEE FOR WITHHELD NON-VOTES
------- --- -------- ---------
Peter M. Bren 971,355,317 887,214 20,635,571
Doni L. Fordyce 971,342,861 899,670 20,635,571
John S. Levy 971,355,432 887,099 20,635,571
Michael Minikes 971,354,519 888,012 20,635,571
M.B. Oglesby, Jr. 971,356,270 886,261 20,635,571
Robert E. Richardson 971,358,104 884,427 20,635,571
Robert M. Steinberg 971,346,988 895,543 20,635,571
(2) Ratification of the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the fiscal year ending March 31, 2001.
FOR AGAINST WITHHELD NON-VOTES
--- ------- -------- ---------
970,516,805 598,042 1,127,684 20,635,571
3) Approval, with respect to the Portfolio, of an amended and Restated
Investment Advisory Agreement.
FOR AGAINST WITHHELD NON-VOTES
--- ------- -------- ---------
920,514,352 -- 6,213 10,257,531
(4) Approval of amendments to, and a restatement of, the Fund's Declaration of
Trust:
(a) To permit the Trustees to reorganize the Fund and any future portfolio
without shareholder approval.
FOR AGAINST WITHHELD NON-VOTES
--- ------- -------- ---------
593,890,391 3,017,845 1,519,363 394,450,503
(b) To permit the Trustees to reorganize an existing portfolio without
shareholder approval.*
FOR AGAINST WITHHELD NON-VOTES
--- ------- -------- ---------
571,099,678 995,546 6,213 358,676,659
(c) To permit electronic and telephonic voting (results reported for the
Fund).
FOR AGAINST WITHHELD NON-VOTES
--- ------- -------- ---------
596,718,281 530,167 1,189,151 394,440,503
(d) To permit the Trustees to amend the Declaration of Trust without
shareholder approval (results reported for the Fund).
FOR AGAINST WITHHELD NON-VOTES
--- ------- -------- ---------
587,473,031 7,282,190 3,682,378 394,440,503
(e) To convert from share-based to dollar-based voting rights (results
reported for the Fund).
FOR AGAINST WITHHELD NON-VOTES
--- ------- -------- ---------
591,508,285 5,445,022 1,484,292 394,440,503
----------
*This proposal was not passed.
16
<PAGE>
The
Bear Stearns
Funds
575 Lexington Avenue
New York, NY 10022
1.800.766.4111
Michael Minikes Chairman of the Board and Trustee
Doni L. Fordyce President and Trustee
Peter M. Bren Trustee
John S. Levy Trustee
M.B. Oglesby, Jr. Trustee
Robert E. Richardson Trustee
Robert M. Steinberg Trustee
Barry Sommers Executive Vice President
Stephen A. Bornstein Vice President and Secretary
Frank J. Maresca Vice President and Treasurer
Vincent L. Pereira Assistant Treasurer
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
COUNSEL
Kramer Levin
Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
DISTRIBUTOR
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167
TRANSFER AND DIVIDEND
DISBURSEMENT AGENT
PFPC Worldwide Inc.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19808
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
The financial information included herein is taken from the records of the
Portfolio without examination by independent auditors who do not express an
opinion thereof.
This report is submitted for the general information of the shareholders of the
Portfolio. It is not authorized for distribution to prospective investors in the
Portfolio unless it is preceded or accompanied by a current prospectus which
includes details regarding the Portfolio's objectives, policies, and other
information. Total investment return is based on historical results and is not
intended to indicate future performance.
Prime Money Market Portfolio is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Prime Money Market Portfolio
will be able to maintain a stable net asset value of $1.00 per share.
BSF-R-017-07
